Editas Medicine
Annual Report 2015

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015 ☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________ to ________ Commission File Number 001-37687EDITAS MEDICINE, INC.(Exact name of registrant as specified in its charter) Delaware(State or other jurisdiction ofincorporation or organization) 46‑4097528(I.R.S. EmployerIdentification No.) 300 Third Street, First Floor Cambridge, Massachusetts 02142(Address of principal executive offices) (Zip Code) (617) 401‑9000(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, $0.0001 par value per share NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes ☐ No ☒ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☐ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§229.405) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or anyamendment to this Form 10‑K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act. (Check one): Large accelerated filer ☐Non‑accelerated filer ☒(Do not check if asmaller reporting company)Accelerated filer ☐Smaller reporting company ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒ As of June 30, 2015, the last day of the registrant’s most recently completed second fiscal quarter, there was no public market for the registrant’s CommonStock. The registrant’s Common Stock began trading on the NASDAQ Global Select Market on February 3, 2016. As of March 18, 2016, the aggregate market valueof the Common Stock held by non-affiliates of the registrant was approximately $532.27 million, based on the closing price of the registrant’s common stock onMarch 18, 2016. The number of shares of the Common Stock outstanding as of March 18, 2016 was 36,605,251. Table of ContentsEditas Medicine, Inc.TABLE OF CONTENTS PART I Item 1. Business4 Item 1A. Risk Factors63 Item 1B. Unresolved Staff Comments111 Item 2. Properties111 Item 3. Legal Proceedings111 Item 4. Mine Safety Disclosures112 PART II 113 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities113 Item 6. Selected Financial Data115 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations116 Item 7A. Quantitative and Qualitative Disclosures About Market Risk135 Item 8. Financial Statements and Supplementary Data136 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure172 Item 9A. Controls and Procedures172 Item 9B. Other Information172 PART III 173 Item 10. Directors, Executive Officers and Corporate Governance173 Item 11. Executive Compensation176 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters188 Item 13. Certain Relationships and Related Transactions, and Director Independence192 Item 14. Principal Accounting Fees and Services197 PART IV 198 Item 15. Exhibits, Financial Statement Schedules198 SIGNATURES 199 EXHIBIT INDEX 200 2 Table of ContentsReferences to Editas Throughout this Annual Report on Form 10-K, the “Company,” “Editas,” “Editas Medicine,” “we,” “us,” and “our,”except where the context requires otherwise, refer to Editas Medicine, Inc. and its consolidated subsidiary, and “our board ofdirectors” refers to the board of directors of Editas Medicine, Inc. Special Note Regarding Forward-Looking Statements and Industry Data This Annual Report on Form 10-K contains forward-looking statements regarding, among other things, our futurediscovery and development efforts, our future operating results and financial position, our business strategy, and otherobjectives for our operations. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,”“project,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could causeour actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve theplans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance onour forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectationsdisclosed in the forward-looking statements we make. We have included important factors in the cautionary statementsincluded in this Annual Report on Form 10-K, particularly in the section entitled “Risk Factors” in Part I that could causeactual results or events to differ materially from the forward-looking statements that we make. Our forward-lookingstatements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investmentsthat we may make. You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this AnnualReport on Form 10-K completely and with the understanding that our actual future results may be materially different fromwhat we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date ofthis Annual Report on Form 10-K,and we do not assume any obligation to update any forward-looking statements, whether asa result of new information, future events or otherwise, except as required by applicable law. This Annual Report on Form 10-K includes statistical and other industry and market data, which we obtained fromour own internal estimates and research, as well as from industry and general publications and research, surveys, and studiesconducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained fromsources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While webelieve that each of these studies and publications is reliable, we have not independently verified market and industry datafrom third‑party sources. While we believe our internal company research is reliable and the market definitions areappropriate, neither such research nor these definitions have been verified by any independent source.3 Table of Contents PART I ITEM 1. Business Overview We are a leading genome editing company dedicated to treating patients with genetically defined diseases bycorrecting their disease‑causing genes. We believe that we have entered a new era of genomic medicine as the growth ofgenomic information in recent decades has significantly expanded the understanding of genetically defined diseases. A newtechnology known as CRISPR (clustered, regularly interspaced short palindromic repeats)/Cas9 (CRISPR associated protein9) has the potential to achieve precise, directed changes in DNA. The confluence of these two streams of scientific endeavor,understanding genetic defects and having the tools to be able to address them, creates the opportunity for us to achieve alongstanding goal of medicine: to treat the root causes of diseases at the genetic level. Our mission is to translate the promiseof our science into a broad class of transformative genomic medicines to benefit the greatest number of patients. We are developing a proprietary genome editing platform based on CRISPR/Cas9 technology. CRISPR/Cas9 uses aprotein‑RNA complex composed of the Cas9 enzyme bound to a guide RNA molecule designed to recognize a particularDNA sequence that requires repair. Once there, the complex makes a specific cut in the DNA, ultimately triggering the cell’sDNA repair machinery to address the genetic defect. Our platform consists of four interrelated components: nucleaseengineering, delivery, control and specificity, and directed editing. These components are designed to develop medicinesthat specifically address a wide variety of genetic targets, reach the site of disease safely and effectively, tightly andspecifically control the editing process, and drive the right kind of genetic repair. Our preclinical drug discovery platformuses the flexibility of CRISPR/Cas9 technology to enable rapid reprogramming of the Cas9‑guide RNA complex with thepotential to direct it to almost any site in the human genome. Using this platform, we aim to develop and advance a broadrange of therapies for genetically defined diseases. Our product development strategy is to target genetically defined diseases with an initial focus on debilitatingillnesses where there are no approved treatments and where the genetic basis of disease is well understood. We are advancingover a dozen discovery research programs that we have selected based on our assessment of the structure of the geneticmutation and edit required, our ability to deliver the product candidate to the site of disease, the severity of the disease, theability to identify appropriate patients, and the availability of informative preclinical assays and models and suitable clinicalendpoints. Our most advanced research program is designed to address Leber Congenital Amaurosis type 10, or LCA10, aspecific genetic form of progressive blindness with no available therapies or potential treatments in clinical trials in eitherthe United States or European Union. The localization of LCA10 disease in the eye allows us to efficiently apply ourtechnology in a context that is confined and relatively uncomplicated compared to many of the systemic illnesses we alsoanticipate treating over time. We aim to initiate a clinical trial in this program in 2017. We believe achievement ofproof‑of‑concept in a disease of the eye has the potential to validate our platform technology, including its potentialapplication to other organs and diseases. Our additional research programs address genetic, infectious, and oncologicdiseases of the liver, lung, blood, eye, and muscle. We believe our genome editing technologies have the potential to improve the characteristics of cellular therapies,including engineered T cells to treat cancer. To realize this potential, in May 2015, we entered into a collaboration with JunoTherapeutics, a leader in the emerging field of immuno‑oncology. Under the collaboration, we received an upfront paymentof $25.0 million and are eligible to receive research support of up to $22.0 million over a five year period across threeprograms and approximately $700 million in aggregate in potential research, regulatory, and commercial sales milestonepayments for each of the first products developed in each of the three research programs. By working with Juno Therapeutics,we hope that together we will be able to discover and develop the next generation of engineered T cell therapies that havethe potential to substantially advance the field of cancer immunotherapy. We believe this collaboration exemplifies ourstrategy of selectively establishing alliances with leaders in their fields to realize the full therapeutic potential of genomeediting. 4 Table of ContentsOur company was founded by world leaders in genome editing, who are affiliated with institutions that include TheBroad Institute of MIT and Harvard, Harvard University, Massachusetts Institute of Technology, and Massachusetts GeneralHospital. Through their service as consultants and advisors, our founders were instrumental in defining the initial scientificvision for our company. Collectively, our founders have made many fundamental discoveries in the field of genome editingand have enabled the translation of CRISPR from its origins in bacterial systems to its application in mammalian cells.Among our founders, Drs. Feng Zhang, George Church, David Liu, and J. Keith Joung continue to provide importantscientific guidance and insights to us through ongoing consulting and advisory arrangements. Their discoveries, along withinventions by scientists at our company, have led to our broad portfolio of intellectual property, including the patent estateslicensed from those founders’ institutions. In connection with their consulting and advisory arrangements with us, Drs.Zhang, Church, Liu, and Joung have assignment of inventions obligations to us with respect to the services they perform forus, subject to limitations, including that such assignment obligations do not extend to their work in other fields or to theintellectual property arising from their employment with their respective academic and research institutions. As of February29, 2016, our portfolio included 24 issued U.S. and European patents and over 330 pending patent applications. We believethe breadth and depth of our patent estate is a substantial asset and has the potential to provide us with a durable competitiveposition in the marketplace. We believe that our team and our culture are critical to our success. The lifeblood of our company is exceptionalscientists and company‑builders with experience across leading biopharmaceutical companies and academic researchlaboratories. Our company is distinguished by our leaders’ substantial experience in translating groundbreaking scientificplatforms into therapeutic products and product candidates at Adnexus Therapeutics, Alnylam Pharmaceuticals, AvilaTherapeutics, Millennium Pharmaceuticals, and Novartis Pharmaceuticals. In addition, our board of directors has deepexperience in guiding biotechnology companies through rapid growth and the development of complex, breakthroughscience. Every decade over the past 40 years, an important class of medicines has emerged, such as recombinant proteins,monoclonal antibodies, and RNA‑based drugs. These new categories of medicines have brought forth important therapies forpreviously untreated diseases. In our view, genome editing with CRISPR/Cas9 has the potential to be one of the next majornew categories. At Editas Medicine, we believe we can make that potential a reality. Our Values Our values are a critical foundation upon which we build this organization. These values are: ·Community: One Team—Many Voices—Shared Mission ·Resilience: Respect—Grow—Learn ·Ingenuity: Be Bold—Answer Unknowns—Create Therapies ·Science: Impeccable—Rigorous—Meaningful ·Passion: Love It—Do It—Own It ·Revolution: Discover—Translate—Cure Our Strategy We aim to transform the treatment of a broad range of genetically defined diseases by building an integratedgenomic medicine company focused on creating a novel class of therapeutics to meet patients’ needs. Key elements of ourstrategy are to: ·Build the preeminent genomic medicine company. Developing a major new technology like CRISPR/Cas9requires an exceptional organization. We have assembled a group of world leaders in the fields of genomeediting, gene therapy, nucleic acid pharmaceuticals, and orphan diseases. We will continue to build and expandour team to encompass all the capabilities needed to develop and commercialize medicines and to run anoutstanding company.5 Table of Contents ·Advance therapeutic programs rapidly and rigorously to address patients’ needs. Our strategy centersaround developing medicines where the genetic basis of disease is well understood and where we believe ourapproach can provide unique benefits by addressing the root cause of the disease. For example, we choseLCA10 as our first program due to the absence of therapeutic options and the amenability of the underlyingmutation to genome editing. We believe our product development strategy will initially result in therapies forrare and orphan diseases that have the potential to advance rapidly and deliver substantial benefits for patients,and we aim to identify and advance product candidates into clinical trials on a consistent basis. ·Perfect the tools to repair any broken gene. Our genome editing platform is composed of a broad set of toolsthat we use to design and optimize product candidates for many different genetically defined diseases. We planto continue to invest resources as we further expand the four interrelated components of our platform: nucleaseengineering, delivery, control and specificity, and directed editing. We are developing new capabilities in eachof these components so that we can fully realize the therapeutic potential of genome editing. ·Accelerate the science of genome editing. Our founders and scientists are leaders in the extremely fast‑movingfield of genome editing. We are committed to maintaining and extending our leadership in this field whileempowering the broader scientific field through continued internal and external investment in basic science andtranslational research in genome editing. ·Collaborate to realize the full potential of genome editing to create medicines. Because of the broadpotential for our technology, we have and will continue to seek collaborations with pioneering companies, suchas Juno Therapeutics, and with leading academic and research institutions to expand and improve the range ofproduct candidates we discover and develop. ·Commercialize products to bring new medicines to patients. We believe that therapies for genetically defineddiseases can often be brought to patients through a small, targeted commercial organization without the needfor a commercial partner. In these cases, we intend to commercialize our own products to retain the greatestvalue for shareholders. For any other products, we intend to maximize the commercial opportunity throughselective partnering. Our Focus—Genome Editing Humans possess a genome sequence of roughly three billion base pairs of nucleotides, the building blocks of theDNA double helix. DNA serves as the road map for cellular function. Small changes, or mutations, routinely occur in the basepairs of our DNA. At the molecular level, these mutations can be categorized as single base pair changes, small insertions ordeletions, large deletions, duplications, or repetitive sequence expansions. A mutation could occur on one or both alleles, orcopies, of a gene in a cell. In some cases, these mutations can lead to a failure to produce proteins that are necessary fornormal function or the production of abnormal proteins, either of which can cause disease. Genetically defined diseases varydramatically in their pathologies, their sites of manifestation, and the specific natures of their root causes. Currently, there areapproximately 6,000 diseases that are known to be caused by genetic mutations. Familiar examples of genetically defineddiseases include cystic fibrosis, Duchenne muscular dystrophy, Huntington’s disease, retinitis pigmentosa, and sickle cellanemia. Major investments in the human genome project, clinical sample collection and characterization, and thesubsequent development of low cost and rapid DNA sequencing and informatics tools have revolutionized the understandingof genetically defined diseases and paved the way for advancing the field of genomic medicine. For example, many diseasespreviously thought to be genetically complex in nature have now been re‑categorized as several distinct diseases that presentwith similar clinical dispositions, but are caused by different single‑gene defects. Diseases caused by single‑gene defects areknown as monogenic disorders. The identification of monogenic disorders has resulted in a shift towards therapeuticapproaches targeted at specific mutations, as opposed to the symptom‑specific or pathology‑specific approaches of the past.We believe monogenic disorders are particularly suitable for treatment by genome editing because a single edit has thepotential to correct the disease. 6 Table of ContentsWhile genetic defects are now recognized as the causes of many diseases, the vast majority of these diseases lackeffective treatments. Of the estimated 6,000 diseases that are known to be caused by genetic mutations, we believe fewer than5% are served by approved therapies. In some cases, these existing therapies only treat the symptoms of the disease. In othercases, existing therapies modify the course of disease, but do not address the underlying genetic defect. The Field of Genomic Medicine Genomic medicine harnesses the knowledge of genetics to guide the care of patients and create new therapies. Thereare several technologies that have the potential to create medicines in this field. These technologies can be grouped into twobroad categories: gene augmentation and genome editing. Each approach seeks to address genetically defined diseases at thelevel of DNA. However, gene augmentation, which is commonly called gene therapy, and genome editing differfundamentally with regard to the kind of genomic change they seek to accomplish. Gene therapy is an approach whereby a new gene is transferred into cells to augment a defective gene. This caneither be through insertion of the new gene directly into a patient’s DNA without specific regard to the site of insertion ordelivering a piece of DNA to exist alongside the patient’s genome without being integrated into it. Gene therapy transfersnew DNA into cells, however it does not remove or modify the defective DNA and it generally introduces the new geneticmaterial in a location where it is not subject to the cell’s normal control and feedback mechanisms. This approach is suitedfor a finite set of genetically defined diseases. Genome editing is the process of revising, removing, or repairing defective DNA in situ. Genome editing corrects thedefective DNA in its native location, and consequently the repaired genetic region retains the cell’s normal control andfeedback mechanisms. The diversity of genetic drivers of disease demands a variety of solutions. Genome editing has thepotential to deliver a variety of types of genome modification to address a broad range of genetically defined diseases. At its core, genome editing is a two‑step process. In the first step, an enzyme is brought to the desired site and makesa specific cut. This enzyme, which is called a DNA endonuclease, is capable of cutting one or both strands in thedouble‑stranded DNA. After the desired cut or cuts are made, the cell’s DNA repair machinery responds to complete the editthrough one of two possible mechanisms—non‑homologous end joining or homology directed repair—that can be harnessedfor therapeutic effect in a range of ways. These types of edits could be applied to one or both alleles of the gene in the celldepending on the nature of the mutation. 7 Table of ContentsThe first mechanism, non‑homologous end joining, or NHEJ, occurs in the absence of a DNA template for the cell tocopy as it repairs a DNA cut. The NHEJ response tends to leave small insertions and deletions at the cut site, collectivelyreferred to as indels. The NHEJ mechanism can be used to either cut and revise the targeted gene or to cut and remove asegment of DNA, depending on how many cuts are made. In the “cut and revise” process, depicted on the left below, a singlecut is made, which can result in the creation of an indel during the repair process. In the “cut and remove” process, depictedon the right below, two cuts are made, which results in the removal of the intervening segment and the joining of the twoends of DNA. This approach could be used to delete either a small or a large segment of DNA depending on the type of repairdesired. The second mechanism, homology directed repair, or HDR, occurs in the presence of a DNA template that is similarto the DNA that has been cut. The cell can use the template to construct reparative DNA, resulting in the replacement ofdefective genetic sequences with correct ones. This can be thought of as a “cut and replace” process. As shown in theexample below, HDR is used to replace a defective sequence of GCACCTGAATG with the correct sequence ofAGTCGCATCCC. Whether NHEJ or HDR is likely to be more therapeutically effective depends on the nature of the targeted geneticdefect. The ability of genome editing approaches to utilize both mechanisms provides the opportunity to develop therapiesfor larger patient populations and a broader range of indications than either of the individual mechanisms alone. Althoughmany of our initial programs utilize the NHEJ mechanism, we believe that the combination of our investment in the scienceof HDR and the work we and others are doing to modulate how cells use different repair pathways has the potential to resultin medicines that take advantage of either mechanism to arrive at the desired genomic correction. 8 Table of ContentsAdvantages of CRISPR/Cas9 for Genome Editing CRISPR/Cas9 technology uses a protein‑RNA complex composed of an enzyme known as Cas9 bound to a guideRNA molecule that has been designed to recognize a particular DNA sequence. This recognition occurs when the appropriateportion of the guide RNA matches a DNA sequence, and when that DNA sequence is next to a short DNA sequence called theprotospacer adjacent motif, or PAM. A PAM is part of the overall DNA pattern sought by the Cas9‑guide RNA complex torecognize a location in the genome. We believe that CRISPR/Cas9 technology has three principal advantages for genomeediting: ·Rapid, comprehensive, and systematic identification of product candidates. The key targeting mechanism forthe Cas9 nuclease is an engineered guide RNA, which can be rapidly replaced with a different guide RNA oroptimized by changes as small as a single nucleotide. This allows for the flexible design, synthesis, and testingof hundreds of guide RNA/Cas9 combinations for each genetic target in order to find those that cut the DNAtarget with the optimal efficiency and specificity. In contrast, other commonly used DNA nucleases for genomeediting have inherently limited flexibility. For example, zinc finger nucleases, engineered meganucleases, andtranscription activator‑like effector nucleases, or TALENs, use proteins for DNA sequence recognition to bringthe endonuclease to the site of the genome where cleavage is desired, requiring the creation of an entirely newprotein for each target site. ·Simultaneous and efficient targeting of multiple sites. In CRISPR/Cas9 technology, multiple guide RNAs canbe provided, enabling the simultaneous and efficient targeting of multiple sites. This ability to target multipleDNA sequences expands the applicability of CRISPR/Cas9 technology and also creates the potential forself‑regulating systems that improve on the specificity of genome editing. To address more than one target,other genome editing technologies require the engineering, characterization, manufacture, and delivery ofdistinct nuclease proteins for each target. ·Availability of different types of edits. The availability of the different engineered variants of Cas9 allows fordifferent types of cuts for genome editing, including cuts of both strands of the DNA or either the top or thebottom strand only. In the most broadly exploited genome editing CRISPR systems, the protein endonuclease isa single protein, Cas9, which contains two independent endonuclease sites each responsible for cutting one ofthe two DNA strands. Importantly, either or both of these sites can be rendered inactive by making specificchanges to the Cas9 protein. When one site is rendered inactive, the resulting protein makes either one cut onthe top or bottom strand, which is referred to as a nick. This may be a critical component of improvedHDR‑driven approaches because the type of DNA cut can influence the type of repair mechanism used by a cellin response to that cut. We believe the ability to modify CRISPR/Cas9 technology to allow for different types ofcuts will expand the potential of our genome editing platform. Advantages of Our Genome Editing Platform In order to fully realize the broad potential of CRISPR/Cas9 technology in developing genome editing medicines,we believe we must achieve each of the following four goals: ·specifically edit a wide range of mutations at different genomic locations, ·reach the site of disease, ·tightly control the cutting, and ·achieve the right repair. 9 Table of ContentsWe are developing a proprietary genome editing platform consisting of four interrelated components that aredesigned to meet these goals. Each component is underpinned by several specific technologies and capabilities. With ourplatform we are able to design and optimize each element of the product configuration necessary to achieve the desired edit,including the Cas9 variant, the sequence and structure of the guide RNA(s), the delivery vector, and elements to controlexpression in cells or to drive the desired repair mechanism. ·Nuclease Engineering: We use our genome editing platform to identify and optimize both Cas9 enzymes andguide RNA molecules to create what we believe will be the optimal Cas9‑guide RNA complex for a givendisease target. We have made substantial advances in the characterization and modification of different naturaland engineered variants of Cas9 enzymes and in the design, synthesis, modification, analysis, andcharacterization of guide RNAs. We believe the diversity of the Cas9 enzymes that we are currently employingand those that we are continuing to further develop have the potential to provide us with a competitiveadvantage as we develop a range of products with different technical needs. We believe our systematic approachto measurement of both the efficiency and specificity of multiple possible Cas9 enzyme and guide RNAcombinations enables us to optimize the identification of lead molecules to progress into more advancedtesting. Our aim is to continue to develop new engineered Cas9 enzymes with altered specificities, differentDNA cutting capabilities, and additional advanced properties. We believe that further developing our nucleaseengineering capabilities will allow us to further broaden the range of diseases we can treat while at the sametime ensuring that our products have the best possible safety profiles. ·Delivery: An appropriate product configuration must be designed and optimized to provide efficient andtightly controlled delivery to the desired tissue or cell type. Our strategy is to leverage existing deliverytechnologies to target cell types of interest while developing next generation capabilities as warranted. We arecurrently exploring, and will continue to explore, a variety of delivery approaches, including adeno‑associatedvirus, or AAV, and lipid nanoparticles. In addition, there are three types of molecules that we can deliver to acell to effect genome editing: DNA, RNA, or a ribonucleoprotein, or RNP. Our genome editing platformincludes multiple, modular delivery modes that can be efficiently adapted to deliver different CRISPR/Cas9genome editing components to address the specific needs of each disease targeted. 10 Table of Contents·Control and Specificity: Control of cellular exposure to the Cas9‑guide RNA complex and specificity of theDNA cut are important to optimizing the location and duration of editing activity. We believe these features arecritical to designing medicines that are both safe and effective, and we are developing and applyingtechnologies in both areas. We have implemented multiple, discrete analytical methods that providecomprehensive and unbiased assessments of specificity to minimize off‑target effects. ·Directed Editing: There are different mechanisms that a cell can use to repair cuts in DNA. Each mechanismresults in different kinds of genetic changes. We are developing approaches to selectively harness specific DNArepair mechanisms to be able to drive the appropriate type of repair for a given disease. The ability to direct theDNA repair mechanism is critical to achieving the broadest potential for our platform. We believe that ourability to understand and direct the repair mechanisms used by cells creates opportunities to improve ourexisting programs and opens up new opportunities to develop medicines. All of our research programs have emerged from our proprietary genome editing platform. Our Product Development Criteria We are targeting genetically defined diseases with a focus on debilitating illnesses where there are no approvedtreatments and where the genetic basis of the disease is well understood. Our comprehensive project evaluation and selectionprocess takes into consideration the following criteria: ·Medical need—lack of approved therapies and disease severity; ·Opportunity for genome editing—other therapeutic approaches unlikely to be helpful; ·Nature of genetic mutation—whether the mutation is accessible and can be feasibly corrected; ·Delivery modality—whether the delivery modality has been shown to be safe in patients; ·Pathophysiology of the disease and treatment window—presence of viable cells that can be edited as thedisease progresses and potential for treatment through genome editing; ·Safety and therapeutic index—ability to assess, monitor, and/or minimize safety risks given the biology of thedisease and the anticipated delivery system; ·Clinical development path—consideration of factors such as availability of patients, speed of diseaseprogression, and robust and measurable clinical endpoints; ·Regulatory path—existence of safety and tolerability models as well as suitable clinical endpoints; and ·Commercial opportunity—assessment of potential market, including patient population, competitive landscape,and reimbursement. 11 Table of ContentsWe believe our systematic approach to developing medicines based on CRISPR/Cas9 technology providesopportunities across a range of different genetically defined diseases. We aim to develop and commercialize biologicmedicines for patients with these types of diseases. Where appropriate or necessary, we may do so in collaboration withstrategic partners. If successful, we believe our research programs have the potential to yield therapies comprising acombination of elements that may include protein, DNA, and RNA components, which are collectively often referred to asbiologics, and which differ from traditional small molecule pharmaceuticals in their greater complexity of manufacturing anddelivery. As shown below, as we expand the technical capabilities of our platform, the number of potential patients and rangeof diseases that can potentially be addressed will grow. Our first programs to develop genome editing medicines takeadvantage of the efficiency of making either NHEJ‑mediated indels or NHEJ‑mediated deletions of small segments betweentwo cuts. Over time, we expect to expand the repertoire of clinically feasible edits, including increasing largerNHEJ‑mediated deletions and more complex, HDR‑mediated edits. We also intend to develop the ability to achieveHDR‑mediated replacement of entire DNA segments, which we believe will enable substantial expansion of the number ofpatients we can treat. In this chart, each figure is intended to represent approximately 5,000 potential patients. 12 Table of ContentsOur Genomic Medicine Programs We have initiated a diversified range of research programs across multiple therapeutic areas. Since our scientificstrategy is to optimize our genome editing platform in the context of specific product development efforts, we selected earlyprograms requiring several different types of genome editing and DNA repair—both NHEJ and HDR. Furthermore, our initialprograms use, and will allow us to further optimize, a range of delivery modalities such as local injection, including using anAAV vector, or ex vivo genome modification, where cells are removed from the body, edited, and given back to the patient.We believe the therapeutic programs and delivery technologies we have chosen to date will demonstrate the depth andbreadth of our ability to deploy our genome editing platform to treat patients in need. The current status of our programs issummarized in the table below: Eye Diseases Leber Congenital Amaurosis 10 Leber Congenital Amaurosis, or LCA, is a heterogeneous group of inherited retinal dystrophies caused by mutationsin at least 18 different genes and is the most common cause of inherited childhood blindness, with an incidence of two tothree per 100,000 live births worldwide. Symptoms of LCA appear within the first year of life with significant vision loss,rapid involuntary movements of the eyes, and absence of measurable electroretinogram recordings due to progressive loss ofphotoreceptor cells. Imaging studies of LCA patients have shown that the intracranial visual pathways remain intact intoearly adulthood even though photoreceptor cells have already experienced damage. As a result, we believe that therapeuticapproaches aimed at restoring function of the remaining photoreceptor cells could arrest the further loss of vision in LCApatients, provided that treatment can be initiated prior to complete vision loss. The most common form of the disease, referred to as LCA10, is a monogenic disorder and represents approximately20‑30% of all LCA subtypes. LCA10 is caused by an autosomal recessive mutation in the gene CEP290, which encodes aprotein required for the survival and proper function of photoreceptor cells. The most frequently found mutation within theCEP290 gene is an A to G nucleotide change that disrupts normal splicing, or processing, of the13 Table of Contentsgene, ultimately resulting in the generation of a smaller and nonfunctional protein. Decreased CEP290 function leads to lossof photoreceptor cells over time which leads to blindness. We assessed LCA10 comprehensively and found that it fits well with our genome editing approach and criteria toproduct development. These criteria include: ·Medical need: Currently, there is no approved treatment or potential therapy in clinical trials in either theUnited States or European Union for LCA10, and complete vision loss is the inevitable outcome; ·Opportunity for genome editing: Gene therapy is not currently a viable approach to treating LCA10 because itrequires delivery of the entire DNA coding sequence for CEP290, which is too large to fit into thebest‑characterized ocular gene therapy vector, AAV. In contrast, genome editing only requires delivery of theDNA coding sequence for the relevant Cas9‑guide RNA complex, which can fit into AAV; ·Nature of genetic mutation: The A to G nucleotide change in the CEP290 gene is located in an intron, which isa portion of DNA that does not code for a protein. This allows genome editing via NHEJ with reduced risk ofaltering a protein coding sequence; ·Delivery modality: Sub‑retinal AAV injection is the delivery mode for current gene augmentation therapy trialsfor related ophthalmic diseases and can be used for this program; ·Pathophysiology of the disease and treatment window: The photoreceptors of LCA10 patients die over aperiod of time, and loss of vision corresponds with loss of photoreceptors. By treating patients who retain somevision, there is a window to repair the CEP290 gene in remaining photoreceptor cells; ·Safety and therapeutic index: Because the eye is an immune‑privileged location, injection directly into the eyeminimizes risk of a systemic toxic response by the immune system. In addition, because the product candidatewill be delivered directly to the eye, there is likely to be minimal overall systemic exposure; ·Clinical development path: There are readily measurable endpoints such as visual acuity measures,electroretinography and optical coherence tomography that allow minimally invasive assessment of diseaseprogression; ·Regulatory path: There are no approved therapies for LCA10. We believe that the combination of clinicallymeaningful and readily measurable endpoints for diseases of vision, coupled with the unmet need in this orphanpatient population, has the potential to enable an accelerated regulatory process; and ·Commercial opportunity: LCA10 represents a focused market with a defined number of specialized centerstreating the affected patients. We believe we can develop an effective small, targeted commercial infrastructurewithout the need for a commercial partner. We are developing a genome editing therapeutic for LCA10 that uses an AAV vector to deliver the DNA encodingCas9 and two guide RNAs to photoreceptor cells in the eye. In order to deliver this therapy directly and specifically to thesite of disease, we are assessing the most well‑established and relevant variants of AAV for retinal delivery. These variantshave been shown by others to be effective delivery modalities in clinical trials for various other diseases, including retinaldiseases. 14 Table of ContentsOur approach is designed to eliminate the A to G nucleotide change in the CEP290 gene described above by cuttingout that nucleotide and surrounding DNA, thus restoring normal protein expression and function of the remainingphotoreceptor cells, which could arrest the further loss of vision in LCA patients. The diagrams below illustrate the impairedprotein expression that results from the LCA10 mutation and how we believe our approach can restore normal proteinexpression. As shown below, the LCA10 mutation consists of an A to G nucleotide change in the CEP290 gene that occurs inan intron located between exons 26 and 27 of the gene. Exons are regions of DNA that encode for proteins. This mutationresults in incorrect processing signals in the messenger RNA, or mRNA, that is transcribed from the gene’s DNA. This mRNAis then spliced, or processed, incorrectly, and this in turn leads to the inclusion of a premature stop signal, or codon, and thecreation of a truncated and nonfunctional protein. Segment of CEP290 Gene with Mutation that Causes LCA10 15 Table of ContentsAs shown below, our approach uses an AAV delivery vehicle containing a Cas9 nuclease and two guide RNAmolecules designed to eliminate the mutation by cutting and removing it from the patient’s genome. As a result, transcriptionof the edited DNA produces mRNA that no longer contains the premature stop codon, allowing for the production offunctional protein. Approach to Correcting the CEP290 Gene 16 Table of ContentsWe have tested combinations of Cas9 and guide RNA pairs in cells that were taken from patients with the CEP290mutation to determine whether they could successfully edit the mutation and lead to correctly spliced mRNA and correctlyproduced CEP290 protein. We isolated and analyzed DNA from these edited cells and observed removal of themutation‑containing region in the DNA. Furthermore, as shown in the figure below, these studies also demonstrated that theedit restored significant levels of normal mRNA and lowered the levels of mutant mRNA, as compared to control. Thisrestoration of normal, or wild type, mRNA expression suggests that we successfully corrected the LCA10 gene defect in thesecells. Expression of Corrected CEP290 mRNA These results for guide pair 1 and guide pair 2 were statistically significant, with a p‑value of less than 0.0001.P‑value is a conventional statistical method for measuring the statistical significance of study results. A p‑value of 0.05 orless represents statistical significance, meaning that there is a 1‑in‑20 or less statistical probability that the observed resultsoccurred by chance. 17 Table of ContentsIn these studies we also observed two‑fold and greater increases in full‑length CEP290 protein expression comparedto a control. We believe this demonstrates that successful editing of the genetic defect that causes LCA10 also leads toincreased expression of the normal CEP290 protein. It is our view that increased expression of normal CEP290 protein couldarrest the further loss of vision in LCA10 patients. Full‑Length CEP290 Protein Expression To characterize editing specificity, we are applying a combination of methods to treated patient cells to quantify thefrequency of modification at the targeted DNA location and to assess the potential for edits at off‑target locations. We believeour detailed characterization of editing specificity in vitro will allow us to select guide RNA/Cas9 combinations with thehighest likelihood of providing clinical benefit in patients. We are evaluating the efficacy of CEP290 editing in human photoreceptors. In these studies, stem cells derived fromindividuals with a normal LCA10 gene that are differentiated into photoreceptor cells and retina cells removed from humandonors will be, in each case, treated with AAV vectors expressing each of the candidate guide RNA pairs together with Cas9.We plan to conduct analyses of editing efficiency and specificity to identify candidate guide RNA/Cas9 complexes forfurther studies. We believe these studies will give us an initial indication of the therapeutic potential of these productcandidates. We aim to initiate IND enabling studies in our LCA10 research program in 2016 and a first clinical trial in 2017. Other Eye Diseases We also intend to pursue the development of therapies for eye diseases other than LCA10, including UsherSyndrome 2A, or USH2A, and Herpes Simplex Virus 1, or HSV‑1, infections. We believe that our experience with the LCA10program will support the development of therapies for these other eye diseases. For example, the successful construction,packaging, and testing of the components of the AAV vector we are pursuing for LCA10 will continue to inform ourapproach to treating USH2A. Usher Syndrome 2a USH2A gene mutations are the most common cause of Usher syndrome, a form of retinitis pigmentosa. The U.S.population prevalence of Usher syndrome is estimated to be one in 6,000 individuals, and USH2A gene mutations accountfor an estimated 25‑30% of all cases of Usher syndrome. Loss of the usherin protein encoded by the USH2A gene leads to adegeneration of the retina and progressive vision loss. More than 200 mutations have been identified for this gene. Ourinitial goal in this research program is to address mutations within exon 13, which is the location of the highest percentage ofUSH2A gene mutations.18 Table of Contents Herpes Simplex Virus 1 Herpes Simplex Virus 1, or HSV‑1, causes lifelong infections and mainly causes ocular and oral disease. Infectedindividuals develop persistent latent infections, mainly in the nerves in the affected part of the body. During latency, theHSV‑1 DNA does not integrate into the infected individual’s genome but it remains within the individual’s cells asindependent viral genomic material. The latent HSV‑1 virus can then be reactivated by illness, emotional or physical stress,and other conditions. Ocular infection with HSV‑1 is a major health problem, especially in developed countries. It is the mostcommon infectious cause of blindness in the United States with over 35,000 new cases each year. Existing therapies have notbeen shown to be beneficial in preventing initial HSV‑1 infection or recurrences. As a result, there is a need for an effectivetherapy that prevents or reduces reactivation of latent HSV‑1. We plan to deliver the CRISPR/Cas9 molecular machinery tothe eye and specifically cleave and inactivate latent HSV‑1 DNA with the goal of eliminating or reducing reactivation. Engineered T Cell Therapies for Immuno‑Oncology Engineered T cells have shown encouraging early clinical activity against multiple cancers, and there is significantinterest in the medical community in expanding the application of this technology across a broader range of cancers andpatients. Recent data suggest that improving T cell persistence, or the duration these cells are active in the body, positivelycorrelates with anti‑tumor activity. We believe that our genome editing technology has the potential to improve T cellpersistence and confer other advantageous properties on engineered T cells, such as overcoming signals in the tumormicroenvironment that reduce T cell activity. If we are successful, genome‑edited engineered T cells have the potential tosignificantly expand the types of cancers treatable by chimeric antigen receptor/T cell receptor, or CAR/TCR, engineered Tcells and to improve the outcomes of these therapies. 19 Table of ContentsThrough our collaboration with Juno Therapeutics, a leader in the emerging field of immuno‑oncology, we plan todirect our genome editing technology towards multiple targets in order to improve the efficacy and safety of CAR/TCRengineered T cells against a range of tumor types. We are currently optimizing genome editing components and deliverymethods compatible with engineered T cell manufacturing methods developed by Juno Therapeutics. In an in vitro studyunder this collaboration, Cas9‑guide RNA complexes directed against two different T cell target genes were delivered intohuman T cells obtained from three separate donors. At different time points, the extent of genome editing and the percentageof viable cells were measured. We assessed editing by measuring protein expression on the cells’ surfaces following treatmentwith our Cas9‑guide RNA complexes. We observed high levels of editing, achieving approximately 90% for target A and50% for target B, across samples from the three donors on day four, as shown in the figure below. Editing of T Cell Target Genes in Human T Cells 20 Table of ContentsIn addition, we observed on average approximately 75% cell viability four days following delivery, as shown in thefigure below. We believe this is a sufficiently favorable result to support further advancement of this program. Cell Viability of Human T Cells FollowingDelivery of Cas9‑Guide RNA Complexes We and Juno Therapeutics have selected a number of targets for editing using both NHEJ‑ and HDR‑basedapproaches to evaluate the effects on safety and efficacy of CAR/TCR engineered T cells, both ex vivo and in vivo. Thesestudies are designed to facilitate the selection of therapeutic programs to be pursued under our collaboration with JunoTherapeutics. Additional Research Programs Non‑malignant Hematologic Diseases We intend to develop approaches for genome editing in hematopoietic stem cells to support the advancement ofother programs to treat non‑malignant hematological diseases. We are investigating the correction of the human beta globin,or HBB, gene in order to treat genetic disorders such as beta thalassemia and sickle cell disease. In an ex vivo study,Cas9‑guide RNA complexes directed against the HBB gene were delivered into hematopoietic stem cells obtained from threeseparate donors and evaluated against untreated control cells to assess editing activity as well as effects on the cells’viability, proliferation, and ability to differentiate into different types of blood cells. As shown in the figure below, weobserved approximately 55‑60% editing of the HBB gene in cells treated with Cas9‑guide RNA complexes as compared tono editing observed in the control cells. We observed no substantial differences between the treated cells and the untreatedcontrol cells in their viability, proliferation, or ability to differentiate into different types of blood cells. 21 Table of ContentsIn addition, we are actively assessing other opportunities to develop medicines for diseases where we believe geneediting of hematopoietic stem cells is likely to produce a therapeutic effect. ex vivo Editing of Hemoglobin Beta Genein Human Stem Cells We believe advances developed through our collaboration with Juno Therapeutics, including our efforts to optimizegenome editing components and delivery methods compatible with engineered T cells, may support our current and futurenon‑malignant hematologic disease programs. Duchenne Muscular Dystrophy Duchenne muscular dystrophy, or DMD, is a genetic disorder primarily affecting boys and is characterized byprogressive muscle weakness and atrophy that presents in early childhood and rapidly results in loss of ambulation andrespiratory muscle function. Additionally, DMD often causes cardiomyopathy in adolescence. Death occurs typically in earlyadulthood. The incidence of DMD is approximately one in every 3,500 male births with a prevalence of approximately15,000 cases in the United States. There are no approved disease‑modifying therapies for the disease. The current standard ofcare consists of palliative measures such as glucocorticoids and physical therapy as well as braces, wheelchairs, spinalsurgeries for scoliosis, and mechanical ventilation. The disease is caused by mutations in the gene that encodes dystrophin, astructural protein that is important for normal muscle health. Loss of dystrophin function leads to muscle degeneration. Webelieve that restoring dystrophin activity before the onset of severe loss of muscle function could significantly and favorablyalter disease progression. The dystrophin gene is one of the largest in the human genome spanning 2.2 million base pairs. Pathogenicmutations can occur throughout the gene. Many disease‑causing mutations in the dystrophin gene consist of deletions thatlead to non‑functional protein. Interestingly, large deletions in the middle of the dystrophin protein have been identified thatcause only mild to moderate disease. For example, deletions of selected exons have been shown to cause the much less severeBecker muscular dystrophy. Our genome editing approach is to introduce targeted deletions of mutation‑containingsegments of the gene in order to create smaller, yet functional versions of the dystrophin gene. Based on the known spectrumof DMD‑causing mutations, an NHEJ‑mediated small deletion of exon 51 would be expected to address approximately 13%of patients whereas an NHEJ‑mediated large deletion encompassing exons 45 through 55 would expand coverage to up to60% of patients. 22 Table of ContentsCystic Fibrosis Cystic fibrosis, or CF, is the most common lethal autosomal recessive disease in the Caucasian population. Theoverall birth prevalence of CF in the United States is approximately one in 3,700. While several organs are affected, themorbidity and mortality is primarily caused by the severity of lung disease. The gene that causes CF encodes the cysticfibrosis transmembrane conductance regulator, or CFTR, which helps maintain the water balance within the lung. Mutationsin the CFTR gene lead to an imbalance of ion and water movement, leading to accumulation of mucus, chronic bacterialinfection and inflammation of the airway epithelium. Our genome editing approach is premised on deleting, through NHEJ, avery rare mutation within the CFTR gene. We then intend to leverage that learning to embark on a more technologicallychallenging approach of correcting, through HDR, the rF508 mutation, which affects approximately 70% of all CF patients.Correcting the CF mutations in lung epithelial cells will require efficient editing of these cells and development of advancedpulmonary delivery modalities. We plan to establish multiple collaborations with academics, foundations, and othercompanies developing novel lung delivery approaches to achieve these goals. Alpha‑1 Antitrypsin Deficiency Alpha‑1 antitrypsin deficiency is a genetic disease that causes defective production of the Alpha‑1 Antitrypsin, orA1AT protein, leading to lung and liver disease. A1AT is one of the primary proteins made in the liver and protects the lungsfrom pro‑inflammatory enzymes. This disease affects about one in 1,500 to 3,500 individuals with European ancestry.Mutations in A1AT lead to accumulation of A1AT aggregates and result in liver and lung disease. The current standards ofcare are weekly intravenous infusions of functional A1AT protein obtained from human donor plasma, and lung or livertransplant for severe cases. Our genome editing approach starts with deleting, through NHEJ, the gene in the liver to preventliver disease, followed by gene correction in the liver to address both liver and lung disease. Our Genome Editing Platform in Detail We are developing a proprietary genome editing platform consisting of four interrelated components that aredesigned to address four key goals of genome editing: ·create a comprehensive toolbox for robust and selective genome engineering; ·provide efficient and targeted delivery to any tissue or cell; ·effect spatial and temporal control of gene editing and specificity; and ·orchestrate the cellular response to ensure accurate and precise genome editing. We believe that the developments we have made in our genome editing platform position us to be able to identifyand develop innovative genome editing therapies targeting a wide variety of genetically defined diseases. All of ourprograms to develop medicines leverage aspects of this platform while also providing insights that help improve our ongoingand future drug development capabilities. We believe our genome editing platform forms the basis for our ongoingleadership in the field and differentiates us from other companies working in genome editing. Nuclease Engineering We use our genome editing platform to identify and optimize both Cas9 enzymes and guide RNA molecules tocreate what we believe will be the optimal Cas9‑guide RNA complex for a given disease target. We have made substantialadvances in the characterization and modification of different natural and engineered variants of Cas9 enzymes and in thedesign, synthesis, modification, analysis, and characterization of guide RNAs. We believe the diversity of the Cas9 enzymesthat we are currently employing and those that we are continuing to further develop has the potential to provide us with acompetitive advantage as we develop a range of products with different technical needs. We believe our systematic approachto measurement of both the efficiency and specificity of multiple possible Cas9 enzyme and guide RNA combinationsenables us to optimize the identification of lead molecules to progress into more advanced testing. Our aim is to continue todevelop new engineered Cas9 enzymes with altered specificities,23 Table of Contentsdifferent DNA cutting capabilities, and additional advanced properties. For example, we are using directed evolution, a formof guided protein engineering, to develop Cas9 enzymes that recognize different PAMs in order to target additional locationsin the genome. We are also developing Cas9 enzymes that can cut DNA in an allele‑specific manner. We believe that furtherdeveloping our nuclease engineering capabilities will allow us to further broaden the range of diseases we can treat while atthe same time ensuring that our products have the best possible safety profiles. We have characterized different Cas9 enzymes for several reasons. Firstly, a smaller enzyme will have advantages fordelivering the endonuclease using a viral vector due to the inherent size limitations of most such delivery systems. Forexample, the Cas9 enzyme from Staphylococcus aureus is significantly smaller than that from Streptococcus pyogenes(3,159 vs. 4,104 base pairs), and this is important when working with AAV as a delivery vector, which has an effectivepackaging limit of approximately 4,700 base pairs. Secondly, identifying Cas9 enzymes with different editing properties willexpand the number of potential editing sites in the human genome. As shown below, we have been able to demonstrate thatS. aureus Cas9 has cutting efficiency, as measured by percentage editing of DNA at specific target sites, substantially similarto that of the Cas9 enzyme from S. pyogenes, broadening the available range of sequences we are able to target under ourgenome editing platform. Comparison of Editing of Target Genes by S. pyogenes and S. aureus Cas9 Enzymes In order to accelerate and standardize the selection of guide RNAs, we have created proprietary analytical softwarethat supports guide RNA design through single nucleotide polymorphism analysis, specificity prediction, and assessment ofrelative importance of potential off target sites. We have also advanced the engineering of guide RNAs such that we are ableto produce molecules with suitable properties for use in human cells which have the potential to reduce the innate immuneresponse associated with foreign RNA. This, coupled with active, purified protein enables efficient genome editing for exvivo applications in human cells and has the potential to improve the safety and efficacy of the medicines we develop. Delivery An appropriate product configuration must be designed and optimized to provide efficient and tightly controlleddelivery to the desired tissue or cell type. Two important elements of delivery are the mode of delivery to the cell and thetype of molecule delivered. 24 Table of ContentsThere are three types of molecules that we can deliver to a cell to effect genome editing: ·DNA. If DNA is delivered, both the DNA that codes for Cas9 itself along with DNA that codes for the guideRNA(s) must be introduced into the cell. The cell can then use these DNA molecules to make the Cas9 enzymeand the guide RNA(s) and assemble them into the desired Cas9‑guide RNA complex so this complex can thenlocate its target(s) in the cell’s genome and make the relevant edit(s). ·RNA. If RNA is delivered, both the mRNA that codes for Cas9 itself along with the guide RNA(s) must beintroduced into the cell. The cell can then use the mRNA to make the Cas9 enzyme and assemble it with theguide RNA(s) to produce the desired Cas9‑guide RNA complex so this complex can then locate its target(s) inthe cell’s genome and make the relevant edit(s). ·RNP. Finally, if a pre‑formed RNP complex is delivered, the cell is provided with an already‑functionalCas9‑guide RNA complex that is ready to act on target sites in the genome. The mode of delivery for the different Cas9‑guide RNA complexes depends on the type of molecule (DNA, RNA, orRNP) that is delivered. Delivery can be performed through a range of approaches such as local or systemic injection in vivo orthrough ex vivo genome modification where cells are removed from the body, edited, and the engineered cells are given backto the patient. Delivery mode options depend on whether a therapy is being delivered in vivo or ex vivo and can include viralvectors, such as AAV, lipid nanoparticles, engineered cells, and nucleic acids. As shown below, these potential productconfigurations can be administered through intravenous infusion, a direct injection into a target tissue or organ, or byinhalation. The delivery component of our genome editing platform aims to identify and develop delivery vehicles both byleveraging existing technologies, such as the electroporation system commercialized by MaxCyte, Inc., and also investing innew approaches that have the potential to be used to treat many diseases over the longer term. To this end, we have takenadvantage of the smaller S. aureus Cas9 and existing AAV technology to construct an “all‑in‑one” viral vector that is able todeliver the DNA coding for the nuclease protein and one or two guide RNAs directly to cells. We believe our ability toconfigure all the components for genome editing in an “all‑in‑one” AAV vector has substantial advantages for manufacturingand delivery compared to approaches that rely on multiple vectors. As part of our work to establish our ability to modify genes in the liver in vivo, we have successfully delivered anall‑in‑one AAV vector encoding S. aureus Cas9 and a guide RNA and demonstrated efficient editing of the Factor VII gene, atarget in the liver, in mice. In these experiments we evaluated three different AAV vector constructs against a controlsolution, which we refer to as Control 1, in each case administered by injection into the blood stream. The AAV25 Table of Contentsvectors evaluated in the experiments delivered either an inactive control protein, which we refer to as Control 2, S. aureusCas9 and a selected Factor VII guide RNA, which we refer to as Guide 1, or S. aureus Cas9 and a second selected Factor VIIguide RNA, which we refer to as Guide 2. In these experiments, we observed editing of the DNA for the Factor VII gene inliver tissue with low levels of editing in tissues other than the liver, as shown in the figure below. Comparison of Editing of Factor VII Gene in Various Tissues of MiceAfter Single IV Injection of All‑in‑One AAV In addition, we observed a significant reduction in serum levels of Factor VII by each of the two different guideRNAs targeting this gene, as shown in the figure below. Editing of Factor VII Gene in Liver of MiceAfter Single IV Injection of All‑in‑One AAV We believe these data represent an important proof of concept for our ability to develop genome editing medicinesthat can be delivered to the liver by systemic administration. In addition, the results of this study also provide a frameworkby which to benchmark different systemic delivery modalities designed to target a range of genes expressed in the liver. 26 Table of ContentsWe have also made substantial advances in the ex vivo delivery of CRISPR/Cas9 systems to mature human T cellsand hematopoietic stem cells derived from the bone marrow. We have been able to demonstrate approximately 90% ex vivoediting in human T cells and greater than 45% ex vivo editing in hematopoietic stem cells using either mRNA or RNPcomplexes. These results are consistent across multiple cell donors and multiple target genes. We believe this supports theview that there are multiple delivery approaches that can be used to develop medicines for diseases of the blood and bonemarrow. Control and Specificity Control of cellular exposure to the Cas9‑guide RNA complex and specificity of the DNA cut are important tooptimizing the location and duration of editing activity. We believe these features are critical to designing medicines that areboth safe and effective, and we are developing and applying technologies in these areas. We strive to identify, measure, andeliminate off‑target activity in a systematic and scalable manner as we optimize our molecules. To accomplish this, we havecombined multiple orthogonal methods in the design, testing, and optimization process. Our strategy to assess specificityduring the research stage includes: ·Establish industry‑leading computational tools to design guide RNAs. The guide RNA activates and directs theCas9 enzyme to the right cutting position in the genome. It is important for the guide RNA to be highlyselective to ensure that the right site is cut. For every guide RNA we test, we compare the targeted DNAsequence to the sequence of the entire human genome to identify all sequences that have significant similarityto the targeted DNA sequence. Based on our internal algorithms, we eliminate any guide RNAs that have certaindefined degrees of similarity to other sites across the genome. We continually refine our guide RNA designalgorithms based on results from large‑scale guide RNA screens and further confirmation and refinementexperiments. We expect that this will enhance our ability to design efficient and specific guide RNAs as ourdatabase expands over time. 27 Table of Contents·Use multiple unbiased, comprehensive methods to empirically assess specificity in vitro. While computationaltools are helpful, they are only a starting point and are insufficient to understand specificity completely. It iscritical to make and test molecules in unbiased assays to assess the specificity of their activity. We intend to usemultiple methods to empirically assess specificity in order to test for a variety of potential off‑target cuts, at sitesboth similar and dissimilar to the targeted DNA site. For example, we have implemented in our laboratories amethod called GUIDE‑Seq, which was developed by one of our founders and works in cells in vitro. TheGUIDE‑Seq method identifies potential off‑target cuts in DNA by inserting a small, unique piece of syntheticDNA at breaks in the cell’s genome and then sequencing the cell’s DNA near the site of insertion. A “read” isgenerated each time the unique piece of inserted DNA is mapped to the cell’s genome. The genomic location ofthe “read” indicates whether a cut was made at the intended site or at an off‑target site. We have used theGUIDE‑Seq method to assess the specificity of different guide RNAs targeted to the same gene. In oneexperiment, we evaluated three different Cas9‑guide RNA complexes targeted at a single gene and observedthat two of the Cas9‑guide RNA complexes were able to produce targeted cuts in the DNA with no apparentoff‑target cut sites while the third produced two different types of off‑target cuts, as shown in the figure below. Specificity Analysis by GUIDE‑Seq We are applying this method to our early programs, including our LCA10 and engineered T cell programs.In addition, we are expanding our capabilities to include techniques other than GUIDE‑Seq to assessspecificity empirically. ·Create validated assay panels composed of potential off‑target sites identified by both computationalapproaches and the use of other unbiased methods. These targeted resequencing assay panels will then beapplied to in vitro and in vivo experimental systems to confirm specificity as we advance to the clinic. To optimize the specificity of any product candidate we may develop, there are a number of different aspects of theproduct configuration that we will refine in addition to the sequence of the guide RNA. The length of the guide RNA, thetype of Cas9 enzyme, the delivery vector, the use of tissue‑selective promoters, and the duration of exposure all contribute tooverall specificity, and we optimize each of these elements for every program. We have evaluated various forms of Cas9enzymes and different promoters for selective expression in different cell types, which we believe have the potential toincrease the tissue specificity of our medicines. We have also identified and characterized an alternate promoter system forthe expression of guide RNAs to selectively enhance editing activity in targeted tissues and implemented and produced adetailed characterization of multiple distinct approaches to specificity evaluation in order to best characterize the specificityof our genome editing approaches. To reduce the persistence of genome editing activity,28 Table of Contentswe are developing self‑regulating genome editing systems designed to deliver not only the Cas9‑guide RNA complex, butalso an “off switch” that reduces the presence of the Cas9‑guide RNA complex over time. We have completed studies of thesesystems that demonstrate the ability to both maintain on‑target editing and also reduce levels of editing components oncethe on‑target edit is likely to have been completed. Directed Editing There are different mechanisms that a cell can use to repair cuts in DNA. Each mechanism results in different kindsof genetic changes. The two major DNA repair mechanisms are NHEJ and HDR. We are developing approaches to selectivelyharness these DNA repair mechanisms to be able to drive the appropriate type of repair for a given disease. In particular, asignificant part of our effort to expand our platform is to develop methods to better direct the HDR mechanism. We are takingseveral approaches to improve our understanding of HDR‑based DNA repair and to develop tools to influence it. The abilityto direct the DNA repair mechanism is critical to achieving the broadest potential for our platform. Our initial work in directed editing has focused on the gene for HBB, which is mutated in beta thalassemia andsickle cell disease. We have investigated how different kinds of DNA cuts by a CRISPR/Cas9 molecule drive the choice ofDNA repair mechanism used by the cell to repair these cuts. These experiments took advantage of the flexibility ofCRISPR/Cas9 targeting as well as a series of engineered variants of the Cas9 enzyme that either cut one or both strands of theDNA double helix. The wild type Cas9 enzyme cuts both strands of DNA. Engineered variants of the Cas9 enzyme that onlycut one of the two strands are called nickases. In experiments in cells, we used three different versions of the Cas9 enzymeand we designed guide RNAs to direct them to make three kinds of cuts in the HBB gene: ·Blunt‑Ended DNA Cut: We used the wild type Cas9 enzyme with a single guide RNA to create a cut throughboth strands of the DNA double helix in the same place, leaving what is referred to as a blunt end (left figurebelow). ·3’ Overhang DNA Cut: We designed two “bottom strand” Cas9 nickases so that each nickase cuts one strand ofthe DNA double helix and the respective guide RNAs directed them to opposite sides of the helix. Thesesingle‑stranded cuts in the DNA were offset from one another by a short distance and resulted in what is termed a3’ overhang (middle figure below). 29 Table of Contents·5’ Overhang DNA Cut: We designed two “top strand” Cas9 nickases so that each nickase cuts one strand of theDNA double helix and the respective guide RNAs directed them to opposite sides of the helix. Once again,these single‑stranded cuts in the DNA were offset from one another by a short distance. In this case, the use oftwo offset, top strand nickases resulted in what is termed a 5’ overhang (right figure below). Schematic of Experiment Testing Role of Cut Type in HDR 30 Table of ContentsWe applied these Cas9‑guide RNA complexes to cells and assessed how the cells repaired their DNA as measured byediting of DNA for the HBB gene. In addition, we included in these studies an extra piece of DNA called a repair template.This DNA, or ssODN, contained a DNA sequence that we could detect so that we could determine if the cell used the ssODNpiece of DNA in the repair process. The results of this experiment are shown in the figure below. Comparison of Different Hemoglobin BetaGene Editing Outcomes These studies demonstrated that the cells used different DNA repair mechanisms to edit the HBB gene depending onthe type of DNA cut. Importantly, in response to a 5’ overhang cut, the cells used the HDR process much more often than inresponse to the other types of cuts. The cells used the experimentally supplied ssODN piece of DNA as the template for HDRfairly frequently (23%). In addition, there was a relatively high frequency (25%) of a phenomenon known as geneconversion. In the case of gene conversion, the template for repair was the gene for hemoglobin delta (HBD), a gene that isphysically close and highly similar to the HBB gene. These results show the flexibility of CRISPR/Cas9 technology in creating multiple cut types and demonstrate thatdifferent cut types can result in profoundly different gene repair outcomes. In addition, the observed use of nearby verysimilar DNA from the HBD gene sequences suggests that a more generalizable approach to gene correction may be possibleby designing cuts that drive cells to repair mutations from pre‑existing DNA sequences that are appropriately co‑located.Based in part on these observations, we are seeking to drive HDR‑based repair by developing engineered DNA repairtemplates as well as tethering DNA repair templates to the Cas9‑guide RNA complex. We believe that our ability tounderstand and harness the editing mechanisms used by cells creates opportunities to improve our existing programs andopens up new opportunities to develop medicines. Juno Therapeutics Collaboration and License Agreement In May 2015, we entered into a collaboration and license agreement with Juno Therapeutics for the research anddevelopment of engineered T cells with chimeric antigen receptors, or CARs, and T cell receptors, or TCRs, that have beengenetically modified to recognize and kill other cells. In particular, Juno Therapeutics and we will research and develop CARand TCR engineered T cell products across three research programs over a five‑year period, ending on May 26, 2020. JunoTherapeutics has the option to extend the research period through May 26, 2022, upon payment of31 Table of Contentsone‑year extension fees in the mid‑single‑digit millions of dollars per year. We refer to the five‑ to seven‑year period as theresearch program term of the collaboration. During the research program term, we are responsible for generating genome editing reagents that modify genetargets selected by Juno Therapeutics. Juno Therapeutics is responsible for evaluating and selecting for further research anddevelopment CAR and TCR engineered T cell products modified with our genome editing reagents. Except for ourobligations under the mutually agreed research plan, Juno Therapeutics has sole responsibility, at its own cost, for theworldwide development, manufacturing, and commercialization of the selected CAR and TCR engineered T cell products forthe diagnosis, treatment, or prevention of any cancer in humans, excluding the diagnosis, treatment, or prevention ofmedullary cystic kidney disease 1, which we refer to as the exclusive field. Under the collaboration agreement, we granted to Juno Therapeutics an exclusive (even as to us), worldwide,milestone and royalty‑bearing, sublicensable license to certain of our owned and in‑licensed patent rights to research,develop, make, have made, use, offer for sale, sell and import selected CAR and TCR engineered T cell products in theexclusive field. In addition, we granted to Juno Therapeutics a non‑exclusive, worldwide, milestone and royalty‑bearing,sublicensable license to certain of our owned and in‑licensed patent rights to use genome editing reagents that are used in thecreation of a CAR or TCR engineered T cell product on which Juno Therapeutics has filed an IND for the treatment orprevention of a cancer in humans for researching, developing, making, having made, using, offering for sale, selling, andimporting that CAR or TCR engineered T cell product in all fields outside of the exclusive field, excluding the diagnosis,treatment, or prevention of medullary cystic kidney disease 1. We further granted to Juno Therapeutics a non‑exclusive,worldwide, non‑sublicensable license to certain of our owned and in‑licensed patent rights to, among other things, conductthe activities assigned to Juno under the mutually agreed research plan and to our genome editing reagents for furtherresearch and development of CAR and TCR engineered T cell products. Juno Therapeutics granted to us a non‑exclusive,worldwide, royalty‑free, and non‑sublicensable license to certain Juno Therapeutics patents solely for the purpose of ourconducting the research activities assigned to us under the mutually agreed research plan. During the research program term and except pursuant to the collaboration agreement, we may not conduct orparticipate in, and may not license, fund or otherwise enable a third party to conduct or participate in, research, development,manufacture, or commercialization of CAR and TCR engineered T cells in the exclusive field. In addition, we may not enterinto any collaboration, license, or other relationship with a third party to use our genome editing technology with respect toCAR and TCR engineered T cells in any other field, excluding the diagnosis, treatment, or prevention of medullary cystickidney disease 1, unless we first provide written notice to Juno Therapeutics and provide Juno Therapeutics an opportunityto discuss a comparable collaboration, license, or other relationship. Juno Therapeutics has agreed to certain exclusivityobligations with us with respect to certain gene editing technologies. During the term of the collaboration agreement and except pursuant to the collaboration agreement, we may notconduct or participate in, and may not license, fund, or otherwise enable a third party to conduct or participate in, research,development, manufacturing, or commercialization activities involving the use of our genome editing technology, or anygenome editing technology similar to ours, with respect to the gene targets selected by Juno Therapeutics during the researchprogram term for further research and development in the exclusive field. During the term of the collaboration agreement andexcept pursuant to the collaboration agreement, we may not conduct or participate in, and may not license, fund, or otherwiseenable a third party to conduct or participate in, research, development, manufacturing, or commercialization activities withrespect to a certain type of CAR or TCR engineered T cell product for use in the exclusive field, where such product targets aprotein designated by Juno Therapeutics during the research program term as a target for Juno Therapeutics’ further researchand development of that certain type of CAR or TCR engineered T cell product. Juno Therapeutics and we each must use diligent efforts to perform all activities for which Juno Therapeutics or weare responsible under the collaboration. Juno Therapeutics also is required to achieve certain regulatory objectives withrespect to the engineered T cells in each of the three programs by specified dates. Under the agreement, if Juno Therapeuticsdoes not meet its initial regulatory objective by the required date with respect to an engineered T cell in a specified program,then we can, as our exclusive remedy to Juno Therapeutics’ failure, convert the exclusive license we granted to JunoTherapeutics to a non‑exclusive license to Juno Therapeutics with respect to the particular program to which JunoTherapeutics’ failure relates. If Juno Therapeutics does not meet a subsequent regulatory objective with32 Table of Contentsrespect to an engineered T cell within a program, then we can, as our exclusive remedy to Juno Therapeutics’ failure, convertthe exclusive license we granted to Juno Therapeutics to a non‑exclusive license to Juno Therapeutics with respect to theparticular engineered T cell to which Juno Therapeutics’ failure relates. The collaboration is supervised by a joint research committee, or JRC, comprising an equal number ofrepresentatives from each of Juno Therapeutics and us. The JRC oversees and coordinates research activities during theresearch program term. Moreover, each party will appoint a project leader and the project leaders will be responsible for,among other things, coordinating the day‑to‑day work and raising cross‑party disputes in a timely manner. Decisions of theJRC are made by unanimous vote, with each of Juno Therapeutics and us having one vote. If the JRC is not able to reach aunanimous decision, Juno Therapeutics’ and our respective chief executive officers will attempt to resolve the dispute ingood faith. If the chief executive officers cannot resolve the dispute, subject to certain requirements, Juno Therapeutics hasthe final decision making authority with respect to disputes relating to the development of the licensed products within theresearch plan, and we have the final decision making authority with respect to disputes relating to our patents, know‑how andtechnology. Under the terms of the collaboration agreement, we received an upfront payment of $25.0 million from JunoTherapeutics. In addition, we will receive up to $22.0 million in research support over a five year period across the threeprograms under our collaboration, subject to adjustment in accordance with the terms of the agreement. We are eligible toreceive future research and regulatory milestones of approximately $160 million for each of the first products developed ineach of the three research programs and additional, reduced research and regulatory milestones for subsequent products. Wealso are eligible to receive future commercial sales milestones of $75 million based on certain specified thresholds ofaggregate, worldwide net sales of all engineered T cell products within each of the three research programs. Further, we areeligible to receive tiered royalties of low double‑digit percentages of Juno Therapeutics’ net sales of products licensed underour collaboration agreement. Juno Therapeutics’ obligation to pay royalties on a licensed product will expire on aproduct‑by‑product and country‑by‑country basis upon the later of the tenth anniversary of the first commercial sale of suchlicensed product and the expiration of the last to expire valid claim within the licensed patents covering such licensedproduct. If Juno Therapeutics is required to pay royalties on net sales of a licensed product to a third party because thelicensed product is covered under the third party’s patent, then Juno Therapeutics can credit a certain percentage of itspayments to the third party against the royalties it owes us, subject to certain maximum deduction limits. We will own any inventions developed by our employees and agents during our collaboration with JunoTherapeutics. Juno Therapeutics and we will jointly own any inventions made jointly by employees or agents of JunoTherapeutics and us during our collaboration with Juno Therapeutics. We retain control, at our own cost, of the prosecutionand maintenance of our solely owned patents. Juno Therapeutics and we will be jointly responsible for the prosecution andmaintenance of any jointly owned patents. We hold the final decision making authority with respect to claims of jointlyowned patents relating to our genome editing technology and Juno Therapeutics holds the final decision making authoritywith respect to claims of jointly owned patents relating to CAR and TCR engineered T cell products. Unless terminated earlier, the term of the collaboration agreement will expire on a product‑by‑product andcountry‑by‑country basis until the date no further payments are due to us from Juno Therapeutics. Juno Therapeutics mayterminate the agreement for convenience in its entirety upon six months’ written notice to us. Either Juno Therapeutics or wemay terminate the agreement if the other party is in material breach and fails to cure such breach within the specified cureperiod. Either Juno Therapeutics or we may terminate the agreement in the event of insolvency or bankruptcy of the otherparty. If Juno Therapeutics terminates the agreement as a result of our uncured material breach, Juno Therapeutics’ rightsand licenses to our specified patent rights, Juno Therapeutics’ obligations to pay us certain research milestones and royalties,and Juno Therapeutics’ rights to prosecute, maintain, and enforce certain patent rights each continue as set forth under theagreement. If Juno Therapeutics terminates the agreement for convenience or we terminate the agreement as a result of JunoTherapeutics’ uncured material breach, the licenses we granted to Juno Therapeutics will terminate. 33 Table of ContentsCompetition The biotechnology and pharmaceutical industries, including in the gene therapy and genome‑editing fields, arecharacterized by rapidly advancing technologies, intense competition, and a strong emphasis on intellectual property andproprietary products. While we believe that our technology, development experience, and scientific knowledge provide uswith competitive advantages, we face potential competition from many different sources, including major pharmaceutical,specialty pharmaceutical, and biotechnology companies, academic institutions and governmental agencies, and public andprivate research institutions. Any product candidates that we successfully develop and commercialize will compete withexisting therapies and new therapies that may become available in the future. We compete in the segments of the pharmaceutical, biotechnology, and other related markets that utilizetechnologies encompassing genomic medicines to create therapies, including genome editing and gene therapy. There areadditional companies that are working to develop therapies in areas related to our research programs. Our platform and product focus is the development of therapies using CRISPR/Cas9 technology. Other companiesdeveloping CRISPR/Cas9 technology include Caribou Biosciences, CRISPR Therapeutics, and Intellia Therapeutics. Inaddition, there have been and may continue to be discoveries of new CRISPR‑based gene editing technologies, such as therecently discovered nuclease Cpf1. Cpf1 is early in its scientific characterization; however, its researchers have asserted thatit might provide advantages over Cas9 in genome editing applications, including that Cpf1 requires only one guide RNA incontrast to the two guide RNAs required with Cas9, which could simplify the design and delivery of genome‑editing tools,and that Cpf1 generates staggered DNA cuts in contrast to the blunt‑end cuts generated by Cas9, which could beadvantageous for facilitating NHEJ‑based gene insertion. There are additional companies developing therapies using additional genome editing technologies, includingTALENs, meganucleases, Mega‑TALs, and zinc finger nucleases. Potential advantages of these additional genome editingtechnologies include their degree of scientific characterization to date, which may allow for more rapid development ofsubsequent programs; the range of sites that each is able to recognize and the location of the DNA cut relative to therecognition sequence, each of which may allow for a different range of targets to be addressed; and the orientation of theDNA ends that are left behind after cutting. The companies developing these additional genome editing technologiesinclude bluebird bio, Cellectis, Poseida Therapeutics, Precision Biosciences, and Sangamo Biosciences. Additionalcompanies developing gene therapy products include Abeona Therapeutics, AGTC Therapeutics, AvalancheBiotechnologies, Dimension Therapeutics, REGENXBIO, Spark Therapeutics, uniQure, and Voyager Therapeutics. Inaddition to competition from other genome editing therapies or gene therapies, any products that we develop may also facecompetition from other types of therapies, such as small molecule, antibody, or protein therapies. Caribou Biosciences, CRISPR Therapeutics, and Intellia Therapeutics have all reported that they have obtainedlicenses to a family of patent applications that was filed by the University of California, the University of Vienna, andEmmanuelle Charpentier and has an earliest priority date which pre‑dates the priority dates of our in‑licensed patents andpatent applications. CRISPR Therapeutics has reported that it has an exclusive license to patent rights from EmmanuelleCharpentier. Caribou Biosciences has reported that it has an exclusive license to patent rights from the University ofCalifornia and the University of Vienna. Intellia Therapeutics has reported that it has an exclusive license to such rights fromCaribou Biosciences in certain fields. The University of California derives rights in such applications from an assignment byDr. Jennifer Doudna and certain other inventors listed on such applications. Dr. Doudna was a founder of our company andentered into a consulting agreement with us at the time of our founding. However, Dr. Doudna gave notice of termination ofthat agreement in May 2014 after less than seven months of service, and she has had no further engagement in our businesssince that time. Dr. Doudna is also a founder of Caribou Biosciences and has been publicly identified as an advisor to IntelliaTherapeutics. For more information regarding the risks associated with third party intellectual property, please see “Item 1A.Risk Factors—Risks Related to Our Intellectual Property.” In addition, many of our current or potential competitors, either alone or with their collaboration partners, havesignificantly greater financial resources and expertise in research and development, manufacturing, preclinical testing,conducting clinical trials, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology, and gene therapy industries may result in even more resources being concentrated among a smaller number ofour competitors. Smaller or early‑stage companies may also prove to be significant competitors, particularly34 Table of Contentsthrough collaborative arrangements with large and established companies. These competitors also compete with us inrecruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Ourcommercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that aresafer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products thatwe may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than wemay obtain approval for ours, which could result in our competitors establishing a strong market position before we are ableto enter the market. 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 maycompete with other products currently under development, including genome editing and gene therapy products.Competition with other related products currently under development may include competition for clinical trial sites, patientrecruitment, and product sales. Intellectual Property Our success depends in part on our ability to obtain and maintain proprietary protection for our platformtechnology, programs, and know‑how related to our business, defend and enforce our intellectual property rights, inparticular, our patent rights, preserve the confidentiality of our trade secrets, and operate without infringing valid andenforceable intellectual property rights of others. We seek to protect our proprietary position by, among other things,exclusively licensing and filing U.S. and certain foreign patent applications related to our platform technology, existing andplanned programs, and improvements that are important to the development of our business, where patent protection isavailable. We also rely on trade secrets, know‑how, continuing technological innovation, and confidential information todevelop and maintain our proprietary position and protect aspects of our business that are not amenable to, or that we do notconsider appropriate for, patent protection. We seek to protect our proprietary technology and processes, in part, byconfidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve theintegrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical andelectronic security of our information technology systems. Our in‑licensed patents cover various aspects of our genome editing platform technology, including CRISPR/Cas9systems that employ viral vectors for delivery, single guide RNAs, modified guide RNAs, S. aureus Cas9, or a Cas9 nickase.In addition, we have filed patent applications and have in‑licensed rights to filed patent applications directed to each of thefour components of our genome editing platform technology. We intend to pursue, when possible, additional patentprotection, including composition of matter, method of use, and process claims, directed to each component of our platformtechnology. We also intend to obtain rights to existing delivery technologies through one or more licenses from third parties. Notwithstanding these efforts, we cannot be sure that patents will be granted with respect to any patent applicationswe have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have licensed orpatents that may be licensed or granted to us in the future will not be challenged, invalidated, or circumvented or that suchpatents will be commercially useful in protecting our technology. Moreover, trade secrets can be difficult to protect. Whilewe have confidence in the measures we take to protect and preserve our trade secrets, such measures can be breached, and wemay not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or beindependently discovered by competitors. For more information regarding the risks related to our intellectual property,please see “Item 1A. Risk Factors—Risks Related to Our Intellectual Property.” As of February 29, 2016, we owned two pending U.S. non‑provisional patent applications, 14 pending U.S.provisional patent applications, and 15 pending Patent Cooperation Treaty, or PCT, applications which include claims tocompositions of matter and methods of use. With respect to one of these pending U.S. non‑provisional applications and itscorresponding pending PCT application, we have determined that certain of the claims of such applications cover subjectmatter invented jointly by us and other third parties, which will result in certain third parties holding co‑ownership rights insuch applications. Therefore, we intend to update these applications to reflect such joint inventorship and seek a license tosuch co‑ownership rights from such third parties. We intend to pursue, when possible,35 Table of Contentscomposition of matter, method of use, dosing, and formulation patent protection for genome editing products that wedevelop during the course of our business. As of February 29, 2016, we in‑licensed 24 U.S. patents, which include claims to compositions of matter, methods ofuse, and certain processes as well as approximately 76 pending U.S. patent applications, four European patents and relatedvalidations, 45 pending European patent applications, six pending PCT applications, and other related patent applications injurisdictions outside the United States and Europe, which include claims to compositions of matter, methods of use, andcertain processes. The patents and patent applications outside of the United States and Europe are held primarily in Canada,Japan, and Australia, although some of our in‑licensed patent families were filed in a larger number of countries. Ourin‑licensed patents and patent applications claim the inventions of investigators at The Broad Institute Inc., or Broad,President and Fellows of Harvard College, or Harvard, Massachusetts Institute of Technology, or MIT, The General HospitalCorporation d/b/a Massachusetts General Hospital, or MGH, and Duke University, or Duke, and the majority of theselicensed patents and patent applications are licensed on an exclusive basis. The exclusive licenses are, in some cases, limitedto certain technical fields. Certain patent applications licensed to us by Broad (including a continuation of one of theseapplications) include Rockefeller as a joint applicant. Broad does not and does not purport to grant any rights inRockefeller’s interest in these patent applications under our agreement. As a result, Broad may not be the sole and exclusiveowner of any patents that issue from these patent applications. For more information regarding these license agreements,please see “Item 1. Business—License Agreements.” On January 11, 2016, the Patent Trial and Appeal Board of the USPTO, or PTAB, declared an interference between apending U.S. patent application (U.S. Serial No. 13/842,859) that is owned by the University of California, the University ofVienna, and Emmanuelle Charpentier and 12 U.S. patents (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406;8,871,445; 8,889,356; 8,895,308; 8,906,616; 8,932,814; 8,945,839; 8,993,233; and 8,999,641) that are co‑owned by Broadand MIT, and in some cases Harvard, and in‑licensed by us. On March 17, 2016, the PTAB re-declared the interference to adda pending U.S. patent application (U.S. Serial No. 14/704,551) that is co‑owned by Broad, MIT, and Harvard, and in‑licensedby us. An interference is a proceeding within the USPTO to determine priority of invention of the subject matter of patentclaims filed by different parties. Prior to the declaration of interference, the University of California, acting on behalf of itselfand the University of Vienna, and Emmanuelle Charpentier filed a “Suggestion of Interference” in the USPTO on April 13,2015, which requested that an interference be declared between certain claims in their pending U.S. patent application (U.S.Serial No. 13/842,859) and certain claims in 10 U.S. patents, which we have in‑licensed from Broad acting on behalf of itself,MIT, and Harvard. A Supplemental Suggestion of Interference was filed by the University of California and EmmanuelleCharpentier on November 5, 2015, which requested that an interference be declared between certain claims in their samepending U.S. patent application (U.S. Serial No. 13/842,859) and certain claims in two additional U.S. patents and fivepending U.S. patent applications (including U.S. Serial No. 14/704,551 which has now been added to the interference), whichwe have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. The 12 U.S. patents referred to in theSuggestion of Interference and Supplemental Suggestion of Interference are the same as those included in the declaration ofinterference. The Suggestion of Interference and Supplemental Suggestion of Interference assert that the inventors from theUniversity of California and the University of Vienna and Emmanuelle Charpentier made certain inventions before theinventors from Broad and MIT and, in certain cases, Harvard, which will be evaluated in the interference. The University ofCalifornia derives rights in U.S. Serial No. 13/842,859 from an assignment by Dr. Jennifer Doudna and certain of the otherinventors listed on such application. Dr. Doudna was a founder of our company and entered into a consulting agreement withus at the time of our founding. However, Dr. Doudna gave notice of termination of that agreement in May 2014 after less thanseven months of service, and she has had no further engagement in our business since that time. Dr. Doudna is also a founderof Caribou Biosciences and has been publicly identified as an advisor to Intellia Therapeutics, each of which is one of ourcompetitors. Separately, ToolGen filed Suggestions of Interference in the USPTO on April 13, 2015, which became publiclyavailable on November 12, 2015 and December 3, 2015, suggesting that it believes some of the claims pending in itsapplications (U.S. Serial No. 14/685,568 and U.S. Serial No. 14/685,510, respectively) interfere with certain claims in fiveU.S. patents, which we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. These five U.S. patents areamong the 12 U.S. patents with respect to which the PTAB has declared an interference. The Suggestions of Interference thatwere filed by ToolGen are still pending, and it is uncertain when and in what manner the USPTO will act on them. 36 Table of Contents A request for ex parte re-examination was filed with the USPTO on February 16, 2016 against one of the patentswith respect to which the PTAB has declared an interference (U.S. Patent No. 8,771,945). This patent is also one of thepatents that ToolGen has included in its Suggestions of Interference. Ex parte re-examination is a procedure through which athird party can anonymously request the USPTO to re-examine a granted patent because the third party believes the grantedpatent may not be patentable over prior art in the form of a printed publication or another patent. Before the USPTO will re-examine a granted patent, the third party requestor must establish that the submitted prior art establishes a substantial andnew question of patentability. If the USPTO determines there is a substantial and new question of patentability, it will grantthe re-examination request and re-examine the patent in question. The third party requestor does not participate in the re-examination procedure after filing the request. The request for ex parte re-examination is still pending, and it is uncertainwhen and in what manner the USPTO will act on it. The 12 in‑licensed U.S. patents and pending U.S. patent application that are the subject of the interference with thepending U.S. patent application (U.S. Serial No. 13/842,859) that is owned by the University of California, the University ofVienna, and Emmanuelle Charpentier (which includes the five in‑licensed U.S. patents that are the subject of the Suggestionsof Interference filed by ToolGen and the one in-licensed U.S. patent that is the subject of the request for ex parte re-examination) relate generally to the CRISPR/Cas9 system and its use in eukaryotic cells. The claims of the 12 in‑licensedU.S. patents and pending U.S. patent application vary in scope and coverage and include claims that are directed toCRISPR/Cas9 systems that employ viral vectors for delivery, single guide RNAs, modified guide RNAs, S. aureus Cas9, or aCas9 nickase and are relevant to our genome editing platform technology. The loss of one or more of these in‑licensedpatents could have a material adverse effect on the conduct of our business. In addition, we or our licensors may be subject to claims that former employees, collaborators, or other third partieshave an interest in our owned or in‑licensed patents or other intellectual property as an inventor or co‑inventor. For example,we have determined that certain of the claims of one of our pending U.S. non‑provisional patent applications, and itscorresponding pending PCT application, cover subject matter invented jointly by us and other third parties, which will resultin certain third parties holding co‑ownership rights in such applications. If we are unable to obtain an exclusive license toany such third party co‑owners’ interest in such patent applications, such co‑owners may be able to license their rights toother third parties, including our competitors. In addition, we may need the cooperation of any such co‑owners to enforce anypatents that issue from such patent applications against third parties, and such cooperation may not be provided to us. We arealso aware of one third party, Rockefeller, that has independently filed a U.S. patent application (U.S. Serial No. 14/324,960)as a continuation of a U.S. patent application that we have in‑licensed from Broad, acting on behalf of itself and MIT (U.S.Serial No. 14/183,429, which has since issued as U.S. Patent No. 8,771,945). In contrast to a Suggestion of Interference, a U.S.continuation patent application does not seek to challenge the priority date of an existing patent, rather it is a new filing ofan existing U.S. patent application, which contains the same priority date as the existing application. However, it mayprovoke the declaration of an interference. In that regard, the U.S. continuation patent application filed by Rockefeller listsone of its employees as a co‑inventor alongside Dr. Feng Zhang, who is an employee of Broad in addition to being one of ourfounders. The U.S. continuation patent application was filed by Rockefeller with copies of claims from one U.S. patent andone U.S. patent application, which we have in‑licensed from Broad, acting on behalf of itself and MIT (U.S. PatentNo. 8,697,359 and U.S. Serial No. 14/183,429, which has since issued as U.S. Patent No. 8,771,945). The U.S. continuationpatent application filed by Rockefeller may provoke the declaration of an interference by the USPTO with these or otherpatents that we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. The U.S. continuation applicationfiled by Rockefeller may also prompt a derivation proceeding in the USPTO or litigation in court regarding suchcontinuation patent application. In addition, if the USPTO were to grant a patent based on this U.S. continuation patentapplication including the Rockefeller employee as an inventor, then Rockefeller could license its rights to such patent to oneof our competitors or to another third party such that they may have freedom‑to‑operate under such patent and maycommercialize similar or identical products and technology to us. We may also need the cooperation of Rockefeller toenforce such patent against third parties, and such cooperation may not be provided to us. We or our licensors are subject to and may also become a party to similar proceedings or priority disputes in Europeor other foreign jurisdictions. We are aware of nine oppositions filed by different third parties against a European patent thatwe in‑license from Broad, acting on behalf of itself, MIT and Harvard (European Patent No. EP 2,771,468 B1). The EuropeanPatent Office Opposition Division, or EPO OD, has sent a Communication of Notice of Opposition37 Table of Contentsto Broad informing Broad of the nine oppositions and that an opposition proceeding in the EPO OD has been initiated. TheEPO opposition proceeding may involve issues including, but not limited to, procedural formalities related to filing theEuropean patent application, priority, and the patentability of the involved claims. We are also aware of eight oppositionsfiled by third parties against a second European patent that we in‑license from Broad, acting on behalf of itself, MIT andHarvard (European Patent No. EP 2,784,162 B1). One or more of the third parties that have filed oppositions againstEuropean Patent Nos. EP 2,771,468 B1 or EP 2,784,162 B1 or other third parties may file future oppositions against otherEuropean patents that we in‑license or own. The loss of priority for, or the loss of, these European patents could have amaterial adverse effect on the conduct of our business. For more information regarding the risks associated with the declared interference, the Suggestions of Interference,the continuation patent application filed by Rockefeller, the European oppositions, the request for ex parte re-examination,and other potential third party intellectual property related disputes, please see “Item 1A. Risk Factors—Risks Related to OurIntellectual Property.” The term of individual patents depends upon the legal term for patents in the countries in which they are granted. Inmost countries, including the United States, the patent term is 20 years from the earliest claimed filing date of anon‑provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, belengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examiningand granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patentnaming a common inventor and having an earlier expiration date. The Drug Price Competition and Patent Term RestorationAct of 1984 extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of productapproval, only one patent applicable to each regulatory review period may be extended and only those claims covering theapproved drug or a method for using it may be extended. CRISPR/Cas9 As of February 29, 2016, we owned two pending U.S. non‑provisional patent applications, 14 pending U.S.provisional patent applications, and 15 pending PCT patent applications that are related to our CRISPR/Cas9 technologyand which include claims directed to our genome editing platform, including our directed editing component, as well ascomposition of matter and method of use claims for our therapeutic programs, including LCA10 and other genetic andinfectious eye disorders, and engineered T cells. With respect to one of these pending U.S. non‑provisional applications andits corresponding pending PCT application, we have determined that certain of the claims of such applications cover subjectmatter invented jointly by us and other third parties, which will result in certain third parties holding co‑ownership rights insuch applications. Therefore, we intend to update these applications to reflect such joint inventorship and seek a license tosuch co‑ownership rights from such third parties. If issued as U.S. patents, and if the appropriate maintenance fees are paid,these U.S. patent applications would be expected to expire between 2034 and 2036, excluding any additional term for patentterm adjustments or patent term extensions. As of February 29, 2016, we in‑licensed 20 U.S. patents, four European patents and related validations, and over 300pending patent applications, including 62 pending U.S. patent applications, 35 pending European patent applications, sixpending PCT patent applications, and other related patent applications in jurisdictions outside the United States and Europethat are related to our CRISPR/Cas9 technology collectively from Broad, Harvard, MIT, MGH, and Duke, as more fullydescribed below. The claims from our in‑licensed portfolio include claims to compositions of matter, methods of use, andcertain processes. These include claims directed to CRISPR/Cas9 systems that employ viral vectors for delivery, single guideRNAs, modified guide RNAs, S. aureus Cas9, or a Cas9 nickase. Our current in‑licensed U.S. patents, if the appropriatemaintenance fees are paid, are expected to expire between 2033 and 2034, excluding any additional term for patent termadjustments or patent term extensions. LCA10 As of February 29, 2016, we owned one pending U.S. patent application and one pending PCT patent applicationwhich are directed to compositions of matter, including guide RNAs directed to CEP290, and methods of use for thetreatment of LCA10. If issued as a U.S. patent, and if the appropriate maintenance fees are paid, the U.S. patent38 Table of Contentsapplication would be expected to expire in 2035, excluding any additional term for patent term adjustments or patent termextensions. Trademarks As of February 29, 2016, our registered trademark portfolio consisted of two registered trademarks and one pendingtrademark application in the United States for the mark EDITAS and one corresponding registered trademark in each ofAustralia, China, Europe, Japan, and Switzerland. License Agreements We are a party to a number of license agreements under which we license patents, patent applications, and otherintellectual property from third parties. The licensed intellectual property covers, in part, CRISPR/Cas9 and TAL‑relatedcompositions of matter and their use for genome editing. These licenses impose various diligence and financial paymentobligations on us. We expect to continue to enter into these types of license agreements in the future. We consider thefollowing license agreements to be material to our business. The Broad Institute and President and Fellows of Harvard College License Agreement In October 2014, we entered into a license agreement with The Broad Institute, Inc., or Broad, and President andFellows of Harvard College, or Harvard, for specified patent rights, which include rights to certain patents solely owned byHarvard, which we refer to as Harvard Patent Rights, certain patents co‑owned by the Massachusetts Institute of Technology,or MIT, and Broad, which we refer to as MIT/Broad Patent Rights, and certain patents co‑owned by MIT, Broad and Harvard,which we refer to as the Harvard/MIT/Broad Patent Rights. We refer to all the patents and patent applications licensed to usunder the license agreement as the Harvard/Broad Patent Rights. Certain patent applications licensed to us by Broad(including a continuation of one of these applications) include Rockefeller as a joint applicant. Broad does not and does notpurport to grant any rights in Rockefeller’s interest in these patent applications under our agreement. As a result, Broad maynot be the sole and exclusive owner of any patents that issue from these patent applications. For more information regardingthe risks associated with Rockefeller’s interest in these patent applications, please see “Item 1A. Risk Factors—Risks Relatedto Our Intellectual Property—Our rights to develop and commercialize our technology and product candidates are subject, inpart, to the terms and conditions of licenses granted to us by others.” The Harvard/Broad Patent Rights are directed, in part, to certain CRISPR/Cas9 and transcription activator‑likeeffector (TALE)‑related compositions of matter and their use for genome editing and to certain CRISPR/Cas9 andTALE‑related delivery technologies. Pursuant to this license agreement, and as of February 29, 2016, we have certain rightsunder 24 U.S. patents, 62 pending U.S. patent applications, four European patents and related validations, 35 pendingEuropean patent applications, 5 pending PCT applications, and other related patent applications in jurisdictions outside ofthe United States and Europe. Pursuant to the license agreement, Harvard and Broad granted us an exclusive, worldwide, royalty‑bearing,sublicensable license to the Harvard/Broad Patent Rights to make, have made, use, sell, offer for sale, have sold, import, andexport products and services in the field of the prevention and treatment of human disease, subject to certain limitations andretained rights. The exclusive license granted by Broad and Harvard excludes certain fields, including the modification ofanimals or animal cells for the creation and sale of organs suitable for xenotransplantation into humans and the developmentand commercialization of products or services in the field of livestock applications. Moreover, the license granted by Broadis non‑exclusive with respect to the treatment of medullary cystic kidney disease 1. We have also confirmed with Broad andHarvard that we are not using, and will not use, the licensed technology for human germline modification, includingmodifying the DNA of human embryos or human reproductive cells. Harvard and Broad also granted us a non‑exclusive,worldwide, royalty‑bearing, sublicensable license to the Harvard/Broad Patent Rights for all purposes, with the exceptionthat the non‑exclusive license to certain Harvard Patent Rights excludes the modification of animals or animal cells for thecreation and sale of organs suitable for xenotransplantation into humans and the development and commercialization ofproducts or services in the field of livestock applications. 39 Table of ContentsWe are obligated to use commercially reasonable efforts to research, develop, and commercialize products for theprevention or treatment of human disease under the license agreement. Also, we are required to achieve certain developmentmilestones within specified time periods for products incorporating the CRISPR/Cas9, TAL, and delivery‑relatedtechnologies covered by the Harvard/Broad Patent Rights. Harvard and Broad have the right to terminate our license withrespect to the Harvard/Broad Patent Rights covering the technology or technologies with respect to which we fail to achievethese development milestones. The licenses granted by Broad and Harvard to us under the license agreement are subject to any retained rights ofthe U.S. government in the Harvard/Broad Patent Rights and the rights retained by Broad, Harvard, and MIT on behalf ofthemselves and other academic, government and non‑profit entities, to practice the Harvard/Broad Patent Rights for research,educational, or teaching uses. In addition, certain rights granted to us under the license agreement are further subject to anon‑exclusive license to the Howard Hughes Medical Institute for research purposes. Our exclusive license rights also aresubject to rights retained by Broad, Harvard, and MIT and any third party to research, develop, make, have made, use, offerfor sale, sell, have sold, import or otherwise exploit the Harvard/Broad Patent Rights and licensed products as researchproducts or research tools, or for research purposes. In addition, Broad does not and does not purport to grant any rights inRockefeller’s interest in the patent applications licensed to us by Broad (including a continuation of one of theseapplications) that include Rockefeller as a joint applicant. We have the right to sublicense our licensed rights provided that the sublicense agreement must be in complianceand consistent with the terms of the license agreement. Any sublicense agreement cannot include the right to grant furthersublicenses without the written consent of Broad and Harvard. In addition, any sublicense agreements must contain certainterms, including a provision requiring the sublicensee to indemnify Harvard, Broad, MIT, and Howard Hughes MedicalInstitute according to the same terms as are provided in our license agreement and a statement that Broad, Harvard, MIT, andHoward Hughes Medical Institute are intended third party beneficiaries of the sublicense agreement for certain purposes. Under the agreement, Harvard and Broad also retained rights to grant further licenses under specified circumstancesto third parties, other than specified entities, that wish to develop and commercialize products that target a particular geneand that otherwise would fall within the scope of our exclusive license from Harvard and Broad. If, after a specified period oftime, a third party requests a license under the Harvard/Broad Patent Rights for the development and commercialization of aproduct that would be subject to our exclusive license grant from Harvard and Broad, Harvard and Broad may notify us of therequest. We refer to these requests as Third Party Proposed Product Requests. A Third Party Proposed Product Request mustbe accompanied by a research, development and commercialization plan reasonably satisfactory to Harvard and Broad,including evidence that the third party has, or reasonably expects to have, access to any necessary intellectual property andfunding. Harvard and Broad may not grant a Third Party Proposed Product Request if our collaborators or we are researching,developing, or commercializing a product directed to the same gene target as the product that is the subject of the Third PartyProposed Product Request. If we, directly or through any of our affiliates or sublicensees, are not researching, developing orcommercializing a product directed to the same gene target that is the subject of the Third Party Proposed Product Request,which we refer to as a Licensee Product, and we wish to do so either alone or with a collaboration partner, Harvard and Broadmay not grant the Third Party Proposed Product Request if we can demonstrate to Harvard and Broad’s reasonablesatisfaction that we are interested in researching, developing, and commercializing a Licensee Product, that we have acommercially reasonable research, development, and commercialization plan to do so, and we commence and continuereasonable commercial efforts under the plan. If our collaborators and we are neither researching, developing orcommercializing a Licensee Product nor able to develop and implement a plan reasonably satisfactory to Harvard and Broad,Harvard and Broad may grant a license to the third party on a gene target‑by‑gene target basis. If the license granted to thethird party is exclusive, it shall be on milestone and royalty terms that taken as a whole are no more favorable to the thirdparty than those provided in our license agreement and shall require such third party to use commercially reasonable effortsto implement the research, development and commercialization plan submitted by the third party to Harvard and Broad. Under the license agreement, we paid Broad and Harvard an upfront license fee in the low six figures and issued asingle‑digit percentage of shares of our common stock to Broad (with Broad holding a right to request re‑issuance to itsdesignees, including MIT or MIT’s designee) and Harvard. We also must pay an annual license maintenance fee ranging fromthe low‑ to mid‑five figures to the low‑six figures, depending on the calendar year, beginning in 2016. This annual40 Table of Contentslicense maintenance fee is creditable against royalties owed on products and services in the same year as the maintenance feeis paid. We are obligated to reimburse Broad and Harvard for expenses associated with the prosecution and maintenance ofthe Harvard/Broad Patent Rights, including expenses associated with any interference proceedings in the USPTO, anyopposition proceedings in the European Patent Office, or EPO, or any other inter partes or other post grant proceedings inthese or other jurisdictions where we are seeking patent protection. Therefore, we are obligated to reimburse Broad and/orHarvard for expenses associated with the interference and opposition proceedings involving patents licensed to us under thisagreement (described in more detail in “Item 3. Legal Proceedings”). Broad and Harvard are collectively entitled to receive clinical and regulatory milestone payments totaling up to$14.8 million in the aggregate per licensed product approved in the United States, European Union and Japan for theprevention or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the UnitedStates. If we undergo a change of control during the term of the license agreement, these clinical and regulatory milestonepayments will be increased by a certain percentage in the mid double‑digits. We are also obligated to make additionalpayments to Broad and Harvard, collectively, of up to an aggregate of $54.0 million upon the occurrence of certain salesmilestones per licensed product for the prevention or treatment of a human disease that afflicts at least a specified number ofpatients in the aggregate in the United States. Broad and Harvard are collectively entitled to receive clinical and regulatorymilestone payments totaling up to $4.1 million in the aggregate per licensed product approved in the United States and atleast one jurisdiction outside the United States for the prevention or treatment of a human disease that afflicts fewer than aspecified number of patients in the aggregate in the United States or a specified number of patients per year in the UnitedStates, which we refer to as an ultra‑orphan disease. We are also obligated to make additional payments to Broad andHarvard, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones per licensedproduct for the prevention or treatment of an ultra‑orphan disease. Broad and Harvard, collectively, are entitled to receive mid single‑digit percentage royalties on net sales of productsfor the prevention or treatment of human disease, and ranging from low single‑digit to high single‑digit percentage royaltieson net sales of other products and services, made by us, our affiliates, or our sublicensees. The royalty percentage depends onthe product and service, and whether such licensed product or licensed service is covered by a valid claim within theHarvard/Broad Patent Rights. If we are legally required to pay royalties to a Third Party on net sales of our products becausesuch third party holds patent rights that cover such licensed product, then we can credit up to a mid double‑digit percentageof the amount paid to such third party against the royalties due to Harvard and Broad in the same period. Our obligation topay royalties will expire on a product‑by‑product and country‑by‑country basis upon the later of the expiration of the last toexpire valid claim of the Harvard/Broad Patent Rights that cover the composition, manufacture, or use of each coveredproduct or service in each country or the tenth anniversary of the date of the first commercial sale of the product or service. Ifwe sublicense any of the Harvard/Broad Patent Rights to a third party pursuant to our exclusive license under the licenseagreement, Broad and Harvard, collectively, have the right to receive a low double‑digit percentage of the sublicenseincome, which percentage decreases to a high single‑digit percentage for products for the prevention or treatment of humandisease under sublicenses executed after we meet certain clinical milestones. Broad and Harvard retain control of the prosecution of their respective patent rights. If an interference is declared ora derivation proceeding is initiated, with respect to any Harvard/Broad Patent Rights, then our prosecution related rights,including our right to receive correspondence from a patent office, will be suspended with respect to the patent rightsinvolved in the interference or derivation proceeding until, under some circumstances, we enter into a common interestagreement with that institution. Nevertheless, we remain responsible for the cost of such interference or derivationproceeding. On January 11, 2016, the PTAB declared an interference between a pending U.S. patent application (U.S. SerialNo. 13/842,859) that is owned by the University of California, the University of Vienna, and Emmanuelle Charpentier and 12U.S. patents (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406; 8,871,445; 8,889,356; 8,895,308; 8,906,616;8,932,814; 8,945,839; 8,993,233; and 8,999,641) that are co‑owned by Broad and MIT, and in some cases Harvard, andin‑licensed by us under this license agreement. On March 17, 2016, the PTAB re-declared the interference to add a pendingU.S. patent application (U.S. Serial No. 14/704,551) that is co-owned by Broad, MIT, and Harvard, and also in-licensed by usunder this license agreement. We will be responsible for the cost of the interference proceeding with respect to these patentsand this patent application. Broad and Harvard are required to maintain any application or patent within the Harvard/BroadPatents Rights so long as we meet our obligation to reimburse Broad and Harvard for expenses related to prosecution andthere is a good faith basis for doing so. If we cease41 Table of Contentspayment for the prosecution of any Harvard/Broad Patent Right, then any license granted to us with respect to suchHarvard/Broad Patent Right will terminate. We have the first right, but not the obligation, to enforce the Harvard/Broad Patent Rights with respect to ourlicensed products so long as certain conditions are met, such as providing Broad and Harvard with evidence demonstrating agood faith basis for bringing suit against a third party. We are solely responsible for the costs of any lawsuits we elect toinitiate and cannot enter into a settlement without the prior written consent of Broad and Harvard (and MIT if applicable).Any sums recovered in such lawsuits will be shared between us, Broad, and Harvard. Unless terminated earlier, the term of the license agreement will expire on a country‑by‑country basis, upon theexpiration of the last to expire valid claim of the Harvard/Broad Patent Rights in such country. However, our royaltyobligations, discussed above, may survive expiration or termination. We have the right to terminate the agreement at willupon four months’ written notice to Broad and Harvard. Broad and Harvard may terminate the agreement upon a specifiedperiod of notice in the event of our uncured material breach, such notice period varying depending on the nature of thebreach. Both Broad and Harvard may terminate the license agreement immediately if we challenge the enforceability,validity, or scope of any Harvard/Broad Patent Right or assist a third party to do so, or in the event of our bankruptcy orinsolvency. Neither Broad nor Harvard acting alone has the right to terminate the license agreement. However, Broad andHarvard may separately terminate the licenses granted to us with respect to their respective patent rights upon the occurrenceof the same events that would give rise to the right of both institutions acting collectively to terminate the license agreement. The General Hospital Corporation License Agreement In August 2014, we entered into a license agreement with The General Hospital Corporation, d/b/a MassachusettsGeneral Hospital, or MGH, for specified patent rights, which we refer to as the MGH Patent Rights, and specified know‑howand biological materials. The MGH Patent Rights are directed, in part, to CRISPR/Cas9 and TALE‑related compositions ofmatter and their use for genome editing. Pursuant to the license agreement, and as of February 29, 2016, we have certainrights under 11 pending U.S. patent applications, eight pending European patent applications, one pending PCT application,and other related patent applications in jurisdictions outside of the United States and Europe. Pursuant to the license agreement, MGH granted us an exclusive, worldwide, royalty‑bearing, sublicensable licenseto the MGH Patent Rights, to make, have made, use, have used, sell, offer for sale, and import products and processes in thefields of the prevention or treatment of human or animal disease and agriculture, which includes plants and animals bred andraised for human consumption. We refer to these fields as the exclusive license field. Products and processes used for clinicaldiagnostic assays, and the research, development and sale of research tools, kits, and reagents in the field of agriculture arespecifically excluded from our exclusive license to the MGH Patent Rights. MGH also granted us a non‑exclusive,worldwide, royalty‑bearing, sublicensable license to the MGH Patent Rights to make, have made, use, have used, sell, offerfor sale, and import products and processes in substantially all fields other than the exclusive license field. Products andprocesses used for clinical diagnostic assays are specifically excluded from our non‑exclusive license to the MGH PatentRights. In addition, MGH granted us a non‑exclusive, worldwide, royalty‑bearing sublicensable license under specified MGHknow‑how and biological materials to make, have made, use, have used, sell, offer for sale, and import products and processesin all fields, except for products and processes used for clinical diagnostic assays. The licenses granted to us by MGH underthe license agreement are subject to any retained rights of the U.S. government in the MGH Patent Rights and a royalty‑freeright of MGH, academic, and not‑for‑profit institutions, to practice the MGH Patent Rights for educational, research, andclinical purposes. We are obligated to use commercially reasonable efforts to research, develop, and commercialize products andprocesses in the exclusive license field and outside the exclusive license field under the license agreement. Also, we arerequired to achieve certain development milestones within specified time periods for products and processes in the exclusivelicense field and outside the exclusive license field. MGH has the right to terminate our license if we fail to achieve thesedevelopment milestones. 42 Table of ContentsUnder the license agreement, we paid MGH an upfront license fee in the low six digit dollar amount and issued lessthan one percent of our common stock to MGH. We also must pay an annual license maintenance fee ranging from low‑ tomid‑five digit dollar amount, depending on the calendar year, beginning in 2017. We are obligated to reimburse MGH forexpenses associated with the prosecution and maintenance of the MGH Patent Rights, including expenses associated withany interference proceedings in the USPTO, any opposition proceedings in the EPO, or any other inter partes or other postgrant proceedings in these or other jurisdictions where we are seeking patent protection. MGH is entitled to receive clinical, regulatory, and commercial milestone payments totaling up to $1.4 million inthe aggregate for the first licensed product or process, clinical, and regulatory milestone payments totaling up to $125,000 inthe aggregate for each of the second, third, and fourth indications for which we conduct clinical trials of a licensed product orprocess and commercial milestone payments totaling up to $625,000 in the aggregate for each of the second, third, andfourth licensed products or process we introduce into the market. We are obligated to make additional payments to MGH ofup to an aggregate of $1.8 million upon the occurrence of certain sales milestones. We are also obligated to pay MGH low single‑digit percentage royalties on net sales of products for the preventionor treatment of human disease, and ranging from low single‑digit to low double‑digit percentage royalties on net sales ofother products and services made by us, our affiliates, or our sublicensees. The royalty percentage depends on the productand service, and whether such licensed product or licensed service is covered by a valid claim within the MGH Patent Rights.If we pay royalties to a third party on net sales of our products, then we can credit up to a mid double‑digit percentage of theamount paid to such third party against the royalties due to MGH. Our obligation to pay royalties will expire on aproduct‑by‑product and country‑by‑country basis upon the later of the expiration of the last to expire valid claim of theMGH Patent Rights that cover the composition, manufacture or use of each covered product or service in each country or thetenth anniversary of the date of the first commercial sale of the product or service. If we sublicense any of the MGH PatentRights or know‑how or materials licensed under the license agreement to a third party in the exclusive license field, MGH hasthe right to receive a low double‑digit percentage of the sublicense income, which percentage decreases to a high single‑digitpercentage after a specified period of time. If we sublicense any of the MGH Patent Rights or know‑how or materials licensedunder the license agreement to a third party in the field of research products or processes, MGH has the right to receive a highdouble‑digit percentage of the sublicense income. If we sublicense any of the MGH Patent Rights or know‑how or materialslicensed under the license agreement to a third party in any field outside the exclusive license field and outside the field ofresearch products or processes, MGH has the right to receive a low double‑digit percentage of the sublicense income. MGH retains control of the prosecution and maintenance of the MGH Patent Rights. We have the right to provideinput in the prosecution of the MGH Patent Rights, including directing MGH to file and prosecute patents in certaincountries. MGH controls the enforcement of the MGH Patent Rights, except for the enforcement of the rights exclusivelylicensed to us, which we control at our expense. We may not enter into any settlement without the prior written consent ofMGH. We also retain the first right to defend against any legal or administrative action taken by a third party against anMGH Patent Right at our own costs. Unless terminated earlier, the term of the license agreement will expire, on a country‑by‑country basis, upon theexpiration or abandonment of all MGH Patent Rights in such country. However, our royalty obligations, discussed above,may survive expiration or termination. We have the right to terminate the license agreement at will upon 90 days’ writtennotice to MGH. MGH may terminate the license agreement upon a specified period of written notice in the event of ouruncured material breach, such notice period varying depending on the nature of the breach. MGH also may terminate thelicense agreement immediately if we challenge the enforceability, validity, or scope of any MGH Patent Right or assist athird party to do so, or in the event of our bankruptcy or insolvency. Duke University License Agreement In October 2014, we entered into a license agreement with Duke University, or Duke, for specified patent rights,which we refer to as the Duke Patent Rights, and specified know‑how. The Duke Patent Rights are directed, in part, togenome editing approaches, including CRISPR/Cas9 and TALEN approaches, for treating Duchenne muscular dystrophy.Pursuant to this license agreement, and as of February 29, 2016, we have certain rights under three pending43 Table of ContentsU.S. patent applications, two pending European patent applications, and other related patent applications in jurisdictionsoutside of the United States and Europe. Pursuant to the license agreement, Duke granted us an exclusive, worldwide, royalty‑bearing, sublicensable licenseto the Duke Patent Rights, to make, have made, use, have used, sell, offer for sale, and import products and services in thefield of the prevention or treatment of human disease. Research reagents are specifically excluded from our exclusive licenseto the Duke Patent Rights. Duke also granted us a non‑exclusive and non‑sublicensable license to the Duke Patent Rights forinternal research in any field, including the research reagent field. In addition, Duke granted us a non‑exclusive, worldwide,royalty‑bearing sublicensable license under specified Duke know‑how to make, have made, use, have used, sell, offer for sale,and import products and processes in field of the prevention or treatment of human disease and specifically excluding theresearch reagent field. The licenses granted to us by Duke under the license agreement are subject to any retained rights ofthe U.S. government in the Duke Patent Rights and a royalty‑free right of Duke to practice or license the Duke Patent Rightsfor educational, research, and clinical purposes, including the right to provide licenses to governmental laboratories andother non‑profit or not‑for‑profit institutions for non‑commercial academic research purposes or other non‑commercial,not‑for‑profit scholarly purposes. We are obligated to use commercially reasonable efforts to research, develop, and commercialize products andservices in the field of the prevention or treatment of human disease. Also, we are required to achieve certain developmentmilestones within specified time periods for products for the treatment of Duchenne muscular dystrophy and for otherproducts in the field of the prevention or treatment of human disease. Duke has the right to terminate our license if we fail toachieve these development milestones. Pursuant to the license agreement, we paid Duke an upfront license fee in the high five digits. We also must pay anannual license maintenance fee ranging from mid‑four digit to low‑five digit dollar amount, depending on the calendar year,beginning in 2015. We are obligated to reimburse Duke for expenses associated with the prosecution and maintenance of theDuke Patent Rights. Duke is entitled to receive clinical, regulatory, and commercial milestone payments totaling up to $625,000 in theaggregate per licensed product. We are also obligated to pay to Duke low single‑digit percentage royalties based on annualnet sales of licensed products and licensed services by us and our affiliates and sublicensees. If we pay royalties to a thirdparty on net sales of a licensed product and the aggregate royalties on the net sales of the licensed product payable to all ofour licensors exceeds a specified threshold, then we can credit up to a mid double‑digit percentage of the amount paid tosuch third party against the royalties due to Duke, subject to a limitation on the amounts we may offset against ourobligations to Duke that is determined with regard to the pro rata amount of the total royalties payable by us on net sales ofthe licensed product that are royalties payable to Duke. Our obligation to pay royalties will expire on a product‑by‑productand country‑by‑country basis upon the later of the expiration of the last to expire valid claim of the Duke Patent Rights thatcover the composition, manufacture or use of each covered product or service in each country or the tenth anniversary of thedate of the first commercial sale of the product or service. If we sublicense any of the Duke Patent Rights to a third party,Duke has the right to receive a low double‑digit percentage of the sublicense income, the percentage of which decreases afterwe meet certain pre‑clinical milestones. To the extent that such sublicense includes a sublicense of rights granted us to fromparties other than Duke, we are entitled to assess the relative contributions of the rights licensed under the applicableagreement and apportion to Duke a lower percentage that reflects the portion of the sublicense income attributable to theDuke Patent Rights. In addition, to the extent that our collaboration and license agreement with Juno Therapeutics continuesto provide for a sublicense to Juno Therapeutics of the Duke Patent Rights, we have agreed to apportion to Duke no less thana low‑single‑digit percentage of future non‑royalty sublicense income that we receive under the agreement. Duke controls the prosecution and maintenance of the Duke Patent Rights and will prosecute and maintain the DukePatent Rights in the United States and in specified foreign countries. We can amend the specified foreign countries to includeany jurisdictions we desire to add. If a third party alleges infringement against Duke or us as a result of our or oursublicensee’s practice of the Duke Patent Rights or know‑how licensed to us under the license agreement, then we willcontrol the litigation and have the obligation to assume all costs. We further have the first right, but not the obligation, toenforce the Duke Patent Rights at our own expense. In the event a third party brings a declaratory44 Table of Contentsjudgment action or any other action or defense alleging invalidity of the Duke Patent Rights, then Duke has the right, but notthe obligation, to intervene and control the defense of the action at Duke’s own expense. Unless terminated earlier, the term of the license agreement will expire upon on a country‑by‑country basis, uponthe expiration of the last to expire of the Duke Patent Rights in such country. However, our royalty obligations, discussedabove, may survive expiration or termination. We have the right to terminate the license agreement at will upon at least twomonths’ written notice to Duke. Duke may terminate the license agreement upon a specified period of written notice in theevent of our uncured material breach, such notice period varying depending on the nature of the breach. Duke also mayterminate the license agreement upon a specified period of written notice if we challenge the enforceability, validity, orscope of any Duke Patent Right or assist a third party to do so. Duke may terminate the license agreement immediately forour fraud, willful misconduct, or illegal conduct. The license agreement will terminate immediately in the event of ourbankruptcy or insolvency. Manufacturing We currently contract with third parties for the manufacturing of our materials for preclinical studies and expect todo so for our planned clinical trials. We do not own or operate manufacturing facilities for the production of our programmaterials. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. The use ofcontracted manufacturing and reliance on collaboration partners is relatively cost‑efficient and has eliminated the need forour direct investment in manufacturing facilities and additional staff early in development. Although we rely on contractmanufacturers, we have personnel with manufacturing experience to oversee our contract manufacturers. To date, our third‑party manufacturers have met our manufacturing requirements. We expect third‑partymanufacturers to be capable of providing sufficient quantities of our program materials to meet anticipated clinical‑trial scaledemands. To meet our projected needs for commercial manufacturing, third parties with whom we currently work might needto increase their scale of production or we will need to secure alternate suppliers. We believe that there are alternate sourcesof supply that can satisfy our clinical and commercial requirements, although we cannot be certain that identifying andestablishing relationships with such sources, if necessary, would not result in significant delay or material additional costs. Commercialization We currently intend to build the commercial infrastructure in the United States and Europe necessary to effectivelysupport the commercialization of all of our programs, if and when we first believe a regulatory approval of a productcandidate under one of our programs in a particular geographic market appears probable. The commercial infrastructure fororphan products typically consists of a targeted, specialty sales force that calls on a limited and focused group of physicianssupported by sales management, medical liaisons, internal sales support, an internal marketing group, and distributionsupport. Additional capabilities important to the orphan marketplace include the management of key accounts such asmanaged care organizations, group purchasing organizations, specialty pharmacies, and government accounts. To developthe appropriate commercial infrastructure, we will have to invest significant amounts of financial and management resources,some of which will be committed prior to any confirmation that any product candidate we may develop will be approved. 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 considerbuilding our own commercial infrastructure. As product candidates advance through our pipeline, our commercial plans may change. In particular, some of ourresearch programs target potentially larger indications. Data, the size of the development programs, the size of the targetmarket, 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. 45 Table of ContentsGovernment Regulation Government authorities in the United States, at the federal, state and local level, and in other countries andjurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing,manufacture, pricing, 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. The processes for obtaining marketing approvals in the United States and in foreign countriesand jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatoryauthorities, require the expenditure of substantial time and financial resources. Licensure and Regulation of Biologics in the United States In the United States, our candidate products would be regulated as biological products, or biologics, under thePublic Health Service Act, or PHSA, and the Federal Food, Drug and Cosmetic Act, or FDCA, and its implementingregulations and guidances. The failure to comply with the applicable U.S. requirements at any time during the productdevelopment process, including non‑clinical testing, clinical testing, the approval process or post‑approval process, maysubject an applicant to delays in the conduct of the study, regulatory review and approval, and/or administrative or judicialsanctions. These sanctions may include, but are not limited to, the U.S. Food and Drug Administration’s, or FDA’s, refusal toallow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension, orrevocation, withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partialsuspension of production or distribution, injunctions, fines, and civil or criminal investigations and penalties brought by theFDA or the Department of Justice, or DOJ, or other governmental entities. An applicant seeking approval to market and distribute a new biologic in the United States generally mustsatisfactorily complete each of the following steps: ·preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the FDA’sGood Laboratory Practice, or GLP, regulations; ·submission to the FDA of an investigational new drug, or IND, application for human clinical testing, whichmust become effective before human clinical trials may begin; ·approval by an independent institutional review board, or IRB, representing each clinical site before eachclinical trial may be initiated; ·performance of adequate and well‑controlled human clinical trials to establish the safety, potency, and purity ofthe product candidate for each proposed indication, in accordance with current Good Clinical Practices, or GCP; ·preparation and submission to the FDA of a Biologic License Application, or BLA, for a biologic productrequesting marketing for one or more proposed indications, including submission of detailed information on themanufacture and composition of the product in clinical development and proposed labelling; ·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, includingthose of third parties, at which the product, or components thereof, are produced to assess compliance withcurrent Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods, andcontrols are adequate to preserve the product’s identity, strength, quality, and purity, and, if applicable, theFDA’s current good tissue practice, or GTP, for the use of human cellular and tissue products; ·satisfactory completion of any FDA audits of the non‑clinical and clinical trial sites to assure compliance withGCPs and the integrity of clinical data in support of the BLA; 46 Table of Contents·payment of user fees and securing FDA approval of the BLA and licensure of the new biologic product; and ·compliance with any post‑approval requirements, including the potential requirement to implement a RiskEvaluation and Mitigation Strategy, or REMS, and any post‑approval studies required by the FDA. Preclinical Studies and Investigational New Drug Application Before testing any biologic product candidate in humans, including a gene therapy product candidate, the productcandidate must undergo preclinical testing. Preclinical tests include laboratory evaluations of product chemistry, formulationand stability, as well as studies to evaluate the potential for efficacy and toxicity in animal studies. The conduct of thepreclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. Theresults of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as partof an Investigational New Drug, or IND, application. The IND automatically becomes effective 30 days after receipt by theFDA, unless before that time the FDA raises concerns or questions about the product or conduct of the proposed clinical trial,including concerns that human research subjects will be exposed to unreasonable health risks. In that case, the IND sponsorand 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 allowing the trial tocommence on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either duringthis initial 30‑day period, or at any time during the IND process, it may choose to impose a partial or complete clinical hold.This order issued by the FDA would delay either a proposed clinical study or cause suspension of an ongoing study, until alloutstanding concerns have been adequately addressed and the FDA has notified the company that investigations mayproceed. This could cause significant delays or difficulties in completing planned clinical studies in a timely manner. With gene therapy protocols, if the FDA allows the IND to proceed, but the Recombinant DNA Advisory Committee,or RAC, of the National Institute of Health, or NIH, decides that full public review of the protocol is warranted, the FDA willrequest at the completion of its IND review that sponsors delay initiation of the protocol until after completion of the RACreview process. The FDA also may impose clinical holds on a biologic product candidate at any time before or duringclinical trials due to safety concerns or non‑compliance. If the FDA imposes a clinical hold, trials may not recommencewithout FDA authorization and then only under terms authorized by the FDA. Human Clinical Trials in Support of a BLA Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patientswith the disease to be treated under the supervision of a qualified principal investigator in accordance with GCPrequirements. 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 any 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 FDAauthorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsormay submit data from the clinical trial to the FDA in support of the BLA so long as the clinical trial is conducted incompliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinkiand/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides thegreater protection to the participants in the clinical trial. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB,either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider, amongother things, clinical trial design, patient informed consent, ethical factors, the safety of human subjects, and the possibleliability of the institution. An IRB must operate in compliance with FDA regulations. The FDA, IRB, or the47 Table of Contentsclinical trial sponsor may suspend or discontinue a clinical trial at any time for various reasons, including a finding that theclinical trial is not being conducted in accordance with FDA requirements or the subjects or patients are being exposed to anunacceptable health risk. 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 trialsponsor, known as a data safety monitoring board or committee. This group may recommend continuation of the study asplanned, changes in study conduct, or cessation of the study at designated check points based on access to certain data fromthe study. Finally, research activities involving infectious agents, hazardous chemicals, recombinant DNA, and geneticallyaltered organisms and agents may be subject to review and approval of an Institutional Biosafety Committee in accordancewith NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined.Additional studies may be required after approval. ·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, andpharmacodynamics 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 adverseeffects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications anddetermine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsorto obtain information prior to beginning larger and more costly Phase 3 clinical trials. ·Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the productcandidate is potentially effective and has an acceptable safety profile. Phase 3 clinical trials are undertakenwithin an expanded patient population to further evaluate dosage, provide substantial evidence of clinicalefficacy, and further test for safety in an expanded and diverse patient population at multiple, geographicallydispersed clinical trial sites. A well‑controlled, statistically robust Phase 3 trial may be designed to deliver thedata that regulatory authorities will use to decide whether or not to approve, and, if approved, how toappropriately label a biologic; such Phase 3 studies are referred to as “pivotal.” In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additionalclinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post‑approval trials aretypically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment ofpatients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved underaccelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were notnecessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4clinical trial requirement or to request a change in the product labeling. Failure to exhibit due diligence with regard toconducting Phase 4 clinical trials could result in withdrawal of approval for products. Special Regulations and Guidance Governing Gene Therapy Products It is possible that the procedures and standards applied to gene therapy products and cell therapy products may beapplied to any CRISPR/Cas9 product candidates we may develop, but that remains uncertain at this point. The FDA hasdefined a gene therapy product as one that mediates its effects by transcription and/or translation of transferred geneticmaterial and/or by integrating into the host genome and which are administered as nucleic acids, viruses, or geneticallyengineered microorganisms. The products may be used to modify cells in vivo or transferred to cells ex vivo prior toadministration to the recipient. Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates genetherapy products. Within the CBER, the review of gene therapy and related products is consolidated in the Office of Cellular,Tissue and Gene Therapies, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee toadvise CBER on its reviews. The CBER works closely with the NIH and the RAC, which makes recommendations to the NIHon gene therapy issues and engages in a public discussion of scientific, safety, ethical, and societal issues related to proposedand ongoing gene therapy protocols. The FDA and the NIH have published guidance documents with respect to thedevelopment and submission of gene therapy protocols. The FDA also has published48 Table of Contentsguidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observingsubjects involved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturing, andcontrol information in gene therapy INDs. In addition to the foregoing, products classified as gene therapies are subject to additional regulation. The FDA hasissued various guidance documents regarding gene therapies. Although the FDA has indicated that these guidancedocuments are not legally binding, we believe that our compliance with them is likely necessary to gain approval for anyproduct candidate we may develop. The guidance documents provide additional factors that the FDA will consider at each ofthe above stages of development and relate to, among other things, the proper preclinical assessment of gene therapies; thechemistry, manufacturing, and control information that should be included in an IND application; the proper design of teststo measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects insubjects who have been exposed to investigational gene therapies when the risk of such effects is high. Further, the FDAusually recommends that sponsors observe subjects for potential gene therapy‑related delayed adverse events for a 15‑yearperiod, including a minimum of five years of annual examinations followed by 10 years of annual queries, either in person orby questionnaire. If a gene therapy trial is conducted at, or sponsored by, institutions receiving the NIH funding for recombinant DNAresearch, a protocol and related documentation must submitted to, and the study registered with, the NIH Office ofBiotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Moleculesprior to the submission of an IND to the FDA. In addition, many companies and other institutions not otherwise subject to theNIH Guidelines voluntarily follow them. The NIH will convene the Recombinant DNA Advisory Committee, or RAC, afederal advisory committee, to discuss protocols that raise novel or particularly important scientific, safety or ethicalconsiderations at one of its quarterly public meetings. The OBA will notify the FDA of the RAC’s decision regarding thenecessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA web site andmay be accessed by the public. Finally, to facilitate adverse event reporting and dissemination of additional information about gene therapy trials,the FDA and the NIH established the Genetic Modification Clinical Research Information System, or GeMCRIS.Investigators and sponsors of a human gene transfer trials can utilize this web‑based system to report serious adverse eventsand annual reports. GeMCRIS also allows members of the public to access basic reports about human gene transfer trialsregistered with the NIH and to search for information such as trial location, the names of investigators conducting trials, andthe names of gene transfer products being studied. Compliance with cGMP and GTP 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 fullcompliance with cGMP requirements and adequate to assure consistent production of the product within requiredspecifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance withGTP. These standards are found in FDA regulations and guidances that govern the methods used in, and the facilities andcontrols used for, the manufacture of human cells, tissues, and cellular and tissue based products, or HCT/Ps, which arehuman cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent ofthe GTP requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent theintroduction, transmission, and spread of communicable disease. FDA regulations also require tissue establishments toregister 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 must also register theirestablishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments mustregister and provide additional information to the FDA upon their initial participation in the manufacturing process. Anyproduct manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed49 Table of Contentsmisbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authoritiesto ensure compliance with cGMPs and other laws. Inspections must follow a “risk‑based schedule” that may result in certainestablishments being inspected more frequently. Manufacturers may also have to provide, on request, electronic or physicalrecords regarding their establishments. Delaying, denying, limiting, or refusing inspection by the FDA may lead to a productbeing deemed to be adulterated. Review and Approval of a BLA The results of product candidate development, preclinical testing, and clinical trials, including negative orambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting license to market theproduct. The BLA must contain extensive manufacturing information and detailed information on the composition of theproduct 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 issufficient to accept for filing based on the agency’s threshold determination that it is sufficiently complete to permitsubstantive 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 tenmonths in which to complete its initial review of a standard application and respond to the applicant, and six months for apriority review of the application. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. Thereview process may often be significantly extended by FDA requests for additional information or clarification. The reviewprocess and the PDUFA goal date may be extended by three months if the FDA requests or if the applicant otherwise providesadditional information or clarification regarding information already provided in the submission within the last three monthsbefore 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 thefacility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure, andpotent. On the basis of the FDA’s evaluation of the application and accompanying information, including the results of theinspection of the manufacturing facilities and any FDA audits of non‑clinical and clinical trial sites to assure compliancewith GCPs, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercialmarketing of the product with specific prescribing information for specific indications. If the application is not approved, theFDA will issue a complete response letter, which will contain the conditions that must be met in order to secure finalapproval of the application, and when possible will outline recommended actions the sponsor might take to obtain approvalof the application. Sponsors that receive a complete response letter may submit to the FDA information that represents acomplete response to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 orClass 2. The classification of a resubmission is based on the information submitted by an applicant in response to an actionletter. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has two months to review a Class 1resubmission and six months to review a Class 2 resubmission. The FDA will not approve an application until issuesidentified in the complete response letter have been addressed. The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as towhether the application should be approved. In particular, the FDA may refer applications for novel biologic products orbiologic products that present difficult questions of safety or efficacy to an advisory committee. Typically, an advisorycommittee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates, andprovides a recommendation as to whether the application should be approved and under what conditions. The FDA is notbound by the recommendations of an advisory committee, but it considers such recommendations carefully when makingdecisions. If the FDA approves a new product, it may limit the approved indications for use of the product. It may also requirethat contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call forpost‑approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency mayalso require testing and surveillance programs to monitor the product after commercialization, or impose other conditions,including distribution restrictions or other risk management mechanisms, including REMS, to help50 Table of Contentsensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communicationplans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to,special training or certification for prescribing or dispensing, dispensing only under certain circumstances, specialmonitoring, and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the resultsof post‑market studies or surveillance programs. After approval, many types of changes to the approved product, such asadding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirementsand FDA review and approval. Fast Track, Breakthrough Therapy and Priority Review Designations The FDA is authorized to designate certain products for expedited review if they are intended to address an unmetmedical need in the treatment of a serious or life‑threatening disease or condition. These programs are referred to as fast trackdesignation, breakthrough therapy designation, and priority review designation. Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combinationwith one or more other products, for the treatment of a serious or life‑threatening disease or condition, and it demonstrates thepotential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greaterinteractions with the FDA and the FDA may initiate review of sections of a fast track product’s application before theapplication is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinicaldata submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA mustapprove, 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 issubmitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is nolonger supported by data emerging in the clinical trial process. Second, in 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. Thislaw established a new 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 moreother products, to treat a serious or life‑threatening disease or condition and preliminary clinical evidence indicates that theproduct 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 respectto breakthrough therapies, including holding meetings with the sponsor throughout the development process; providingtimely 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 anefficient manner. Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, ifapproved, 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 product reaction, documented enhancement of patientcompliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a newsubpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of suchapplications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months. Accelerated Approval Pathway The FDA may grant accelerated approval to a product for a serious or life‑threatening condition that providesmeaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has aneffect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant acceleratedapproval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measuredearlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMMor other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability51 Table of Contentsor lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety andeffectiveness 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 ofclinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. Anintermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict theclinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based onintermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where thetherapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basisfor concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product. The accelerated approval pathway is most often used in settings in which the course of a disease is long and anextended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate orintermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development andapproval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival ordecrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate aclinical 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. As a result, a productcandidate approved on this basis is subject to rigorous post‑marketing compliance requirements, including the completion ofPhase 4 or post‑approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct requiredpost‑approval studies, or confirm a clinical benefit during post‑marketing studies, would allow the FDA to withdraw theproduct from the market on an expedited basis. All promotional materials for product candidates approved under acceleratedregulations 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 sponsorwill be required to comply with all regular post‑approval regulatory requirements as well as any post‑approval requirementsthat the FDA have imposed as part of the approval process. The sponsor will be required to report certain adverse reactionsand production problems to the FDA, provide updated safety and efficacy information and comply with requirementsconcerning advertising and promotional labeling requirements. Manufacturers and certain of their subcontractors arerequired to register their establishments with the FDA and certain state agencies, and are subject to periodic unannouncedinspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMPregulations, which impose certain procedural and documentation requirements upon manufacturers. Accordingly, the sponsorand its third‑party manufacturers must continue to expend time, money, and effort in the areas of production and qualitycontrol 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 certaintests on each lot of the product before it is released for distribution. If the product is subject to official lot release, themanufacturer must submit samples of each lot, together with a release protocol showing a summary of the history ofmanufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, theFDA 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 andstandards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknownproblems 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 approved52 Table of Contentslabeling to add new safety information; imposition of post‑market studies or clinical trials to assess new safety risks; orimposition of distribution or other restrictions under a REMS program. Other potential consequences include, among otherthings: ·restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from themarket or product recalls; ·fines, warning letters or holds on post‑approval clinical trials; ·refusal of the FDA to approve pending applications or supplements to approved applications, or suspension orrevocation 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 products that are placed on the market.Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of theapproved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑labeluses, 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 forrare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affectsfewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and forwhich there is no reasonable expectation that the cost of developing and making available the biologic for the disease orcondition 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 thedate of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can bemade any time prior to the filing of an application for approval to market the product. A product becomes an orphan when itreceives orphan drug designation from the Office of Orphan Products Development, or OOPD, at the FDA based onacceptable confidential requests made under the regulatory provisions. The product must then go through the review andapproval process like any other product. A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for analready marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approvedorphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or conditionif it can present a plausible hypothesis that its product may be clinically superior to the first drug. More than one sponsormay receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seekingorphan 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 appliesonly to the indication for which the product has been designated. The FDA may approve a second application for the sameproduct for a different use or a second application for a clinically superior version of the product for the same use. The FDAcannot, however, approve the same product made by another manufacturer for the same indication during the marketexclusivity 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, a BLA or supplement thereto must contain data that are adequateto assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric53 Table of Contentssubpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe andeffective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outlineof the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferralor waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal reviewcommittee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or theapplicant 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 allpediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric datarequirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals arecontained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply to products withorphan designation. 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 regulatoryexclusivity, including the non‑patent and orphan exclusivity. This six‑month exclusivity may be granted if a BLA sponsorsubmits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show theproduct to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’srequest, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by theFDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover theproduct are extended by six months. This is not a patent term extension, but it effectively extends the regulatory periodduring which the FDA cannot approve another application. Biosimilars and Exclusivity The 2010 Patient Protection and Affordable Care Act, which was signed into law in March 2010, included a subtitlecalled the Biologics Price Competition and Innovation Act of 2009 or BPCIA. The BPCIA established a regulatory schemeauthorizing the FDA to approve biosimilars and interchangeable biosimilars. To date, one biosimilar product has beenapproved by the FDA for use in the United States. No interchangeable biosimilars, however, have been approved. The FDAhas issued several guidance documents outlining an approach to review and approval of biosimilars. Additional guidancesare expected to be finalized by the FDA in the near term. Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilarto” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA toapprove a biosimilar product, it must find that there are no clinically meaningful differences between the reference productand proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar product asinterchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce thesame clinical results as the reference product, and (for products administered multiple times) that the biologic and thereference biologic may be switched after one has been previously administered without increasing safety risks or risks ofdiminished efficacy relative to exclusive use of the reference biologic. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four yearsfollowing the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years fromthe date on which the reference product was approved. Even if a product is considered to be a reference product eligible forexclusivity, another company could market a competing version of that product if the FDA approves a full BLA for suchproduct containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials todemonstrate the safety, purity, and potency of their product. The BPCIA also created certain exclusivity periods forbiosimilars approved as interchangeable products. 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. 54 Table of ContentsPatent Term Restoration and Extension A patent claiming a new biologic product may be eligible for a limited patent term extension under theHatch‑Waxman Act, which permits a patent restoration of up to five years for patent term lost during product developmentand FDA regulatory review. The restoration period granted on a patent covering a product is typically one‑half the timebetween the effective date of a clinical investigation involving human beings is begun and the submission date of anapplication, plus the time between the submission date of an application and the ultimate approval date. Patent termrestoration 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 mustbe submitted prior to the expiration of the patent in question. A patent that covers multiple products for which approval issought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application forany patent term extension or restoration in consultation with the FDA. FDA Approval of Companion Diagnostics In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeuticproducts and in vitro companion diagnostics. According to the guidance, for novel drugs, a companion diagnostic deviceand its corresponding therapeutic should be approved or cleared contemporaneously by the FDA for the use indicated in thetherapeutic product’s labeling. Approval or clearance of the companion diagnostic device will ensure that the device hasbeen adequately evaluated and has adequate performance characteristics in the intended population. Under the FDCA, invitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDCA and itsimplementing regulations, and other federal and state statutes and regulations govern, among other things, medical devicedesign and development, preclinical and clinical testing, premarket clearance or approval, registration and listing,manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post‑marketsurveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior tocommercial distribution. Regulation and Procedures Governing Approval of Medicinal Products in the European Union In order to market any product outside of the United States, a company must also comply with numerous andvarying 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 itobtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreignregulatory 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 the European Union, or EU, generally follows the samelines as in the United States. It entails satisfactory completion of preclinical studies and adequate and well‑controlled clinicaltrials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to therelevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorizationby these authorities before the product can be marketed and sold in the EU. Clinical Trial Approval Pursuant to the currently applicable Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on GCP, asystem for the approval of clinical trials in the EU has been implemented through national legislation of the member states.Under this system, an applicant must obtain approval from the competent national authority of an EU member state in whichthe clinical trial is to be conducted, or in multiple member states if the clinical trial is to be conducted in a number of memberstates. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committeehas issued a favorable opinion. The clinical trial application, or CTA, must be accompanied by an investigational medicinalproduct dossier with supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC andcorresponding national laws of the member states and further detailed in applicable guidance documents. 55 Table of ContentsIn April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace thecurrent Clinical Trials Directive 2001/20/EC. The new Clinical Trials Regulation (EU) No 536/2014 will become applicableno earlier than May 28, 2016. It will overhaul the current system of approvals for clinical trials in the EU. Specifically, thenew legislation, which will be directly applicable in all member states, aims at simplifying and streamlining the approval ofclinical trials in the EU. For instance, the New Clinical Trials Regulation provides for a streamlined application procedurevia 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 under the EU regulatory system, an applicant must submit anMAA, either under a centralized procedure administered by the European Medicines Authority, or EMA, or one of theprocedures administered by competent authorities in EU Member States (decentralized procedure, national procedure, ormutual recognition procedure). A marketing authorization may be granted only to an applicant established in the EU.Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the EU, an applicant mustdemonstrate compliance with all measures included in an EMA‑approved Pediatric Investigation Plan, or PIP, covering allsubsets of the pediatric population, unless the EMA has granted a product‑specific waiver, class waiver, or a deferral for oneor more of the measures included in the PIP. The centralized procedure provides for the grant of a single marketing authorization by the European Commissionthat is valid for all EU member states. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory forspecific products, including for medicines produced by certain biotechnological processes, products designated as orphanmedicinal products, advanced therapy products and products with a new active substance indicated for the treatment ofcertain diseases, including products for the treatment of cancer. For products with a new active substance indicated for thetreatment of other diseases and products that are highly innovative or for which a centralized process is in the interest ofpatients, the centralized procedure may be optional. Specifically, the grant of marketing authorization in the European Union for products containing viable humantissues or cells such as gene therapy medicinal products is governed by Regulation 1394/2007/EC on advanced therapymedicinal products, read in combination with Directive 2001/83/EC of the European Parliament and of the Council,commonly known as the Community code on medicinal products. Regulation 1394/2007/EC lays down specific rulesconcerning the authorization, supervision, and pharmacovigilance of gene therapy medicinal products, somatic cell therapymedicinal products, and tissue engineered products. Manufacturers of advanced therapy medicinal products mustdemonstrate the quality, safety, and efficacy of their products to EMA which provides an opinion regarding the applicationfor marketing authorization. The European Commission grants or refuses marketing authorization in light of the opiniondelivered by EMA. Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established atthe EMA is responsible for conducting an initial assessment of a product. Under the centralized procedure in the EuropeanUnion, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additionalinformation or written or oral explanation is to be provided by the applicant in response to questions of the CHMP.Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is of major interestfrom the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP acceptssuch a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revert to thestandard time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an acceleratedassessment. Regulatory Data Protection in the European Union In the European Union, new chemical entities approved on the basis of a complete independent data packagequalify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivitypursuant to Regulation (EC) No 726/2004, as amended, and Directive 2001/83/EC, as amended. Data exclusivity preventsregulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated)application for a period of eight years. During the additional two‑year period of market exclusivity, a56 Table of Contentsgeneric marketing authorization application can be submitted, and the innovator’s data may be referenced, but no genericmedicinal product can be marketed until the expiration of the market exclusivity. The overall ten‑year period will beextended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holderobtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior toauthorization, is held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound isconsidered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, anothercompany may market another version of the product if such company obtained marketing authorization based on an MAAwith a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials. Periods of Authorization and Renewals A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of areevaluation of the risk‑benefit balance by the EMA or by the competent authority of the authorizing member state. To thatend, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of thefile in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization wasgranted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing authorizationis valid for an unlimited period, unless the European Commission or the competent authority decides, on justified groundsrelating to pharmacovigilance, to proceed with one additional five‑year renewal period. Any authorization that is notfollowed by the placement of the drug on the EU market (in the case of the centralized procedure) or on the market of theauthorizing member state within three years after authorization ceases to be valid. Regulatory Requirements after Marketing Authorization Following approval, the holder of the marketing authorization is required to comply with a range of requirementsapplicable to the manufacturing, marketing, promotion and sale of the medicinal product. These include compliance with theEU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post‑authorization studies and additionalmonitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which a separatemanufacturer’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP requirements andcomparable requirements of other regulatory bodies in the EU, which mandate the methods, facilities, and controls used inmanufacturing, processing and packing of drugs to assure their safety and identity. Finally, the marketing and promotion ofauthorized products, including industry‑sponsored continuing medical education and advertising directed toward theprescribers of drugs and/or the general public, are strictly regulated in the European Union under Directive 2001/83EC, asamended. Orphan Drug Designation and Exclusivity Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as anorphan drug by the European Commission if its sponsor can establish: that the product is intended for the diagnosis,prevention or treatment of (1) a life‑threatening or chronically debilitating condition affecting not more than five in tenthousand persons in the EU when the application is made, or (2) a life‑threatening, seriously debilitating or serious andchronic condition in the EU and that without incentives it is unlikely that the marketing of the drug in the EU wouldgenerate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstratethat there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has beenauthorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition. An orphan drug designation provides a number of benefits, including fee reductions, regulatory assistance, and thepossibility to apply for a centralized EU marketing authorization. Marketing authorization for an orphan drug leads to aten‑year period of market exclusivity. During this market exclusivity period, neither the EMA nor the European Commissionor the member states can accept an application or grant a marketing authorization for a “similar medicinal product.” A“similar medicinal product” is defined as a medicinal product containing a similar active substance or substances ascontained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The marketexclusivity period for the authorized therapeutic indication may, however, be reduced to six years57 Table of Contentsif, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designationbecause, for example, the product is sufficiently profitable not to justify market exclusivity. Coverage, Pricing, and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which wemay seek regulatory approval by the FDA or other government authorities. In the United States and markets in othercountries, patients who are prescribed treatments for their conditions and providers performing the prescribed servicesgenerally rely on third‑party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use anyproduct candidates we may develop unless coverage is provided and reimbursement is adequate to cover a significantportion of the cost of such product candidates. Even if any product candidates we may develop are approved, sales of suchproduct candidates will depend, in part, on the extent to which third‑party payors, including government health programs inthe United States such as Medicare and Medicaid, commercial health insurers, and managed care organizations, providecoverage, and establish adequate reimbursement levels for, such product candidates. The process for determining whether apayor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that thepayor 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 imposingcontrols to manage costs. Third‑party payors may limit coverage to specific products on an approved list, also known as aformulary, 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 needto conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of theproduct, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, productcandidates may not be considered medically necessary or cost effective. A decision by a third‑party payor not to cover anyproduct candidates we may develop could reduce physician utilization of such product candidates once approved and have amaterial adverse effect on our sales, results of operations and financial condition. Additionally, a payor’s decision to providecoverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’sdetermination to provide coverage for a product does not assure that other payors will also provide coverage andreimbursement 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 anappropriate return on our investment in product development. The containment of healthcare costs also has become a priority of federal, state and foreign governments and theprices of pharmaceuticals have been a focus in this effort. Governments have shown significant interest in implementingcost‑containment programs, including price controls, restrictions on reimbursement, and requirements for substitution ofgeneric products. Adoption of price controls and cost‑containment measures, and adoption of more restrictive policies injurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of anyapproved products. Coverage policies and third‑party reimbursement rates may change at any time. Even if favorablecoverage and reimbursement status is attained for one or more products for which a company or its collaborators receivemarketing 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 product candidates we may developwill face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricingnegotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for aproduct and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we maydevelop to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in ourcommercialization efforts. In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countriesprovide that products may be marketed only after a reimbursement price has been agreed. Some countries may require thecompletion of additional studies that compare the cost‑effectiveness of a particular product candidate to currently availabletherapies (so called health technology assessments, or HTAs) in order to obtain reimbursement or58 Table of Contentspricing approval. For example, the European Union provides options for its member states to restrict the range of products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products forhuman use. E.U. member states may approve a specific price for a product or it may instead adopt a system of direct orindirect controls on the profitability of the company placing the product on the market. Other member states allowcompanies to fix their own prices for products, but monitor and control prescription volumes and issue guidance tophysicians to limit prescriptions. Recently, many countries in the European Union have increased the amount of discountsrequired on 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 European Union. The downwardpressure on health care costs in general, particularly prescription products, has become intense. As a result, increasingly highbarriers are being erected to the entry of new products. Political, economic, and regulatory developments may furthercomplicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Referencepricing used by various European Union member states, and parallel trade (arbitrage between low‑priced and high‑pricedmember states), can further reduce prices. There can be no assurance that any country that has price controls or reimbursementlimitations 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 ofpharmaceutical 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 tophysicians and teaching physicians and patient privacy laws and regulations and other healthcare laws and regulations thatmay constrain our business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws andregulations, include the following: ·the U.S. federal Anti‑Kickback Statute, which prohibits, among other things, persons and entities fromknowingly and willfully soliciting, offering, paying, receiving, or providing remuneration, directly orindirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order orrecommendation of, any good or service, for which payment may be made, in whole or in part, under a federalhealthcare program such as Medicare and Medicaid; ·the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetarypenalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, orcausing to be presented, to the federal government, claims for payment that are false, fictitious, or fraudulent orknowingly making, using, or causing to made or used a false record or statement to avoid, decrease, or concealan obligation to pay money to the federal government; ·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additionalfederal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting toexecute, a scheme to defraud any healthcare benefit program or making false statements relating to healthcarematters; ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and theirrespective implementing regulations, including the Final Omnibus Rule published in January 2013, whichimpose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security,and transmission of individually identifiable health information; ·the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the PatientProtection and Affordable Care Act, or PPACA, as amended by the Health Care Education Reconciliation Act,which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to theCenters for Medicare & Medicaid Services, or CMS, within the U.S. Department of Health and Human Services,information related to payments and other transfers of value made by that entity to physicians and teachinghospitals, as well as ownership and investment interests held by physicians and their immediate familymembers; and 59 Table of Contents·analogous state and foreign laws and regulations, such as state anti‑kickback and false claims laws, which mayapply to healthcare items or services that are reimbursed by non‑governmental third‑party payors, includingprivate insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntarycompliance guidelines and the relevant compliance guidance promulgated by the federal government in addition torequiring pharmaceutical manufacturers to report information related to payments to physicians and other health careproviders or marketing expenditures. State and foreign laws also govern the privacy and security of health information insome circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thuscomplicating compliance efforts. Healthcare Reform A primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number offederal 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 thehealthcare system in the United States. By way of example, the United States and state governments continue to propose and pass legislation designed toreduce the cost of healthcare. In March 2010, the United States Congress enacted the PPACA, which, among other things,includes changes to the coverage and payment for products under government health care programs. Among the provisionsof the PPACA of importance to our potential product candidates are: ·an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugsand biologic agents, apportioned among these entities according to their market share in certain governmenthealthcare programs, although this fee would not apply to sales of certain products approved exclusively fororphan indications; ·expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offerMedicaid coverage to certain individuals with income at or below 133% of the federal poverty level, therebypotentially increasing a manufacturer’s Medicaid rebate liability; ·expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimumrebate 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 rebateliability to prescriptions for individuals enrolled in Medicare Advantage plans; ·addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug RebateProgram 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 50%point‑of‑sale‑discount off the negotiated price of applicable products to eligible beneficiaries during theircoverage gap period as a condition for the manufacturers’ outpatient products to be covered under MedicarePart D; ·a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparativeclinical effectiveness research, along with funding for such research; ·the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to theMedicare program to reduce expenditures by the program that could result in reduced payments for prescriptionproducts. However, the IPAB implementation has been not been clearly defined. The PPACA provided thatunder certain circumstances, IPAB recommendations will become law unless Congress enacts legislation thatwill achieve the same or greater Medicare cost savings; and60 Table of Contents ·established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment andservice delivery models to lower Medicare and Medicaid spending, potentially including prescription productspending. Funding has been allocated to support the mission of the Center for Medicare and MedicaidInnovation from 2011 to 2019. Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. Forexample, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions byCongress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least$1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’sautomatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providersof up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additionalCongressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012,which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers,and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments toproviders from three to five years. There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal, and statelevels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. Such reformscould have an adverse effect on anticipated revenues from product candidates that we may successfully develop and forwhich we may obtain marketing approval and may affect our overall financial condition and ability to develop productcandidates. 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 SubstancesControl 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 theenvironment 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. Employees As of March 18, 2016, we had 67 full-time employees, including 27 employees with M.D. or Ph.D. degrees. Of thesefull-time employees, 47 employees are engaged in research and development activities. None of our employees is representedby a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to begood. Our Corporate Information We were incorporated under the name Gengine, Inc. in Delaware in September 2013, and we changed our name toEditas Medicine, Inc. in November 2013. Our executive offices are located at 300 Third Street, First Floor, Cambridge,Massachusetts, 02142, and our telephone number is (617) 401-9000. Available Information We maintain an internet website at www.editasmedicine.com and make available free of charge through our websiteour Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to thosereports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act of 1934, or the Exchange Act. We makethese reports available through our website as soon as reasonably practicable after we electronically file such reports with, orfurnish such reports to, the Securities and Exchange Commission, or the SEC. You can find, copy and inspect information wefile at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, DC 20549. Pleasecall the SEC at 1-800-SEC-0330 for more information about the61 Table of Contentsoperation of the SEC’s public reference room. You can review our electronically filed reports and other information that wefile with the SEC on the SEC’s web site at http://www.sec.gov. We also make available, free of charge on our website, thereports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under theExchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. In addition,we regularly use our website to post information regarding our business, product development programs and governance, andwe encourage investors to use our website, particularly the information in the section entitled “Investors & Media,” as asource of information about us. The information on our website is not incorporated by reference into this Annual Report on Form 10-K and shouldnot be considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report onForm 10-K as an inactive technical reference only.62 Table of ContentsITEM 1A. Risk Factors Our business is subject to numerous risks. The following important factors, among others, could cause our actualresults to differ materially from those expressed in forward-looking statements made by us or on our behalf in this AnnualReport on Form 10-K and other filings with the Securities and Exchange Commission, or the SEC, press releases,communications with investors, and oral statements. Actual future results may differ materially from those anticipated in ourforward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result ofnew information, future events, or otherwise. Risks Related to Our Financial Position and Need for Additional Capital We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may neverachieve or maintain profitability. Since inception, we have incurred significant operating losses. Our net losses were $72.9 million, $13.7 million, and$1.8 million for the years ended December 31, 2015 and 2014 and the period ended December 31, 2013, respectively. As ofDecember 31, 2015, we had an accumulated deficit of $88.3 million. We have financed our operations primarily through thepublic offering of our common stock, private placements of our preferred stock and our collaboration with Juno Therapeutics.We have devoted all of our efforts to research and development. We expect to continue to incur significant expenses andincreasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter toquarter. We anticipate that our expenses will increase substantially if and as we: ·continue our current research programs and our preclinical development of product candidates from our currentresearch programs; ·seek to identify additional research programs and additional product candidates; ·initiate preclinical testing and clinical trials for any product candidates we identify and develop; ·maintain, expand, and protect our intellectual property portfolio and provide reimbursement of third‑partyexpenses related to our patent portfolio; ·seek marketing approvals for any of our product candidates that successfully complete clinical trials; ·ultimately establish a sales, marketing, and distribution infrastructure to commercialize any medicines for whichwe may obtain marketing approval; ·further develop our genome editing platform; ·hire additional clinical, quality control, and scientific personnel; ·add operational, financial, and management information systems and personnel, including personnel to supportour product development; ·acquire or in‑license other medicines and technologies; ·validate a commercial‑scale current Good Manufacturing Practices, or cGMP, manufacturing facility; and ·operate as a public company. We have not initiated clinical development of any product candidate and expect that it will be many years, if ever,before we have a product candidate ready for commercialization. To become and remain profitable, we must develop andeventually commercialize a medicine or medicines with significant market potential. This will require us to63 Table of Contentsbe successful in a range of challenging activities, including identifying product candidates, completing preclinical testingand clinical trials of product candidates, obtaining marketing approval for these product candidates, manufacturing,marketing, and selling those medicines for which we may obtain marketing approval, and satisfying any post‑marketingrequirements. We may never succeed in these activities and, even if we do, may never generate revenues that are significantor large enough to achieve profitability. We are currently only in the preclinical testing stages for our most advancedresearch programs. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly orannual basis. Our failure to become and remain profitable would decrease the value of our company and could impair ourability to raise capital, maintain our research and development efforts, expand our business, or continue our operations. Adecline in the value of our company could cause our stockholders to lose all or part of their investments in us. We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay,reduce, or eliminate our research and product development programs or commercialization efforts. We expect our expenses to increase in connection with our ongoing activities, particularly as we identify, continuethe research and development of, initiate clinical trials of, and seek marketing approval for, product candidates. In addition,if we obtain marketing approval for any product candidates we may develop, we expect to incur significantcommercialization expenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales,marketing, manufacturing, and distribution are not the responsibility of a collaborator. In addition, relative to previous years, when we were a private company, we expect to incur significant additional costs associated with operating as a publiccompany in 2016 and future years. Accordingly, we will need to obtain substantial additional funding in connection withour continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay,reduce, or eliminate our research and product development programs or future commercialization efforts. We expect that the net proceeds from our initial public offering, or IPO, together with our existing cash and cashequivalents at December 31, 2015, anticipated interest income, and anticipated research support under our collaborationagreement with Juno Therapeutics, will enable us to fund our operating expenses and capital expenditure requirements for atleast the next 24 months following the date of this Annual Report on Form 10-K. Our future capital requirements will dependon many factors, including: ·the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, andclinical trials for the product candidates we may develop; ·the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectualproperty and proprietary rights, and defending intellectual property‑related claims; ·the costs, timing, and outcome of regulatory review of the product candidates we may develop; ·the costs of future activities, including product sales, medical affairs, marketing, manufacturing, anddistribution, for any product candidates for which we receive regulatory approval; ·the success of our collaboration with Juno Therapeutics; ·whether Juno Therapeutics exercises either or both of its options to extend the research program term under ourcollaboration (each of which would trigger an extension payment to us); ·our ability to establish and maintain additional collaborations on favorable terms, if at all; ·the extent to which we acquire or in‑license other medicines and technologies; and ·the costs of operating as a public company. 64 Table of ContentsIdentifying potential product candidates and conducting preclinical testing and clinical trials is a time‑consuming,expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or resultsrequired to obtain marketing approval and achieve product sales. In addition, even if we successfully identify and developproduct candidates and those are approved, we may not achieve commercial success. Our commercial revenues, if any, will bederived from sales of medicines that we do not expect to be commercially available for many years, if at all. Accordingly, wewill need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing maynot be available to us on acceptable terms, or at all. Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rightsto our technologies or product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needsthrough a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, and licensingarrangements. We do not have any committed external source of funds, other than our collaboration with Juno Therapeutics,which is limited in scope and duration. To the extent that we raise additional capital through the sale of equity or convertibledebt securities, the ownership interests of our stockholders may be materially diluted, and the terms of these securities mayinclude liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, mayinvolve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurringadditional debt, making capital expenditures, or declaring dividends. If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties,we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or productcandidates, or we may have to grant licenses on terms that may not be favorable to us. If we are unable to raise additionalfunds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our productdevelopment or future commercialization efforts or grant rights to develop and market product candidates that we wouldotherwise prefer to develop and market ourselves. Our short operating history may make it difficult for our stockholders to evaluate the success of our business to date and toassess our future viability. We are an early‑stage company. We were founded and commenced operations in the second half of 2013. Ouroperations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiringand developing our technology, identifying potential product candidates, and undertaking preclinical studies. All of ourresearch programs are still in the preclinical or research stage of development, and their risk of failure is high. We have notyet demonstrated an ability to initiate or successfully complete any clinical trials, including large‑scale, pivotal clinicaltrials, obtain marketing approvals, manufacture a commercial‑scale medicine, or arrange for a third party to do so on ourbehalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes about 10 to15 years to develop a new medicine from the time it is discovered to when it is available for treating patients. Consequently,any predictions about our future success or viability may not be as accurate as they could be if we had a longer operatinghistory. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays, and otherknown and unknown factors. We will need to transition from a company with a research focus to a company capable ofsupporting commercial activities. We may not be successful in such a transition. We expect that our financial condition and operating results will continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, our stockholdersshould not rely upon the results of any quarterly or annual periods as indications of future operating performance. We have never generated revenue from product sales and may never be profitable. Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or withcollaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary65 Table of Contentsto commercialize, product candidates we may identify for development. We do not anticipate generating revenues fromproduct sales for the next several years, if ever. Our ability to generate future revenues from product sales depends heavily onour, or our collaborators’, ability to successfully: ·identify product candidates and complete research and preclinical and clinical development of any productcandidates we may identify; ·seek and obtain regulatory and marketing approvals for any of our product candidates for which we completeclinical trials; ·launch and commercialize any of our product candidates for which we obtain regulatory and marketingapproval by establishing a sales force, marketing, and distribution infrastructure or, alternatively, collaboratingwith a commercialization partner; ·qualify for adequate coverage and reimbursement by government and third‑party payors for any our productcandidates for which we obtain regulatory and marketing approval; ·develop, maintain, and enhance a sustainable, scalable, reproducible, and transferable manufacturing process forthe product candidates we may develop; ·establish and maintain supply and manufacturing relationships with third parties that can provide adequate, inboth amount and quality, products and services to support clinical development and the market demand for anyof our product candidates for which we obtain regulatory and marketing approval; ·obtain market acceptance of any product candidates we may develop as viable treatment options; ·address competing technological and market developments; ·implement internal systems and infrastructure, as needed; ·negotiate favorable terms in any collaboration, licensing, or other arrangements into which we may enter andperforming our obligations in such collaborations; ·maintain, protect, and expand our portfolio of intellectual property rights, including patents, trade secrets, andknow‑how; ·avoid and defend against third‑party interference or infringement claims; and ·attract, hire, and retain qualified personnel. Even if one or more of the product candidates we may develop is approved for commercial sale, we anticipateincurring significant costs associated with commercializing any approved product candidate. Our expenses could increasebeyond expectations if we are required by the U.S. Food and Drug Administration, or the FDA, the European MedicinesAgency, or the EMA, or other regulatory authorities to perform clinical and other studies in addition to those that wecurrently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not becomeprofitable and may need to obtain additional funding to continue operations. 66 Table of ContentsRisks Related to Discovery, Development, and Commercialization We intend to identify and develop product candidates based on a novel genome editing technology, which makes it difficultto predict the time and cost of product candidate development. No products that utilize genome editing technology havebeen approved in the United States or in Europe, and there have only been a limited number of human clinical trials of agenome editing product candidate. Moreover, none of those trials has involved CRISPR/Cas9 technology. We have concentrated our research and development efforts on our genome editing platform, which usesCRISPR/Cas9 technology. Our future success depends on the successful development of this novel genome editingtherapeutic approach. To date, no product that utilizes genome editing has been approved in the United States or Europe.There have been a limited number of clinical trials of genome editing technologies, however no product candidates havebeen approved, and none of these clinical trials involved product candidates that utilize CRISPR/Cas9 genome editingtechnology. In addition, because our programs are all in the research or preclinical stage, we have not yet been able to assesssafety in humans, and there may be long‑term effects from treatment with any of our future product candidates that we cannotpredict at this time. Any product candidates we may develop will act at the level of DNA, and, because animal DNA differsfrom human DNA, it will be difficult for us to test our future product candidates in animal models for either safety or efficacy.Also, animal models do not exist for some of the diseases we expect to pursue in our programs. As a result of these factors, itis more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether theapplication of our genome editing platform, or any similar or competitive genome editing platforms, will result in theidentification, development, and regulatory approval of any medicines. There can be no assurance that any developmentproblems we experience in the future related to our genome editing platform or any of our research programs will not causesignificant delays or unanticipated costs, or that such development problems can be solved. We may also experience delaysin developing a sustainable, reproducible, and scalable manufacturing process or transferring that process to commercialpartners. Any of these factors may prevent us from completing our preclinical studies or any clinical trials that we mayinitiate or commercializing any product candidates we may develop on a timely or profitable basis, if at all. Because genome editing is novel and the regulatory landscape that will govern any product candidates we may develop isuncertain and may change, we cannot predict the time and cost of obtaining regulatory approval, if we receive it at all, forany product candidates we may develop. The regulatory requirements that will govern any novel genome editing product candidates we develop are notentirely clear and may change. Within the broader genome medicine field, only one gene therapy product, uniQure N.V.’sGlybera, has received marketing authorization from the European Commission, and no gene therapy products have receivedmarketing approval in the United States. Even with respect to more established products that fit into the categories of genetherapies or cell therapies, the regulatory landscape is still developing. Regulatory requirements governing gene therapyproducts and cell therapy products have changed frequently and will likely continue to change in the future. Moreover, thereis substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing gene therapy productsand cell therapy products. For example, in the United States, the FDA has established the Office of Cellular, Tissue and GeneTherapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy andrelated products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Genetherapy clinical trials are also subject to review and oversight by an institutional biosafety committee, or IBC, a localinstitutional committee that reviews and oversees basic and clinical research conducted at the institution participating in theclinical trial. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research fromthe United States National Institutes of Health, or the NIH, are also subject to review by the NIH Office of BiotechnologyActivities’ Recombinant DNA Advisory Committee. Although the FDA decides whether individual gene therapy protocolsmay proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation of a clinicaltrial, even if the FDA has reviewed the trial and approved its initiation. The same applies in the European Union. The EMA’sCommittee for Advanced Therapies, or CAT, is responsible for assessing the quality, safety, and efficacy of advanced‑therapymedicinal products. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for a genetherapy medicinal candidate that is submitted to the EMA. In the European Union, the development and evaluation of a genetherapy medicinal product must be considered in the context of the relevant67 Table of ContentsEuropean Union guidelines. The EMA may issue new guidelines concerning the development and marketing authorizationfor gene therapy medicinal products and require that we comply with these new guidelines. As a result, the procedures andstandards applied to gene therapy products and cell therapy products may be applied to any CRISPR/Cas9 productcandidates we may develop, but that remains uncertain at this point. Adverse developments in clinical trials conducted by others of gene therapy products, cell therapy products, orproducts developed through the application of a CRISPR/Cas9 or other genome editing technology may cause the FDA, theEMA, and other regulatory bodies to revise the requirements for approval of any product candidates we may develop or limitthe use of products utilizing genome editing technologies, either of which could materially harm our business. In addition,the clinical trial requirements of the FDA, the EMA, and other regulatory authorities and the criteria these regulators use todetermine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty, andintended use and market of the potential products. The regulatory approval process for novel product candidates such as ourscan be more expensive and take longer than for other, better known, or more extensively studied pharmaceutical or otherproduct candidates. Regulatory agencies administering existing or future regulations or legislation may not allow productionand marketing of products utilizing genome editing technology in a timely manner or under technically or commerciallyfeasible conditions. In addition, regulatory action or private litigation could result in expenses, delays, or other impedimentsto our research programs or the commercialization of resulting products. The regulatory review committees and advisory groups described above and the new guidelines they promulgatemay 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 thesetreatment candidates, or lead to significant post‑approval limitations or restrictions. As we advance our research programsand develop future product candidates, we will be required to consult with these regulatory and advisory groups and tocomply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of anyproduct candidates we identify and develop. Adverse public perception of genomic medicines, and genome editing in particular, may negatively impact regulatoryapproval of, or demand for, our potential products. Our potential therapeutic products involve editing the human genome. The clinical and commercial success of ourpotential products will depend in part on public acceptance of the use of genome editing therapy for the prevention ortreatment of human diseases. Public attitudes may be influenced by claims that genome editing is unsafe, unethical, orimmoral, and, consequently, our products may not gain the acceptance of the public or the medical community. Adversepublic attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physiciansprescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may developin lieu of, or in addition to, existing treatments with which they are already familiar and for which greater clinical data maybe available. In addition, genome editing technology is subject to public debate and heightened regulatory scrutiny due toethical concerns relating to the application of genome editing technology to human embryos or the human germline. Forexample, in April 2015, Chinese scientists reported on their attempts to edit the genome of human embryos to modify thegene for hemoglobin beta. This is the gene in which a mutation occurs in patients with the inherited blood disorder betathalassemia. Although this research was purposefully conducted in embryos that were not viable, the work prompted calls fora moratorium or other types of restrictions on genome editing of human eggs, sperm, and embryos. The Alliance forRegenerative Medicine in Washington has called for a voluntary moratorium on the use of genome editing technologies,including CRISPR/Cas9, in research that involved altering human embryos or human germline cells. Similarly, the NIH hasannounced that it would not fund any use of genome editing technologies in human embryos, noting that there are multipleexisting legislative and regulatory prohibitions against such work, including the Dickey‑Wicker Amendment, whichprohibits the use of appropriated funds for the creation of human embryos for research purposes or for research in whichhuman embryos are destroyed. Laws in the United Kingdom prohibit genetically modified embryos from being implantedinto women, but embryos can be altered in research labs under license from the Human Fertilisation and EmbryologyAuthority. Research on embryos is more tightly controlled in many other European countries. 68 Table of ContentsMoreover, an annual worldwide threat assessment report delivered to the U.S. Congress in February 2016, the U.S.Director of National Intelligence stated that research into genome editing probably increases the risk of the creation ofpotentially harmful biological agents or products, including weapons of mass destruction. He noted that the broaddistribution, low cost, and accelerated pace of development of genome editing technology could result in the deliberate orunintentional misuse of such technology. Although we do not use our technologies to edit human embryos or the human germline, such public debate aboutthe use of genome editing technologies in human embryos and heightened regulatory scrutiny could prevent or delay ourdevelopment of product candidates. More restrictive government regulations or negative public opinion would have anegative effect on our business or financial condition and may delay or impair our development and commercialization ofproduct candidates or demand for any products we may develop. Adverse events in our preclinical studies or clinical trials orthose of our competitors or of academic researchers utilizing genome editing technologies, even if not ultimately attributableto product candidates we may identify and develop, and the resulting publicity could result in increased governmentalregulation, unfavorable public perception, potential regulatory delays in the testing or approval of potential productcandidates we may identify and develop, stricter labeling requirements for those product candidates that are approved, and adecrease in demand for any such product candidates. Use of genome editing technology by a third party or government todevelop biological agents or products that threaten the United States’ national security could similarly result in suchnegative impacts to us. We may not be successful in our efforts to identify, develop, or commercialize potential product candidates. The success of our business depends primarily upon our ability to identify, develop, and commercialize productsbased on our genome editing platform. All of our product development programs are still in the preclinical or research stageof development. Our research programs, including those subject to our collaboration with Juno Therapeutics, may fail toidentify potential product candidates for clinical development for a number of reasons. Our research methodology may beunsuccessful in identifying potential product candidates, or our potential product candidates may be shown to have harmfulside effects or may have other characteristics that may make the products impractical to manufacture, unmarketable, orunlikely to receive marketing approval. If any of these events occur, we may be forced to abandon our development efforts for a program or programs, whichwould have a material adverse effect on our business, financial condition, results of operations, and prospects. Researchprograms to identify new product candidates require substantial technical, financial, and human resources. We may focus ourefforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. The genome editing field is relatively new and is evolving rapidly. We are focusing our research and development effortson CRISPR/Cas9, but other genome editing technologies may be discovered that provide significant advantages overCRISPR/Cas9, which could materially harm our business. To date, we have focused our efforts on genome editing technologies using CRISPR/Cas9. Other companies havepreviously undertaken research and development of genome editing technologies using zinc finger nucleases, engineeredmeganucleases, and transcription activator‑like effector nucleases, or TALENs, but to date none has obtained marketingapproval for a product candidate. There can be no certainty that the CRISPR/Cas9 technology will lead to the developmentof genomic medicines or that other genome editing technologies will not be considered better or more attractive for thedevelopment of medicines. For example, researchers, including Feng Zhang, Ph.D., one of our founders, recently announcedthe discovery of a CRISPR system involving a different protein, Cpf1, which can also edit human DNA. These researchershave asserted that Cpf1 may work better than Cas9 in some cases. Cas9 may be determined to be less attractive than Cpf1 orother CRISPR proteins that have yet to be discovered. Similarly, a new genome editing technology that has not beendiscovered yet may be determined to be more attractive than CRISPR. Moreover, if we decide to develop genometechnologies other than CRISPR/Cas9, we cannot be certain we will be able to obtain rights to such technologies. Althoughall of our founders who currently provide consulting and advisory services to us in the areas of Cas9 and TALEN genomeediting technologies have assignment of inventions obligations to us with respect to the services they perform for us, theseassignment of inventions obligations are subject to limitations and do not extend to their work in other fields or to theintellectual property arising from their employment with their respective academic and research institutions. To obtainintellectual property rights assigned by these founders69 Table of Contentsto such institutions, we would need to enter into license agreements with such institutions. For example, we do not haverights to Cpf1, and, if we were to seek such rights, there can be no assurance we could obtain such rights on commerciallyreasonable terms, or at all. Any of these factors could reduce or eliminate our commercial opportunity, and could have amaterial adverse effect on our business, financial condition, results of operations, and prospects. We depend heavily on the success of our most advanced program. All of our product development programs are at thepreclinical or research stage. Preclinical testing and clinical trials of product candidates may not be successful. If we areunable to commercialize any product candidates we may develop or experience significant delays in doing so, our businesswill be materially harmed. We have invested a significant portion of our efforts and financial resources in the identification of our mostadvanced product development program for the treatment of Leber Congenital Amaurosis, or LCA, type 10, or LCA10. Ourability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on thesuccessful development and eventual commercialization of a product candidate for the treatment of LCA10 and otherproduct candidates that we may identify in the future. The success of product candidates we may identify and develop willdepend on many factors, including the following: ·sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trialsfor our most advanced program; ·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 for our medicines; ·launching commercial sales of the medicines, if and when approved, whether alone or in collaboration withothers; ·acceptance of the medicines, 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 of the medicines following approval; ·enforcing and defending intellectual property and proprietary rights and claims; and ·achieving desirable medicinal properties for the intended indications. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delaysor an inability to successfully commercialize any product candidates we may develop, which would materially harm ourbusiness. Of the large number of biologics and drugs in development in the pharmaceutical industry, only a small percentageresult in the submission of a Biologics License Application, or BLA, to the FDA or a marketing authorization application, orMAA, to the EMA. Not all BLAs or MAAs that are submitted to a regulatory agency are approved for commercialization.Furthermore, even if we do receive regulatory approval to market any product candidates that we may identify and develop,any such approval may be subject to limitations on the indicated uses for which we may70 Table of Contentsmarket the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund our researchprograms, we cannot assure you that we will successfully develop or commercialize our most advanced program, or any ofour other research programs. If we or any of our future development partners are unable to develop, or obtain regulatoryapproval for, or, if approved, successfully commercialize, any product candidates we may identify and develop, we may notbe able to generate sufficient revenue to continue our business. If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the development ofany product candidates we may develop, we may need to abandon or limit our further clinical development of thoseproduct candidates. We have not evaluated any product candidates in human clinical trials, and many of our proposed delivery modeshave never been evaluated in human clinical trials. Moreover, we are not aware of any clinical trials involving CRISPR/Cas9technology. It is impossible to predict when or if any product candidates we may develop will prove safe in humans. In thegenomic medicine field, there have been several significant adverse events from gene therapy treatments in the past,including reported cases of leukemia and death. There can be no assurance that genome editing technologies will not causeundesirable side effects. A significant risk in any genome editing product is that the edit will be “off‑target” and cause serious adverseevents, undesirable side effects, or unexpected characteristics. For example, off‑target cuts could lead to disruption of a geneor a genetic regulatory sequence at an unintended site in the DNA, or, in those instances where we also provide a segment ofDNA to serve as a repair template, it is possible that following off‑target cut events, DNA from such repair template could beintegrated into the genome at an unintended site, potentially disrupting another important gene or genomic element. Wecannot be certain that off‑target editing will not occur in any of our planned or future clinical studies. There is also thepotential risk of delayed adverse events following exposure to genome editing therapy due to the potential for persistentbiological activity of the genetic material or other components of products used to carry the genetic material. If any product candidates we develop are associated with serious adverse events, or undesirable side effects, or havecharacteristics that are unexpected, we may need to abandon their development or limit development to certain uses orsubpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, lesssevere, or more acceptable from a risk‑benefit perspective, any of which would have a material adverse effect on our business,financial condition, results of operations, and prospects. Many product candidates that initially showed promise in earlystage testing for treating cancer or other diseases have later been found to cause side effects that prevented further clinicaldevelopment of the product candidates. If any of the product candidates we may develop or the delivery modes we rely on cause undesirable side effects, it coulddelay or prevent their regulatory approval, limit the commercial potential, or result in significant negative consequencesfollowing any potential marketing approval. Product candidates we may develop may be associated with off‑target editing or other serious adverse events,undesirable side effects, or unexpected characteristics. There also is the potential risk of delayed adverse events followingexposure to gene editing therapy due to persistent biologic activity of the genetic material or other components of productsused to carry the genetic material. In addition to serious adverse events or side effects caused by any product candidate wemay develop, the administration process or related procedures also can cause undesirable side effects. If any such eventsoccur, our clinical trials could be suspended or terminated. If in the future we are unable to demonstrate that such adverse events were caused by factors other than our productcandidate, the FDA, the European Commission, the EMA or other regulatory authorities could order us to cease furtherdevelopment of, or deny approval of, any product candidates we are able to develop for any or all targeted indications. Evenif we are able to demonstrate that all future serious adverse events are not product‑related, such occurrences could affectpatient 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 we may develop, the commercial prospects of such productcandidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayedor eliminated. Any of these occurrences may harm our ability to identify and71 Table of Contentsdevelop product candidates, and may harm our business, financial condition, result of operations, and prospectssignificantly. Additionally, if we successfully develop a product candidate and it receives marketing approval, the FDA couldrequire us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of treatment with suchproduct candidate outweighs the risks for each potential patient, which may include, among other things, a medication guideoutlining the risks of the product for distribution to patients, a communication plan to health care practitioners, extensivepatient monitoring, or distribution systems and processes that are highly controlled, restrictive, and more costly than what istypical for the industry. Furthermore, if we or others later identify undesirable side effects caused by any product candidatethat we to develop, several potentially significant negative consequences could result, including: ·regulatory authorities may suspend 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. Any of these events could prevent us from achieving or maintaining market acceptance of any product candidateswe may identify and develop and could have a material adverse effect on our business, financial condition, results ofoperations, and prospects. We have not tested any of our proposed delivery modes and product candidates in clinical trials. Our proposed delivery modes and product candidates have never been evaluated in human clinical trials. Moreover,we are not aware of any clinical trials involving CRISPR/Cas9 technology. Any product candidates we develop may fail toshow the desired safety and efficacy in later stages of clinical development despite having successfully advanced throughinitial clinical trials. There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in thepharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even afterachieving promising results in earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject tovarying interpretations, which may delay, limit, or prevent regulatory approval. In addition, regulatory delays or rejectionsmay be encountered as a result of many factors, including changes in regulatory policy during the period of productdevelopment. Any such adverse events may cause us to delay, limit, or terminate planned clinical trials, any of which would havea material adverse effect on our business, financial condition, results of operations, and prospects. Because we are developing product candidates for the treatment of diseases in which there is little clinical experienceusing new technologies, there is increased risk that the FDA, the EMA, or other regulatory authorities may not consider theendpoints of our clinical trials to provide clinically meaningful results and that these results may be difficult to analyze. During the regulatory review process, we will need to identify success criteria and endpoints such that the FDA, theEMA, or other regulatory authorities will be able to determine the clinical efficacy and safety profile of any productcandidates we may develop. As we are initially seeking to identify and develop product candidates to treat diseases in whichthere is little clinical experience using new technologies, there is heightened risk that the FDA, the EMA, or other regulatoryauthorities may not consider the clinical trial endpoints that we propose to provide clinically meaningful72 Table of Contentsresults (reflecting a tangible benefit to patients). In addition, the resulting clinical data and results may be difficult toanalyze. Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may notachieve the pre‑specified endpoints to a degree of statistical significance. This may be a particularly significant risk for manyof the genetically defined diseases for which we plan to develop product candidates because many of these diseases havesmall patient populations, and designing and executing a rigorous clinical trial with appropriate statistical power is moredifficult than with diseases that have larger patient populations. Further, even if we do achieve the pre‑specified criteria, wemay produce results that are unpredictable or inconsistent with the results of the non‑primary endpoints or other relevantdata. The FDA also weighs the benefits of a product against its risks, and the FDA may view the efficacy results in the contextof safety as not being supportive of regulatory approval. Other regulatory authorities in the European Union and othercountries, such as the CAT, may make similar comments with respect to these endpoints and data. Any product candidates wemay develop will be based on a novel technology that makes it difficult to predict the time and cost of development and ofsubsequently obtaining regulatory approval. No genome editing product has been approved in the United States or inEurope. If clinical trials of any product candidates we may identify and develop fail to demonstrate safety and efficacy to thesatisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs orexperience delays in completing, or ultimately be unable to complete, the development and commercialization of suchproduct candidates. Before obtaining marketing approval from regulatory authorities for the sale of any product candidates we mayidentify and develop, we must complete preclinical development and then conduct extensive clinical trials to demonstratethe safety and efficacy in humans of any such product candidates. Clinical testing is expensive, difficult to design andimplement, can take many years to complete, and is uncertain as to outcome. A failure of one or more clinical trials can occurat any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of laterclinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. Manycompanies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials havenonetheless failed to obtain marketing approval of their product candidates. We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials thatcould delay or prevent our ability to receive marketing approval or commercialize any product candidates we may identifyand develop, including: ·delays in reaching a consensus with regulators on trial design; ·regulators, IRBs, or independent ethics committees may not authorize us or our investigators to commence aclinical trial or conduct a clinical trial at a prospective trial site; ·delays in reaching or failing to reach agreement on acceptable clinical trial contracts or clinical trial protocolswith prospective contract research organizations, or CROs, and clinical trial sites; ·clinical trials of any product candidates we may develop may produce negative or inconclusive results, and wemay decide, or regulators may require us, to conduct additional clinical trials or abandon product developmentor research programs; ·difficulty in designing well‑controlled clinical trials due to ethical considerations which may render itinappropriate to conduct a trial with a control arm that can be effectively compared to a treatment arm; ·difficulty in designing clinical trials and selecting endpoints for diseases that have not been well‑studied andfor which the natural history and course of the disease is poorly understood; 73 Table of Contents·the number of patients required for clinical trials of any product candidates we may develop may be larger thanwe anticipate; enrollment of suitable participants in these clinical trials, which may be particularly challengingfor some of the rare genetically defined diseases we are targeting in our most advanced programs, may bedelayed or slower than we anticipate; or subjects may drop out of these clinical trials at a higher rate than weanticipate; ·our third‑party contractors may fail to comply with regulatory requirements or meet their contractualobligations to us in a timely manner, or at all; ·regulators, IRBs, or independent ethics committees may require that we or our investigators suspend orterminate clinical research or clinical trials of any product candidates we may develop for various reasons,including noncompliance with regulatory requirements, a finding of undesirable side effects or otherunexpected characteristics, or that the participants are being exposed to unacceptable health risks or after aninspection of our clinical trial operations or trial sites; ·the cost of clinical trials of any product candidates we may develop may be greater than we anticipate; ·the supply or quality of any product candidates we may develop or other materials necessary to conduct clinicaltrials of any product candidates we may develop may be insufficient or inadequate, including as a result ofdelays in the testing, validation, manufacturing, and delivery of any product candidates we may develop to theclinical sites by us or by third parties with whom we have contracted to perform certain of those functions; ·delays in having subjects complete participation in a trial or return for post‑treatment follow‑up; ·clinical trial sites dropping out of a trial; ·selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resultingdata; ·occurrence of serious adverse events associated with any product candidates we may develop that are viewed tooutweigh their potential benefits; ·occurrence of serious adverse events in trials of the same class of agents conducted by other sponsors; and ·changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. If we or our collaborators are required to conduct additional clinical trials or other testing of any product candidateswe may develop beyond those that we currently contemplate, if we or our collaborators are unable to successfully completeclinical trials of any product candidates we may develop or other testing, or if the results of these trials or tests are notpositive or are only modestly positive or if there are safety concerns, we or our collaborators may: ·be delayed in obtaining marketing approval for any such product candidates we may develop or not obtainmarketing approval at all; ·obtain approval for indications or patient populations that are not as broad as intended or desired; ·obtain approval with labeling that includes significant use or distribution restrictions or safety warnings,including boxed warnings; ·be subject to changes in the way the product is administered; 74 Table of Contents·be required to perform additional clinical trials to support approval or be subject to additional post‑marketingtesting requirements; ·have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on itsdistribution in the form of a modified risk evaluation and mitigation strategy; ·be sued; or ·experience damage to our reputation. Product development costs will also increase if we or our collaborators experience delays in testing or marketingapprovals. We do not know whether any clinical trials will begin as planned, will need to be restructured, or will becompleted on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may havethe exclusive right to commercialize any product candidates we may develop, could allow our competitors to bring productsto market before we do, and could impair our ability to successfully commercialize any product candidates we may develop,any of which may harm 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 regulatoryapprovals could be delayed or prevented. We or our collaborators may not be able to initiate or continue clinical trials for any product candidates we identifyor develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials asrequired by the FDA or analogous regulatory authorities outside the United States, or as needed to provide appropriatestatistical power for a given trial. Enrollment may be particularly challenging for some of the rare genetically defineddiseases we are targeting in our most advanced programs. In addition, if patients are unwilling to participate in our geneediting trials because of negative publicity from adverse events related to the biotechnology, gene therapy, or genomeediting fields, competitive clinical trials for similar patient populations, clinical trials in competing products, or for otherreasons, the timeline for recruiting patients, conducting studies, and obtaining regulatory approval of any product candidateswe may develop may be delayed. Moreover, some of our competitors may have ongoing clinical trials for product candidatesthat would treat the same indications as any product candidates we may develop, and patients who would otherwise beeligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is also affected by other factors, including: ·severity of the disease under investigation; ·size of the patient population and process for identifying subjects; ·design of the trial protocol; ·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; 75 Table of Contents·perceived risks and benefits of genome editing as a therapeutic approach; ·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. In particular, our most advanced programs are focused on rare genetically defined diseases with limited patientpools from which to draw for enrollment in clinical trials. For example, the global incidence of LCA10 is estimated to be twoto three per 100,000 live births worldwide. The eligibility criteria of our clinical trials will further limit the pool of availabletrial participants. Additionally, the process of finding and diagnosing patients may prove costly. Our ability to successfully initiate, enroll, and complete a clinical trial in any foreign country is subject to numerousrisks unique to conducting business in foreign countries, including: ·difficulty in establishing or managing relationships with CROs and physicians; ·different standards for the conduct of clinical trials; ·different standard‑of‑care for patients with a particular disease; ·inability to locate qualified local consultants, physicians, and partners; and ·potential burden of complying with a variety of foreign laws, medical standards, and regulatory requirements,including the regulation of pharmaceutical and biotechnology products and treatment. Enrollment delays in our clinical trials may result in increased development costs for any product candidates wemay develop, which would cause the value of our company to decline and limit our ability to obtain additional financing. Ifwe or our collaborators have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, wemay need to delay, limit, or terminate ongoing or planned clinical trials, any of which would have an adverse effect on ourbusiness, financial condition, results of operations, and prospects. We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize onproduct candidates or indications that may be more profitable or for which there is a greater likelihood of success. Because we have limited financial and managerial resources, we focus on research programs and product candidatesthat we identify for specific indications among many potential options. As a result, we may forego or delay pursuit ofopportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial medicines or profitable marketopportunities. Our spending on current and future research and development programs and product candidates for specificindications may not yield any commercially viable medicines. If we do not accurately evaluate the commercial potential ortarget market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us toretain sole development and commercialization rights to such product candidate. Any such event could have a materialadverse effect on our business, financial condition, results of operations, and prospects. 76 Table of ContentsIf we are unable to successfully identify patients who are likely to benefit from therapy with any medicines we develop, orexperience significant delays in doing so, we may not realize the full commercial potential of any medicines we maydevelop. Our success may depend, in part, on our ability to identify patients who are likely to benefit from therapy with anymedicines we may develop, which requires those potential patients to have their DNA analyzed for the presence or absence ofa particular sequence. For example, although LCA can be diagnosed based on a patient’s symptoms and retinal scans, DNAsamples are taken from LCA patients in order to test for the presence of the known gene mutations that cause LCA and, wherepossible, to identify the specific genetically defined disease, such as LCA10. If we, or any third parties that we engage toassist us, are unable to successfully identify such patients, or experience delays in doing so, then: ·our ability to develop any product candidates may be adversely affected if we are unable to appropriately selectpatients for enrollment in our clinical trials; ·any product candidates we develop may not receive marketing approval if safe and effective use of such productcandidates depends on an in vitro diagnostic; and ·we may not realize the full commercial potential of any product candidates we develop that receive marketingapproval if, among other reasons, we are unable to appropriately select patients who are likely to benefit fromtherapy with our medicines. As a result, we may be unable to successfully develop and realize the commercial potential of any productcandidates we may identify and develop, and our business, financial condition, results of operations, and prospects would bematerially adversely effected. Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval tocommercialize a product candidate we may develop, and any such approval may be for a more narrow indication than weseek. We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed andapproved the product candidate. Even if any product candidates we may develop meet their safety and efficacy endpoints inclinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be ableto obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authorityrecommends non‑approval or restrictions on approval. In addition, we may experience delays or rejections based uponadditional government regulation from future legislation or administrative action, or changes in regulatory authority policyduring the period of product development, clinical trials, and the review process. Regulatory authorities also may approve a product candidate for more limited indications than requested or theymay impose significant limitations in the form of narrow indications, warnings or a REMS. These regulatory authorities mayrequire precautions or contra‑indications with respect to conditions of use, or they may grant approval subject to theperformance of costly post‑marketing clinical trials. In addition, regulatory authorities may not approve the labeling claimsthat are necessary or desirable for the successful commercialization of any product candidates we may develop. Any of theforegoing scenarios could materially harm the commercial prospects for any product candidates we may develop andmaterially adversely affect our business, financial condition, results of operations, and prospects. Even if any product candidates we may develop receive marketing approval, they may fail to achieve the degree of marketacceptance by physicians, patients, healthcare payors, and others in the medical community necessary for commercialsuccess. The commercial success of any of our product candidates will depend upon its degree of market acceptance byphysicians, patients, third‑party payors, and others in the medical community. Ethical, social, and legal concerns aboutgenomic medicines generally and genome editing technologies specifically could result in additional regulations restrictingor prohibiting our products. Even if any product candidates we may develop receive marketing approval, they77 Table of Contentsmay nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors, and others in themedical community. The degree of market acceptance of any product candidates we may develop, if approved forcommercial sale, will depend on a number of factors, including: ·the efficacy and safety of such product candidates as demonstrated in clinical trials; ·the potential and perceived advantages compared to alternative treatments; ·the limitation to our targeted patient population and limitations or warnings contained in approved labeling bythe FDA or other regulatory authority; ·the ability to offer our medicines for sale at competitive prices; ·convenience and ease of administration compared to alternative treatments; ·the clinical indications for which the product candidate is approved by FDA, the European Commission, orother regulatory agencies; ·public attitudes regarding genomic medicine generally and genome editing technologies specifically; ·the willingness of the target patient population to try new therapies and of physicians to prescribe thesetherapies, as well as their willingness to accept a therapeutic intervention that involves the editing of thepatient’s genome; ·product labeling or product insert requirements of the FDA, the EMA, or other regulatory authorities, includingany limitations or warnings contained in a product’s approved labeling; ·relative convenience and ease of administration; ·the timing of market introduction of competitive products; ·publicity concerning our products or competing products and treatments; ·the strength of marketing and distribution support; ·sufficient third‑party coverage or reimbursement; and ·the prevalence and severity of any side effects. If any product candidates we develop do not achieve an adequate level of acceptance, we may not generatesignificant product revenues, and we may not become profitable. If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties tosell and market any product candidates we may develop, we may not be successful in commercializing those productcandidates if and when they are approved. We do not have a sales or marketing infrastructure and have no experience in the sale, marketing, or distribution ofpharmaceutical products. To achieve commercial success for any approved medicine for which we retain sales and marketingresponsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties. Inthe future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or participate insales activities with our collaborators for, some of our product candidates if and when they are approved. 78 Table of ContentsThere are risks involved with both establishing our own commercial capabilities and entering into arrangementswith third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists isexpensive and time consuming and could delay any product launch. If the commercial launch of a product candidate forwhich we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not occurfor 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 commercialization personnel. Factors that may inhibit our efforts to commercialize our medicines on our own include: ·our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customerservice, medical affairs, and other support personnel; ·the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians toprescribe any future medicines; ·the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement, andother acceptance by payors; ·restricted or closed distribution channels that make it difficult to distribute our products to segments of thepatient population; ·the lack of complementary medicines to be offered by sales personnel, which may put us at a competitivedisadvantage relative to companies with more extensive product lines; and ·unforeseen costs and expenses associated with creating an independent commercialization organization. If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distributionservices, our product revenues or the profitability of these product revenues to us may be lower than if we were to market andsell any medicines we may develop ourselves. In addition, we may not be successful in entering into arrangements with thirdparties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may havelittle control over such third parties, and any of them may fail to devote the necessary resources and attention to sell andmarket our medicines effectively. If we do not establish commercialization capabilities successfully, either on our own or incollaboration with third parties, we will not be successful in commercializing our product candidates. We face significant competition in an environment of rapid technological change, and there is a possibility that ourcompetitors may achieve regulatory approval before us or develop therapies that are safer or more advanced or effectivethan ours, which may harm our financial condition and our ability to successfully market or commercialize any productcandidates we may develop. The development and commercialization of new drug products is highly competitive. Moreover, the genome editingfield is characterized by rapidly changing technologies, significant competition, and a strong emphasis on intellectualproperty. We will face competition with respect to any product candidates that we may seek to develop or commercialize inthe future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companiesworldwide. Potential competitors also include academic institutions, government agencies, and other public and privateresearch organizations that conduct research, seek patent protection, and establish collaborative arrangements for research,development, manufacturing, and commercialization. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products orare pursuing the development of products for the treatment of the disease indications for which we have research programs,including LCA10, Duchenne muscular dystrophy, and cystic fibrosis. Some of these competitive products and therapies arebased on scientific approaches that are the same as or similar to our approach, and others are based on entirely differentapproaches.79 Table of Contents Our platform and product focus is the development of therapies using the CRISPR/Cas9 technology. Companiesdeveloping the CRISPR/Cas9 technology include Caribou Biosciences, CRISPR Therapeutics, and Intellia Therapeutics.There are additional companies developing therapies using additional genome editing technologies, including transcriptionactivator‑like effector nucleases, meganucleases, Mega‑TALs, and zinc finger nucleases. These companies include bluebirdbio, Cellectis, Poseida Therapeutics, Precision Biosciences, and Sangamo Biosciences. Additional companies developinggene therapy products include Abeona Therapeutics, AGTC Therapeutics, Avalanche Biotechnologies, DimensionTherapeutics, REGENXBIO, Spark Therapeutics, uniQure, and Voyager Therapeutics. In addition to competition from othergenome editing therapies or gene therapies, any products we may develop may also face competition from other types oftherapies, such as small molecule, antibody, or protein therapies. Many of our current or potential competitors, either alone or with their collaboration partners, have significantlygreater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinicaltrials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in thepharmaceutical, biotechnology, and gene therapy industries may result in even more resources being concentrated among asmaller 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 withus in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Ourcommercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that aresafer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products thatwe may develop or that would render any products that we may develop obsolete or non‑competitive. Our competitors alsomay obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, whichcould 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 wemay not be successful in marketing any product candidates we may develop against competitors. In addition, as a result of the expiration or successful challenge of our patent rights, we could face more litigationwith respect to the validity and/or scope of patents relating to our competitors’ products. The availability of our competitors’products could limit the demand, and the price we are able to charge, for any products that we may develop andcommercialize. Even if we are able to commercialize any product candidates, such products may become subject to unfavorable pricingregulations, third‑party reimbursement practices, or healthcare reform initiatives, which would harm our business. The regulations that govern marketing approvals, pricing, and reimbursement for new medicines vary widely fromcountry to country. In the United States, recently enacted legislation may significantly change the approval requirements inways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of thesale price of a medicine before it can be marketed. In many countries, the pricing review period begins after marketing orproduct licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject tocontinuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for amedicine in a particular country, but then be subject to price regulations that delay our commercial launch of the medicine,possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the medicine inthat 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 medicines successfully also will depend in part on the extent to whichreimbursement for these medicines and related treatments will be available from government health administrationauthorities, private health insurers, and other organizations. Government authorities and third‑party payors, such as privatehealth insurers and health maintenance organizations, decide which medications they will pay for and establishreimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government80 Table of Contentsauthorities and third‑party payors have attempted to control costs by limiting coverage and the amount of reimbursement forparticular medications. Increasingly, third‑party payors are requiring that drug companies provide them with predetermineddiscounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursementwill be available for any medicine 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. Ifreimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize anyproduct candidate for which we obtain marketing approval. There may be significant delays in obtaining reimbursement for newly approved medicines, and coverage may bemore limited than the purposes for which the medicine is approved by the FDA or similar regulatory authorities outside theUnited States. Moreover, eligibility for reimbursement does not imply that any medicine will be paid for in all cases or at arate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levelsfor new medicines, 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 medicine and the clinical setting in which it is used, may be basedon reimbursement levels already set for lower cost medicines and may be incorporated into existing payments for otherservices. Net prices for medicines may be reduced by mandatory discounts or rebates required by government healthcareprograms or private payors and by any future relaxation of laws that presently restrict imports of medicines from countrieswhere they may be sold at lower prices than in the United States. Third‑party payors often rely upon Medicare coveragepolicy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage andprofitable payment rates from both government‑funded and private payors for any approved medicines we may developcould have a material adverse effect on our operating results, our ability to raise capital needed to commercialize medicines,and our overall financial condition. Due to the novel nature of our technology and the potential for any product candidates we may develop to offer therapeuticbenefit in a single administration or limited number of administrations, we face uncertainty related to pricing andreimbursement for these product candidates. Our initial target patient populations are relatively small, as a result of which the pricing and reimbursement of anyproduct candidates we may develop, if approved, must be adequate to support the necessary commercial infrastructure. If weare unable to obtain adequate levels of reimbursement, our ability to successfully market and sell any such productcandidates will be adversely affected. The manner and level at which reimbursement is provided for services related to anyproduct candidates we may develop (e.g., for administration of our product to patients) is also important. Inadequatereimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell ourproducts. In addition, it may be necessary for us to develop new reimbursement models in order to realize adequate value.Payors may not be able or willing to adopt such new models, and patients may be unable to afford that portion of the costthat such models may require them to bear. If we determine such new models are necessary but we are unsuccessful indeveloping them, or if such models are not adopted by payors, our business, financial condition, results of operations, andprospects could be adversely affected. We expect the cost of a single administration of genomic medicine products, such as those we are seeking todevelop, to be substantial, when and if they achieve regulatory approval. We expect that coverage and reimbursement bygovernment and private payors will be essential for most patients to be able to afford these treatments. Accordingly, sales ofany such product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of anyproduct candidates we may develop will be paid by health maintenance, managed care, pharmacy benefit, and similarhealthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers, andother third‑party payors. Coverage and reimbursement by a third‑party payor may depend upon several factors, including thethird‑party payor’s determination that use of a product is: ·a covered benefit under its health plan; ·safe, effective, and medically necessary; ·appropriate for the specific patient; 81 Table of Contents·cost‑effective; and ·neither experimental nor investigational. Obtaining coverage and reimbursement for a product from third‑party payors is a time‑consuming and costly processthat could require us to provide to the payor supporting scientific, clinical, and cost‑effectiveness data. There is significantuncertainty related to third‑party coverage and reimbursement of newly approved products. We may not be able to providedata sufficient to gain acceptance with respect to coverage and reimbursement. If coverage and reimbursement are notavailable, or are available only at limited levels, we may not be able to successfully commercialize any product candidateswe may develop. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize asufficient return on our investment. Moreover, the downward pressure on healthcare costs in general, particularly prescription drugs and surgicalprocedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry ofnew products such as ours. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market andsell any product candidates we may develop will be harmed. If the market opportunities for any product candidates we may develop are smaller than we believe they are, our revenuesmay be adversely affected, and our business may suffer. Because the target patient populations for many of the productcandidates we may develop are small, we must be able to successfully identify patients and achieve a significant marketshare to maintain profitability and growth. We focus our research and product development on treatments for rare genetically defined diseases. Our projectionsof both the number of people who have these diseases, as well as the subset of people with these diseases who have thepotential to benefit from treatment with product candidates we may develop, are based on estimates. These estimates mayprove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. The number ofpatients in the United States, Europe, and elsewhere may turn out to be lower than expected, and patients may not beamenable to treatment with our products, or may become increasingly difficult to identify or gain access to, all of whichwould adversely affect our business, financial condition, results of operations, and prospects. Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization ofany medicines that we may develop. We face an inherent risk of product liability exposure related to the testing in human clinical trials of any productcandidates we may develop and will face an even greater risk if we commercially sell any medicines that we may develop. Ifwe cannot successfully defend ourselves against claims that our product candidates or medicines caused injuries, we couldincur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: ·decreased demand for any product candidates or medicines that we may develop; ·injury to our reputation and significant negative media attention; ·withdrawal of clinical trial participants; ·significant time and costs to defend the related litigation; ·substantial monetary awards to trial participants or patients; ·loss of revenue; and ·the inability to commercialize any medicines that we may develop. Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that wemay incur. We anticipate that we will need to increase our insurance coverage when we begin clinical trials and if we82 Table of Contentssuccessfully commercialize any medicine. Insurance coverage is increasingly expensive. We may not be able to maintaininsurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety lawsand regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect onthe success of our business. We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and localenvironmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratoryprocedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes;the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Ouroperations involve the use of hazardous and flammable materials, including chemicals and biological and radioactivematerials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of thesematerials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event ofcontamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, andany liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating toany contamination at our current or past facilities and at third‑party facilities. We also could incur significant costsassociated with civil or criminal fines and penalties. Compliance with applicable environmental laws and regulations may be expensive, and current or futureenvironmental laws and regulations may impair our research and product development efforts. In addition, we cannot entirelyeliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from theuse of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carryspecific biological or hazardous waste insurance coverage, and our commercial general liability and umbrella liabilitypolicies (under which we currently have an aggregate of $7.0 million in coverage) specifically exclude coverage for damagesand fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contaminationor injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and ourclinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business,financial condition, results of operations, and prospects. In addition, we may incur substantial costs in order to comply with current or future environmental, health, andsafety laws, regulations, and permitting requirements. These current or future laws, regulations, and permitting requirementsmay impair our research, development, or production efforts. Failure to comply with these laws, regulations, and permittingrequirements also may result in substantial fines, penalties, or other sanctions or business disruption, which could have amaterial adverse effect on our business, financial condition, results of operations, and prospects. Any third‑party contract manufacturers and suppliers we engage will also be subject to these and otherenvironmental, health, and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations couldresult 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. Genomic medicines are novel, and any product candidates we develop may be complex and difficult to manufacture. Wecould experience production problems that result in delays in our development or commercialization programs, limit thesupply of our products, or otherwise harm our business. Any product candidates we may develop will likely require processing steps that are more complex than thoserequired for most chemical pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemicalproperties of a biologic such as the product candidates we intend to develop generally cannot be fully characterized. As aresult, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner.Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects ormanufacturing failures that result in lot failures, product recalls, product liability claims, or insufficient inventory. If wesuccessfully develop product candidates, we may encounter problems achieving adequate quantities and quality ofclinical‑grade materials that meet FDA, European Commission or other comparable applicable foreign standards orspecifications with consistent and acceptable production yields and costs. To date, no cGMP gene83 Table of Contentstherapy manufacturing facility in the United States has received approval from the FDA for the manufacture of an approvedgenome editing or gene therapy product, and, therefore, the timeframe required for us to obtain such approval is uncertain. In addition, the FDA, the EMA, and other regulatory authorities may require us to submit samples of any lot of anyapproved product together with the protocols showing the results of applicable tests at any time. Under some circumstances,the FDA, the EMA, or other regulatory authorities may require that we not distribute a lot until the agency authorizes itsrelease. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may resultin unacceptable changes in the product that could result in lot failures or product recalls. Lot failures or product recalls couldcause us to delay clinical trials or product launches, which could be costly to us and otherwise harm our business, financialcondition, results of operations, and prospects. We also may encounter problems hiring and retaining the experienced scientific, quality control, and manufacturingpersonnel needed to manage our manufacturing process, which could result in delays in our production or difficulties inmaintaining compliance with applicable regulatory requirements. Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Anycontamination could materially harm our ability to produce product candidates on schedule and could harm our results ofoperations and cause reputational damage. Some of the raw materials that we anticipate will be required in our manufacturingprocess are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination orrecall. A material shortage, contamination, recall, or restriction on the use of biologically derived substances in themanufacture of any product candidates we may develop could adversely impact or disrupt the commercial manufacturing orthe production of clinical material, which could materially harm our development timelines and our business, financialcondition, results of operations, and prospects. Any problems in our manufacturing process or the facilities with which we contract could make us a less attractivecollaborator for potential partners, including larger pharmaceutical companies and academic research institutions, whichcould limit our access to additional attractive development programs. Problems in third‑party manufacturing process orfacilities also could restrict our ability to meet market demand for any products we develop and commercialize. Risks Related to Our Dependence on Third Parties We expect to depend on collaborations with third parties for the research, development, and commercialization of certainof the product candidates we may develop. If any such collaborations are not successful, we may not be able to capitalizeon the market potential of those product candidates. We anticipate seeking third‑party collaborators for the research, development, and commercialization of certain ofthe product candidates we may develop. For example, in May 2015, we entered into a collaboration with Juno Therapeuticsfocused on research and development of engineered T cell immunotherapies that utilize or incorporate our genome editingtechnologies. Our likely collaborators for any other collaboration arrangements include large and mid‑size pharmaceuticalcompanies, regional and national pharmaceutical companies, and biotechnology companies. If we enter into any sucharrangements with any third parties, we will likely have limited control over the amount and timing of resources that ourcollaborators dedicate to the development or commercialization of any product candidates we may seek to develop withthem. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfullyperform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that weenter into. Collaborations involving our research programs or any product candidates we may develop, including ourcollaboration with Juno Therapeutics, pose the following risks to us: ·Collaborators have significant discretion in determining the efforts and resources that they will apply to thesecollaborations. For example, under our collaboration with Juno Therapeutics, development and commercializationplans and strategies for licensed programs will be conducted in accordance with a plan and budget approved by ajoint research committee, or JRC, comprised of equal numbers of representatives from each of us and JunoTherapeutics.84 Table of Contents ·Collaborators may not pursue development and commercialization of any product candidates we may develop ormay elect not to continue or renew development or commercialization programs based on clinical trial results,changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition thatdiverts resources or creates competing priorities. For example, it is possible for Juno Therapeutics to elect not tosubmit an IND for a product candidate that we have nominated and the JRC confirmed without triggering atermination of the collaboration arrangement. ·Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trialor abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a productcandidate for clinical testing. ·Collaborators could independently develop, or develop with third parties, products that compete directly orindirectly with our medicines or product candidates if the collaborators believe that competitive products are morelikely to be successfully developed or can be commercialized under terms that are more economically attractive thanours. ·Collaborators with marketing and distribution rights to one or more medicines may not commit sufficient resourcesto the marketing and distribution of such medicine or medicines. ·Collaborators may not properly obtain, maintain, enforce, or defend our intellectual property or proprietary rights ormay use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate ourproprietary information or expose us to potential litigation. For example, Juno Therapeutics has the first right toenforce or defend certain of our intellectual property rights under our collaboration arrangement with respect tocertain licensed programs, and although we may have the right to assume the enforcement and defense of suchintellectual property rights if Juno Therapeutics does not, our ability to do so may be compromised by JunoTherapeutics’ actions. ·Disputes may arise between the collaborators and us that result in the delay or termination of the research,development, or commercialization of our medicines or product candidates or that result in costly litigation orarbitration that diverts management attention and resources. ·We may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo achange of control. ·Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue furtherdevelopment or commercialization of the applicable product candidates. For example, Juno Therapeutics canterminate its agreement with us in its entirety upon six months’ notice and can terminate the entire agreement withus in connection with a material breach of the agreement by us that remains uncured for a specified period of time. ·Collaboration agreements may not lead to development or commercialization of product candidates in the mostefficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination,the continued pursuit and emphasis on our product development or commercialization program under suchcollaboration could be delayed, diminished, or terminated. If our collaborations do not result in the successful development and commercialization of products, or if one of ourcollaborators terminates its agreement with us, we may not receive any future research funding or milestone or royaltypayments under the collaboration. If we do not receive the funding we expect under these agreements, our development ofproduct candidates could be delayed, and we may need additional resources to develop product candidates. In addition, ifone of our collaborators terminates its agreement with us, we may find it more difficult to find a suitable replacementcollaborator or attract new collaborators, and our development programs may be delayed or the perception of us in thebusiness and financial communities could be adversely affected. All of the risks relating to85 Table of Contentsproduct development, regulatory approval, and commercialization described in this Annual Report on Form 10-K apply tothe activities of our collaborators. We may in the future decide to collaborate with pharmaceutical and biotechnology companies for the developmentand potential commercialization of any product candidates we may develop. These relationships, or those like them, mayrequire us to incur non‑recurring and other charges, increase our near‑ and long‑term expenditures, issue securities that diluteour existing stockholders, or disrupt our management and business. In addition, we could face significant competition inseeking appropriate collaborators, and the negotiation process is time‑consuming and complex. Our ability to reach adefinitive collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources andexpertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of severalfactors. If we license rights to any product candidates we or our collaborators may develop, we may not be able to realize thebenefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. If we are not able to establish collaborations on commercially reasonable terms, we may have to alter our development andcommercialization plans. Our product development and research programs and the potential commercialization of any product candidates wemay develop will require substantial additional cash to fund expenses. For some of the product candidates we may develop,we may decide to collaborate with other pharmaceutical and biotechnology companies for the development and potentialcommercialization of those product candidates. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for acollaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the termsand conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Thosefactors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatoryauthorities outside the United States, the potential market for the subject product candidate, the costs and complexities ofmanufacturing and delivering such product candidate to patients, the potential of competing products, the existence ofuncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership withoutregard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consideralternative product candidates or technologies for similar indications that may be available to collaborate on and whethersuch a collaboration could be more attractive than the one with us. We may also be restricted under existing collaboration agreements from entering into future agreements on certainterms with potential collaborators. For example, during the research program term of our collaboration with JunoTherapeutics, we may not directly or indirectly license, fund, enable, or participate in any research, development,manufacture, or commercialization of engineered T cells with chimeric antigen receptors and T cell receptors in the field ofdiagnosis, treatment, or prevention of cancer in humans through the use of engineered T cells, excluding the diagnosis,treatment, or prevention of medullary cystic kidney disease. Collaborations are complex and time‑consuming to negotiate and document. In addition, there have been asignificant number of recent business combinations among large pharmaceutical companies that have resulted in a reducednumber of potential future collaborators. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable todo so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce ordelay its development program or one or more of our other development programs, delay its potential commercialization orreduce the scope of any sales or marketing activities, or increase our expenditures and undertake development orcommercialization activities at our own expense. If we elect to increase our expenditures to fund development orcommercialization activities on our own, we may need to obtain additional capital, which may not be available to us onacceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates orbring them to market and generate product revenue. 86 Table of ContentsWe expect to rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing,and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials,research, or testing. We expect to rely on third parties, such as CROs, clinical data management organizations, medical institutions, andclinical investigators, to conduct our clinical trials. We currently rely and expect to continue to rely on third parties toconduct some aspects of our research and preclinical testing. Any of these third parties may terminate their engagements withus at any time. If we need to enter into alternative arrangements, it would delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over theseactivities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of ourclinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDArequires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, andreporting 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 andpost the results of completed clinical trials on a government‑sponsored database, ClinicalTrials.gov, within certaintimeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions. Furthermore, these third parties may also have relationships with other entities, some of which may be ourcompetitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conductour clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may bedelayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may bedelayed in our efforts to, successfully commercialize our medicines. We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Anyperformance failure on the part of our distributors could delay clinical development or marketing approval of any productcandidates we may develop or commercialization of our medicines, producing additional losses and depriving us of potentialproduct revenue. We contract with third parties for the manufacture of materials for our research programs and preclinical studies andexpect to continue to do so for clinical trials and for commercialization of any product candidates that we may develop.This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, productcandidates, or any medicines that we may develop and commercialize, or that such supply will not be available to us at anacceptable cost, which could delay, prevent, or impair our development or commercialization efforts. We do not have any manufacturing facilities. We currently rely on third‑party manufacturers for the manufacture ofour materials for preclinical studies and expect to continue to do so for clinical testing and for commercial supply of anyproduct candidates that we may develop and for which we or our collaborators obtain marketing approval. We do not have along term supply agreement with any of the third‑party manufacturers, and we purchase our required supply on a purchaseorder basis. We may be unable to establish any agreements with third‑party manufacturers or to do so on acceptable terms. Evenif we are able to establish agreements with third‑party manufacturers, reliance on third‑party manufacturers entails additionalrisks, including: ·the possible breach of the manufacturing agreement by the third party; ·the possible termination or nonrenewal of the agreement by the third party at a time that is costly orinconvenient for us; and ·reliance on the third party for regulatory compliance, quality assurance, safety, and pharmacovigilance andrelated reporting.87 Table of Contents Third‑party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirementsoutside the United States. Our failure, or the failure of our third‑party manufacturers, to comply with applicable regulationscould result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawalof approvals, license revocations, seizures or recalls of product candidates or medicines, operating restrictions, and criminalprosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our business,financial condition, results of operations, and prospects. Any medicines that we may develop may compete with other product candidates and products for access tomanufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might becapable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development ormarketing approval. We do not currently have arrangements in place for redundant supply for bulk drug substances. If anyone of our current contract manufacturer cannot perform as agreed, we may be required to replace that manufacturer.Although we believe that there are several potential alternative manufacturers who could manufacture any productcandidates we may develop, we may incur added costs and delays in identifying and qualifying any such replacement. Our current and anticipated future dependence upon others for the manufacture of any product candidates we maydevelop or medicines may adversely affect our future profit margins and our ability to commercialize any medicines thatreceive marketing approval on a timely and competitive basis. Risks Related to Our Intellectual Property If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if thescope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercializeproducts and technology similar or identical to ours, and our ability to successfully commercialize any product candidateswe may develop, and our technology may be adversely affected. Our success depends in large part on our ability to obtain and maintain patent protection in the United States andother countries with respect to our CRISPR/Cas9 platform technology and any proprietary product candidates andtechnology we develop. We seek to protect our proprietary position by in‑licensing intellectual property relating to ourplatform technology and filing patent applications in the United States and abroad related to our technologies and productcandidates that are important to our business. If we or our licensors are unable to obtain or maintain patent protection withrespect 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. No consistent policy regarding the scope of claims allowable in the field of genome editing, includingCRISPR/Cas9 technology, has emerged in the United States. The scope of patent protection outside of the United States isalso uncertain. Changes in either the patent laws or their interpretation in the United States and other countries may diminishour ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, couldaffect the value of our intellectual property or narrow the scope of our owned and licensed patents. With respect to bothin‑licensed and owned intellectual property, we cannot predict whether the patent applications we and our licensors arecurrently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will providesufficient protection from 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 timelymanner. It is also possible that we will fail to identify patentable aspects of our research and development output in time toobtain patent protection. Although we enter into non‑disclosure and confidentiality agreements with parties who have accessto 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 theseparties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing ourability to seek patent protection. In addition, publications of discoveries in the scientific88 Table of Contentsliterature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions aretypically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we werethe first to make the inventions claimed in our owned or any licensed patents or pending patent applications, or that we werethe first to file for patent protection of such inventions. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involvescomplex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance,scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patentapplications may not result in patents being issued which protect our technology or product candidates or which effectivelyprevent others from commercializing competitive technologies and product candidates. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, andits scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue aspatents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other thirdparties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we hold orin‑license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not knowwhether any of our platform advances and product candidates will be protectable or remain protected by valid andenforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar oralternative technologies or products in a non‑infringing manner. For example, we are aware that third parties have suggestedthe use of the CRISPR technology in conjunction with a protein other than Cas9. Our owned and in‑licensed patents may notcover such technology. If our competitors commercialize the CRISPR technology in conjunction with a protein other thanCas9, our business, financial condition, results of operations, and prospects could be materially adversely affected. The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patentsmay be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third partypreissuance submission of prior art to the United States Patent and Trademark Office, or USPTO, or become involved inopposition, derivation, revocation, reexamination, post‑grant and inter partes review, or interference proceedingschallenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding orlitigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology orproducts and compete directly with us, without payment to us, or result in our inability to manufacture or commercializeproducts without infringing third‑party patent rights. Moreover, we, or one of our licensors, may have to participate ininterference proceedings declared by the USPTO to determine priority of invention or in post‑grant challenge proceedings,such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Suchchallenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or heldunenforceable, which could limit our ability to stop others from using or commercializing similar or identical technologyand products, or limit the duration of the patent protection of our technology and product candidates. Such proceedings alsomay result in substantial cost and require significant time from our scientists and management, even if the eventual outcomeis favorable to us. As discussed below, some of our in‑licensed patents are subject to interference, opposition, and request forex parte re-examination proceedings and therefore subject to these risks. In addition, given the amount of time required for the development, testing, and regulatory review of new productcandidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As aresult, our intellectual property may not provide us with sufficient rights to exclude others from commercializing productssimilar or identical to ours. Moreover, some of our owned and in‑licensed patents and patent applications are, and may in thefuture be, co‑owned with third parties. If we are unable to obtain an exclusive license to any such third party co‑owners’interest in such patents or patent applications, such co‑owners may be able to license their rights to other third parties,including our competitors, and our competitors could market competing products and technology. In addition, we may needthe cooperation of any such co‑owners of our patents in order to enforce such patents against third parties, and suchcooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitiveposition, business, financial conditions, results of operations, and prospects. 89 Table of ContentsFurthermore, our owned and in‑licensed patents may be subject to a reservation of rights by one or more thirdparties. For example, the research resulting in certain of our owned and in‑licensed patent rights and technology was fundedin part by the U.S. government. As a result, the government may have certain rights, or march‑in rights, to such patent rightsand technology. When new technologies are developed with government funding, the government generally obtains certainrights in any resulting patents, including a non‑exclusive license authorizing the government to use the invention fornon‑commercial purposes. These rights may permit the government to disclose our confidential information to third partiesand to exercise march‑in rights to use or allow third parties to use our licensed technology. The government can exercise itsmarch‑in rights if it determines that action is necessary because we fail to achieve practical application of thegovernment‑funded technology, because action is necessary to alleviate health or safety needs, to meet requirements offederal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certainrequirements to manufacture products embodying such inventions in the United States. Any exercise by the government ofsuch rights could harm our competitive position, business, financial condition, results of operations, and prospects. Our rights to develop and commercialize our technology and product candidates are subject, in part, to the terms andconditions of licenses granted to us by others. We are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that areimportant or necessary to the development of our genome editing technology, including our CRISPR/Cas9 technology, andproduct candidates. These and other licenses may not provide exclusive rights to use such intellectual property andtechnology in all relevant fields of use and in all territories in which we may wish to develop or commercialize ourtechnology and products in the future. As a result, we may not be able to prevent competitors from developing andcommercializing competitive products in territories included in all of our licenses. For example, pursuant to our licenseagreement with The Broad Institute, Inc., or Broad, and the President and Fellows of Harvard College, or Harvard, or theBroad‑Harvard License Agreement, under certain circumstances, Broad and Harvard may grant a license to the patents thatare the subject of our license agreement to a third party. Such third party would have full rights to the patent rights that arethe subject of our Broad‑Harvard License Agreement, which could impact our competitive position and enable a third partyto commercialize products similar to our future product candidates and technology. In addition, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement, anddefense of patents and patent applications covering the technology that we license from third parties. For example, pursuantto each of our intellectual property licenses with Broad and Harvard, The General Hospital Corporation, d/b/a MassachusettsGeneral Hospital, or MGH, and Duke University, or Duke, our licensors retain control of preparation, filing, prosecution, andmaintenance, and, in certain circumstances, enforcement and defense of their patents and patent applications. Therefore, wecannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, anddefended in a manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce,and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced oreliminated, and our right to develop and commercialize any of our products that are subject of such licensed rights could beadversely affected. Our licensors may have relied on third party consultants or collaborators or on funds from third parties such that ourlicensors are not the sole and exclusive owners of the patents we in‑licensed. For example, the Rockefeller University, orRockefeller, is a joint applicant on certain patent applications (including a continuation of one of these applications) that wehave in‑licensed from Broad, acting on behalf of itself, MIT and Harvard. Broad does not and does not purport to grant anyrights in Rockefeller’s interest in these patent applications under our agreement. As a result, Broad may not be the sole andexclusive owner of any patents that issue from these patent applications. If other third parties have ownership rights to ourin‑licensed patents, they may be able to license such patents to our competitors, and our competitors could market competingproducts and technology. This could have a material adverse effect on our competitive position, business, financialconditions, results of operations, and prospects. In spite of our best efforts, our licensors might conclude that we have materially breached our license agreementsand might therefore terminate the license agreements, thereby removing our ability to develop and commercialize productsand technology covered by these license agreements. If these in‑licenses are terminated, or if the underlying patents fail toprovide the intended exclusivity, competitors would have the freedom to seek regulatory90 Table of Contentsapproval of, and to market, products identical to ours. In addition, we may seek to obtain additional licenses from ourlicensors and, in connection with obtaining such licenses, we may agree to amend our existing licenses in a manner that maybe more favorable to the licensors, including by agreeing to terms that could enable third parties (potentially including ourcompetitors) to receive licenses to a portion of the intellectual property that is subject to our existing licenses. Any of theseevents could have a material adverse effect on our competitive position, business, financial conditions, results of operations,and prospects. Some of our in‑licensed patents are subject to priority disputes. In addition, our owned and in‑licensed patents and otherintellectual property may be subject to further priority disputes or to inventorship disputes and similar proceedingsincluding validity disputes. If we or our licensors are unsuccessful in any of these proceedings, we may be required toobtain licenses from third parties, which may not be available on commercially reasonable terms or at all, or to cease thedevelopment, manufacture, and commercialization of one or more of the product candidates we may develop, which couldhave a material adverse impact on our business. On January 11, 2016, the Patent Trial and Appeal Board of the USPTO, or PTAB, declared an interference between apending U.S. patent application (U.S. Serial No. 13/842,859) that is owned by the University of California, the University ofVienna, and Emmanuelle Charpentier and 12 U.S. patents (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406;8,871,445; 8,889,356; 8,895,308; 8,906,616; 8,932,814; 8,945,839; 8,993,233; and 8,999,641) that are co‑owned by Broadand MIT, and in some cases Harvard, and in‑licensed by us. On March 17, 2016, the PTAB re-declared the interference to adda pending U.S. patent application (U.S. Serial No. 14/704,551) that is co-owned by Broad, MIT, and Harvard, and in-licensedby us. An interference is a proceeding within the USPTO to determine priority of invention of the subject matter of patentclaims filed by different parties. This proceeding is only potentially available for patent applications filed in the UnitedStates on or before March 15, 2013 and related continuing patent applications. In the declared interference, the University of California, acting on behalf of itself and the University of Vienna, andEmmanuelle Charpentier have been designated as the senior party and Broad has been designated as the junior party. In aninterference proceeding, the junior party has the burden of proof and presents its priority evidence first. The declaration ofinterference defines the invention that is subject to the declaration of interference, also referred to as “the count,” as relatingto a method that involves contacting a target DNA in a eukaryotic cell with certain defined CRISPR/Cas9 components for thepurpose of cleaving or editing a target DNA molecule or modulating transcription of at least one gene encoded thereon. Allof the claims in the pending U.S. patent application that is owned by the University of California, the University of Vienna,and Emmanuelle Charpentier and all of the claims in the 12 U.S. patents and one pending U.S. patent application that areco‑owned by Broad and MIT, and in some cases Harvard, and in‑licensed by us are currently implicated in the interference.Prior to the declaration of interference, the University of California, acting on behalf of itself and the University of Vienna,and Emmanuelle Charpentier filed a “Suggestion of Interference” in the USPTO on April 13, 2015, which requested that aninterference be declared between certain claims in this same pending U.S. patent application (U.S. Serial No. 13/842,859) andcertain claims in 10 U.S. patents, which we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. ASupplemental Suggestion of Interference was filed by the University of California and Emmanuelle Charpentier onNovember 5, 2015, which requested that an interference be declared between certain claims in their same pending U.S. patentapplication (U.S. Serial No. 13/842,859) and certain claims in two additional U.S. patents and five pending U.S. applications(including U.S. Serial No. 14/704,551 which has now been added to the interference), which we have in‑licensed from Broad,acting on behalf of itself, MIT, and Harvard. The 12 U.S. patents referred to in the Suggestion of Interference andSupplemental Suggestion of Interference are the same as those included in the declaration of interference. The Suggestion ofInterference and Supplemental Suggestion of Interference assert that the inventors from the University of California and theUniversity of Vienna, and Emmanuelle Charpentier made certain inventions before the inventors from Broad and MIT and, incertain cases, Harvard, which will be evaluated by the PTAB in the interference discussed above. The University ofCalifornia, the University of Vienna, and Emmanuelle Charpentier are listed as applicants on U.S. Serial No. 13/842,859. TheUniversity of California derives rights in U.S. Serial No. 13/842,859 from an assignment by Dr. Jennifer Doudna and certainother inventors listed on such application. Caribou Biosciences has reported that it has an exclusive license to patent rightsfrom the University of California and the University of Vienna. Intellia Therapeutics has reported that it has an exclusivelicense to such rights from Caribou Biosciences in certain fields. CRISPR Therapeutics has reported that it has an exclusivelicense to patent rights from Emmanuelle Charpentier. Further, Dr. Doudna was a founder of our company and entered into aconsulting agreement with us at the time of our founding.91 Table of ContentsHowever, Dr. Doudna gave notice of termination of that agreement in May 2014 after less than seven months of service, andshe has had no further engagement in our business since that time. Dr. Doudna is also a founder of Caribou Biosciences andhas been publicly identified as an advisor to Intellia Therapeutics, each of which is one of our competitors. As a result of the declaration of interference, an adversarial proceeding in the USPTO before the PTAB has beeninitiated. An interference is declared to ultimately determine priority, specifically which party was first to invent thecommonly claimed invention. An interference is typically divided into two phases. The first phase is typically referred to asthe motions or preliminary motions phase while the second is referred to as the priority phase. In the first phase, each partymay raise issues including but not limited to those relating to the patentability of a party’s claims based on prior art, writtendescription, and enablement. A party also may seek an earlier priority benefit or may challenge whether the declaration ofinterference was proper in the first place. Priority, or a determination of who first invented the commonly claimed invention,is determined in the second phase of an interference. Although we cannot predict with any certainty how long each phasewill actually take, each phase may take approximately a year or longer before a decision is made by the PTAB. It is possiblefor motions filed in the preliminary motions phase to be dispositive of the interference proceeding, such that the secondpriority phase is not reached. It is also possible that other third parties may seek to become a party to this interference or afuture interference or that the University of California and Emmanuelle Charpentier or other third parties may file a separateSuggestion of Interference against the Broad patents subject to the interference or other U.S. patents and patent applicationsthat we own or in‑license. Separately, ToolGen Inc., or ToolGen, filed Suggestions of Interference in the USPTO on April 13, 2015, whichbecame publicly available on November 12, 2015 and December 3, 2015, suggesting that they believe some of the claims inpending U.S. applications owned by ToolGen (U.S. Serial No. 14/685,568 and U.S. Serial No. 14/685,510, respectively)interfere with certain claims in five U.S. patents, which we have in‑licensed from Broad, acting on behalf of itself, MIT, andHarvard. These five U.S. patents are among the 12 U.S. patents with respect to which the PTAB has declared an interference.The Suggestions of Interference that were filed by ToolGen are still pending and it is uncertain when and in what manner theUSPTO will act on them. The 12 in‑licensed U.S. patents and one in-licensed U.S. patent application that are the subject of the interferencewith the pending U.S. patent application (U.S. Serial No. 13/842,859) that is owned by the University of California, theUniversity of Vienna, and Emmanuelle Charpentier (which includes the five in‑licensed U.S. patents that are the subject ofthe Suggestions of Interference filed by ToolGen) relate generally to the CRISPR/Cas9 system and its use in eukaryotic cells.The claims of the 12 in‑licensed U.S. patents and one in-licensed U.S. patent application vary in scope and coverage andinclude claims that are directed to CRISPR/Cas9 systems that employ viral vectors for delivery, single guide RNAs, modifiedguide RNAs, S. aureus Cas9, or a Cas9 nickase and are relevant to our genome editing platform technology. The loss of oneor more of these in‑licensed patents could have a material adverse effect on the conduct of our business. In addition, we or our licensors may be subject to claims that former employees, collaborators, or other third partieshave an interest in our owned or in‑licensed patents or other intellectual property as an inventor or co‑inventor. For example,we have determined that certain of the claims of one of our pending U.S. non‑provisional patent applications, and itscorresponding pending PCT application, cover subject matter invented jointly by us and other third parties, which will resultin certain third parties holding co‑ownership rights in such applications. If we are unable to obtain an exclusive license toany such third party co‑owners’ interest in such patent applications, such co‑owners may be able to license their rights toother third parties, including our competitors. In addition, we may need the cooperation of any such co‑owners to enforce anypatents that issue from such patent applications against third parties, and such cooperation may not be provided to us. We arealso aware of one third party, Rockefeller, that has independently filed a U.S. patent application (U.S. Serial No. 14/324,960)as a continuation of a U.S. patent application that we have in‑licensed from Broad, acting on behalf of itself and MIT (U.S.Serial No. 14/183,429, which has since issued as U.S. Patent No. 8,771,945). In contrast to a Suggestion of Interference, a U.S.continuation patent application does not seek to challenge the priority date of an existing patent, rather it is a new filing ofan existing U.S. patent application, which contains the same priority date as the existing application. However, it mayprovoke the declaration of an interference. In that regard, the U.S. continuation patent application filed by Rockefeller listsone of its employees as a co‑inventor alongside Dr. Feng Zhang, who is an employee of Broad in addition to being one of ourfounders. The U.S. continuation92 Table of Contentspatent application was filed by Rockefeller with copies of claims from one U.S. patent and one U.S. patent application, whichwe have in‑licensed from Broad, acting on behalf of itself and MIT (U.S. Patent No. 8,697,359 and U.S. SerialNo. 14/183,429, which has since issued as U.S. Patent No. 8,771,945). The U.S. continuation patent application filed byRockefeller may provoke the declaration of an interference by the USPTO with these or other patents that we havein‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. The U.S. continuation application filed by Rockefellermay also prompt a derivation proceeding in the USPTO or litigation in court regarding such continuation patent application.In addition, if the USPTO were to grant a patent based on this U.S. continuation patent application including the Rockefelleremployee as an inventor, then Rockefeller could license its rights to such patent to one of our competitors or to another thirdparty such that they may have freedom‑to‑operate under such patent and may commercialize similar or identical products andtechnology to us. We may also need the cooperation of Rockefeller to enforce such patent against third parties, and suchcooperation may not be provided to us. Any of the foregoing could have a material adverse effect on the conduct of ourbusiness. We or our licensors are subject to and may in the future become a party to similar proceedings or priority disputes inEurope or other foreign jurisdictions. We are aware of nine oppositions filed by different third parties against a Europeanpatent that we in‑license from Broad, acting on behalf of itself, MIT and Harvard (European Patent No. EP 2,771,468 B1).The European Patent Office Opposition Division, or EPO OD, has sent a Communication of Notice of Opposition to Broadinforming Broad of the nine oppositions and that an opposition proceeding before the EPO OD has been initiated. The EPOopposition proceeding may involve issues including, but not limited to, procedural formalities related to filing the Europeanpatent application, priority, and the patentability of the involved claims. We are also aware of eight oppositions filed againsta second European patent that we in‑license from Broad, acting on behalf of itself, MIT and Harvard (European Patent No. EP2,784,162 B1). One or more of the third parties that have filed oppositions against European Patent Nos. EP 2,771,468 B1and/or EP 2,784,162 B1 or other third parties may file future oppositions against other European patents that we in‑license orown. The loss of priority for, or the loss of, these European patents could have a material adverse effect on the conduct of ourbusiness. We or our licensors are subject to a validity dispute in the USPTO and in the future may become a party toadditional validity disputes in the United States or other jurisdictions. We are aware of a request for re-examination that wasfiled by an anonymous third party against a U.S. patent that we in-license from Broad, acting on behalf of itself and MIT (U.S.Patent No. 8,771,945). This patent is also one of the 12 U.S. patents included in the interference declared by the PTAB. Theloss of this patent or one or more of our other in-licensed patents could have a material adverse effect on the conduct of ourbusiness. If we or our licensors are unsuccessful in any interference proceedings or other priority or validity disputes(including any patent oppositions or requests for re-examination) to which we or they are subject, we may lose valuableintellectual property rights through the loss of one or more patents owned or licensed or our owned or licensed patent claimsmay be narrowed, invalidated, or held unenforceable. In addition, if we or our licensors are unsuccessful in any inventorshipdisputes to which we or they are subject, we may lose valuable intellectual property rights, such as exclusive ownership of, orthe exclusive right to use, our owned or in‑licensed patents. If we or our licensors are unsuccessful in any interferenceproceeding or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties,including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses maynot be available on commercially reasonable terms or at all, or may be non‑exclusive. If we are unable to obtain and maintainsuch licenses, we may need to cease the development, manufacture, and commercialization of one or more of the productcandidates we may develop. The loss of exclusivity or the narrowing of our owned and licensed patent claims could limit ourability to stop others from using or commercializing similar or identical technology and products. Any of the foregoingcould result in a material adverse effect on our business, financial condition, results of operations, or prospects. Even if we aresuccessful in an interference proceeding or other similar priority or inventorship disputes, it could result in substantial costsand be a distraction to management and other employees. We may not be able to protect our intellectual property and proprietary rights throughout the world. Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would beprohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the93 Table of ContentsUnited States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countriesoutside the United States, or from selling or importing products made using our inventions in and into the United States orother jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection todevelop their own products and, further, may export otherwise infringing products to territories where we have patentprotection but enforcement is not as strong as that in the United States. These products may compete with our products, andour patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights inforeign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor theenforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnologyproducts, which could make it difficult for us to stop the infringement of our patents or marketing of competing products inviolation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property andproprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patentapplications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in anylawsuits 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 toobtain 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 tothird parties. In addition, many countries limit the enforceability of patents against government agencies or governmentcontractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value ofsuch patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to ourbusiness, our competitive position may be impaired, and our business, financial condition, results of operations, andprospects may be adversely affected. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission,fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reducedor eliminated for non‑compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents andapplications will be due to be paid to the USPTO and various government patent agencies outside of the United States overthe lifetime of our owned or licensed patents and applications. In certain circumstances, we rely on our licensing partners topay these fees due to U.S. and non‑U.S. patent agencies. The USPTO and various non‑U.S. government agencies requirecompliance with several procedural, documentary, fee payment, and other similar provisions during the patent applicationprocess. We are also dependent on our licensors to take the necessary action to comply with these requirements with respectto our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by othermeans in accordance with the applicable rules. There are situations, however, in which non‑compliance can result inabandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in therelevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identicalproducts or technology, which could have a material adverse effect on our business, financial condition, results of operations,and prospects. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from thirdparties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rightsthat are important to our business. We have entered into license agreements with third parties and may need to obtain additional licenses from ourexisting licensors and others to advance our research or allow commercialization of product candidates we may develop. It ispossible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. In thatevent, we may be required to expend significant time and resources to redesign our technology, product candidates, or themethods for manufacturing them or to develop or license replacement technology, all of which may94 Table of Contentsnot be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercializethe affected product candidates, which could harm our business, financial condition, results of operations, and prospectssignificantly. We cannot provide any assurances that third party patents do not exist which might be enforced against ourcurrent technology, including CRISPR/Cas9, manufacturing methods, product candidates, or future methods or productsresulting in either an injunction prohibiting our manufacture or sales, or, with respect to our sales, an obligation on our partto pay royalties and/or other forms of compensation to third parties, which could be significant. In each of our license agreements, and we expect in our future agreements, we are responsible for bringing anyactions against any third party for infringing on the patents we have licensed. Certain of our license agreements also requireus to meet development thresholds to maintain the license, including establishing a set timeline for developing andcommercializing products. Disputes may arise regarding intellectual property subject to a licensing agreement, including: ·the scope of rights granted under the license agreement and other interpretation‑related issues; ·the extent to which our technology and processes infringe on intellectual property of the licensor that is notsubject to the licensing agreement; ·the sublicensing of patent and other rights under our collaborative development relationships; ·our diligence obligations under the license agreement and what activities satisfy those diligence obligations; ·the inventorship and ownership of inventions and know‑how resulting from the joint creation or use ofintellectual 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 partiesare complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of anycontract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevantintellectual property or technology, or increase what we believe to be our financial or other obligations under the relevantagreement, 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 maintainour current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop andcommercialize the affected product candidates, which could have a material adverse effect on our business, financialconditions, results of operations, and prospects. We may not be successful in obtaining necessary rights to any product candidates we may develop through acquisitionsand in‑licenses. We currently have rights to intellectual property, through licenses from third parties, to identify and developproduct candidates. Many pharmaceutical companies, biotechnology companies, and academic institutions are competingwith us in the field of genome editing technology and filing patent applications potentially relevant to our business. Forexample, we are aware of several third party patent applications that, if issued, may be construed to cover our CRISPR/Cas9technology and product candidates. In order to avoid infringing these third party patents, we may find it necessary or prudentto obtain licenses from such third party intellectual property holders. We may also require licenses from third parties forcertain non‑CRISPR/Cas9 technologies including certain delivery methods that we are evaluating for use with productcandidates we may develop. In addition, with respect to any patents we co‑own with third parties, we may require licenses tosuch co‑owners’ interest to such patents. However, we may be unable to secure such licenses or otherwise acquire orin‑license any compositions, methods of use, processes, or other intellectual property rights from third parties that we identifyas necessary for product candidates we may develop and CRISPR/Cas9 technology. The licensing or acquisition of thirdparty intellectual property rights is a competitive area, and several more established companies may pursue strategies tolicense or acquire third party intellectual property rights that we may consider95 Table of Contentsattractive or necessary. These established companies may have a competitive advantage over us due to their size, capitalresources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to bea competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third partyintellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. Forexample, certain delivery modes, including certain adeno associated virus, or AAV, vectors and lipid nanoparticletechnologies, we are evaluating for use in our LCA10 program or with other product candidates we may develop are coveredby patents held by third parties. If we are unable to successfully obtain rights to required third party intellectual propertyrights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevantprogram or product candidate, which could have a material adverse effect on our business, financial condition, results ofoperations, and prospects. Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect ourproducts. Changes in either the patent laws or interpretation of the patent laws in the United States could increase theuncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent theclaimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitledto the patent. After March 2013, under the Leahy‑Smith America Invents Act, or the America Invents Act, enacted inSeptember 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirementsfor patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardlessof whether a third party was the first to invent the claimed invention. The America Invents Act also includes a number ofsignificant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. Theseinclude allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures toattack the validity of a patent by USPTO administered post‑grant proceedings, including post‑grant review, inter partesreview, and derivation proceedings. However, the America Invents Act and its implementation could increase theuncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issuedpatents, all of which could have a material adverse effect on our business, financial condition, results of operations, andprospects. In addition, the patent positions of companies in the development and commercialization of biologics andpharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protectionavailable in certain circumstances and weakened the rights of patent owners in certain situations. This combination of eventshas created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actionsby the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change inunpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect andenforce our intellectual property in the future. Issued patents covering our technology and product candidates could be found invalid or unenforceable if challenged incourt or before administrative bodies in the United States or abroad. If we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering a productcandidate we may develop or our technology, including CRISPR/Cas9, the defendant could counterclaim that such patent isinvalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity orunenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of severalstatutory requirements, including lack of novelty, obviousness, or non‑enablement. Grounds for an unenforceability assertioncould be an allegation that someone connected with prosecution of the patent withheld relevant information from theUSPTO, or made a misleading statement, during prosecution. Third parties have raised challenges to the validity of certain ofour in‑licensed patent claims and may in the future raise similar claims before administrative bodies in the United States orabroad, even outside the context of litigation. Such mechanisms include re‑examination, post‑grant review, inter partesreview, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions(e.g., opposition proceedings). For example, an interference has been declared against 12 of our in‑licensed U.S. patents, arequest for re-examination has been filed against one of these U.S. patents, and opposition proceedings have been initiatedagainst two of our in‑licensed European patents, and additional96 Table of Contentsinterference and opposition proceedings may be initiated in the future. For more information regarding these proceedings,see “Item 3. Legal Proceedings.” Such proceedings could result in the revocation of, cancellation of, or amendment to ourpatents 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 validityquestion, for example, we cannot be certain that there is no invalidating prior art, of which we or our licensing partners andthe patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity orunenforceability, we would lose at least part, and perhaps all, of the patent protection on our technology or platform, or anyproduct candidates that we may develop. Such a loss of patent protection would have a material adverse impact on ourbusiness, financial condition, results of operations, and prospects. The intellectual property landscape around genome editing technology, including CRISPR/Cas9, is highly dynamic, andthird parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating theirintellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on thesuccess of our business. The field of genome editing, especially in the area of CRISPR/Cas9 technology, is still in its infancy, and no suchproducts have reached the market. 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 forthe coming years. There may be significant intellectual property related litigation and proceedings relating to our owned andin‑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 biotechnologyand pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual propertyrights. We are subject to and may in the future become party to, or threatened with, adversarial proceedings or litigationregarding intellectual property rights with respect to our technology and any product candidates we may develop, includinginterference proceedings, post‑grant review, inter partes review, and derivation proceedings before the USPTO and similarproceedings in foreign jurisdictions such as oppositions before the EPO. Third parties may assert infringement claims againstus based on existing patents or patents that may be granted in the future, regardless of their merit. We are aware of certainthird party patent applications in this landscape that may, if issued as patents, be asserted to encompass our CRISPR/Cas9technology. In particular, we are aware of several separate families of U.S. patent applications and foreign counterparts whichrelate to CRISPR/Cas9 technology, where the earliest priority dates of each family pre‑date the priority dates of ourin‑licensed patents and patent applications, including PCT Publication No. WO 2013/176772 (and its related U.S. andforeign patent applications) filed by the University of California, the University of Vienna (both of which are reported tohave exclusively licensed their rights to Caribou Biosciences, which is reported to have exclusively licensed certain rights toIntellia Therapeutics), and Emmanuelle Charpentier (who is reported to have exclusively licensed her rights to CRISPRTherapeutics), and WO 2014/065596 (and its related U.S. and foreign patent applications) filed by ToolGen. Each of thesefamilies of patent applications are owned by a different third party and contain claims that may be construed to covercomponents and uses of CRISPR/Cas9 technology. If these third‑party patent applications are issued as patents and we arenot able to obtain or maintain a license on commercially reasonable terms, such third parties could potentially assertinfringement claims against us, which could have a material adverse effect on the conduct of our business. We are also awareof a third‑party U.S. patent and a related U.S. continuation patent application (U.S. Patent No. 8,921,332 and U.S. SerialNo. 14/550,463), which are reported to have been exclusively licensed to Cellectis and contain claims related to methods forinducing double strand breaks in chromosomal DNA using a chimeric restriction endonuclease. In addition, we are aware of aU.S. patent and a related U.S. continuation patent application (U.S. Patent No. 9,200,266 and U.S. Serial No. 14/925,386) thatis assigned to Sangamo Biosciences, Inc. and contains claims to a chimeric nuclease that induces a site‑specificsingle‑stranded break in a double‑stranded DNA. Although we believe that we do not infringe a valid claim of such thirdparty patents, such third parties may assert infringement claims or claim infringement against us, and if we are found toinfringe such third party patents, we may be required to pay damages, cease commercialization of the infringing technology,or obtain a license from such third parties, which may not be available on commercially reasonable terms or at all. 97 Table of ContentsEven if we believe third‑party intellectual property claims are without merit, there is no assurance that a court wouldfind in our favor on questions of infringement, validity, enforceability, or priority. A court of competent jurisdiction couldhold that these third party patents are valid, enforceable, and infringed, which could materially and adversely affect ourability to commercialize any product candidates we may develop and any other product candidates or technologies coveredby the asserted third party patents. In order to successfully challenge the validity of any such U.S. patent in federal court, wewould need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincingevidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction wouldinvalidate the claims of any such U.S. patent. If we are found to infringe a third party’s intellectual property rights, and we areunsuccessful in demonstrating that such patents are invalid or unenforceable, we could be required to obtain a license fromsuch third party to continue developing, manufacturing, and marketing any product candidates we may develop and ourtechnology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even ifwe were able to obtain a license, it could be non‑exclusive, thereby giving our competitors and other third parties access tothe same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We alsocould be forced, including by court order, to cease developing, manufacturing, and commercializing the infringingtechnology or product candidates. In addition, we could be found liable for significant monetary damages, including trebledamages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claimsthat we have misappropriated the confidential information or trade secrets of third parties could have a similar materialadverse 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 alleged tradesecrets of their current or former employers or claims asserting ownership of what we regard as our own intellectualproperty. Many of our employees, consultants, and advisors are currently or were previously employed at universities or otherbiotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensurethat our employees, consultants, and advisors do not use the proprietary information or know‑how of others in their work forus, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including tradesecrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary todefend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation couldresult in substantial costs and be a distraction to management. In addition, while it is our policy to require our employees and contractors who may be involved in the conceptionor development of intellectual property to execute agreements assigning such intellectual property to us, we may beunsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property thatwe regard as our own. The assignment of intellectual property rights may not be self‑executing, or the assignment agreementsmay 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 effecton our business, financial condition, results of operations, and prospects. We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which couldbe expensive, time consuming, and unsuccessful. Competitors may infringe our patents or the patents of our licensing partners, or we may be required to defendagainst claims of infringement. In addition, our patents or the patents of our licensing partners also are, and may in the futurebecome, involved in inventorship or priority disputes. To counter or defend against such claims can be expensive and timeconsuming. In an infringement proceeding, a court may decide that a patent owned or in‑licensed by us is invalid orunenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our owned andin‑licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one ormore of our owned or in‑licensed patents at risk of being invalidated or interpreted narrowly. Furthermore, because of thesubstantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation.98 Table of Contents Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may causeus to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there couldbe public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securitiesanalysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of ourcommon stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resourcesavailable for development activities or any future sales, marketing, or distribution activities. We may not have sufficientfinancial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able tosustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resourcesand more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuationof patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. 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 andconfidentiality agreements to protect our unpatented know‑how, technology, and other proprietary information and tomaintain our competitive position. With respect to our technology platform, we consider trade secrets and know‑how to beone of our primary sources of intellectual property. Trade secrets and know‑how can be difficult to protect. In particular, weanticipate that with respect to our technology platform, these trade secrets and know‑how will over time be disseminatedwithin the industry through independent development, the publication of journal articles describing the methodology, andthe movement of personnel from academic to industry scientific positions. We seek to protect these trade secrets and other proprietary technology, in part, by entering into non‑disclosure andconfidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outsidescientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter intoconfidentiality and invention or patent assignment agreements with our employees and consultants. We cannot guaranteethat we have entered into such agreements with each party that may have or have had access to our trade secrets orproprietary technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose ourproprietary 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, andtime‑consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are lesswilling or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independentlydeveloped by a competitor or other third party, we would have no right to prevent them from using that technology orinformation to compete with us. If any of our trade secrets were to be disclosed to or independently developed by acompetitor 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 businessmay be materially harmed. Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates wemay develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug PriceCompetition and Patent Term Restoration Action of 1984, or Hatch‑Waxman Amendments. The Hatch‑WaxmanAmendments permit a patent extension term of up to five years as compensation for patent term lost during the FDAregulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 yearsfrom the date of product approval, only one patent may be extended and only those claims covering the approved drug, amethod for using it, or a method for manufacturing it may be extended. However, we may not be granted an extensionbecause of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing toapply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfyapplicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less thanwe request. If we are unable to obtain patent term extension or term of any such99 Table of Contentsextension is less than we request, our competitors may obtain approval of competing products following our patentexpiration, 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 propertyrights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. Forexample: ·others may be able to make gene therapy products that are similar to any product candidates we may develop orutilize similar gene therapy technology but that are not covered by the claims of the patents that we license ormay own in the future; ·we, or our license partners or current or future collaborators, might not have been the first to make theinventions 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 patentapplications covering certain of our or their inventions; ·others may independently develop similar or alternative technologies or duplicate any of our technologieswithout 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 leadto issued patents; ·issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legalchallenges by our competitors; ·our competitors might conduct research and development activities in countries where we do not have patentrights and then use the information learned from such activities to develop competitive products for sale in ourmajor 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 maysubsequently file a patent covering such intellectual property. Should any of these events occur, they could have a material adverse effect on our business, financial condition,results of operations, and prospects. Risks Related to Regulatory Approval and Other Legal Compliance Matters 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 productcandidates 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 ourability to generate revenue will be materially impaired. Any product candidates we may develop and the activities associated with their development andcommercialization, 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 other100 Table of Contentsregulatory authorities in the United States and by comparable authorities in other countries. Failure to obtain marketingapproval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. Wehave not received approval to market any product candidates from regulatory authorities in any jurisdiction. We have onlylimited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely onthird‑party CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinicaland clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establishthe biologic product candidate’s safety, purity, and potency. Securing regulatory approval also requires the submission ofinformation about the product manufacturing process to, and inspection of manufacturing facilities by, the relevantregulatory authority. Any product candidates we develop may not be effective, may be only moderately effective, or mayprove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtainingmarketing approval or prevent or limit commercial use. The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take manyyears if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety offactors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approvalpolicies during the development period, changes in or the enactment of additional statutes or regulations, or changes inregulatory review for 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 toaccept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, orother 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 orsubject to restrictions or post‑approval commitments that render the approved medicine not commercially viable. If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we maydevelop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will bematerially impaired. Failure to obtain marketing approval in foreign jurisdictions would prevent any product candidates we may develop frombeing marketed in such jurisdictions, which, in turn, would materially impair our ability to generate revenue. In order to market and sell any product candidates we may develop in the European Union and many other foreignjurisdictions, we or our third‑party collaborators must obtain separate marketing approvals and comply with numerous andvarying regulatory requirements. The approval procedure varies among countries and can involve additional testing. Thetime required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approvalprocess outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, inmany countries outside the United States, it is required that the product be approved for reimbursement before the productcan be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authoritiesoutside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authoritiesin other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensureapproval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketingapprovals and may not receive necessary approvals to commercialize our medicines in any jurisdiction, which wouldmaterially impair our ability to generate revenue. Even if we, or any collaborators we may have, obtain marketing approvals for any product candidates we develop, theterms of approvals and ongoing regulation of our products could require the substantial expenditure of resources and maylimit how we, or they, manufacture and market our products, which could materially impair our ability to generaterevenue. Any product candidate for which we obtain marketing approval, along with the manufacturing processes,post‑approval clinical data, labeling, advertising, and promotional activities for such medicine, will be subject to continualrequirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safetyand other post‑marketing information and reports, registration and listing requirements, cGMP requirements relating toquality control, quality assurance and corresponding maintenance of records and documents, and101 Table of Contentsrequirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a productcandidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may bemarketed or to the conditions of approval, or contain requirements for costly post‑marketing testing and surveillance tomonitor the safety or efficacy of the medicine. Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more productcandidates 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, andquality control. If we and such collaborators are not able to comply with post‑approval regulatory requirements, we and suchcollaborators could have the marketing approvals for our products withdrawn by regulatory authorities and our, or suchcollaborators’, ability to market any future products could be limited, which could adversely affect our ability to achieve orsustain profitability. Further, the cost of compliance with post‑approval regulations may have a negative effect on ourbusiness, operating results, financial condition, and prospects. Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from themarket, and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if weexperience unanticipated problems with our medicines, when and if any of them are approved. The FDA and other regulatory agencies closely regulate the post‑approval marketing and promotion of medicines toensure that they are marketed only for the approved indications and in accordance with the provisions of the approvedlabeling. The FDA and other regulatory agencies impose stringent restrictions on manufacturers’ communications regardingoff‑label use, and if we do not market our medicines for their approved indications, we may be subject to enforcement actionfor off‑label marketing by the FDA and other federal and state enforcement agencies, including the Department of Justice.Violation of the Federal Food, Product, and Cosmetic Act and other statutes, including the False Claims Act, relating to thepromotion and advertising of prescription products may also lead to investigations or allegations of violations of federal andstate health care fraud and abuse laws and state consumer protection laws. In addition, later discovery of previously unknown problems with our medicines, manufacturers, or manufacturingprocesses, or failure to comply with regulatory requirements, may yield various results, including: ·restrictions on such medicines, manufacturers, or manufacturing processes; ·restrictions on the labeling or marketing of a medicine; ·restrictions on the distribution or use of a medicine; ·requirements to conduct post‑marketing clinical trials; ·receipt of warning or untitled letters; ·withdrawal of the medicines from the market; ·refusal to approve pending applications or supplements to approved applications that we submit; ·recall of medicines; ·fines, restitution, or disgorgement of profits or revenue; ·suspension or withdrawal of marketing approvals; ·suspension of any ongoing clinical trials; ·refusal to permit the import or export of our medicines; 102 Table of Contents·product seizure; and ·injunctions or the imposition of civil or criminal penalties. Any government investigation of alleged violations of law could require us to expend significant time and resourcesin response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit ourability to commercialize any product candidates we may develop and adversely affect our business, financial condition,results of operations, and prospects. Our relationships with healthcare providers, physicians, and third‑party payors will be subject to applicable anti‑kickback,fraud and abuse, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties,contractual damages, reputational harm, and diminished profits and future earnings. Healthcare providers, physicians, and third‑party payors play a primary role in the recommendation and prescriptionof any product candidates that we may develop for which we obtain marketing approval. Our future arrangements withthird‑party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws andregulations that may constrain the business or financial arrangements and relationships through which we market, sell, anddistribute our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcarelaws and regulations include the following: ·the federal healthcare anti‑kickback statute prohibits, among other things, persons from knowingly andwillfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, toinduce or reward either the referral of an individual for, or the purchase, order, or recommendation of, any goodor service, for which payment may be made under federal and state healthcare programs such as Medicare andMedicaid; ·the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tamactions, against individuals or entities for knowingly presenting, or causing to be presented, to the federalgovernment, claims for payment or approval from Medicare, Medicaid, or other government payors that are falseor fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to thefederal government, with potential liability including mandatory treble damages and significant per‑claimpenalties, currently set at $5,500 to $11,000 per false claim; ·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as further amended by theHealth Information Technology for Economic and Clinical Health Act, or HITECH, which imposes certainrequirements, including mandatory contractual terms, with respect to safeguarding the privacy, security, andtransmission of individually identifiable health information without appropriate authorization by entitiessubject to the rule, such as health plans, health care clearinghouses, and health care providers; ·the federal false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up amaterial fact or making any materially false statement in connection with the delivery of or payment forhealthcare benefits, items, or services; ·the federal transparency requirements under the federal Physician Payment Sunshine Act, which requiresmanufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health andHuman Services, or HHS, information related to payments and other transfers of value to physicians andteaching hospitals, and ownership and investment interests held by physicians and other healthcare providersand their immediate family members and applicable group purchasing organizations; and ·analogous state laws and regulations, such as state anti‑kickback and false claims laws, may apply to sales ormarketing arrangements and claims involving healthcare items or services reimbursed by non‑governmentalthird‑party payors, including private insurers, and some state laws require pharmaceutical companies to complywith the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government in addition to requiring drug manufacturers to report informationrelated to payments to physicians and other health care providers or marketing expenditures.103 Table of Contents Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it ispossible that some of our business activities could be subject to challenge under one or more of such laws. If our operationsare found to be in violation of any of the laws described above or any other government regulations that apply to us, we maybe subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in governmenthealth care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations,any of which could adversely affect our business, financial condition, results of operations, and prospects. 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 European Union. The provision ofbenefits or advantages to physicians is also governed by the national anti‑bribery laws of European Union Member States,such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment. Payments made to physicians in certain European Union Member States must be publically disclosed. Moreover,agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his orher competent professional organization, and/or the regulatory authorities of the individual European Union Member States.These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in theEuropean Union Member States. Failure to comply with these requirements could result in reputational risk, publicreprimands, administrative penalties, fines, or imprisonment. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws andregulations will involve substantial costs. It is possible that governmental authorities will conclude that our businesspractices may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse orother healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any othergovernmental 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 curtailmentor restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do businessare 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 resultin significant costs or an interruption in operations, which could have a material adverse effect on our business, financialcondition, results of operations, and prospects. Recently enacted and future legislation, and any changes to existing legislation, may increase the difficulty and cost for usand any collaborators we may have to obtain marketing approval of and commercialize any product candidates we maydevelop and affect the prices we, or they, may obtain. In the United States and some foreign jurisdictions, there have been and continue to be a number of legislative andregulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval ofany product candidates that we may develop, restrict or regulate post‑approval activities, and affect our ability to profitablysell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other healthcarereform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downwardpressure on the price that we, or our future collaborators, may receive for any approved products. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MedicareModernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expandedMedicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on averagesales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugsthat will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decreasethe coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only todrug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations insetting their own reimbursement rates. Therefore, any reduction in104 Table of Contentsreimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from privatepayors. The Patient Protection and Affordable Care Act enacted in March 2010 and subsequently amended by the HealthCare and Education Affordability Reconciliation Act, or collectively the PPACA, contains several provisions of potentialimportance to any product candidates we may develop, including the following: ·an annual, non‑deductible fee on any entity that manufactures or imports specified branded prescriptionproducts and biologic agents; ·an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Product RebateProgram; ·expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti‑Kickback Statute,new government investigative powers, and enhanced penalties for non‑compliance; ·a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50%point‑of‑sale discounts off negotiated prices; ·extension of manufacturers’ Medicaid rebate liability; ·expansion of eligibility criteria for Medicaid programs; ·expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ·new requirements to report financial arrangements with physicians and teaching hospitals; ·a new requirement to annually report product samples that manufacturers and distributors provide to physicians;and ·a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparativeclinical effectiveness research, along with funding for such research. In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. These newlaws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we mayobtain for any product candidates we may develop for which marketing approval is obtained. We expect that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may resultin more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approvedproduct. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction inpayments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent usfrom being able to generate revenue from sales of products, attain profitability, or commercialize any product candidates wemay develop. Our employees, principal investigators, consultants, and commercial partners may engage in misconduct or other improperactivities, 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, and commercial partners,and, if we commence clinical trials, our principal investigators. Misconduct by these parties could include intentionalfailures to comply with FDA regulations or the regulations applicable in the European Union and other jurisdictions, provideaccurate information to the FDA, the European Commission, and other regulatory authorities, comply with healthcare fraudand abuse laws and regulations in the United States and abroad, report financial information or data accurately, or discloseunauthorized activities to us. In particular, sales, marketing, and business105 Table of Contentsarrangements 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 interactionswith the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to ourreputation. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identifyand deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective incontrolling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions orlawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, andwe are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on ourbusiness, financial condition, results of operations, and prospects, including the imposition of significant fines or othersanctions. Risks Related to Employee Matters and Managing Growth Our future success depends on our ability to retain our Chief Executive Officer and other key executives and to attract,retain, and motivate qualified personnel. We are highly dependent on Katrine S. Bosley, our Chief Executive Officer, as well as the other principal membersof our management and scientific teams. Ms. Bosley is employed “at will,” meaning we or she may terminate the employmentrelationship at any time. We do not maintain “key person” insurance for any of our executives or other employees. The lossof the services of any of these persons could impede the achievement of our research, development, and commercializationobjectives. Recruiting and retaining qualified scientific, clinical, manufacturing, and sales and marketing personnel will also becritical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competitionamong numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition forthe hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultantsand advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors, including our scientific co‑founders, may be employed byemployers other than us and may have commitments under consulting or advisory contracts with other entities that may limittheir availability to us. The inability to recruit, or loss of services of certain executives, key employees, consultants, oradvisors, may impede the progress of our research, development, and commercialization objectives and have a materialadverse effect on our business, financial condition, results of operations, and prospects. We expect to expand our development, regulatory, and future sales and marketing capabilities, and as a result, we mayencounter difficulties in managing our growth, which could disrupt our operations. We expect to experience significant growth in the number of our employees and the scope of our operations,particularly in the areas of drug development, regulatory affairs, and sales and marketing. To manage our anticipated futuregrowth, we must continue to implement and improve our managerial, operational, and financial systems, expand ourfacilities, and continue to recruit and train additional qualified personnel. Due to our limited financial resources and thelimited experience of our management team in managing a company with such anticipated growth, we may not be able toeffectively manage the expected expansion of our operations or recruit and train additional qualified personnel. Moreover,the expected physical expansion of our operations may lead to significant costs and may divert our management andbusiness development resources. Any inability to manage growth could delay the execution of our business plans or disruptour operations. Risks Related to Our Common Stock An active trading market for our common stock may not be sustained Our shares of common stock began trading on The NASDAQ Global Select Market on February 3, 2016. Given thelimited trading history of our common stock, there is a risk that an active trading market for our shares will not be106 Table of Contentssustained, which could put downward pressure on the market price of our common stock and thereby affect the ability of ourstockholders to sell their shares. The market price of our common stock may be volatile, which could result in substantial losses for our stockholders. Our stock price is, and is likely to continue to be, volatile. As a result of this volatility, our stockholders may not beable to sell their common stock at or above the prices at which they purchased their shares. Some of the factors that maycause the market price of our common stock to fluctuate include: ·the success of existing or new competitive products or technologies; ·the timing and results of preclinical studies for our LCA10 program and any product candidates that we maydevelop; ·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, orannouncements about new research programs or product candidates of our competitors; ·developments or changing views regarding the use of genomic medicines, including those that involve genomeediting; ·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 productcandidates that we may develop; ·the results of our efforts to develop additional product candidates or products; ·actual or anticipated changes in estimates as to financial results, development timelines, or recommendations bysecurities analysts; ·announcement or expectation of additional financing efforts; ·sales of our common stock by us, our insiders, or other stockholders; ·expiration of market stand‑off or lock‑up agreement; ·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 stock; ·changes in the structure of healthcare payment systems; ·market conditions in the pharmaceutical and biotechnology sectors; ·general economic, industry, and market conditions; and107 Table of Contents ·the other factors described in this “Risk Factors” section. In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies inparticular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate tochanges in the operating performance of the companies whose stock is experiencing those price and volume fluctuations.Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actualoperating performance. Following periods of such volatility in the market price of a company’s securities, securities classaction litigation has often been brought against that company. Because of the potential volatility of our stock price, we maybecome the target of securities litigation in the future. Securities litigation could result in substantial costs and divertmanagement’s attention and resources from our business. If securities analysts do not publish research or reports about our business or if they publish negative evaluations of ourstock, the price of our stock and trading volume could decline. The trading market for our common stock depends in part on the research and reports that industry or financialanalysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations ofour stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could losevisibility in the market for our stock, which in turn could cause our stock price to decline. A significant portion of our total outstanding shares is restricted from immediate resale but may be sold into the market inthe near future, which could cause the market price of our common stock to decline significantly, even if our business isdoing well. Sales of a substantial number of shares of our common stock in the public market could occur at any time. Thesesales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, couldreduce the market price of our common stock. Of the 36,605,251 shares of our common stock outstanding as of March 18,2016, 29,820,251 shares are currently subject to restrictions on transfer under 180-day lock-up arrangements with either theunderwriters for our initial public offering or under agreements entered into between us and the holders of those shares. Theserestrictions are due to expire July 31, 2016, resulting in these shares becoming eligible for public sale on August 1, 2016 ifthey are registered under the Securities Act of 1933, as amended, which we refer to as the Securities Act, or if they qualify foran exemption from registration under the Securities Act, including under Rules 144 or 701. Moreover, holders of an aggregate of 24,929,709 shares of our common stock have rights, subject to conditions, torequire us to file registration statements covering their shares or to include their shares in registration statements that we mayfile for ourselves or other stockholders. We also have registered all shares of common stock that we may issue under ourequity compensation plans or that are issuable upon exercise of outstanding options. These shares can be freely sold in thepublic market upon issuance and once vested, subject to volume limitations applicable to affiliates and the lock‑upagreements described above. If any of these additional shares are sold, or if it is perceived that they will be sold, in the publicmarket, the market price of our common stock could decline. Our executive officers, directors, and principal stockholders, if they choose to act together, have the ability to control allmatters submitted to stockholders for approval. As of March 18, 2016, our executive officers and directors, combined with our stockholders who owned more than5% of our outstanding common stock, and their affiliates, in the aggregate, beneficially owned shares representing a majorityof our outstanding common stock. As a result, these stockholders, if they act together, will be able to influence ourmanagement and affairs and all matters requiring stockholder approval, including the election of directors and approval ofsignificant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change incontrol of our company and might affect the market price of our common stock. 108 Table of ContentsWe are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growthcompanies may make our common stock less attractive to investors. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBSAct, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growthcompany, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to otherpublic companies that are not emerging growth companies. These exemptions include not being required to comply with theauditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act of 2002, or SOX Section 404, not being required tocomply with any requirement that may be adopted by the Public Company Accounting Oversight Board regardingmandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit andthe financial statements, reduced disclosure obligations regarding executive compensation, and exemptions from therequirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any goldenparachute payments not previously approved. As a result, the information we provide stockholders will be different than theinformation that is available with respect to other public companies. In particular, in this Annual Report on Form 10-K, wehave not included all of the executive compensation related information that would be required if we were not an emerginggrowth company. We expect to continue to take advantage of some of the reporting exemptions available to emerginggrowth companies. We cannot predict whether investors will find our common stock less attractive if we rely on theseexemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market forour common stock, and our stock price may be more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transitionperiod for complying with new or revised accounting standards. This allows an emerging growth company to delay theadoption of certain accounting standards until those standards would otherwise apply to private companies. We haveirrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we willbe subject to the same new or revised accounting standards as other public companies that are not emerging growthcompanies. As compared to previous years, we will incur increased costs as a result of operating as a public company, and ourmanagement will be required to devote substantial time to new compliance initiatives and corporate governance practices. As a public company, and particularly after we are no longer an “emerging growth company,” we will incursignificant legal, accounting, and other expenses that we did not incur as a private company. The Sarbanes‑Oxley Act of2002, the Dodd‑Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ GlobalSelect 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.We expect that we will need to hire additional accounting, finance, and other personnel in connection with our becoming,and our efforts to comply with the requirements of being, a public company, and our management and other personnel willneed to devote a substantial amount of time towards maintaining compliance with these requirements. These requirementswill increase our legal and financial compliance costs and will make some activities more time‑consuming and costly. Forexample, we expect that the rules and regulations applicable to us as a public company may make it more difficult and moreexpensive for us to obtain director and officer liability insurance, which could make it more difficult for us to attract andretain qualified members of our board of directors. We are currently evaluating these rules and regulations and cannot predictor estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are oftensubject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practicemay evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuinguncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governancepractices. Pursuant to SOX Section 404, we will be required to furnish a report by our management on our internal control overfinancial reporting beginning with our second filing of an Annual Report on Form 10‑K with the SEC after we become apublic company. However, while we remain an emerging growth company, we will not be required to include an attestationreport on internal control over financial reporting issued by our independent registered public accounting109 Table of Contentsfirm. To achieve compliance with SOX Section 404 within the prescribed period, we will be engaged in a process todocument and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, wewill need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan toassess and document the adequacy of internal control over financial reporting, continue steps to improve control processes asappropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting andimprovement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able toconclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as requiredby SOX Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financialmarkets due to a loss of confidence in the reliability of our financial statements. We have broad discretion in the use of our cash reserves and may not use them effectively. Our management has broad discretion to use our cash reserves and could use our cash reserves in ways that do notimprove our results of operations or enhance the value of our common stock. The failure by our management to apply thesefunds effectively could result in financial losses that could have a material adverse effect on our business, cause the price ofour common stock to decline, and delay the development of our product candidates. Pending their use, we may invest ourcash reserves in a manner that does not produce income or that loses value. We do not expect to pay any dividends for the foreseeable future. Accordingly, stockholders must rely on capitalappreciation, if any, for any return on their investments. We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our futureearnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreementsmay preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be stockholders’sole source of gain for the foreseeable future. Provisions in our certificate of incorporation and bylaws or Delaware law might discourage, delay, or prevent a change incontrol of our company or changes in our management and, therefore, depress the trading price of our common stock. Provisions in our certificate of incorporation and bylaws or Delaware law may discourage, delay, or prevent amerger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which youmight otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrateattempts by our stockholders to replace or remove our management. These provisions include: ·limitations on the removal of directors; ·a classified board of directors so that not all members of our board of directors are elected at one time; ·advance notice requirements for stockholder proposals and nominations; ·the inability of stockholders to act by written consent or to call special meetings; ·the requirement that at least 75% of the votes cast by all our stockholders approve the amendment or repeal ofcertain provisions of our bylaws or certificate of incorporation; ·the ability of our board of directors to make, alter, or repeal our bylaws; and ·the ability of our board of directors to designate the terms of and issue new series of preferred stock withoutstockholder approval, which could be used to institute a rights plan, or a poison pill, that would work to dilutethe stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approvedby our board of directors. In addition, Section 203 of the General Corporation Law of the State of Delaware prohibits a publicly held Delawarecorporation from engaging in a business combination with an interested stockholder, generally a person which110 Table of Contentstogether with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three yearsafter the date of the transaction in which the person became an interested stockholder, unless the business combination isapproved in a prescribed manner. The existence of the foregoing provisions could also deter potential acquirers of our company, thereby reducing thelikelihood that our stockholders could receive a premium for their shares of common stock in an acquisition. Our certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within theState of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certaintypes of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against thecompany and our directors and officers. Our certificate of incorporation provides that, unless our board of directors otherwise determines, the state courts inthe State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for theDistrict of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, anyaction asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or ourstockholders, any action asserting a claim against us or any of our directors or officers arising pursuant to any provision ofthe General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws, or any action asserting aclaim against us or any of our directors or officers governed by the internal affairs doctrine. This exclusive forum provisionmay limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable fordisputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties. We occupy approximately 18,000 square feet of office and laboratory space in Cambridge, Massachusetts under asublease that expires in September 2016. We also occupy approximately 9,300 square feet of additional laboratory space inCambridge, Massachusetts under a sublease that expires in November 2016. We have also entered into a lease forapproximately 59,783 square feet of office and laboratory space located in Cambridge, Massachusetts, to which we expect torelocate our corporate headquarters in the fall of 2016. We believe that our facilities are sufficient to meet our current needsand that suitable additional space will be available as and when needed. Item 3. Legal Proceedings. On January 11, 2016, the PTAB declared an interference between a pending U.S. patent application (U.S. SerialNo. 13/842,859) that is owned by the University of California, the University of Vienna, and Emmanuelle Charpentier and 12U.S. patents (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406; 8,871,445; 8,889,356; 8,895,308; 8,906,616;8,932,814; 8,945,839; 8,993,233; and 8,999,641) that are co‑owned by Broad and MIT, and in some cases Harvard, andin‑licensed by us. On March 17, 2016, the PTAB re-declared the interference to add a pending U.S. patent application (U.S.Serial No. 14/704,551) that is co-owned by Broad, MIT, and Harvard, and in-licensed by us. An interference is a proceedingwithin the USPTO to determine priority of invention of the subject matter of patent claims filed by different parties. In thedeclared interference, the University of California, acting on behalf of itself and the University of Vienna, and EmmanuelleCharpentier have been designated as the senior party and Broad has been designated as the junior party. Prior to thedeclaration of interference, the University of California, acting on behalf of itself and the University of Vienna, andEmmanuelle Charpentier filed a Suggestion of Interference in the USPTO on April 13, 2015 against 10 U.S. patents that wehave in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. A Supplemental Suggestion of Interference wasfiled by the University of California and Emmanuelle Charpentier on November 5, 2015 against two additional U.S. patentsand five pending U.S. patent applications (including U.S. Serial No. 14/704,551 which has now been added to theinterference) that we have in‑licensed from Broad, acting on behalf of itself, MIT and Harvard. The 12 U.S. patents and onepending U.S. patent application referred to in the Suggestion of Interference and Supplemental Suggestion of Interference arethe same as those referred to above and will be evaluated by the PTAB in the interference described above. Separately,ToolGen also filed Suggestions of Interference in the111 Table of ContentsUSPTO on April 13, 2015, which became publicly available on November 12, 2015 and December 3, 2015, against five U.S.patents, which are among the 12 U.S. patents with respect to which the PTAB has declared an interference and which we havein‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. A request for ex parte re-examination was filed onFebruary 16, 2016 against U.S. Patent No. 8,771,945, which we have in‑licensed from Broad, acting on behalf of itself andMIT. In addition, we are aware that Rockefeller has independently filed a U.S. patent application as a continuation of a U.S.patent that we have in‑licensed from Broad, acting on behalf of itself and MIT, and added one of its employees as aco‑inventor on this patent application. In addition, the EPO OD has initiated an opposition proceeding in the EPO against aEuropean patent that we in‑license from Broad, acting on behalf of itself, MIT and Harvard, and we are also aware of eightoppositions filed against a second European patent that we in‑license from Broad, acting on behalf of itself, MIT andHarvard. There can be no assurance that any proceedings that result from these third‑party actions will be resolved in favor ofBroad. In addition, if they are not resolved in favor of Broad, there can be no assurance that the result will not have a materialadverse effect on our business, financial condition, results of operations, or prospects. See “Item 1A. Risk Factors—RisksRelated to Our Intellectual Property—Some of our in‑licensed patents are subject to priority disputes.” and“Business—Intellectual Property.” Regardless of outcome, litigation or other legal proceedings can have an adverse impacton us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures. Not applicable. 112 Table of ContentsPART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities. Market Information Our common stock trades on the NASDAQ Global Select Market under the symbol “EDIT”. Trading of our commonstock commenced on February 3, 2016 in connection with our initial public offering, or IPO. Prior to that time, there was noestablished public trading market for our common stock. As a result, we have not set forth quarterly information with respectto the high and low prices for our common stock for the two most recent fiscal years. The following table sets forth for theperiod indicated the high and low sale prices per share for our common stock as reported on the NASDAQ Global SelectMarket for the period indicated:Irst QasdMarket PriceHighLowFirst Quarter (February 3, 2016 to March 18, 2016)$43.99$12.57 Holders As of March 18, 2016, we had approximately 72 holders of record of our common stock. This number does notinclude beneficial owners whose shares were held in street name. Dividend Policy We have never declared or paid any cash dividends on our common stock. We currently intend to retain futureearnings to fund the development and growth of our business. We do not expect to pay any cash dividends in the foreseeablefuture. In addition, the terms of any future debt agreements that we may enter into, may preclude us from paying dividendswithout the lenders’ consent or at all. Recent Sales of Unregistered Securities Set forth below is information regarding shares of our common stock and preferred stock issued and stock optionsgranted by us during the fiscal year ended December 31, 2015 that were not registered under the Securities Act of 1933, asamended, or the Securities Act. Also included is the consideration, if any, received by us for such shares, warrants and optionsand information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under whichexemption from registration was claimed. (a) Issuances and sales of preferred stock In June 2015, we issued and sold an aggregate of 16,890,699 shares of our Series A-2 preferred stock to ten investorsfor aggregate consideration of $22.0 million. In August 2015, we issued and sold an aggregate of 26,666,660 shares of our Series B preferred stock for aggregateconsideration of $120.0 million to forty-three investors. No underwriters were involved in the foregoing issuances of securities. The securities described in this paragraph (a)were issued to accredited investors in reliance upon exemptions from the registration requirements of the Securities Actprovided under Regulation D promulgated under the Securities Act, or pursuant to Section 4(a)(2) under the Securities Act,relating to transactions by an issuer not involving any public offering. All of the shares of preferred stock described aboveautomatically converted into common stock on a 2.6-for-one basis upon the closing of our IPO. 113 Table of Contents(b) Issuance of common stock During the fiscal year ended December 31, 2015, we issued an aggregate of 327,970 shares of common stock tocertain parties with whom we have entered into license agreements. No underwriters were involved in the foregoing issuances of securities. The issuances of shares of our common stockdescribed in this paragraph (b) were issued pursuant to Section 4(a)(2) under the Securities Act, relating to transactions by anissuer not involving any public offering. All recipients either received adequate information about us or had access, throughother relationships, to such information. (c) Stock Option Grants and Option Exercises During the fiscal year ended December 31, 2015, we granted options to purchase an aggregate of 1,705,584 shares ofcommon stock, with exercise prices ranging from $0.65 to $11.21 per share, to employees, directors and consultants pursuantto our 2013 Stock Incentive Plan, as amended. During that same time period, we issued an aggregate of 28,651 shares ofcommon stock upon the exercise of options for aggregate consideration of $6,025. No underwriters were involved in the foregoing issuances of securities. The issuances of stock options and the sharesof our common stock issued upon the exercise of the options described in this paragraph (c) were issued pursuant to writtencompensatory plans or arrangements with our employees, directors, and consultants, in reliance on the exemption providedby Rule 701 promulgated under the Securities Act, or pursuant to Section 4(a)(2) under the Securities Act, relating totransactions by an issuer not involving any public offering. All recipients either received adequate information about us orhad access, through employment or other relationships, to such information. Purchase of Equity Securities We did not purchase any of our registered equity securities during the period covered by this Annual Report onForm 10-K. Use of Proceeds from Registered Securities On February 8, 2016, we closed our initial public offering of 6,785,000 shares of our common stock, including885,000 shares of our common stock pursuant to the full exercise by the underwriters of an option to purchase additionalshares, at a public offering price of $16.00 per share for an aggregate offering of approximately $108.6 million. The offer andsale of all of the shares in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-208856), which was declared effective by the SEC on February 2, 2016. Morgan Stanley & Co. LLC and J.P.Morgan Securities LLC acted as joint book-running managers for the offering and as representatives of the underwriters.Cowen and Company, LLC acted as lead manager and JMP Securities acted as co-manager. The offering commenced onFebruary 2, 2016 and did not terminate until the sale of all of the shares offered. We received aggregate net proceeds from the offering of $97.8 million, after deducting underwriting discounts andcommissions and other offering expenses payable by us. None of the underwriting discounts and commissions or otheroffering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10% or more ofour common stock or to any affiliates of ours. Because the closing of our IPO occurred on February 8, 2016, as of December 31, 2015, we had not yet received thenet proceeds from the sale of shares of common stock in our IPO and, therefore, had used none of the proceeds as ofDecember 31, 2015. There has been no material change in our planned use of the net proceeds from the offering as describedin our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act. 114 Table of ContentsItem 6. Selected Financial Data. You should read the following selected consolidated financial data together with our consolidated financialstatements and accompanying notes appearing elsewhere in this Annual Report on Form 10-K and the “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K. Wehave derived the consolidated statement of operations data for the years ended December 31, 2015 and 2014 and for the period from September 3, 2013 (inception) to December 31, 2013 and the consolidated balance sheet data as of December31, 2015 and 2014 from our audited consolidated financial statements included in this Annual Report on Form 10-K. Wehave derived the consolidated balance sheet data as of December 31, 2013 from our audited consolidated financialstatements not included in this Annual Report on Form 10-K. Our historical results for any prior period are not necessarilyindicative of the results that may be expected in any future period. Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2015 2014 2013 (in thousands, except share and per share data) Consolidated Statements of Operations Data: Collaboration revenue $1,629 $ — $ — Operating expenses: Research and development 18,846 5,073 530 General and administrative 18,095 7,650 1,210 Total operating expenses 36,941 12,723 1,740 Operating loss (35,312) (12,723) (1,740) Other expense, net (37,445) (928) (18) Interest expense, net (143) (34) — Total other expense, net (37,588) (962) (18) Net loss and comprehensive loss $(72,900) $(13,685) $(1,758) Reconciliation of net loss to net loss attributable to common stockholders: Net loss $(72,900) $(13,685) $(1,758) Accretion of redeemable convertible preferred stock to redemption value (394) (309) (25) Net loss attributable to common stockholders $(73,294) $(13,994) $(1,783) Net loss per share attributable to common stockholders, basic and diluted $(28.55) $(12.46) $(5.93) Weighted-average common shares outstanding, basic and diluted 2,566,916 1,123,098 300,480 (1)See Note 2 to our consolidated financial statements for further details on the calculation of net loss per share, basicand diluted, attributable to common stockholders and the weighted‑average number of shares used in thecomputation of the per share amounts. December 31, 2015 2014 2013 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $143,180 $10,623 $2,012 Working capital 138,060 4,555 (39) Total assets 149,363 12,188 2,481 Non-current deferred revenue 25,321 — — Equipment loan, net of current portion and discounts — 344 — Redeemable convertible preferred stock 199,915 20,772 2,111 Total stockholders’ deficit (83,114) (15,292) (1,763) 115 (1)(1)(1)(1)Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read togetherwith 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 and should be read together with the “Risk Factors” section of thisAnnual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially fromthe results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a leading genome editing company dedicated to treating patients with genetically defined diseases bycorrecting their disease‑causing genes. Our mission is to translate the promise of genome editing science into a broad class oftransformative genomic medicines to benefit the greatest number of patients. To this end, we are developing a proprietarygenome editing platform based on CRISPR/Cas9 technology. Our product development strategy is to target geneticallydefined diseases with an initial focus on debilitating illnesses where there are no approved treatments and where the geneticbasis of disease is well understood. We are advancing over a dozen discovery research programs, including programs toaddress genetic, infectious, and oncologic diseases of the liver, lung, blood, eye, and muscle. Our most advanced program isdesigned to address a specific genetic form of retinal degeneration called Leber Congenital Amaurosis type 10, or LCA10, adisease with no available therapies or potential treatments in clinical trials in either the United States or European Union. Weaim to initiate a clinical trial in this program in 2017. In May 2015, we entered into a collaboration with Juno Therapeutics, aleader in the emerging field of immuno‑oncology, to develop novel engineered T cell therapies for cancer. Since our inception in September 2013, our operations have focused on organizing and staffing our company,business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities ingenome editing, seeking to identify potential product candidates, and undertaking preclinical studies. All of our researchprograms are still in the preclinical or research stage of development and their risk of failure is high. We have not generatedany revenue from product sales. We have funded our operations primarily through the initial public offering of our commonstock, or IPO, private placements of our preferred stock, and our collaboration with Juno Therapeutics. From inceptionthrough December 31, 2015, we raised an aggregate of $190.3 million to fund our operations, consisting of $163.3 million ofgross proceeds from sales of our preferred stock, a $25.0 million up‑front payment under our collaboration with JunoTherapeutics, and $2.0 million of gross proceeds from an equipment loan financing. On February 8, 2016, we completed our IPO and sold 6,785,000 shares of our common stock, including 885,000shares of our common stock pursuant to the full exercise by the underwriters of an option to purchase additional shares, at apublic offering price of $16.00 per share for an aggregate offering of approximately $108.6 million. We received aggregatenet proceeds from the IPO of approximately $97.8 million, after deducting underwriting discounts and commissions andother offering expenses payable by us. Since inception, we have incurred significant operating losses. Our net losses were $72.9 million, $13.7 million, and$1.8 million for the years ended December 31, 2015 and 2014 and the period ended December 31, 2013, respectively. As ofDecember 31, 2015, we had an accumulated deficit of $88.3 million. We expect to continue to incur significant expenses andoperating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and from year toyear. We anticipate that our expenses will increase substantially as we continue our current research programs and ourpreclinical development activities; seek to identify additional research programs and additional product candidates; initiatepreclinical testing and clinical trials for any product candidates we identify and develop; maintain, expand, and protect ourintellectual property portfolio; further develop our genome editing platform; hire additional clinical, quality control, andscientific personnel; and incur additional costs associated with operating as a public company. We do not expect to beprofitable for the year ending December 31, 2016. 116 Table of ContentsFinancial Operations Overview Revenue To date, we have not generated any revenue from product sales and do not expect to generate any revenue fromproduct sales for the foreseeable future. For the year ended December 31, 2015, we recognized $1.6 million of collaborationrevenue related to our collaboration with Juno Therapeutics. As of December 31, 2015, we had not received any milestone orroyalty payments under the collaboration. For additional information about our revenue recognition policy related to thecollaboration, see the section titled “—Critical Accounting Policies and Estimates—Revenue.” For the foreseeable future, we expect substantially all of our revenue will be generated from our collaboration withJuno Therapeutics and any other collaborations we may enter into. Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including ourdrug discovery efforts and preclinical studies under our research programs, which include: ·employee‑related expenses including salaries, benefits, and stock‑based compensation expense; ·costs of funding research performed by third parties that conduct research and development and preclinicalactivities on our behalf; ·costs of purchasing lab supplies and non‑capital equipment used in our preclinical activities and inmanufacturing preclinical study materials; ·consultant fees; ·facility costs including rent, depreciation, and maintenance expenses; and ·fees for maintaining licenses under our third‑party licensing agreements. Research and development costs are expensed as incurred. At this time, we cannot reasonably estimate or know thenature, timing, and estimated costs of the efforts that will be necessary to complete the development of any productcandidates we may identify and develop. This is due to the numerous risks and uncertainties associated with developing suchproduct candidates, including the uncertainty of: ·successful completion of preclinical studies and Investigational New Drug‑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 withothers; 117 Table of Contents·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 wemay develop would significantly change the costs, timing, and viability associated with the development of that productcandidate. Other than in connection with our collaboration with Juno Therapeutics, we do not track research and developmentcosts on a program‑by‑program basis as we have not yet identified a product candidate for advancement into clinical trials.We plan to track research and development costs for any individual development program when we identify a productcandidate from the program that we believe we can advance into clinical trials. Research and development activities are central to our business model. We expect research and development coststo increase significantly for the foreseeable future as our development programs progress, including as we continue tosupport the preclinical studies for our LCA10 program as well as our other research programs. General and Administrative Expenses General and administrative expenses consist primarily of salaries and other related costs, including stock‑basedcompensation for personnel in executive, finance, accounting, business development, legal, and human resource functions.Other significant costs include corporate facility costs not otherwise included in research and development expenses, legalfees related to patent and corporate matters, and fees for accounting and consulting services. We anticipate that our general and administrative expenses will increase in the future to support continued researchand development activities and potential commercialization of any product candidates we identify and develop. Theseincreases will include increased costs associated with the lease of a new facility for our headquarters and will likely includeincreased costs related to the hiring of additional personnel, and fees to outside consultants. We also anticipate increasedexpenses related to reimbursement of third‑party patent‑related expenses and increased expenses associated with being apublic company, including costs for audit, legal, regulatory, and tax‑related services, director and officer insurancepremiums, and investor relations costs. With respect to reimbursement of third-party patent-related expenses specifically,given the ongoing nature of the interference and opposition proceedings involving the patents licensed to us under ourlicense agreement with The Broad Institute, Inc., or Broad, and the President and Fellows of Harvard College, or Harvard(described in more detail in “Item 3. Legal Proceedings”), we anticipate that our obligation to reimburse Broad and Harvardfor expenses related to these proceedings during future periods will increase substantially until such interference andopposition proceedings are resolved. Other Expense, Net Other expense, net consists primarily of re‑measurement gains or losses associated with changes in the fair value ofthe tranche rights associated with our Series A‑1 preferred stock, warrant liability associated with the warrant we issued to ourequipment loan lender, and the anti‑dilutive protection liability associated with our issuance of common stock to certainlicensors. In June 2015, upon the issuance of the final tranche of our Series A preferred stock, the tranche right liability wassettled and reclassified to Series A preferred stock and the anti‑dilutive protection liability was settled and reclassified toadditional paid‑in‑capital. Therefore no further re‑measurement gains or losses will be recognized related to the tranche rightsor the anti‑dilutive protection liability. In connection with the closing of our IPO, all of our preferred stock converted intocommon stock on a 2.6-for-one basis.118 Table of Contents Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on ourconsolidated financial statements, which have been prepared in accordance with U.S. generally accepted accountingprinciples. The preparation of our consolidated financial statements requires us to make judgments and estimates that affectthe reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities inour consolidated financial statements. We base our estimates on historical experience, known trends and events, and variousother factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates underdifferent assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes incircumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in theconsolidated financial statements prospectively from the date of change in estimates. While our significant accounting policies are described in more detail in the notes to our consolidated financialstatements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used inthe preparation of our consolidated financial statements require the most significant judgments and estimates. Revenue As of December 31, 2015, all of our revenue to date had been generated exclusively from our collaboration withJuno Therapeutics. We recognize revenue in accordance with Financial Accounting Standards Board, or FASB, AccountingStandards Codification, or ASC, Topic 605, Revenue Recognition, or ASC 605. Accordingly, revenue is recognized for eachunit of accounting when all of the following criteria are met: ·persuasive evidence of an arrangement exists; ·delivery has occurred or services have been rendered; ·the seller’s price to the buyer is fixed or determinable; and ·collectability is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in ourconsolidated balance sheets. Multiple Element Arrangements Determination of Accounting Units We analyze multiple element arrangements based on the guidance in ASC Topic 605‑25, RevenueRecognition—Multiple Element Arrangements, or ASC 605‑25. Pursuant to the guidance in ASC 605‑25, we evaluatemultiple element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the individualdeliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting.This evaluation involves subjective determinations and requires management to make judgments about the individualdeliverables and whether such deliverables are separate from other aspects of the contractual relationship. Deliverables areconsidered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalonebasis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance ofthe undelivered item(s) is considered probable and substantially within our control. In assessing whether an item under acollaboration has standalone value, we consider factors such as the research, manufacturing, and commercializationcapabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. We alsoconsider whether our collaboration partner can use the other deliverable(s) for their intended purpose without the receipt ofthe remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s), and whether there areother vendors that can provide the undelivered element(s). 119 Table of ContentsOptions under a collaboration are considered substantive if, at the inception of the arrangement, we are at risk as towhether the collaboration partner will choose to exercise the option. Factors that we consider in evaluating whether anoption is substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit thecollaboration partner might obtain from the arrangement without exercising the option, and the likelihood the option will beexercised. When an option is considered substantive, we would not consider the option or item underlying the option to be adeliverable at the inception of the arrangement and the associated option fees are not included in allocable consideration,assuming the option is not priced at a significant and incremental discount. Conversely, when an option is not consideredsubstantive, we would consider the option, including other deliverables contingent upon the exercise of the option, to be adeliverable at the inception of the arrangement and a corresponding amount would be included in allocable arrangementconsideration. In addition, if the price of the option includes a significant incremental discount, the discount would beincluded as a deliverable at the inception of the arrangement. Allocation of Arrangement Consideration Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting usingthe relative selling price method. The applicable revenue recognition criteria in ASC 605 are applied to each of the separateunits of accounting in determining the appropriate period and pattern of recognition. We determine the selling price of a unitof accounting following the hierarchy of evidence prescribed by ASC 605‑25. Accordingly, we determine the estimatedselling price for units of accounting within each arrangement using vendor specific objective evidence, or VSOE, of sellingprice, if available, third‑party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price, orBESP, if neither VSOE or TPE is available. We have only used BESP to estimate selling price, since we have not had VSOEor TPE of selling price for any units of accounting to date. Determining BESP for a unit of accounting requires significantjudgment. In developing the BESP for a unit of accounting, we consider applicable market conditions and relevantentity‑specific factors, including factors that were contemplated in negotiating the applicable agreement and estimated costs.We validate BESP for units of accounting by evaluating whether changes in the key assumptions used by us to determine theBESP will have a significant effect on the allocation of arrangement consideration between multiple units of accounting. Pattern of Recognition We recognize the arrangement’s consideration allocated to each unit of accounting when all of the revenuerecognition criteria in ASC 605 are satisfied for that particular unit of accounting. We will recognize revenue associated withlicenses, license options, or the discount related to a license option upon (i) delivery of the license or (ii) the earlier ofexercise or expiration of the license option, if the underlying license has standalone value from the other deliverables to beprovided after delivering that license. If the license does not have standalone value, the amounts allocated to the license willbe combined with the related undelivered items as a single unit of accounting. We recognize the amounts associated with collaboration research and development services, joint researchcommittees, or other services ratably over the associated period of performance. If there is no discernible pattern ofperformance or objectively measurable performance measures do not exist, then we recognize revenue under the arrangementon a straight‑line basis over the period that we are expected to complete our performance obligations. Conversely, if thepattern of performance in which the service is provided to the collaboration partner can be determined and objectivelymeasureable performance exists, then we recognize revenue under the arrangement using the proportional performancemethod. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulativerevenue earned determined using the straight line method or proportional performance, as applicable, as of the period enddate. Recognition of Milestones and Royalties At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone issubstantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes anassessment of whether: (1) the consideration is commensurate with either our performance to achieve the milestone or theenhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achievethe milestone, (2) the consideration relates solely to past performance, and (3) the consideration is reasonably120 Table of Contentsrelative to all of the deliverables and payment terms within the arrangement. We evaluate factors such as clinical, regulatory,commercial, and other risks that must be overcome to achieve the respective milestones and the level of effort and investmentrequired to achieve the respective milestones in making this assessment. There is considerable judgment involved indetermining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. Inaccordance with ASC Topic 605‑28, Revenue Recognition—Milestone Method, or ASC 605‑28, a clinical or regulatorymilestone that is considered substantive will be recognized as revenue in its entirety upon successful accomplishment of themilestone, assuming all other revenue recognition criteria are met. Milestones that are not considered substantive would berecognized as revenue over the remaining period of performance, assuming all other revenue recognition criteria are met.Revenue from a commercial milestone payment will be accounted for as royalties and recorded as revenue upon achievementof the milestone, assuming all other revenue recognition criteria are met. We will recognize royalty revenue in the period of sale of the related product(s), based on the underlying contractterms, provided that the reported sales are reliably measurable, we have no remaining performance obligations, and assumingall other revenue recognition criteria are met. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accruedexpenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicatingwith our personnel to identify services that have been performed on our behalf, and estimating the level of service performedand 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 aremet. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to usat that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments ifnecessary. The significant estimates in our accrued research and development expenses include the costs incurred for servicesperformed by our vendors in connection with research and development activities for which we have not yet been invoiced. We record our expenses related to research and development activities based on our estimates of the servicesreceived and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on ourbehalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result inuneven payment flows. There may be instances in which payments made to our vendors will exceed the level of servicesprovided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the timeperiod over which services will be performed and the level of effort to be expended in each period. If the actual timing of theperformance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.Non‑refundable advance payments for goods and services that will be used in future research and development activities areexpensed when the activity has been performed or when the goods have been received rather than when the payment is made. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimatesof the status and timing of services performed differ from the actual status and timing of services performed, it could result inus reporting amounts that are too high or too low in any particular period. To date, there have been no material differencesbetween our estimates of such expenses and the amounts actually incurred. Fair Value Measurements Tranche Rights The Series A preferred stock purchase agreement that we entered into provided the investors with the right, uponachievement of certain milestones, to participate in subsequent offerings of Series A preferred stock, which we refer to astranche rights. The tranche rights meet the definition of a freestanding financial instrument, as the tranche rights are legallydetachable and separately exercisable from the Series A preferred stock. Since the Series A preferred stock was redeemable atthe holder’s option subject to certain limitations, the tranche rights were classified as an asset or121 Table of Contentsliability and were initially recorded at fair value and then marked to market at each subsequent reporting period, through thesettlement of the tranche rights. We determined fair value utilizing the concept of “Fair Value” from ASC Topic 820, Fair Value Measurement, orASC 820, which states that any fair value measurement requires that the reporting entity to determine the valuationtechnique(s) appropriate for the measurement, considering the availability of data with which to develop inputs thatrepresent the assumptions that market participants would use in pricing the asset or liability and the level in the fair valuehierarchy within which the inputs are categorized. The estimated fair value of the tranche rights was determined using a probability‑weighted present value model thatconsidered the probability and timing of closing a tranche, the estimated future value of the Series A preferred stock to beissued at each closing, and the amount of the investment required at each closing. Future values were converted to presentvalue using a discount rate appropriate for probability‑adjusted cash flows. Upon the settlement of each tranche, the fairvalue of the tranche rights associated with that tranche was reclassified to Series A preferred stock at its then fair value andthereafter was no longer re‑measured. Warrants In conjunction with an equipment loan financing, we issued to Silicon Valley Bank a warrant to purchase up to60,000 shares of our Series A‑1 preferred stock at an exercise price of $1.00 per share. The fair value of the warrant at theissuance date was recorded as a reduction to face value of the debt balance and was amortized as interest expense, along withother debt issuance costs, over the term of the loan. Due to the liquidation preferences of the Series A‑1 preferred stock, werecorded the warrant as a liability on our consolidated balance sheets. Following a reverse stock split in January 2016 and theclosing of our IPO in February 2016, such warrant converted into a warrant to purchase 23,076 shares of our common stock,which Silicon Valley Bank fully exercised in February 2016 pursuant to a net exercise provision for an aggregate of 19,271shares of our common stock. Anti‑dilutive Protection Liability Pursuant to agreements with licensors and in consideration for licenses received, we paid certain institutions upfrontpayments in cash, issued shares of common stock equal to a certain percentage of our outstanding stock on a fully dilutedbasis, and granted to the institutions the right to receive future issuances of common stock to maintain their respectiveownership percentages of our company through the final tranche of our Series A preferred stock financing that ultimatelyoccurred in June 2015. The anti‑dilutive protection obligation under these agreements met the definition of a freestandingfinancial instrument and the obligation was legally detachable and separately exercisable from the original issuance of thecommon stock. We concluded that the anti‑dilutive protection obligation represented a liability because the anti‑dilutivefeature represented a conditional obligation to issue a variable number of shares and the monetary value of the obligationwas based on something other than the fair value of the equity shares. As such, we recorded the initial value of the obligationat the issuance date as research and development expense (considered additional consideration paid to the licensors) and theliability was marked to market at each subsequent reporting period, through the settlement date. Stock‑based Compensation We account for stock‑based compensation awards in accordance with ASC Topic 718, Compensation—StockCompensation, or ASC 718. ASC 718 requires all stock‑based compensation awards to employees, including grants ofrestricted stock and stock options, to be recognized as expense in the statements of operations based on their grant date fairvalues. We estimate the fair value of options granted using the Black‑Scholes option pricing model. We use the value of ourcommon stock to determine the fair value of restricted stock awards. The Black‑Scholes option pricing model requires the input of certain subjective assumptions, including (1) theexpected stock price volatility, (2) the calculation of expected term of the award, (3) the risk‑free interest rate, and (4) theexpected dividend yield. Because there had been no public market for our common stock prior to our IPO, there is a lack ofcompany‑specific historical and implied volatility data. Accordingly, we base our estimates of expected volatility on122 Table of Contentsthe historical volatility of a group of similar companies that are publicly traded. We calculate historical volatility based on aperiod of time commensurate with the expected term. We compute expected volatility based on the historical volatility of arepresentative group of companies with similar characteristics to us, including their stages of product development and focuson the life science industry. We use the simplified method as prescribed by the Securities and Exchange Commission’s StaffAccounting Bulletin No. 107, Share‑Based Payment, to calculate the expected term for options granted to employees as wedo not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. Foroptions granted to non‑employees, we utilize the contractual term of the arrangement as the basis for the expected term. Wedetermine the risk‑free interest rate based on a treasury instrument whose term is consistent with the expected term of thestock options. We use an assumed dividend yield of zero as we have never paid dividends and do not have current plans topay any dividends on common stock. The weighted‑average assumptions used in the Black‑Scholes option pricing model to determine the fair value ofstock options granted to employees were as follows: Year Ended December 31, 2015 2014 Expected volatility 78.8% 87.6% Expected term (in years) 6.25 6.25 Risk-free interest rate 1.7% 1.9% Expected dividend yield — — The weighted average assumptions used in the Black‑Scholes option pricing model to determine the fair value ofstock options granted to non‑employees were as follows: Year Ended December 31, 2015 2014 Expected volatility 80.0% 80.5% Expected term (in years) 10.0 9.5 Risk-free interest rate 2.2% 1.5% Expected dividend yield — — We expense the fair value of stock‑based compensation awards granted to employees on a straight‑line basis overthe associated service period, which is generally the period in which the related services are received. We measurestock‑based compensation awards granted to non‑employees at fair value as the awards vest and recognize the resulting valueas stock‑based compensation expense during the period the related services are rendered. At the end of each financialreporting period prior to completion of the service, we re‑measure the unvested portion of these awards. We record the expense for stock‑based compensation awards subject to performance‑based milestone vesting overthe remaining service period when management determines that achievement of the milestone is probable. Managementevaluates when the achievement of a performance‑based milestone is probable based on the expected satisfaction of theperformance conditions as of the reporting date. 123 Table of ContentsAward Grants The following table summarizes by grant date the number of shares of restricted common stock and common stocksubject to options granted between January 1, 2014 and December 31, 2015, the per share purchase or exercise prices, the fairvalue of the common stock on the dates of grant, and the estimated fair value per share utilized to calculate stock‑basedcompensation expense. Fair Value of Retrospective Purchase or Common Stock Fair Value Estimated Fair Exercise per Share Per Share Value Per Share Number of Price per on Grant on Grant of Awards on Grant Date Type of Award Shares Share Date Date Grant Date January 29, 2014 Restricted Stock 76,922 $0.03 $0.03 — $0.00 April 19, 2014 Option 82,034 $0.03 $0.03 — $0.03 May 9, 2014 Option 13,461 $0.03 $0.03 — $0.03 June 18, 2014 Restricted Stock 1,362,966 $0.03 $0.03 — $0.03 January 9, 2015 Option 66,766 $0.65 $0.65 — $0.47 April 16, 2015 Option 91,918 $0.65 $0.65 $4.84 $4.45 April 30, 2015 Option 142,307 $0.65 $0.65 $4.84 $4.45 July 14, 2015 Option 233,843 $3.23 $3.23 $5.91 $4.63 July 21, 2015 Option 45,382 $3.23 $3.23 $5.91 $4.63 September 14, 2015 Option 578,355 $6.48 $6.48 $8.92 $6.61 October 30, 2015 Option 547,013 $11.21 $11.21 — $7.65 (1)Represents the determination by our board of directors of the fair value of our common stock on the date of grant,taking into consideration the various objective and subjective factors described below. (2)The fair value of common stock at the grant date was adjusted in connection with a retrospective fair valueassessment for financial reporting purposes. Stock-based compensation totaled approximately $3.5 million and $0.1 million for the years ended December 31,2015 and 2014, respectively. As of December 31, 2015, we had $9.1 million and $6.6 million of unrecognized compensationexpense related to restricted stock awards and stock option awards, respectively, which are expected to be recognized overweighted‑average remaining vesting periods of approximately 1.6 and 3.5 years, respectively. We expect the impact of ourstock‑based compensation expense for restricted stock and stock options granted to employees and non‑employees to growin future periods due to the potential increases in the value of our common stock and headcount. Determination of Fair Value of Common Stock on Grant Dates We historically have granted stock options and restricted stock at exercise or purchase prices not less than the fairvalue of our common stock. Due to the absence of an active market for our common stock prior to the commencement oftrading of our common stock on the NASDAQ Global Select Market on February 3, 2016 in connection with our IPO, theestimated fair values of our common stock as of the grant dates prior to our IPO were determined contemporaneously by ourboard of directors. Since 2014, our board of directors’ determinations have involved the preparation of valuations performedin accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuationof Privately‑Held Company Equity Securities Issued as Compensation, also known as the Practice Aid. Following our IPO, itis no longer necessary for us to estimate the fair value of our common stock in connection with our accounting for stockoptions or other equity awards, as the fair value of our common stock can be determined by reference to its closing price onThe NASDAQ Global Select Market on the date of the applicable grant. Following our entry into license agreements with The Broad Institute, Inc., the President and Fellows of HarvardCollege, Massachusetts Institute of Technology, and the General Hospital Corporation d/b/a Massachusetts General Hospital,our board of directors performed common stock valuations, with the assistance of a third‑party124 (1)(2)Table of Contentsvaluation specialist, as of October 31, 2014, June 1, 2015, August 4, 2015, and October 23, 2015, which resulted invaluations of our common stock of $0.65, $3.23, $6.48, and $11.21 per share, respectively, as of those dates. In conductingits valuations, our board of directors considered all objective and subjective factors that it believed to be relevant for eachvaluation conducted, including its best estimate of our business condition, prospects, and operating performance at eachvaluation date. Within the valuations performed, a range of factors, assumptions, and methodologies were used. Thesignificant factors included: ·the lack of an active public market for our common and our convertible preferred stock; ·the prices of shares of our convertible preferred stock that we had sold to outside investors in arm’s lengthtransactions, and the rights, preferences, and privileges of that convertible preferred stock relative to ourcommon stock; ·our results of operations and financial condition; ·the entry into license agreements, pursuant to which we obtained rights to important intellectual property; ·the material risks related to our business; ·our business strategy; ·the market performance of publicly traded companies in the life sciences and biotechnology sectors; and ·the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial publicoffering, given prevailing market conditions. For financial reporting purposes, we also performed common stock valuations retrospectively, with the assistance ofa third‑party specialist, as of April 16, 2015, June 1, 2015, and September 14, 2015, which resulted in valuations of ourcommon stock of $4.84, $5.91, and $8.92 per share, respectively, as of those dates. Our retrospective valuations wereprepared in accordance with the guidelines in the Practice Aid following the methodologies described below. There are significant judgments and estimates inherent in the determination of the fair value of our common stock.These judgments and estimates have included assumptions regarding our future operating performance, the time to completean IPO or other liquidity event, the related company valuations associated with such events, and the determinations of theappropriate valuation methods. If we had made different assumptions, our stock‑based compensation expense, net loss, andnet loss per share applicable to common stockholders could have been significantly different. Common Stock Valuation Methodologies Our common stock valuations were prepared using the option‑pricing method, or OPM, and a hybrid of theprobability‑weighted expected return method, or PWERM, and the OPM. OPM The OPM treats common stock and convertible preferred stock as call options on the total equity value of acompany, with exercise prices based on the value thresholds at which the allocation among the various holders of acompany’s securities changes. Under this method, the common stock has value only if the funds available for distribution tostockholders exceed the value of the liquidation preferences at the time of a liquidity event, such as a strategic sale or merger.The common stock is modeled as a call option on the underlying equity value at a predetermined exercise price. In thismodel, the exercise price is based on a comparison with the total equity value rather than, as in the case of a regular calloption, a comparison with a per share stock price. Thus, common stock is considered to be a call125 Table of Contentsoption with a claim on the enterprise at an exercise price equal to the remaining value immediately after the convertiblepreferred stock liquidation preference is paid. The OPM uses the Black‑Scholes option‑pricing model to price the call options. This model defines the securities’fair values as functions of the current fair value of a company and uses assumptions, such as the anticipated timing of apotential liquidity event and the estimated volatility of the equity securities. The aggregate value of the common stockderived from the OPM is then divided by the number of shares of common stock outstanding to arrive at the per share value. We used the OPM back‑solve approach to estimate enterprise value under the OPM. The OPM back‑solve approachuses the OPM to derive an implied equity value for one type of a company’s equity securities from a contemporaneous saletransaction involving another type of the company’s equity securities. For the OPM, we based our assumed volatility factoron the historical trading volatility of our publicly traded peer companies. At each valuation date, we determined theappropriate volatility to be used, considering such factors as our expected time to a liquidity event and our stage ofdevelopment. To derive the fair value of our common stock using the OPM, we calculated the proceeds to our commonstockholders based on the preferences and priorities of our convertible preferred stock and common stock. We then applied adiscount for lack of marketability to the common stock to account for the lack of access to an active public market. Our contemporaneous common stock valuations as of October 31, 2014 and June 1, 2015 were prepared using theOPM back‑solve approach. PWERM Under the PWERM methodology, the fair value of a company’s common stock is estimated based upon an analysisof future values for the company, assuming various outcomes. The common stock value is based on the probability‑weightedpresent value of expected future investment returns considering each of the possible outcomes available as well as the rightsof each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date atan appropriate risk‑adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. Hybrid Method The hybrid method is a PWERM where the equity value in one of the scenarios is calculated using an OPM. In thehybrid method used by us, we considered two types of future‑event scenarios: an IPO and an unspecified liquidity event. Theenterprise value for the IPO scenario was determined using the guideline public company, or GPC, method under the marketapproach. The enterprise value for the unspecified liquidity event scenario was determined using the GPC method or theOPM back‑solve approach. The relative probability of each type of future‑event scenario was determined based on ananalysis of market conditions at the time, including then‑current IPO valuations of similarly situated companies, and ourexpectations as to the timing and likely prospects of the future‑event scenarios. In our application of the GPC method, we considered publicly traded companies in the biopharmaceutical industrythat recently completed IPOs as indicators of our estimated future value in an IPO. We then discounted that future value backto the valuation date at an appropriate risk‑adjusted discount rate. We applied a discount for lack of marketability to thecommon stock to account for the lack of access to an active public market. Our contemporaneous common stock valuations as of August 4, 2015 and October 23, 2015 and our retrospectivecommon stock valuations as of April 16, 2015, June 1, 2015, and September 14, 2015 were prepared using the hybridmethod. 126 Table of ContentsResults of Operations Comparison of Years ended December 31, 2015 and 2014 The following table summarizes our results of operations for the years ended December 31, 2015 and 2014, togetherwith the changes in those items in dollars (in thousands): Year Ended December 31, 2015 2014 Dollar Change Collaboration revenue $1,629 $ — $1,629 Operating expenses: Research and development 18,846 5,073 13,773 General and administrative 18,095 7,650 10,445 Total operating expenses 36,941 12,723 24,218 Other expense, net: Other expense, net (37,445) (928) (36,517) Interest expense, net (143) (34) (109) Total other expense, net (37,588) (962) (36,626) Net loss $(72,900) $(13,685) $(59,215) Collaboration Revenue Collaboration revenue was $1.6 million for the year ended December 31, 2015 and represented revenue recognizedpursuant to our collaboration with Juno Therapeutics that we entered into in May 2015. We did not recognize anycollaboration revenue in the year ended December 31, 2014. Research and Development Expenses Research and development expenses increased by $13.8 million, to $18.8 million for the year ended December 31,2015 from $5.1 million for the year ended December 31, 2014. The following table summarizes our research anddevelopment expenses for the years ended December 31, 2015 and December 31, 2014, together with the changes in thoseitems in dollars (in thousands): Year Ended December 31, 2015 2014 Dollar Change Employee and contractor related expenses $8,203 $1,894 $6,309 Process and platform development expenses 3,957 874 3,083 License fees and expenses 4,603 1,202 3,401 Facility expenses 1,805 1,054 751 Other expenses 278 49 229 Total research and development expenses $18,846 $5,073 $13,773 The increase in research and development expenses for the year ended December 31, 2015 compared to the yearended December 31, 2014 was primarily attributable to: ·approximately $6.3 million in increased research and development employee and contractor compensationcosts; ·approximately $3.4 million in increased license fees and expenses due to sublicense payments that weretriggered in the year ended December 31, 2015 under agreements with licensors as a result of our entry into ourcollaboration agreement with Juno Therapeutics; 127 Table of Contents·approximately $3.1 million in increased process and platform development costs; ·approximately $0.8 million in increased facilities costs, including rent, utilities, and depreciation expense;and ·approximately $0.2 million in increased other expenses. General and Administrative Expenses General and administrative expenses increased by $10.5 million, to $18.1 million for the year ended December 31,2015 from $7.6 million for the year ended December 31, 2014. The increase in general and administrative expenses wasprimarily attributable to: ·approximately $6.2 million in increased patent‑related fees, including third‑party costs to procure theapplication for and issuance of additional patents in the United States and other jurisdictions; and ·approximately $2.3 million in increased contractor consulting fees, $1.8 million in increased employeecompensation cost, and $0.2 million in other general and administrative expenses. Other Expense, Net Other expense, net was $37.6 million for the year ended December 31, 2015 and $1.0 million for the year endedDecember 31, 2014. The increase was primarily related to a $35.6 million increase in our Series A preferred stock trancheright liability resulting from mark‑to‑market adjustments attributable to an increase in the fair value of our Series A preferredstock during 2015. The tranche right liability was settled in June 2015. The increase in other expense, net was also attributable to a $1.6 million mark‑to‑market adjustment recorded inJune 2015 for the anti‑dilution protection liability related to our issuance of common stock to our licensors. Theanti‑dilution liability was settled in June 2015. Comparison of Year Ended December 31, 2014 and Period Ended 2013 The following table summarizes our results of operations for the year ended December 31, 2014 and the periodended December 31, 2013, together with the changes in those items in dollars (in thousands): Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2014 2013 Dollar Change Collaboration revenue $ — $ — $ — Operating expenses: Research and development 5,073 530 4,543 General and administrative 7,650 1,210 6,440 Total operating expenses 12,723 1,740 10,983 Other expense, net: Other expense, net (928) (18) (910) Interest expense (34) — (34) Total other expense, net (962) (18) (944) Net loss $(13,685) $(1,758) $(11,927) Collaboration Revenue We did not earn any collaboration revenue in either year ended December 31, 2014 or the period endedDecember 31, 2013.128 Table of Contents Research and Development Expenses Research and development expense increased by $4.6 million, to $5.1 million for the year ended December 31,2014 from $0.5 million for the period ended December 31, 2013. The following table summarizes our research anddevelopment expenses, for the year ended December 31, 2014 and the period ended December 31, 2013, together with thechanges in those items in dollars (in thousands): Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2014 2013 Dollar Change Employee and contractor related expenses $1,894 $412 $1,482 Process and platform development expenses 874 2 872 License fees and expenses 1,202 80 1,122 Facility expenses 1,054 18 1,036 Other expenses 49 18 31 Total research and development expenses $5,073 $530 $4,543 The increase in research and development expenses was primarily attributable to: ·approximately $1.1 million in increased license fees; ·approximately $1.1 million in increased employee compensation expense and $0.4 million in increasedcontractor and third‑party consulting expenses; ·approximately $1.0 million in increased facilities costs including rent, utilities, and depreciation expense; and ·approximately $0.9 million in increased laboratory expenses. General and Administrative Expenses General and administrative expenses increased by $6.4 million, to $7.6 million for the year ended December 31,2014 from $1.2 million for the period ended December 31, 2013. The increase in general and administrative expenses wasprimarily attributable to 12 months of operations being included in 2014 versus four months of operations during 2013 andincluded the following: ·approximately $3.5 million in increased patent and license fees, including third‑party costs to procure theapplication for and issuance of additional patents in the U.S. and other jurisdictions and for intellectualproperty matters; ·approximately $1.3 million in increased employee compensation costs, and $0.6 million in increasedcontractor and third‑party consulting expenses; and ·approximately $0.5 million in increased facility costs, including rent, utilities, and depreciation expense. Other Expense, Net Other expense, net was $1.0 million for the year ended December 31, 2014 and $18,000 for the period endedDecember 31, 2013. The increase was primarily related to a $0.9 million increase in our Series A preferred stock tranche rightliability during 2014 resulting from mark‑to‑market adjustments. Additionally, interest expense increased by $34,000 for theyear ended December 31, 2014 from zero for the period ended December 31, 2013. 129 Table of ContentsLiquidity and Capital Resources Sources of Liquidity From inception through December 31, 2015, we funded our operations primarily through proceeds from privateplacements of our preferred stock of $163.3 million, an up‑front payment under our collaboration with Juno Therapeutics of$25.0 million, and $2.0 million of gross proceeds from an equipment loan financing. As of December 31, 2015, we had cashand cash equivalents of $143.2 million, which amount does not include $97.8 million in net proceeds from our IPO inFebruary 2016. In December 2015, we formed a wholly owned subsidiary, Editas Securities Corporation, a Delaware corporation, forthe sole purpose of buying, selling, and holding securities on our behalf. Indebtedness In May 2014, we entered into an equipment loan agreement with Silicon Valley Bank, which permitted us to borrowup to an aggregate principal amount of $2.0 million. We borrowed $0.5 million in July 2014, an additional $0.8 million inJanuary 2015, and $0.7 million in July 2015. Each borrowing was payable in equal monthly principal installments over36 months beginning after the nine‑month anniversary of the funding date of each borrowing under the loans. Interestaccrued under the Silicon Valley Bank agreement at an annual rate of 2.75% above the greater of the prime rate and 3.25%.In December 2015, we paid off all amounts outstanding under the loans and terminated the equipment loan agreement. Inconnection with the Silicon Valley Bank loans, we issued to Silicon Valley Bank a warrant to purchase up to 60,000 sharesof our Series A‑1 preferred stock at an exercise price of $1.00 per share. The warrant had a 10 year term. Following a reversestock split in January 2016 and the closing of our IPO in February 2016, such warrant converted into a warrant to purchase23,076 shares of our common stock, which SVB fully exercised pursuant to a net exercise provision for an aggregate of19,271 shares of our common stock. Cash Flows The following table provides information regarding our cash flows for the years ended December 31, 2015 and 2014and the period ended December 31, 2013, respectively (in thousands): Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2015 2014 2013 Net cash provided by (used in): Operating activities $(5,403) $(8,655) $(928) Investing activities (1,431) (1,217) (53) Financing activities 139,391 18,483 2,993 Net increase in cash and cash equivalents $132,557 $8,611 $2,012 Net Cash Used in Operating Activities The use of cash in all periods resulted primarily from our net losses adjusted for non‑cash charges and changes incomponents of working capital. Net cash used in operating activities was $5.4 million for the year ended December 31, 2015 compared to$8.7 million of net cash used in operating activities for the year ended December 31, 2014. The decrease of $3.3 million incash used in operating activities was primarily due to an increase of $36.5 million in non‑cash expense from the mark tomarket of our preferred stock tranche liability, anti‑dilutive protection liability, and warrant liability; an increase of$25.3 million of deferred revenue under our collaboration with Juno Therapeutics during the year ended December 31, 2015;an increase of $2.7 million in accrued expenses; and an increase of $3.5 million and $0.3 million in stock‑basedcompensation expense and non‑cash depreciation expense, respectively. These increases were partially offset by an130 Table of Contentsincrease in net loss of $59.2 million, a decrease in cash flows attributable to accounts receivable and prepaid expenses andother current assets of $1.3 million, a decrease in accounts payable of $3.6 million, and other changes that net to $0.9 millionrelated to deferred rent, non-cash loss on extinguishment of debt and research and development expenses. Net cash used in operating activities was $8.7 million for the period ended December 31, 2014 compared to $0.9million for the year ended December 31, 2013. The increase of $7.8 million in cash used in operating activities was primarilydue to an increase in net loss of $11.9 million for the year ended December 31, 2014 as compared to the period endedDecember 31, 2013, partially offset by an increase in cash flows attributable to non‑cash expenses of $2.0 million and anincrease in cash flows attributable to accounts payable and accrued expenses of $1.9 million. Net Cash Used in Investing Activities Net cash used in investing activities was $1.4 million for the year ended December 31, 2015 compared to$1.2 million for the year ended December 31, 2014. The cash used in investing activities was primarily due to purchases oflaboratory equipment. Net cash used in investing activities was $1.2 million for the period ended December 31, 2014 compared to$0.1 million for the year ended December 31, 2013. The increase of $1.1 million in cash used in investing activities was dueto purchases of laboratory equipment and our facility build out. Net Cash Provided by Financing Activities Net cash provided by financing activities was $139.4 million for the year ended December 31, 2015, compared to$18.5 million for the year ended December 31, 2014. The increase of $120.9 million in cash provided by financing activitieswas primarily due to the issuance of Series A‑2 and Series B preferred stock, net of issuance costs, in 2015, resulting in anincrease in aggregate gross proceeds of $123.7 million during the year ended December 31, 2015, and proceeds from anincrease in borrowings under the equipment loan of $1.0 million. This increase was partially offset by payoff of theequipment loan of $2.1 million and the payment of deferred initial public offering costs of $1.7 million. Net cash provided by financing activities was $18.5 million for the period ended December 31, 2014 compared to$3.0 million for the year ended December 31, 2013. The increase of $15.5 million in cash provided by financing activitieswas primarily due to the issuance of Series A‑1 preferred stock, net of issuance costs, resulting in aggregate gross proceeds of$18.0 million during 2014. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we further advance ourcurrent research programs and our preclinical development activities; seek to identify product candidates and additionalresearch programs; initiate preclinical testing and clinical trials for any product candidates we identify and develop;maintain, expand, and protect our intellectual property portfolio; hire additional clinical, quality control, and scientificpersonnel; and incur additional costs associated with operating as a public company. In addition, if we obtain marketingapproval for any product candidate that we identify and develop, we expect to incur significant commercialization expensesrelated to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing, and distributionare not the responsibility of a collaborator. We do not expect to generate significant recurring revenue unless and until weobtain regulatory approval for and commercialize a product candidate. Furthermore, following the closing of our IPO, wehave begun to incur additional costs associated with operating as a public company. Accordingly, we will need to obtainsubstantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed oron attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or futurecommercialization efforts. We expect that the net proceeds from our IPO, together with our existing cash and cash equivalents at December 31,2015, anticipated interest income, and anticipated research support under our collaboration agreement with JunoTherapeutics, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 24months following the date of this Annual Report on Form 10-K. We have based our estimates on131 Table of Contentsassumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.Our future capital requirements will depend on many factors, including: ·the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, andclinical trials for the product candidates we may develop; ·the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectualproperty and proprietary rights, and defending intellectual property‑related claims; ·the costs, timing, and outcome of regulatory review of the product candidates we may develop; ·the costs of future activities, including product sales, medical affairs, marketing, manufacturing, anddistribution, for any product candidates for which we receive regulatory approval; ·the success of our collaboration with Juno Therapeutics; ·whether Juno Therapeutics exercises either or both of its options to extend the research program term underour collaboration (each of which would trigger an extension payment to us); ·our ability to establish and maintain additional collaborations on favorable terms, if at all; ·the extent to which we acquire or in‑license other medicines and technologies; and ·the costs of operating as a public company. Identifying potential product candidates and conducting preclinical studies and clinical trials is a time‑consuming,expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or resultsrequired to obtain marketing approval and achieve product sales. In addition, any product candidate that we identify anddevelop, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales ofgenomic medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need tocontinue to rely on additional financing to achieve our business objectives. Adequate additional financing may not beavailable to us on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needsthrough a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences thatadversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenantslimiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, ordeclaring dividends. If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties,we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or productcandidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds throughequity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development orfuture commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer todevelop and market ourselves. 132 Table of ContentsContractual Obligations The following table summarizes our significant contractual obligations as of payment due date by period atDecember 31, 2015 (in thousands): Less Than More than Total 1 Year 1 to 3 Years 3 Years Operating sublease commitments $2,315 $2,315 $ — $— Total $2,315 $2,315 $ — $— (1)We sublease space at 300 Third Street in Cambridge, Massachusetts under a non‑cancelable operating lease thatexpires in September 2016. In addition, we sublease space at 675 W Kendall Street, Cambridge, Massachusettsunder an operating lease that expires November 2016.(2)In February 2016, we entered into a lease for a new corporate headquarters in Cambridge, Massachusetts, which weintend to relocate to in the fall of 2016. Under the terms of the lease, we will lease approximately 59,783 square feetat $65.00 per square foot per year in base rent, which base rent is subject to scheduled annual increases, plus certainoperating expenses and taxes, and an additional rent of approximately $0.926 per square foot per year related tocertain tenant improvements to the space. The contractual obligations for this lease are not reflected in the tableabove. The lease will continue until the end of the 84 full calendar month following the first day of the first fullmonth immediately following the commencement of the lease. We have the option to extend the lease for anadditional five-year term. The table above does not include potential milestone fees, sublicense fees, royalty fees, licensing maintenance fees,and reimbursement of patent maintenance costs that we may be required to pay under agreements we have entered into withcertain institutions to license intellectual property. We have not included such potential obligations in the table abovebecause they are contingent upon the occurrence of future events and the timing and likelihood of such potential obligationsare not known with certainty. For further information regarding these agreements and amounts that could become payable inthe future under these agreements, please see “Item 1. Business—License Agreements.” Pursuant to our license agreementwith Broad and Harvard, we have paid an aggregate of $9.4 million and $1.7 million, during the years ended December 31,2015 and 2014, respectively, for reimbursement of expenses associated with the prosecution and maintenance of the patentsand patent applications licensed to us under such license agreement, including expenses associated with any interferenceproceedings in the United States Patent and Trademark Office, any opposition proceedings in the European Patent Office orany other inter partes or other post grant proceedings in these or other jurisdictions where we are seeking patent protection(described in more detail in “Item 1. Business—License Agreements – The Broad Institute and President and Fellows ofHarvard College License Agreement”). Given the interference and opposition proceedings involving the patents licensed tous under this license agreement are ongoing (described in more detail in “Item 3. Legal Proceedings”), we anticipate that ourobligation to reimburse Broad and Harvard for these expenses during future periods will increase substantially until suchinterference and opposition proceedings are resolved. Our agreements to license intellectual property include potential milestone payments that are dependent upon thedevelopment of products using the intellectual property licensed under the agreements and contingent upon the achievementof development or regulatory approval milestones, as well as commercial milestones. The maximum potential milestonepayments under one of our licensing agreements are approximately $5.5 million. The maximum potential milestonepayments under another of our licensing agreements are approximately $0.6 million in the aggregate per licensed product. Under a license agreement with certain research institutions, we may also be obligated to pay clinical and regulatorymilestones of up to $14.8 million per product approved in the United States, European Union, and Japan for the treatment ofa human disease that afflicts at least a specified number of patients in the aggregate in the United States, as well as potentialcommercial milestones of up to $54.0 million. In addition, we may be obligated to pay additional clinical and regulatorymilestones of up to $4.1 million per product approved in the United States and at least one jurisdiction outside the UnitesStates for the treatment of human disease based on certain criteria, as well as potential133 (1)(2)thTable of Contentscommercial milestones of up to $36.0 million upon the occurrence of certain sales milestones per licensed product for thetreatment of a rare disease meeting certain criteria. We also may be obligated to pay royalties of low single digit to low double digits as a percentage of net productsales depending on the terms of the applicable agreement. Under the terms of our collaboration with Juno Therapeutics, we received an upfront payment of $25.0 million fromJuno Therapeutics. In addition, we will receive up to $22.0 million in research support over the next five years across thethree programs under our collaboration, subject to adjustment in accordance with the terms of the agreement, and we are eachobligated to use diligent efforts to perform all activities for which we are responsible under the collaboration. We enter into contracts in the normal course of business with contract research organizations, or CROs, to assist inthe performance of our research and development activities and other services and products for operating purposes. Thesecontracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table ofcontractual obligations and commitments. Off‑Balance Sheet Arrangements We did not have, during the periods presented, and we do not currently have, any off‑balance sheet arrangements, asdefined under applicable Securities and Exchange Commission rules. JOBS Act In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of theJOBS Act provides that an “emerging growth company,” or EGC, may take advantage of the extended transition periodprovided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new orrevised accounting standards. Thus, an EGC is permitted to delay the adoption of certain accounting standards until thosestandards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extendedtransition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoptionof such standards is required for other public companies. We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirementsunder the JOBS Act. Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, includingwithout limitation, (1) providing an auditor’s attestation report on our system of internal controls over financial reportingpursuant to Section 404(b) of the Sarbanes‑Oxley Act and (2) complying with any requirement that may be adopted by thePublic Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to theauditor’s report providing additional information about the audit and the financial statements, known as the auditordiscussion and analysis. We will remain an EGC until the earlier of (i) the last day of the fiscal year in which we have totalannual gross revenues of $1.0 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date ofthe completion of our IPO; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during theprevious three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securitiesand Exchange Commission or SEC. Internal Controls and Procedures In connection with the preparation of the consolidated financial statements included in this Annual Report on Form10-K, we concluded that the material weakness that was previously disclosed in our registration statement on Form S-1 (FileNo. 333-208856), or the Registration Statement, had been remediated as of December 31, 2015. See “Risk Factors” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls andProcedures” contained in the Registration Statement for disclosure of information about such material weakness. Wedetermined that this material weakness had been remediated as of December 31, 2015 as a result of the corrective measureswe described in the Registration Statement as having been completed. 134 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest ratesensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments,including cash equivalents, are in the form, or may be in the form of, money market funds or marketable securities and are ormay be invested in U.S. Treasury and U.S. government agency obligations. Due to the short‑term maturities and low riskprofiles of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fairmarket value of our investments. We are not currently exposed to market risk related to changes in foreign currency exchange rates; however, we maycontract with vendors that are located in Asia and Europe in the future and may be subject to fluctuations in foreign currencyrates at that time. Inflation would generally affect us by increasing our cost of labor and clinical trial costs. We do not believe thatinflation had a material effect on our business, financial condition or results of operations during the years endedDecember 31, 2015 and 2014 and period ended December 31, 2013.135 Table of ContentsItem 8. Financial Statement and Other Supplementary Information. EDITAS MEDICINE, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 137 Consolidated Balance Sheets 138 Consolidated Statements of Operations and Comprehensive Loss 139 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit 140 Consolidated Statements of Cash Flows 141 Notes to Consolidated Financial Statements 142 136 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders ofEditas Medicine, Inc. We have audited the accompanying consolidated balance sheets of Editas Medicine, Inc. (the “Company”) as ofDecember 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, redeemableconvertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and for the period fromSeptember 3, 2013 (Inception) to December 31, 2013. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. We were not engaged to perform an audit of theCompany’s internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, weexpress no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements, assessing the accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for ouropinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Editas Medicine, Inc. at December 31, 2015 and 2014, and the consolidated results of itsoperations and its cash flows for the years then ended and the period from September 3, 2013 (Inception) to December 31,2013, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, MassachusettsMarch 29, 2016 137 Table of ContentsEditas Medicine, Inc.Consolidated Balance Sheets(amounts in thousands, except share and per share data) December 31, 2015 2014 ASSETS Current assets: Cash and cash equivalents $143,180 $10,623 Accounts receivable 1,019 — Prepaid expenses and other current assets 786 93 Total current assets 144,985 10,716 Property and equipment, net 2,130 1,112 Other non-current assets 2,248 360 Total assets $149,363 $12,188 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’DEFICIT Current liabilities: Accounts payable $1,381 $2,595 Accrued expenses 5,456 1,592 Deferred rent, current portion 88 93 Anti-dilution protection liability — 327 Preferred stock tranche liability — 1,487 Equipment loan, current portion, net of discount — 67 Total current liabilities 6,925 6,161 Deferred rent, net of current portion — 91 Equipment loan, net of current portion and discount — 344 Deferred revenue 25,321 — Warrant to purchase redeemable securities28948Other non-current liabilities 27 64 Total liabilities 32,562 6,708 Commitments and contingencies (see note 8) Series A-1 redeemable convertible preferred stock, $0.0001 par value per share: 21,320,000 shares authorizedat December 31, 2015 and 2014, respectively; 21,260,000 shares issued and outstanding at December 31,2015 and 2014, respectively; aggregate liquidation preference of $21,260,000 at December 31, 2015 21,137 20,772 Series A-2 redeemable convertible preferred stock, $0.0001 par value per share: 16,890,699 and 16,698,672shares authorized at December 31, 2015 and 2014, respectively; 16,890,699, and 0 shares issued andoutstanding at December 31, 2015 and 2014, respectively; aggregate liquidation preference of $21,990,000 atDecember 31, 2015 59,027 — Series B redeemable convertible preferred stock, $0.0001 par value per share: 26,666,660 and no sharesauthorized at December 31, 2015, and 2014, respectively; 26,666,660, and 0 shares issued and outstanding atDecember 31, 2015 and 2014, respectively; aggregate liquidation preference of $119,999,970 atDecember 31, 2015 119,751 — Stockholders’ deficit Common stock, $0.0001 par value per share: 92,000,000 authorized at December 31, 2015, and60,800,000 shares authorized at December 31, 2014, respectively; 4,869,829, and 4,513,208 sharesissued, and 3,233,638, and 1,863,169 shares outstanding at December 31, 2015 and 2014, respectively — — Additional paid-in capital 5,234 156 Accumulated deficit (88,348) (15,448) Total stockholders’ deficit (83,114) (15,292) Total liabilities, redeemable convertible preferred stock and stockholders’ deficit $149,363 $12,188 The accompanying notes are an integral part of the consolidated financial statements.138 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Operations and Comprehensive Loss(amounts in thousands, except per share and share data) Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2015 2014 2013 Collaboration revenue $1,629 $ — $ — Operating expenses: Research and development 18,846 5,073 530 General and administrative 18,095 7,650 1,210 Total operating expenses 36,941 12,723 1,740 Operating loss (35,312) (12,723) (1,740) Other expense, net Other expense, net (37,445) (928) (18) Interest expense, net (143) (34) — Total other expense, net (37,588) (962) (18) Net loss and comprehensive loss $(72,900) $(13,685) $(1,758) Reconciliation of net loss to net loss attributable to common stockholders: Net loss $(72,900) $(13,685) $(1,758) Accretion of redeemable convertible preferred stock to redemption value (394) (309) (25) Net loss attributable to common stockholders $(73,294) $(13,994) $(1,783) Net loss per share attributable to common stockholders, basic and diluted $(28.55) $(12.46) $(5.93) Weighted-average common shares outstanding, basic and diluted 2,566,916 1,123,098 300,480 The accompanying notes are an integral part of the consolidated financial statements.139 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit(amounts in thousands except share data) Series A-1 Series A-2 Series B Total Redeemable Convertible Redeemable Convertible Redeemable Convertible Additional Stockholders’ Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-In Accumulated (Deficit) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at September 3, 2013(Inception) — $— — $— — $— — $— $— $— $— Issuance of Series A-1 redeemableconvertible preferred stock, net ofpreferred stock tranche liability of $902and issuance costs of $272 3,260,000 2,086 — — — — — — — — — Vesting of founders shares — — — — — — 751,200 — 20 — 20 Accretion of redeemable convertiblepreferred stock to redemption value — 25 — — — — — — (20) (5) (25) Net loss — — — — — — — — — (1,758) (1,758) Balance at December 31, 2013 3,260,000 2,111 — — — — 751,200 — — (1,763) (1,763) Issuance of common stock to licensors — — — — — — 628,379 — 408 — 408 Issuance of Series A-1 redeemableconvertible preferred stock, net ofissuance costs of $20 18,000,000 17,980 — — — — — — — — — Reclassification of tranche rights uponissuance of redeemable convertiblepreferred stock — 372 — — — — — — — — — Stock-based compensation expense — — — — — — — — 7 — 7 Vesting of restricted common stock andcommon stock subject to repurchase — — — — — — 77,942 — 2 — 2 Vesting of founders shares — — — — — — 405,648 — 48 — 48 Accretion of redeemable convertiblepreferred stock to redemption value — 309 — — — — — — (309) — (309) Net loss — — — — — — — — — (13,685) (13,685) Balance at December 31, 2014 21,260,000 20,772 — — — — 1,863,169 — 156 (15,448) (15,292) Issuance of Series A-2 redeemableconvertible preferred stock, net ofissuance costs of $1 — — 16,890,699 21,989 — — — — — — — Reclassification of tranche rights uponissuance of redeemable — — 37,038 — — — — — — — convertible preferred stock — — — — — — — — — Issuance of Series B redeemableconvertible preferred stock, net ofissuance costs of $278 — — — — 26,666,660 119,722 — — — — — Accretion of redeemable convertiblepreferred stock to redemption value — 365 — — — 29 — — (394) — (394) Issuance of common stock to licensorsupon settlement of anti-dilution protectionliability — — — — — — 327,970 — 1,936 — 1,936 Exercise of stock options — — — — — — 28,651 — 6 — 6 Vesting of restricted common stock andcommon stock subject to repurchase — — — — — — 653,272 — 17 — 17 Vesting of founder shares — — — — — — 360,576 — 2,345 — 2,345 Stock-based compensation expense — — — — — — — — 1,168 — 1,168 Net loss — — — — — — — — — (72,900) (72,900) Balance at December 31, 2015 21,260,000 $21,137 16,890,699 $59,027 26,666,660 $119,751 3,233,638 $ — $5,234 $(88,348) $(83,114) The accompanying notes are an integral part of the consolidated financial statements. 140 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Cash Flows Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2015 2014 2013 Cash flow from operating activities    Net loss $(72,900) $(13,685) $(1,758) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 3,513 55 20 Depreciation 471 157 1 Non-cash research and development expenses — 730 — Non-cash interest expense 65 19 — Non-cash loss on debt extinguishment 84 — — Re-measurement of warrant to purchase redeemable securities 241 (2) — Change in fair value of preferred stock tranche asset or liability 35,551 938 19 Changes in fair value of anti-dilutive protection liability 1,609 5 — Changes in deferred rent (96) 184 — Changes in operating assets and liabilities: Accounts receivable (1,019) — — Prepaid expenses and other current assets (373) (88) (5) Other non-current assets 40 (20) (340) Accounts payable (1,436) 2,191 404 Accrued expenses 3,526 861 731 Deferred revenue 25,321 — — Net cash used in operating activities (5,403) (8,655) (928) Cash flow from investing activities Purchases of property and equipment (1,431) (1,217) (53) Net cash used in investing activities (1,431) (1,217) (53) Cash flow from financing activities Proceeds from equipment loan, net of issuance costs 1,500 462 — Proceeds from the issuance of redeemable convertible preferred stock andtranche rights, net of issuance costs 141,711 17,980 2,988 Payments of equipment loan principal (2,000) — — Payments of final fee for loan payoff (80) — — Proceeds from the issuance of common stock and restricted stock 6 41 5 Payments of initial public offering costs (1,746) — — Net cash provided by financing activities 139,391 18,483 2,993 Net increase in cash and cash equivalents 132,557 8,611 2,012 Cash and cash equivalents, beginning of period 10,623 2,012 — Cash and cash equivalents, end of period $143,180 $10,623 $2,012 Supplemental disclosure of cash and non-cash activities: Accretion of redeemable convertible preferred stock to redemption value $394 $309 $25 Conversion of anti-dilutive protection liability to common stock 1,936 — — Reclassification of liability for common stock subject to repurchase 17 2 — Accrual of final payment fee on equipment loan and debt discount — 20 — Fixed asset additions included in accounts payable and accrued expenses 58 — — Cash paid for interest 91 — — Initial public offering costs incurred but unpaid at period end 502 — — Reclassification of preferred stock tranche liability upon settlement 37,038 372 — The accompanying notes are an integral part of the consolidated financial statements. 141 Table of ContentsEditas Medicine, Inc.Notes to Consolidated Financial Statements 1. Nature of business Editas Medicine, Inc. (the “Company”), formerly known as Gengine, Inc., is a research stage company dedicated totreating patients with genetically defined diseases by correcting their disease‑causing genes. The Company was incorporatedin the state of Delaware in September 2013. Its principal offices are in Cambridge, Massachusetts. Since its inception, the Company has devoted substantially all of its efforts to business planning, research anddevelopment, recruiting management and technical staff, and raising capital, and has financed its operations through variousequity and debt financings including the issuance of preferred stock and an equipment loan, and from upfront fees paid undera research collaboration. 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 candidatethat it may identify and develop, the need to successfully commercialize and gain market acceptance of its productcandidates, 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 tolarge‑scale production of products. Liquidity On February 8, 2016, the Company completed its initial public offering (“IPO”), in which the Company sold6,785,000 shares of its common stock for aggregate net proceeds of approximately $97.8 million (see Note 2). The Companybelieves its cash and cash equivalents at December 31, 2015 of $143.2 million, together with the proceeds from the IPO willbe sufficient to fund the Company’s current operating plan through at least the next 24 months following the date of thisAnnual Report on Form 10-K. The Company has incurred annual net operating losses in every year since its inception. The Company had anaccumulated deficit of $88.3 million at December 31, 2015, and will require substantial additional capital to fund operations.The Company has not generated any product revenues and has financed its operations primarily through public offerings andprivate placements of its equity securities, and funding from its collaboration with Juno Therapeutics. There can be noassurance that the Company will be able to obtain additional debt or equity financing or generate product revenue orrevenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of theCompany to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’sbusiness, results of operations, and financial condition. 2. Summary of significant accounting policies Principles of consolidation The accompanying consolidated financial statements include the accounts of Editas Medicine, Inc. and its whollyowned subsidiary, Editas Securities Corporation, which is a Delaware subsidiary created to buy, sell and hold securities. Allintercompany transactions and balances have been eliminated. Basis of presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principlesgenerally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meantto refer to the authoritative United States generally accepted accounting principles as found in the Accounting StandardsCodification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).142 Table of Contents Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimatesrelated to revenue recognition, accrued expenses, stock‑based compensation expense, valuation of the redeemableconvertible preferred stock tranche liability and the anti‑dilutive protection liability, valuation of the warrant liability,deferred tax valuation allowances, and the fair value of common stock. The Company bases its estimates on historicalexperience and other market‑specific or relevant assumptions that it believes to be reasonable under the circumstances.Actual results may differ from those estimates or assumptions. The Company utilizes significant estimates and assumptions in determining the fair value of its common stock. TheCompany has utilized various valuation methodologies in accordance with the framework of the 2004 American Institute ofCertified Public Accountants Technical Practice Aid, Valuation of Privately‑Held Company Equity Securities Issued asCompensation, to estimate the fair value of its common stock. Each valuation methodology includes estimates andassumptions that require the Company’s judgment. These estimates and assumptions include a number of objective andsubjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, thesuperior rights and preferences of securities senior to the Company’s common stock at the time of, and the likelihood of,achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in thevaluations could result in different fair values of common stock at each valuation date. Initial Public Offering On February 8, 2016, the Company completed its IPO, whereby the Company sold 6,785,000 shares of its commonstock, inclusive of 885,000 shares of common stock sold by the Company pursuant to the full exercise of an overallotmentoption granted to the underwriters in connection with the offering, at a price to the public of $16.00 per share. The sharesbegan trading on the NASDAQ Global Select Market on February 3, 2016. The aggregate net proceeds received by theCompany from the offering were approximately $97.8 million, after deducting underwriting discounts and commissions andother offering expenses payable by the Company. As of December 31, 2015, the Company had incurred $2.2 million of costsrelated to the IPO which have been deferred and are included in other non-current assets on the accompanying consolidatedbalance sheet. Upon the closing of the IPO, all outstanding shares of convertible preferred stock converted into 24,929,709shares of common stock. Reverse stock split In connection with the IPO, the board of directors and the stockholders of the Company approved a one-for-2.6 reverse stock split of the Company’s issued and outstanding common stock. The reverse stock split became effectiveon January 15, 2016. All share and per share amounts in the consolidated financial statements have been retroactivelyadjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to thereduction in par value to additional paid-in capital. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measuredat fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s ownassumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset orliability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs thatreflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, andare developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received tosell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for143 Table of Contentsconsidering market participant assumptions in fair value measurements, ASC 820 establishes a three‑tier fair value hierarchythat distinguishes between the following: ·Level 1 – Quoted market prices in active markets for identical assets or liabilities. ·Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quotedmarket prices, interest rates, and yield curves. ·Level 3 – Unobservable inputs developed using estimates of assumptions developed by the Company, whichreflect those that a market participant would use. To the extent that the 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 indetermining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair valuehierarchy is based on the lowest level of any input that is significant to the fair value measurement. The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, prepaid expensesand other current assets, accounts payable and accrued expenses approximate their fair values, due to their short‑term nature. Cash and cash equivalents The Company considers all highly liquid investments purchased with original maturities of 90 days or less atacquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money marketfunds. Restricted cash At December 31, 2015, the Company had restricted cash of $0.3 million held in the form of money market accountsas collateral for the Company’s facility lease obligation. At December 31, 2014, the Company had restricted cash of $0.4million held in the form of money market accounts as collateral for the Company’s facility lease obligation and credit cards.The restricted cash balance is included within other current assets and other non-current assets in the accompanyingconsolidated balance sheets at December 31, 2015 and December 31, 2014, respectively. Accounts Receivable The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance forreceivables when collection becomes doubtful. Provisions are made based upon a specific review of all significantoutstanding invoices and the overall quality and age of those invoices not specifically reviewed. The Company's receivablesprimarily relate to amounts reimbursed under its collaboration agreement. The Company believes that credit risks associatedwith its collaborations partner is not significant. To date, the Company has not had any write-offs of bad debt, and theCompany did not have an allowance for doubtful accounts as of December 31, 2015 and 2014. Property and equipment Property and equipment consists of computers, laboratory equipment, furniture and office equipment, and leaseholdimprovements and is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extendthe lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments arecapitalized. Depreciation is calculated over the estimated useful lives of the assets using the straight‑line method. TheCompany capitalizes laboratory equipment used for research and development if it has alternative future use in research anddevelopment or otherwise. 144 Table of Contents Asset: Estimated Useful life Lab equipment 5 years Computer equipment and software 3 years Furniture and equipment 5 years Leasehold improvements Shorter of useful life or remaining lease term Impairment of long‑lived assets The Company evaluates long‑lived assets for potential impairment when events or changes in circumstancesindicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values ofthe assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets areconsidered to be impaired, the impairment to be recognized is measured by the amount by which the book values of theassets exceed their fair value. The Company has not recognized any impairment losses from inception through December 31,2015. Deferred issuance costs Deferred issuance costs, which primarily consist of direct incremental legal and accounting fees relating to theCompany’s now completed IPO of common stock are capitalized as incurred. The deferred issuance costs will be offsetagainst proceeds upon the consummation of the offering. Approximately $2.2 million of deferred issuance costs wereincurred and capitalized as of December 31, 2015. No amounts were capitalized as of December 31, 2014. Such costs areclassified in other non‑current assets on the consolidated balance sheet. Revenue Recognition To date, the Company’s only source of revenue has been the collaboration and license agreement with JunoTherapeutics, Inc. (“Juno Therapeutics”) (see Note 9). The Company recognizes revenue in accordance with ASC Topic 605, Revenue Recognition (“ASC 605”).Accordingly, revenue is recognized for each unit of accounting when all of the following criteria are met: ·Persuasive evidence of an arrangement exists; ·Delivery has occurred or services have been rendered; ·The seller’s price to the buyer is fixed or determinable; and ·Collectability is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amountsexpected to be recognized as revenue within the 12 months following the balance sheet date are classified in currentliabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date areclassified as deferred revenue, net of current portion. The Company evaluates multiple‑element arrangements based on the guidance in ASC Topic 605‑25, RevenueRecognition Multiple‑Element Arrangements (“ASC 605‑25”). Pursuant to the guidance in ASC 605‑25, the Companyevaluates multiple‑element arrangements to determine (1) the deliverables included in the arrangement and (2) whether theindividual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit ofaccounting. This evaluation involves subjective determinations and requires the Company to make judgments about theindividual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship.Deliverables are considered separate units of accounting provided that the delivered item has value to the customer on astandalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery orperformance of the undelivered item is considered probable and substantially in the Company’s control. In assessing whetheran item has standalone value, the Company considers factors such as the research, development,145 Table of Contentsmanufacturing and commercialization capabilities of the collaboration partner and the availability of the associatedexpertise in the general marketplace. In addition, the Company considers whether the collaboration partner can use adeliverable for its intended purpose without the receipt of the remaining deliverable, whether the value of the deliverable isdependent on the undelivered item and whether there are other vendors that can provide the undelivered items. Options are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether thecollaboration partner will choose to exercise the option. Factors that the Company considers in evaluating whether an optionis substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit the collaboratormight obtain from the arrangement without exercising the option and the likelihood the option will be exercised. When anoption is considered substantive, the Company does not consider the option or item underlying the option to be adeliverable at the inception of the arrangement and the associated option fees are not included in allocable consideration,assuming the option is not priced at a significant and incremental discount. Conversely, when an option is not consideredsubstantive, the Company would consider the option, including other deliverables contingent upon the exercise of theoption, to be a deliverable at the inception of the arrangement and a corresponding amount would be included in allocablearrangement consideration. In addition, if the price of the option includes a significant incremental discount, the discountwould be included as a deliverable at the inception of the arrangement. The consideration received under the arrangement that is fixed or determinable is then allocated among the separateunits of accounting using the relative selling price method. The Company determines the estimated selling price for units ofaccounting within each arrangement using vendor‑specific objective evidence (“VSOE”) of selling price, if available,third‑party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price (“BESP”) if neitherVSOE nor TPE is available. Determining the BESP for a unit of accounting requires significant judgment. In developing theBESP for a unit of accounting, the Company considers applicable market conditions and relevant entity‑specific factors,including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The Companyvalidates the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine theBESP will have a significant effect on the allocation of arrangement consideration between multiple units of accounting. The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenuerecognition criteria in ASC 605 are satisfied for that particular unit of accounting. In the event that a deliverable does notrepresent a separate unit of accounting, the Company recognizes revenue from the combined unit of accounting over theCompany’s contractual or estimated performance period for the undelivered elements, which is typically the term of theCompany’s research and development obligations. If there is no discernible pattern of performance or objectively measurableperformance measures do not exist, then the Company recognizes revenue under the arrangement on a straight‑line basis overthe period the Company is expected to complete its performance obligations. Conversely, if the pattern of performance inwhich the service is provided to the customer can be determined and objectively measurable performance measures exist,then the Company recognizes revenue under the arrangement using the proportional performance method. Revenuerecognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenueearned, as determined using the straight‑line method or proportional performance method, as applicable, as of the periodending date. At the inception of an arrangement that includes milestone payments, the Company evaluates whether eachmilestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluationincludes an assessment of whether: (1) the consideration is commensurate with either the Company’s performance to achievethe milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from itsperformance to achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration isreasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors suchas the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestoneand the level of effort and investment required to achieve the particular milestone in making this assessment. There isconsiderable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that amilestone is substantive. Milestones that are not considered substantive are recognized as earned if there are no remainingperformance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met. 146 Table of ContentsThe Company will recognize royalty revenue in the period of sale of the related product(s), based on the underlyingcontract terms, provided that the reported sales are reliably measurable and the Company has no remaining performanceobligations, assuming all other revenue recognition criteria are met. Research and development costs Research and development costs are charged to expense as incurred in performing research and developmentactivities. The costs include employee‑related expenses including salaries, benefits, and stock‑based compensation expense,costs of funding research performed by third parties that conduct research and development and preclinical activities on theCompany’s behalf, the cost of purchasing lab supplies and non‑capital equipment used in preclinical activities, consultantfees, facility costs including rent, depreciation, and maintenance expenses, and fees for maintaining licenses under thirdparty licensing agreements. Facilities costs primarily include the allocation of rent, utilities, and depreciation. Patent costs The Company expenses patent and patent application costs and related legal costs for the prosecution andmaintenance of such patents and patent applications as incurred and classifies such costs as general and administrativeexpenses in the accompanying statements of operations. Stock‑based compensation expense The Company accounts for its stock‑based compensation awards in accordance with ASC Topic 718,Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock‑based compensation awards to employees,including grants of restricted stock and stock options, to be recognized as expense in the statements of operations based ontheir grant date fair values. The Company estimates the fair value of options granted using the Black‑Scholes option pricingmodel. The Company uses the value of its common stock to determine the fair value of restricted stock awards. The Black‑Scholes option pricing model requires the input of certain subjective assumptions, including (i) theexpected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk‑free interest rate and (iv) theexpected dividend yield. Due to the lack of a public market for the trading of the Company’s common stock and a lack ofcompany‑specific historical and implied volatility data, the Company has based its estimate of expected volatility on thehistorical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on aperiod of time commensurate with the expected term assumption. The computation of expected volatility is based on thehistorical volatility of a representative group of companies with similar characteristics to the Company, including theirstages of product development and focus on the life science industry. The Company uses the simplified method, which is theaverage of the vesting tranche dates and the contractual term, to calculate the expected term for options granted to employeesas it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.For options granted to non‑employees, the Company utilizes the contractual term of the arrangement as the basis for theexpected term assumption. The risk‑free interest rate is based on a treasury instrument whose term is consistent with theexpected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paiddividends and has no current plans to pay any dividends on its common stock. The Company expenses the fair value of its stock‑based compensation awards granted to employees on astraight‑line basis over the associated service period, which is generally the period in which the related services are received.The Company measures stock‑based compensation awards granted to non‑employees at fair value as the awards vest andrecognizes the resulting value as compensation expense at each financial reporting period. The Company expenses restricted stock awards based on the fair value of the award on a straight‑line basis over theassociated service period of the award. Awards of restricted stock to non‑employees are adjusted through stock‑basedcompensation expense at each reporting period end to reflect the current fair value of such awards and expensed on astraight‑line basis.147 Table of Contents The Company records the expense for stock‑based compensation awards subject to performance‑based milestonevesting over the remaining service period when management determines that achievement of the milestone is probable.Management evaluates when the achievement of a performance‑based milestone is probable based on the expectedsatisfaction of the performance conditions as of the reporting date. There has only been one such award to date. Income taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides fordeferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determinedbased on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measuredusing the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. TheCompany provides a valuation allowance against net deferred tax assets unless, based upon the weight of available evidence,it is more likely than not that the deferred tax assets will be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertaintax positions exist, the Company recognized the tax benefit of tax positions to the extent that the benefit will more likelythan not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon thetechnical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31,2015 and December 31, 2014, the Company did not have any significant uncertain tax positions. Comprehensive loss Comprehensive loss is comprised of net loss and other comprehensive income or loss. Comprehensive loss includesnet loss as well as other changes in stockholders’ (deficit) equity that result from transactions and economic events other thanthose with stockholders. There was no difference between net loss and comprehensive loss for each of the periods presentedin the accompanying consolidated financial statements. Net loss per share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by theweighted‑average number of common shares outstanding during the period, without consideration for potentially dilutivesecurities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by theweighted‑average number of common shares and potentially dilutive securities outstanding for the period determined usingthe treasury‑stock and if‑converted methods. For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, warrants topurchase redeemable convertible preferred stock, and unvested restricted common stock are considered to be potentiallydilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would beanti‑dilutive and therefore, basic and diluted net loss per share were the same for all periods presented. The following table sets forth the outstanding potentially dilutive securities that have been excluded in thecalculation of diluted net loss per share because to do so would be anti‑dilutive (in common stock equivalent shares): As of December 31, 2015 2014 Redeemable convertible preferred stock 24,929,709 8,176,900 Warrant to purchase redeemable convertible preferred stock 23,076 23,076 Unvested restricted common stock 1,596,853 2,574,735 Outstanding stock options 1,713,385 95,495 Total 28,263,023 10,870,206 148 Table of ContentsConcentrations of credit risk and off‑balance sheet risk The Company has no financial instruments with off‑balance sheet risk such as foreign exchange contracts, optioncontracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to aconcentration of credit risk are cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalentsare held in accounts at a financial institution that may exceed federally insured limits. The Company has not experiencedany credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. Accountsreceivable primarily consist of amounts due under the collaboration agreement with Juno Therapeutics (Note 9) for which theCompany does not obtain collateral. As of December 31, 2015, all of the Company’s revenue to date had been generatedexclusively from the collaboration with Juno Therapeutics. Segment information Operating segments are defined as components of an enterprise about which separate discrete information isavailable for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance.The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer, view theCompany’s operations and manage the Company’s business as a single operating segment, which is the business ofdeveloping and commercializing genome editing technology. Subsequent events The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of theconsolidated financial statements to provide additional evidence relative to certain estimates or to identify matters thatrequire additional disclosure (Note 17). Recent accounting pronouncements In May 2014, the FASB issued ASU No. 2014‑09, Revenue From Contracts With Customers. ASU No. 2014‑09amends ASC 605, by outlining a single comprehensive model for entities to use in accounting for revenue arising fromcontracts with customers. ASU No. 2014‑09 will be effective for the Company for interim and annual periods beginning afterDecember 15, 2017. The Company is evaluating the impact that this ASU may have on its consolidated financial statements. In June 2014, the FASB issued ASU No. 2014‑10, Development Stage Entities, which eliminates the concept of adevelopment stage entity (“DSE”), in its entirety from GAAP. Under existing guidance, DSEs are required to reportincremental information, including inception‑to‑date financial information, in their financial statements. A DSE is an entitydevoting substantially all of its efforts to establishing a new business and for which either planned principal operations havenot yet commenced or have commenced but there has been no significant revenues generated from that business. Entitiesclassified as DSEs will no longer be subject to these incremental reporting requirement. ASU No. 2014‑10 is effective forfiscal years beginning after December 15, 2014, with early adoption permitted. Prior to the issuance of ASU No. 2014‑10, theCompany had met the definition of a DSE since its inception. The Company elected to early adopt the provisions of ASUNo. 2014‑10 in these consolidated financial statements. In August 2014, the FASB issued ASU No. 2014‑15, Presentation of Financial Statements—Going Concern, whichrequires management to assess an entity’s ability to continue as a going concern every reporting period, and provide certaindisclosures if management has substantial doubt about the entity’s ability to operate as a going concern, or an expressstatement if not, by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Thisguidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periodswithin annual periods beginning thereafter. Early application is permitted. The Company is in process of evaluating thisguidance and determining the expected effect on its consolidated financial statements, but does not expect it to have asignificant impact on the Company's results of operations, cash flows or financial position. In April 2015, the FASB issued ASU No. 2015‑03, Interest—Imputation of Interest, which states the discount orpremium resulting from the determination of the present value in cash or non‑cash transactions, is not an asset or liability149 Table of Contentsseparable from the note that gives rise to it. Therefore, the discount or premium shall be reported in the balance sheet as adirect deduction from or addition to the face amount of the note. Similarly, debt issuance costs related to a note shall bereported in the balance sheet as a direct deduction from the face amount of that note. The discount, premium, or debt issuancecosts shall not be classified as a deferred charge or deferred credit. Early application is permitted. The Company elected toearly adopt the provisions of ASU No. 2015‑03 in the financial statements for the year ended December 31, 2014. In 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU No. 2015-17”),which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet. The standardwill be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annualperiods, and early adoption is permitted. The Company prospectively adopted this guidance in the fourth quarter of 2015,which resulted in the removal of gross deferred tax assets and liabilities from the Company's consolidated balance sheet, thenet impact of which was zero. Prior periods were not retrospectively adjusted. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and willrequire lessees to put most leases on the balance sheet, but recognize expense in a manner similar to the currentstandard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within thoseyears, which is the year ended December 31, 2019 for the Company. Entities are required to use a modified retrospectiveapproach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in thefinancial statements. Full retrospective application is prohibited. The Company is evaluating the new guidance and theexpected effect on the Company’s consolidated financial statements. 3. Fair Value Measurements Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 are as follows (inthousands): Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs Assets 2015 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $143,180 $143,180 $ — $ — Money market funds, included in other current assets 320 320 — — Total $143,500 $143,500 $ — $— Liabilities Warrant liability $289 $— $— $289 Assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 are as follows (inthousands): Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs Assets 2014 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $10,623 $10,623 $ — $ — Money market funds, included in other non-current assets 360 360 — — Total $10,983 $10,983 $— $— Liabilities Anti-dilution protection liability 327 — — 327 Preferred stock tranche liability 1,487 — — 1,487 Warrant liability 48 — — 48 Total $1,862 $ — $ — $1,862 150 Table of ContentsThe Company evaluates transfers between levels at the end of each reporting period. There have been no transfersbetween levels during the years ended December 31, 2015 and 2014, respectively. The estimated fair value of the redeemable convertible preferred stock tranche liability was determined using aprobability‑weighted present value model that considered the probability of closing a future tranche, the estimated futurevalue of Series A‑1 and Series A‑2 redeemable convertible preferred stock, as applicable, at each closing, and the amount ofthe investment required at each closing. Future values were converted to present value using a discount rate appropriate forprobability‑adjusted cash flows. The Company estimated the fair value of the preferred stock tranche liability at the time of issuance andsubsequently remeasured it using a probability‑weighted present value model that considered the probability of closing eachtranche (varying from 80% to 95% based on the milestone and measurement date), and the estimated future value ofSeries A‑1 and Series A‑2 Preferred Stock at closing (varying from $0.72 to $1.42 based on the expected tranche closingdate). The Company converted future values to present value using a discount rate (21 %) appropriate forprobability‑adjusted cash flows. The estimates are based, in part, on subjective assumptions. Changes to these assumptionscan have a significant impact on the fair value of the preferred stock tranche liability. The Company determined the fair value of the warrants to purchase redeemable convertible preferred stock based oninput from management and the board of directors, which utilized an independent valuation of the Company’s enterprisevalue, determined utilizing an analytical valuation model. Each valuation methodology includes estimates and assumptionsthat require the Company’s judgment. Any changes in the assumptions used in the valuation could materially affect thefinancial results of the Company. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3measurement. The analytical valuation model used for the period ended December 31, 2013 and the years ended December 31,2014 and 2015 are as follows: Analytical Valuation Model Used December 31, 2013 Option Pricing Model (OPM) December 31, 2014 OPM December 31, 2015 Hybrid approach based on an OPM method and the Probability Weighted Expected Return Method(PWERM) The Company estimated the fair value of the anti‑dilution protection liability at the time of issuance in October2014 and subsequently remeasured it using a probability‑weighted present value model that considers the probability ofissuing additional shares (85%), the estimated future value of the common stock at closing, and converted the future valuesto present value using a discount rate of 21% appropriate for probability‑adjusted cash flows. The estimates are based, in part, on subjective assumptions. Changes to these assumptions as well as the Company’sstock value on the reporting date can have a significant impact on the fair value of the anti‑dilution protection liability. The following table provides a roll‑forward of the fair value of the assets and liabilities measured at fair value on arecurring basis using Level 3 significant unobservable inputs (in thousands): Anti-dilutive Warrant Preferred Stock Preferred Stock Protection Liability Tranche Asset Tranche Liability liability Balance at December 31, 2014 $48 $ — $1,487 $327 Changes in fair value 241 — 35,551 1,609 Reclassification to additional paid in capital uponsettlement — — — (1,936) Reclassification of redeemable convertible preferred stocktranche liability to preferred stock upon issuance of shares — — (37,038) — Balance at December 31, 2015 $289 $ — $ — $ — 151 Table of ContentsPlease refer to Note 7, “Equipment Financing,” for further information about the warrant liability. Please refer to Note 10,“Redeemable Convertible Preferred Stock,” for further information about the preferred stock tranche liability. Please refer toNote 9, “Significant Agreements,” for further information about the anti-dilutive protection liability. 4. Prepaid expenses and other current assets Prepaid expense and other current assets consisted of the following (in thousands): As of December 31, 2015 2014 Prepaid expenses $460 $93 Restricted cash 320 — Other 6 — Total $786 $93 5. Property and equipment, net Property and equipment, net consisted of the following (in thousands): As of December 31, 2015 2014 Laboratory equipment $2,215 $961 Computer equipment 447 293 Furniture and office equipment 74 — Leasehold improvements 23 16 Total property and equipment 2,759 1,270 Less: accumulated depreciation (629) (158) Property and equipment, net $2,130 $1,112 The Company recorded $0.5 million, $0.2 million and $1,000 in depreciation expense during the years endedDecember 31, 2015 and 2014 and the period ended December 31, 2013, respectively 6. Accrued expenses Accrued expenses consisted of the following (in thousands): As of December 31, 2015 2014 Patent and license fees $3,395 $1,302 Deferred initial public offering costs 283 — Employee compensation costs 1,016 187 Professional services 382 83 Other 380 20 Total $5,456 $1,592 152 Table of Contents7. Equipment Financing In May 2014, the Company entered into a $2.0 million equipment loan agreement (the “Equipment Loan”) withSilicon Valley Bank. Under the terms of the Equipment Loan, $0.5 million was available to be borrowed before July 31, 2014(“Equipment Loan A”), with the remaining $1.5 million available to be borrowed upon the closing of the issuance of$17.0 million of redeemable convertible preferred stock (“Equipment Loan B”). In July 2014, the Company borrowed$0.5 million under Equipment Loan A. In January 2015, the Company borrowed $0.8 million under Equipment Loan B.Additionally, in July 2015, the Company entered into a modification to the Equipment Loan to extend the availability todraw the remaining balance on the Equipment Loan. The Company borrowed $0.7 million under Equipment Loan B in July2015. Interest is fixed at the time of borrowing at the bank’s prime rate, as defined, plus 2.75% and is payable monthly. Forall borrowings to date, the interest rate is 6.00% per annum. Each borrowing is repayable in equal monthly principalinstallments over 36 months beginning after the nine‑month anniversary of the funding date of each loan. The loan wassecured by the related financed equipment. In conjunction with execution of the Equipment Loan, the Company issued a warrant to purchase 60,000 shares ofSeries A‑1 redeemable convertible preferred stock with an exercise price of $1.00 per share. The fair value of the warrant atthe issuance date was recorded as a reduction to face value of the debt balance and will be amortized as interest expense,along with other debt issuance costs, over the term of the loan using the effective interest rate method. Due to the liquidationpreferences of the redeemable convertible preferred stock, the warrant was recorded as a liability in the accompanyingconsolidated balance sheets. The Company re-measured the fair value of the warrant liability at the end of each reportingperiod.In December 2015, the Company paid off all the amounts outstanding under the Equipment Loan and terminatedthe equipment loan agreement. As a result of the extinguishment of debt, the Company recognized a $0.1 million loss duringthe year ended December 31, 2015. 8. Commitments and contingencies Operating leases During December 2013, the Company entered into an agreement to sublease its facility under a non‑cancelableoperating lease that expires September 2016. Pursuant to the sublease agreement, the Company maintains restricted cash of$0.3 million in a collateral account to be held until the expiration or termination of the Company’s obligations under theagreement. The sublease agreement cannot be extended beyond the expiration date of the sublease. The lease containsescalating rent clauses which require higher rent payments in future years. The Company expenses rent on a straight‑linebasis over the term of the lease, including any rent‑free periods. The deposit is recorded in other non‑current assets in theaccompanying consolidated balance sheet as of December 31, 2014 and in prepaid expenses and other current assets in theaccompanying consolidated balance sheet as of December 31, 2015. In November 2015, the Company entered into a real estate license agreement to sublease from the licensoradditional laboratory space in Cambridge, Massachusetts. The term of the lease is from December 1, 2015 to November 30,2016. The Company’s contractual obligation related to lease payments over the term of the sublease is approximately$1.9 million. The sublease is cancelable upon no less than 30 days written notice, provided however, the Company remainsliable to continue to pay the monthly rental fee for the remainder of the term unless the licensor can sublease the space. If thelicensor can sublease the space to another party, the Company will be credited the lesser of (i) the rental fee paid by suchparty corresponding to the remainder of the term and (ii) 50% of the rental for the remainder of the term. Rent expense of approximately $1.0 million, $0.9 million and $22,000 was incurred during the years endedDecember 31, 2015 and 2014 and the period ended December 31, 2013, respectively. 153 Table of ContentsFuture annual minimum lease payments at December 31, 2015 were as follows (in thousands): Total Minimum Lease Payments 2016 $2,315 $2,315 Licensor Expense Reimbursement The Company is obligated to reimburse The Broad Institute Inc., or Broad, and the President and Fellows of HarvardCollege, or Harvard, for expenses incurred by each of them associated with the prosecution and maintenance of the patentrights that the Company licenses from them pursuant to the license agreement by and among the Company, Broad andHarvard, including the interference and opposition proceedings involving patents licensed to the Company under thisagreement. As such, the Company anticipates that it has a substantial commitment in connection with these proceedingsuntil such time as these proceedings have been resolved, but the amount of such commitment is not determinable. TheCompany paid an aggregate of $9.4 million, $1.7 million and $0.0 million during the years ended December 31, 2015 and2014 and the period ended December 31, 2013, respectively, for such reimbursement. Litigation The Company is not a party to any litigation and did not have contingency reserves established for any litigationliabilities as of December 31, 2015 or December 31, 2014. 9. Significant Agreements Juno Therapeutics Collaboration Agreement (unaudited) Summary of Agreement In May, 2015, the Company entered into a Collaboration and License Agreement (the “Collaboration Agreement”)with Juno Therapeutics. The collaboration is focused on the research and development of engineered T cells with chimericantigen receptors (“CARs”) and T cell receptors (“TCRs”) that have been genetically modified to recognize and kill othercells. The parties will pursue the research and development of CAR and TCR engineered T cell products utilizing theCompany’s genome editing technologies with Juno Therapeutics’ CAR and TCR technologies across three research areas. The collaborative program of research to be undertaken by the parties pursuant to the Collaboration Agreement willbe conducted in accordance with a mutually agreed upon research plan which outlines each party’s research anddevelopment responsibilities across the three research areas. The Company’s research and development responsibilities underthe research plan are related to generating genome editing reagents that modify gene targets selected by Juno Therapeutics.Juno Therapeutics is responsible for evaluating and selecting for further research and development CAR and TCR engineeredT cell products modified with the Company’s genome editing reagents. Except with respect to the Company’s obligationsunder the mutually agreed upon research plan, Juno Therapeutics has sole responsibility, at its own costs, for the worldwideresearch, development, manufacturing and commercialization of products within each of the three research areas for thediagnosis, treatment or prevention of any cancer in humans through the use of engineered T cells, excluding the diagnosis,treatment or prevention of medullary cystic kidney disease 1 (the “Exclusive Field”). The initial term of the research program commenced on May 26, 2015 and continues for five years ending onMay 26, 2020 (the “Initial Research Program Term”). Juno Therapeutics may extend the Initial Research Program Term for upto two additional one year periods upon the payment of extension fees for each one year extension period, assuming theCompany has agreed to the extension request(s) (together, the initial term and any extension period(s) are referred to as the“Research Program Term”). 154 Table of ContentsUnder the terms of the Collaboration Agreement, the Company granted to Juno Therapeutics during the ResearchProgram Term a nonexclusive, worldwide, royalty‑free, sublicensable (subject to certain conditions) license under certain ofthe intellectual property controlled by the Company solely for the purpose of conducting activities required under thespecified research under the Collaboration Agreement: (i) conduct activities assigned to Juno Therapeutics under theresearch plan, (ii) conduct activities assigned to the Company under the research plan that the Company fails or refuses toconduct in a timely manner, (iii) use certain genome editing reagents generated under the research program to research,evaluate and conduct preclinical testing and development of certain engineered T cells and (iv) evaluate the data developedin the conduct of activities under the research plan (the “Research License”). Additionally, as it relates to two of the threeresearch areas, the Company granted to Juno Therapeutics an exclusive, milestone and royalty‑bearing, sublicensable licenseunder certain of the intellectual property controlled by the Company to research, develop, make and have made, use, offer forsale, sell, import and export selected CAR and TCR engineered T cell products in the Exclusive Field on a worldwide basis,specifically as it relates to certain targets selected by Juno Therapeutics pursuant to the research program. Furthermore, as itrelates to the same two research areas, the Company granted to Juno Therapeutics a non‑exclusive, milestone androyalty‑bearing, sub licensable license under certain of the intellectual property controlled by the Company to use genomeediting reagents generated under the research program that are used in the creation of certain CAR or TCR engineered T cellproducts on which Juno Therapeutics has filed an IND in the Exclusive Field for the treatment or prevention of a cancer inhumans to research, develop, make and have made, use, offer for sale, sell, import and export those CAR or TCR engineered Tcell products in all fields outside of the Exclusive Field (the “Non‑Exclusive Field”) on a worldwide basis, specifically as itrelates to certain targets selected by Juno Therapeutics pursuant to the research program (together, the license in theExclusive Field and the license in the Non‑Exclusive Field are referred to as the “Development and CommercializationLicense” for each particular research area). Lastly, as it relates to the third research area, the Company granted to JunoTherapeutics a milestone and royalty‑bearing, sublicensable license under certain of the intellectual property controlled bythe Company to use the genome editing reagents generated under the research program that are associated with certain CARor TCR engineered T cell products to research, develop, make and have made, use, offer for sale, sell, import or export thoseCAR or TCR engineered T cell products in the Exclusive Field on a worldwide basis, specifically as it relates to certain tocertain products selected by Juno Therapeutics pursuant to the research program. The license associated with the thirdresearch area is exclusive as it relates to CAR or TCR engineered T cell products directed to certain targets as selected byJuno Therapeutics, but is otherwise non‑exclusive (referred to as the “Development and Commercialization License” for thethird research area). The Collaboration Agreement will be managed on an overall basis by a project leader from each of the Companyand Juno Therapeutics. The project leaders will serve as the contact point between the parties with respect to the researchprogram and will be primarily responsible for facilitating the flow of information, interaction, and collaboration between theparties. In addition, the activities under the Collaboration Agreement during the Research Program Term will be governed bya joint research committee (“JRC”) formed by an equal number of representatives from the Company and Juno Therapeutics.The JRC will oversee, review and recommend direction of the research program. Among other responsibilities, the JRC willmonitor and report research progress and ensure open and frequent exchange between the parties regarding research programactivities. Under the terms of the Collaboration Agreement, the Company received a $25.0 million up‑front, non‑refundable,non‑creditable cash payment. In addition, Juno Therapeutics will pay to the Company an aggregate of up to $22.0 million inresearch and development funding over the initial five year term of the research program across the three research areasconsisting primarily of funding for up to a specified maximum number of full time equivalents personnel each year over theinitial five year term of the research program across three research areas. Under the terms of the Collaboration Agreement,there is no incremental compensation due to the Company with respect to the Development and Commercialization Licensegranted to Juno Therapeutics associated with the first target or product, as applicable, designated by Juno Therapeuticswithin each of the three research areas. However, for two of the three research areas, Juno Therapeutics has the option topurchase up to three additional Development and Commercialization Licenses associated with other gene targets for anadditional fee of approximately $2.5 million per target. In addition, Juno Therapeutics would be required to make certainmilestone payments to the Company upon the achievement of specified development, regulatory and commercial events.More specifically, for the first product to achieve the associated event in each of the three research areas, the Company iseligible to receive up to a $77.5 million in development milestone payments and up to $80 million in regulatory milestonepayments. In addition, the Company is eligible to receive additional development and regulatory milestone payments forsubsequent products developed within each of the three research areas. Moreover, the Company is eligible for up to$75.0 million in commercial milestone155 Table of Contentspayments associated with aggregate sales of all products within each of the three research areas. Development milestonepayments are triggered upon the achievement of certain specified development criteria or upon initiation of a defined phaseof clinical research for a product candidate. Regulatory milestone payments are triggered upon approval to market a productcandidate by the United States Food and Drug Administration (“FDA”) or other global regulatory authorities. Commercialmilestone payments are triggered when an approved pharmaceutical product reaches certain defined levels of net sales by thelicensee. In addition, to the extent any of the product candidates covered by the licenses conveyed to Juno Therapeutics arecommercialized, the Company would be entitled to receive tiered royalty payments of low double digits based on apercentage of net sales. Royalty payments are subject to certain reductions, including for any royalty payments required tobe made by Juno Therapeutics related to a third‑party’s intellectual property rights, subject to an aggregate minimum floor.Royalties are due on a licensed product‑by‑licensed product and country‑by‑country basis from the date of the firstcommercial sale of each product in a country until the later of: (i) the tenth anniversary of the first commercial sale of suchlicensed product in such country and (ii) the expiration date in such country of the last to expire valid claim within thelicensed intellectual property covering the manufacture, use or sale of such licensed product in such country. Due to theuncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development,no milestone or royalty payments may ever be received from Juno Therapeutics. The next potential milestone payment thatthe Company may be entitled to receive under the agreement is a substantive milestone payment of $2.5 million for theachievement of certain development criteria. The Company would recognize the milestone payment as revenue uponachievement. There are no cancellation, termination or refund provisions in the Collaboration Agreement that containmaterial financial consequences to the Company. Unless earlier terminated, the Collaboration Agreement will continue in full force and effect, on aproduct‑by‑product and country‑by‑country basis until the date no further payments are due to the Company fromJuno Therapeutics. Either party may terminate the Collaboration Agreement if the other party has materially breached ordefaulted in the performance of any of its material obligations and such breach or default continues after the specified cureperiod. Either party may terminate the Collaboration Agreement in the event of the commencement of any proceeding in orfor bankruptcy, insolvency, dissolution or winding up by or against the other party that is not dismissed or otherwisedisposed of within a specified time period. Juno Therapeutics may terminate the Collaboration Agreement for convenienceupon not less than six months prior written notice to the Company. The Company may terminate the CollaborationAgreement in the event that Juno Therapeutics brings, assumes, or participates in, or knowingly, willfully or recklessly assistsin bringing a dispute or challenge against the Company related to its intellectual property. Termination of the Collaboration Agreement for any reason does not release either party from any liability which, atthe time of such termination, has already accrued to the other party or which is attributable to a period prior to suchtermination nor preclude either party from pursuing any rights and remedies it may have under the agreement or at law or inequity with respect to any breach of the Collaboration Agreement. If Juno Therapeutics terminates the CollaborationAgreement as a result of the Company’s uncured material breach or default, then: (i) the licenses and rights conveyed toJuno Therapeutics will continue as set forth in the agreement, (ii) Juno Therapeutics’ obligations related to milestones androyalties will continue as set forth in the agreement and (iii) Juno Therapeutics’ rights to prosecute, maintain and enforcecertain intellectual property rights will continue as set forth in the agreement. If Juno Therapeutics terminates theCollaboration Agreement for convenience or if the Company terminates the Collaboration Agreement as a result ofJuno Therapeutics’ uncured material breach or default, then the licenses conveyed to Juno will terminate. Accounting Analysis The Company evaluated the Collaboration Agreement in accordance with the provisions of ASC 605‑25. TheCompany’s arrangement with Juno Therapeutics contains the following deliverables: (i) research and development servicesduring the Initial Research Program Term (the “R&D Services Deliverable”), (ii) research License, (iii) Development andCommercialization License related to each of the three research areas (each, the “Development and CommercializationLicense Deliverable” for the respective research area), (iv) significant and incremental discount related to the option topurchase up to three additional Development and Commercialization Licenses for two of the156 Table of Contentsresearch areas (each, the “Discount Deliverable” for the associated option) and (v) JRC services during the Initial ResearchProgram Term (the “JRC Deliverable”). The Company has determined that the options to purchase additional development and commercialization licenseswithin two of the research program areas related to other gene targets are substantive options. Juno Therapeutics is notcontractually obligated to exercise the options. Moreover, as a result of the uncertain outcome of the discovery, research anddevelopment activities, there is significant uncertainty as to whether Juno Therapeutics will decide to exercise its option forany additional gene targets within either of the two applicable research areas. Consequently, the Company is at risk withregard to whether Juno Therapeutics will exercise the options. However, the Company has determined that the options topurchase additional development and commercialization licenses with respect to other gene targets within the two applicableresearch program areas are priced at a significant and incremental discount. As a result, the Company has concluded that thediscounts to purchase development and commercialization licenses for up to three additional gene targets within both of theresearch areas represent separate elements in the arrangement at inception. Accordingly, the deliverables identified atinception of the arrangement include six separate deliverables related to the significant and incremental discount inherent inthe pricing of the option to purchase up to three additional development and commercialization licenses for two of theresearch areas included within the research program. The Company has concluded that the Research License deliverable does not qualify for separation from the R&DServices Deliverable. As it relates to the assessment of standalone value, the Company has determined that Juno Therapeuticscannot fully exploit the value of the Research License deliverable without receipt of the R&D Services Deliverable. This isprimarily due to the fact that Juno Therapeutics must rely upon the Company to provide the research and developmentservices included in the research plan because the services incorporate technology that is proprietary to the Company. Theservices to be provided by the Company involve unique skills and specialized expertise, particularly as it relates to genomeediting technology that is not available in the marketplace. Accordingly, Juno Therapeutics must obtain the research anddevelopment services from the Company which significantly limits the ability for Juno Therapeutics to utilize the ResearchLicense for its intended purpose on a standalone basis. Therefore, the Research License deliverable does not have standalonevalue from the R&D Services Deliverable. As a result, the Research License deliverable and the R&D Services Deliverablehave been combined as a single unit of accounting (the “R&D Services Unit of Accounting”). Conversely, the Company hasconcluded that each of the other deliverables identified at the inception of the arrangement has standalone value from eachof the other elements based on their nature. Factors considered in this determination included, among other things, thecapabilities of the collaboration partner, whether any other vendor sells the item separately, whether the value of thedeliverable is dependent on the other elements in the arrangement, whether there are other vendors that can provide the itemsand if the customer could use the item for its intended purpose without the other deliverables in the arrangement.Additionally, the Collaboration Agreement does not include a general right of return. Accordingly, each of the otherdeliverables included in the Juno Therapeutics arrangement qualifies as a separate unit of accounting. Therefore, the Company has identified eleven units of accounting in connection with its obligations under thecollaboration arrangement with Juno Therapeutics as follows: (i) R&D Services Unit of Accounting, (ii) three units ofaccounting related to the Development and Commercialization License for each of the three research areas, (iii) six units ofaccounting related to each of the Discount Deliverables, and (iv) JRC Deliverable. The Company has determined that neither VSOE of selling price nor TPE of selling price is available for any of theunits of accounting identified at inception of the arrangement with Juno Therapeutics. Accordingly, the selling price of eachunit of accounting was determined based on the Company’s BESP. The Company developed the BESP for all of the units ofaccounting included in the Collaboration Agreement with the objective of determining the price at which it would sell suchan item if it were to be sold regularly on a standalone basis. The Company developed the BESP for the R&D Services Unit ofAccounting and the JRC Deliverable primarily based on the nature of the services to be performed and estimates of theassociated effort and cost of the services, adjusted for a reasonable profit margin that would be expected to be realized undersimilar contracts. The Company developed the BESP for each of the Development and Commercialization License units ofaccounting based on the probability‑weighted present value of expected future cash flows associated with each licenserelated to each specific research area. In developing such estimate, the Company also considered applicable marketconditions and relevant entity‑specific factors, including those factors contemplated in negotiating the agreement,probability of success and the time needed to commercialize a product candidate pursuant to157 Table of Contentsthe associated license. The Company developed the BESP for each of the Discount Deliverables based on the estimated valueof the associated in‑the‑money options. In developing such estimate, the Company considered the period to exercise theoption, an appropriate discount rate and the likelihood that a market participant who was entitled to the discount wouldexercise the option. Allocable arrangement consideration at inception is comprised of: (i) the up‑front payment of $25.0 million, (ii) theresearch support of $20.0 million and (iii) payments related to specialized materials costs of $2.0 million. The researchsupport of $20.0 million and payments related to specialized materials costs of $2.0 million represent contingent revenuefeatures because the Company’s retention of the associated arrangement consideration is dependent upon its futureperformance of research support services and development of specialized materials. The aggregate allocable arrangementconsideration of $47.0 million was allocated among the separate units of accounting using the relative selling price methodas follows: (i) R&D Services Unit of Accounting: $16.7 million, (ii) Development and Commercialization License for the firstresearch area: $9.3 million, (iii) Development and Commercialization License for the second research area: $15.4 million,(iv) Development and Commercialization License for the third research area: $0.2 million, (v) the first Discount Deliverablefor the first research area: $0.7 million, (vi) the second Discount Deliverable for the first research area: $0.4 million, (vii) thethird Discount Deliverable for the first research area: $0.2 million, (viii) the first Discount Deliverable for the second researcharea: $2.0 million, (ix) the second Discount Deliverable for the second research area: $1.3 million, and (x) the third DiscountDeliverable for the second research area: $0.8 million. No amounts were allocated to the JRC Deliverable because theassociated BESP was determined to be de minimis. The amounts allocated to each of the development and commercializationlicenses are based on the respective BESP calculations, which reflect the level of risk and expected probability of successinherent in the nature of the associated research area. The Company will recognize revenue related to amounts allocated to the R&D Services Unit of Accounting as theunderlying services are performed. The Company will recognize revenue related to amounts allocated to each of theDevelopment and Commercialization Licenses upon delivery of the associated license, assuming the research services aresubstantially complete at the time the license is delivered. The rights to be conveyed to Juno Therapeutics pursuant to eachof the Development and Commercialization Licenses extend exclusively to an individual target or product, as applicable;therefore, delivery is deemed to occur upon the designation by Juno Therapeutics of the specific target or product, asapplicable, whereupon the license becomes effective. The Company will recognize revenue related to amounts allocated toeach of the Discount Deliverables upon the earlier of exercise of the associated option or upon lapsing of the underlyingright, if the respective option expires unexercised. The Company has evaluated all of the milestones that may be received in connection with the Juno Therapeuticsarrangement. In evaluating if a milestone is substantive, the Company assesses whether: (i) the consideration iscommensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of thedelivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone, (ii) theconsideration relates solely to past performance, and (iii) the consideration is reasonable relative to all of the deliverablesand payment terms within the arrangement. All development and regulatory milestones are considered substantive on thebasis of the contingent nature of the milestone, specifically reviewing factors such as the scientific, clinical, regulatory,commercial and other risks that must be overcome to achieve the milestone as well as the level of effort and investmentrequired. Accordingly, such amounts will be recognized as revenue in full in the period in which the associated milestone isachieved, assuming all other revenue recognition criteria are met. All commercial milestones will be accounted for in thesame manner as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenuerecognition criteria are met. The Company will recognize royalty revenue in the period of sale of the related product(s), basedon the underlying contract terms, provided that the reported sales are reliably measurable and the Company has no remainingperformance obligations, assuming all other revenue recognition criteria are met. During the year ended December 31 2015, the Company recognized revenue totaling approximately $1.6 millionwith respect to the collaboration with Juno Therapeutics. The revenue is classified as collaboration revenue in theaccompanying consolidated statement of operations. As of December 31, 2015, there is approximately $25.3 million ofdeferred revenue related to the Company’s collaboration with Juno Therapeutics, all of which is classified as long‑term in theaccompanying consolidated balance sheet. In addition, as of December 31, 2015, the158 Table of ContentsCompany has recorded accounts receivable of $0.9 million related to reimbursable research and development costs under theCollaboration Agreement for activities performed during the fourth quarter of 2015. Other Agreements Licensing Agreements The Company is a party to a number of license agreements under which the Company licenses patents, patentapplications and other intellectual property from third parties. The Company anticipates entering into these types of licenseagreements in the future. The Company believes the following agreements are significant to the business: The General Hospital Corporation License Agreement—In August 2014, the Company entered into an agreement tolicense certain patent rights owned or co‑owned by The General Hospital Corporation, d/b/a Massachusetts General Hospital(“MGH”). Consideration for the granting of the license included the payment of an upfront license fee of $0.1 million, theissuance of 66,848 shares of the Company’s common stock, which was based on 0.5% of the Company’s outstanding stockon a fully diluted basis, and the future issuance of shares of common stock to maintain MGH’s ownership following the thirdtranche of the Company’s Series A redeemable convertible preferred stock financing (e.g. anti‑dilution protection liability)(see Note 11). MGH is entitled to nominal annual license fees and to receive future clinical, regulatory and commercialmilestone payments aggregating to a maximum of $3.7 million and aggregate of $1.8 million upon the occurrence of certainsales milestones. The Company is also obligated to pay MGH low single digit percentage royalties on net sales of productsfor the prevention or treatment of human disease, and ranging from low single digit to low double digit percentage royaltieson net sales of other products and services made by the Company, its affiliates or its sublicenses. The royalty percentagedepends on the product and service, and whether such licensed product or licensed service is covered by a valid claim withinthe certain patent rights that the Company licenses from MGH. The Broad Institute, Inc., The President and Fellows of Harvard College, and Massachusetts Institute ofTechnology License Agreement—In October 2014, the Company entered into an agreement with the President and Fellows ofHarvard College (“Harvard”) and The Broad Institute, Inc. (“Broad”) to license certain patent rights owned or co‑owned by,or among, Harvard, Massachusetts Institute of Technology, and the Broad (collectively, the “Institutions”). Consideration forthe granting of the license included the payment of an upfront license issuance fee of $0.2 million, the issuance of 561,531shares of the Company’s common stock, which was equal to 4.2% of the Company’s outstanding stock on a fully dilutedbasis and, the future issuance of shares of common stock to maintain the Institutions’ ownership following the third trancheof the Series A Preferred Stock financing (e.g. anti‑dilution protection liability) (see Note 11). The Institutions arecollectively entitled to receive clinical and regulatory milestone payments totaling up to $14.8 million in the aggregate perlicensed product approved in the United States, European Union, and Japan for the treatment of a human disease that afflictsat least a specified number of patients in the aggregate in the United States. If the Company undergoes a change of controlduring the term of the license agreement, the clinical and regulatory milestone payments will be increased by a certainpercentage in the mid‑double digits. The Company is also obligated to make additional payments to the Institutions,collectively; of up to an aggregate of $54.0 million upon the occurrence of certain sales milestones per licensed product forthe treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States. TheInstitutions are collectively entitled to receive clinical and regulatory milestone payments totaling up to $4.1 million in theaggregate per licensed product approved in the U.S. and at least one jurisdiction outside the U.S. for the treatment of a humandisease based on certain criteria. The Company is also obligated to make additional payments to the Institutions,collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones per licensed product forthe treatment of a rare disease meeting certain criteria. The Institutions are entitled to receive from the Company nominalannual license fees and a mid‑single digit percentage royalties on net sales of products for the prevention or treatment ofhuman disease, and ranging from low single digit to high single digit percentage royalties on net sales of other products andservices, made by the Company, its affiliates, or its sublicensees. The royalty percentage depends on the product and service,and whether such licensed product or licensed service is covered by a valid claim within the certain patent rights that theCompany licenses from the Institutions. 159 Table of ContentsDuke University License Agreement—In October 2014, the Company entered into an exclusive license agreementwith Duke University (“Duke”) to access intellectual property and technology related to the CRISPR/Cas9 and TALENgenome editing systems. In consideration for the granting of the license, the Company paid Duke an upfront fee of$0.1 million. Duke is entitled to receive clinical, regulatory, and commercial milestone payments totaling up to $0.6 millionin the aggregate per licensed product. The Company is also obligated to pay to Duke nominal annual license fees and lowsingle digit royalties based on annual net sales of licensed products and licensed services by the Company and its affiliatesand sublicensees. Each of the above license agreements obligates the Company to use commercially reasonable efforts to research,develop, and commercialize products for the prevention or treatment of human disease. The Company is also required toachieve certain development milestones within specific time periods. Each licensor has the right to terminate the license ifthe Company fails to achieve the development milestones. Each license agreement requires the Company to pay an annuallicense maintenance fee and reimburse the licensor for expenses associated with the prosecution and maintenance of thelicensed patent rights. Research and development expense for the year ended December 31, 2015 included $4.5 million ofsublicensing fees due under license agreements that was triggered by the execution of the Juno Therapeutics collaborationagreement. The Company recorded the upfront issuance fees and the fair value of the common stock issued to the licensors asresearch and development expense (as the licenses do not have alternative future use) in accordance with ASC Topic 730,Research and Development. The anti‑dilutive protection obligation is classified as a liability and was recorded at its grantdate fair value on the effective date of the respective agreements with the initial fair value being recorded to research anddevelopment expense as it represented additional consideration paid to the licensor in connection with the licenseagreement. 10. Redeemable Convertible Preferred Stock The Company’s redeemable convertible preferred stock has been classified as temporary equity on theaccompanying consolidated balance sheets instead of in stockholders’ (deficit) equity in accordance with authoritativeguidance for the classification and measurement of redeemable securities as the convertible preferred stock is redeemable atthe option of the holders after August 2019. In November 2013, the Company entered into a preferred stock purchase agreement (the “Preferred StockAgreement”) in which it agreed to sell, and the purchasers agreed to purchase up to $43 million of Series A‑1 redeemableconvertible preferred stock (“Series A‑1 Preferred Stock”) and Series A‑2 redeemable convertible preferred stock (“Series A‑2Preferred Stock” which together with the Series A‑1 Preferred Stock is collectively referred to as “Series A Preferred Stock”) inthree anticipated tranches. Under the Preferred Stock Agreement, the Company initially issued 3,260,000 shares of Series A‑1Preferred Stock in exchange for gross cash proceeds of $3.3 million in November 2013. The Preferred Stock Agreementprovided for second and third closings based on the achievement of defined performance milestones. Subsequently, theCompany and the investors amended the Preferred Stock Agreement to fund the second closing in four separate closings. TheCompany issued 2,000,000 shares of Series A‑1 Preferred Stock in exchange for cash proceeds of $2.0 million, issued2,500,000 shares of Series A‑1 Preferred Stock in exchange for cash proceeds of $2.5 million, and issued 500,000 shares ofSeries A‑1 Preferred Stock in exchange for cash proceeds of $500,000 in interim closings in May 2014, July 2014, andOctober 2014, respectively. The final closing of the second tranche occurred in November 2014, when the Company issued13,000,000 shares of Series A‑1 Preferred Stock in exchange for cash proceeds of $13.0 million. The milestones for the thirdtranche of the Series A Preferred Stock were waived by the investors, and the Company issued 16,698,672 shares ofSeries A‑2 Convertible Preferred Stock in exchange for cash proceeds of $21.7 million in June 2015. In addition, anexecutive of the Company purchased 192,027 shares of Series A‑2 Preferred Stock for $0.3 million. In August 2015, the Company entered into a preferred stock purchase agreement in which it agreed to sell, and thepurchasers agreed to purchase up 26,666,660 shares of Series B redeemable convertible preferred stock (“Series B PreferredStock”) for cash proceeds of $120.0 million. In connection with the issuance of the Series B Preferred Stock, the redemptiondate of the Series A Preferred Stock was modified from November 2018 to August 2019, consistent with the terms of theSeries B Preferred Stock.160 Table of Contents The rights, preferences, and privileges of the Series A Preferred Stock and Series B Preferred Stock, which togetherare collectively referred to as Preferred Stock, as of December 31, 2015 are listed below: Conversion Shares of Preferred Stock are convertible at any time at the option of the holder into such number of shares as isdetermined by dividing the original issuance price by the conversion price in effect at the time. The conversion price forSeries A‑1 Preferred Stock is $2.60, the conversion price for Series A‑2 Preferred Stock is $3.3849, and the conversion pricefor Series B Preferred Stock is $11.70, subject in each case to certain adjustments to reflect the issuance of common stock,options, warrants, or other rights to subscribe for or to purchase shares of the Company’s common stock for a considerationper share less than the conversion price then in effect and subsequent stock dividends and stock splits. All outstanding shares of Preferred Stock will automatically convert upon the completion of either an initial publicoffering at a price per share of at least $17.55 (adjusted for stock splits or stock dividends) resulting in gross proceeds to theCompany of at least $50.0 million or the vote or written consent of the holders of at least 69% of the then outstanding sharesof Preferred Stock on an as‑converted to common stock basis. Dividends The holders of shares of Preferred Stock are entitled to receive dividends, if and when declared by the Company’sboard of directors. Dividends payable on each share of Preferred Stock will be determined as if such share has been convertedinto shares of the Company’s common stock. As of December 31, 2015, no dividends had been declared since the Company’sinception. Redemption The Preferred Stock is redeemable after August 2019 upon written notice from the holders of at least 69% of theshares of Preferred Stock then outstanding on an as‑converted to common stock basis. The redemption price of the PreferredStock is equal to $1.00 per share for Series A‑1 Preferred Stock, $1.3019 per share for Series A‑2 Preferred Stock, and$4.50 per share for Series B Preferred Stock, plus any declared but unpaid dividends. Liquidation Preference Holders of Preferred Stock are entitled to a liquidation preference in the event of any voluntary or involuntaryliquidation, dissolution, or winding‑up of the Company, equal to $1.00 per share for Series A‑1 Preferred Stock, $1.3019 pershare for Series A‑2 Preferred Stock and $4.50 per share for Series B Preferred Stock, plus any declared but unpaid dividends.If the amount per share as would have been payable with respect to a series of Preferred Stock had all shares of that series ofPreferred Stock been converted to common stock immediately prior to such liquidation, dissolution, winding up, or deemedliquidation event of the Company is greater than the liquidation preference of such shares (assuming the conversion tocommon stock of all shares of each other series of Preferred Stock for which this is also the case), such shares are entitled toreceive that greater amount in lieu of their liquidation preference. A deemed liquidation event is defined in the Company’s Certificate of Incorporation as a merger (unless the sharesof capital stock prior to the transaction represent the majority of the post‑merger voting rights) or the sale or transfer ofsubstantially all of the assets of the Company unless the holders of at least 69% of the then outstanding shares of PreferredStock on an as‑converted to common stock basis elected otherwise. After all preferential payments, the common stockholdersare entitled to share in the remaining assets of the Company on a pro‑rata basis. Voting Rights Holders of Preferred Stock are entitled to vote as a single class with the holders of the Company’s common stock onall matters submitted for vote to the stockholders of the Company. The holders of Preferred Stock are entitled to one vote foreach equivalent share for the Company’s common stock on an as‑converted to common stock basis. In161 Table of Contentsaddition, the holders of Series A Preferred Stock are entitled to elect three directors. The holders of Series B Preferred Stockare entitled to elect one director. The holders of common stock voting as a separate class are entitled to elect one director.The holders of Preferred Stock and the holders of common stock, voting together as a single class, are entitled to elect anyremaining directors. Certain actions such as liquidation, dissolution, wind up of business, and deemed liquidation events (as defined bythe Certificate of Incorporation), are required to be approved by the holders of at least 69% of the then outstanding PreferredStock voting as a single class on an as‑converted to common stock basis. Tranche Rights Issued with Series A Preferred Stock Included in the terms of the Preferred Stock Agreement were certain rights (“Tranche Rights”) granted to thepurchasers of Series A‑1 Preferred Stock. The Tranche Rights provided purchasers of Series A Preferred Stock the right topurchase and the Company to sell an additional 18,000,000 shares of Series A‑1 Preferred Stock at $1.00 per share contingentupon certain performance milestones (“Tranche Right I”). Subsequently, the Company and the investors amended thePreferred Stock Agreement to fund the second tranche in four separate closings. In addition, the purchasers had the right topurchase, and the Company was obligated to sell an additional 16,698,672 shares of Series A‑2 Preferred Stock at $1.3019per share upon additional performance milestones (“Tranche Right II”). The Tranche Rights were transferrable by thepurchasers. The Company concluded the Tranche Rights met the definition of a freestanding financial instrument, as theTranche Rights were legally detachable and separately exercisable from the Series A‑1 Preferred Stock. Therefore, theCompany allocated the proceeds received from the sale of shares under the Preferred Stock Agreement between the TrancheRights and the Series A‑1 Preferred Stock. As the Series A Preferred Stock was redeemable at the election of holders of thethen‑outstanding shares of Series A Preferred Stock, the Tranche Rights were classified as an asset or liability underASC Topic 480, Distinguishing Liabilities from Equity, and were initially recorded at fair value. The Tranche Rights werethen remeasured at fair value at each subsequent reporting period. Since the Tranche Rights were subject to fair valueaccounting, the Company allocated the proceeds to the Tranche Rights based on the fair value at the date of issuance withthe remaining proceeds being allocated to the Series A‑1 Preferred Stock. The estimated fair value of the Tranche Rights wasdetermined using a probability‑weighted present value model that considered the probability of closing a tranche, theestimated future value of Series A Preferred Stock each closing and the investment required at each closing. Future valueswere converted to present value using a discount rate appropriate for probability‑adjusted cash flows. The following table summarizes the initial value of the Tranche Rights included in the Preferred Stock Agreement(in thousands): Fair Value of Tranche Right Asset (Liability) Tranche Right I $70 Tranche Right II (972) Total value of Tranche Rights $(902) As the carrying value of the initial 3,260,000 shares of Series A Preferred Stock issued in November 2013 was lessthan the redemption value of $3.3 million, the carrying value was accreted to redemption value through the date the sharesbecome redeemable in August 2019. Tranche Right I was initially recorded as an asset of $70,000 as the purchase price of the additional shares wasgreater than the estimated value of the Series A‑1 Preferred Stock at the expected settlement date. The Company issued18,000,000 additional shares under Tranche Right I, in four separate closings during the year ended December 31, 2014 withtotal proceeds of $18.0 million prior to issuance costs. Prior to each closing, any change in the value of Tranche Right I wasrecorded as other expense, net. The fair value of the portion of the Tranche Right I, based on the implied value of theSeries A‑1 Preferred Stock from the Company’s third party valuation, that was settled at each closing, was reclassified toSeries A‑1 Preferred Stock. The carrying value of the issuance of 5,000,000 shares of Series A‑1 Preferred162 Table of ContentsStock was $4.3 million, which is less than the redemption value, and was being accreted to redemption value of $5.0 million.The carrying value of 13,000,000 shares of Series A‑1 Preferred Stock issued in the final closing of the second tranche was$14.1 million, which exceeded the redemption value of $13.0 million, therefore the carrying value was not currently beingsubsequently adjusted. Tranche Right II was initially recorded as a liability of $1.0 million as the purchase price of the additional shareswas less than the estimated fair value of the Series A‑2 Preferred Stock at the expected settlement date. There were no closingsunder Tranche Right II in the year ended December 31, 2014. The Company recognized $0.9 million of expense related tothe mark to market of Tranche Right I and II during the year ended December 31, 2014. In June 2015, Tranche Right II was settled when the Company closed the issuance of Series A‑2 Preferred Stock. TheCompany recognized expense of $35.6 million related to the mark to market of Tranche Right II during the year endedDecember 31, 2015, which is included in other expense, net. The fair value of the Tranche Right II at settlement was based onthe implied value of the Series A‑2 preferred stock from the Company’s third party contemporaneous valuation of commonstock. The fair value of the Tranche II right was settled at the June 2015 closing and was reclassified to Series A PreferredStock. The initial carrying amount of the Series A‑2 Preferred Stock issued upon the closing of Tranche Right II amounted toapproximately $59.0 million which exceeds the redemption value of $22.0 million, therefore the carrying value is notcurrently being subsequently adjusted. 11. Common Stock The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by therights, powers, and preferences of the holders of redeemable convertible preferred stock. The common stock has the followingcharacteristics as of December 31, 2015: Voting The holders of shares of common stock are entitled to one vote for each share of common stock held at any meetingof stockholders and at the time of any written action in lieu of a meeting. Dividends The holders of shares of common stock are entitled to receive dividends, if and when declared by the Company’sboard of directors. Cash dividends may not be declared or paid to holders of shares of common stock until all unpaiddividends on the redeemable convertible preferred stock have been paid in accordance with their terms. No dividends havebeen declared or paid by the Company since its inception. Liquidation After payment of the respective liquidation preferences to the holders of shares of redeemable convertible preferredstock, the holders of shares of common stock are entitled to share ratably in the Company’s remaining assets available fordistribution to its stockholders in the event of any voluntary or involuntary liquidation, dissolution or winding up of theCompany or upon occurrence of a deemed liquidation event. 163 Table of ContentsShares reserved for future issuance As of December 31, 2015 2014 2013 Shares reserved for redeemable convertible preferred stockoutstanding 24,929,709 8,176,900 1,253,843 Shares reserved for future issuances of redeemable convertiblepreferred stock warrants 23,076 23,076 — Shares reserved for outstanding stock options awards under the2013 Stock Incentive Plan, as amended 1,674,047 20,191 — Remaining shares reserved, but unissued, for future awards underthe 2013 Stock Incentive Plan, as amended 2,848,630 636,444 806,443 29,475,462 8,856,611 2,060,286 12. Stock‑based compensation 2013 Stock Incentive Plan In September 2013, the board of directors adopted the 2013 Stock Incentive Plan, as amended (the “Plan”), whichprovides for the grant of incentive stock options and nonqualified stock options or other awards including restricted stockawards, unrestricted stock awards, and restricted stock units to the Company’s employees, officers, directors, advisors, andconsultants for the purchase of up to 1,057,692 shares of the Company’s common stock. In June 2014, the Plan was amendedto increase the number of shares reserved thereunder by 1,365,384 shares. In April 2015, the Plan was amended to increasethe number of shares reserved thereunder by 153,846 shares. In July 2015, the Plan was amended to increase the number ofshares reserved thereunder by 3,740,847 shares. The terms of stock awards agreements, including vesting requirements, are determined by the board of directors andare subject to the provisions of the Plan. The stock options granted to employees generally vest over a four‑year period andexpire ten years from the date of grant. Certain awards contain performance based vesting criteria. There has only been onesuch award to date. Certain options provide for accelerated vesting in the event of a change in control, as defined. Awardsgranted to non‑employee consultants generally vest monthly over a period of one to four years. The Company granted a total of 251,249 and 1,439,888 shares of restricted stock to employees and consultantsduring the period ended December 31, 2013 and the year ended December 31, 2014, respectively, at an issuance price of$0.03 per share. During the years ended December 31, 2015 and 2014 the Company granted options to purchase 1,705,584and 95,495 shares of common stock, respectively, to employees and consultants. As of December 31 2015 and 2014, therewere 2,848,630 shares and 636,444 shares available for future issuance under the 2013 Plan, respectively. Founder Awards In September 2013, the Company issued 2,403,845 shares of restricted stock to its non‑employee founders forservices rendered. The shares vested 25% upon the first issuance of shares of Series A Preferred Stock and then 1.5625% amonth through the fourth anniversary of the vesting commencement date. These shares of restricted stock are subject torepurchase rights. Accordingly, the Company has recorded the proceeds from the issuance of restricted stock as a liability inits consolidated balance sheets. The restricted stock liability is reclassified into stockholders’ (deficit) equity as the restrictedstock vests. In the event that a founder is no longer in the Company’s service (whether as a consultant, employee, director, oradvisor) prior to the fourth anniversary of the vesting commencement date, the Company has the right to repurchase theunvested shares at $0.0003 per share. In June 2014, one founder ceased to be in the Company’s service and the Companyrepurchased 285,457 shares of unvested restricted stock from the founder for $74. Upon a change in control, all unvestedfounder shares will be released from the Company’s repurchase options. Stock‑based compensation expense associated with these awards is recognized as the awards vest. Unvested awardsare remeasured at each reporting period end to reflect the current fair value of such awards on a straight‑line basis.164 Table of Contents Licensor Awards In August 2014, the Company entered into an agreement to license certain patent rights owned or co‑owned byMGH (see Note 8). Consideration for the granting of the license included, amongst other payments, the issuance of shares ofthe Company’s common stock equal to 0.5% of the Company’s outstanding stock on a fully diluted basis and the futureissuance of shares of common stock to maintain MGH’s ownership following the third tranche of the Series A Preferred Stockfinancing (e.g., anti‑dilution protection obligation). In 2014, the Company issued to MGH 66,848 shares of its common stockwhich was determined to have a fair value of $0.65 per share. In 2015, the Company issued to MGH 34,894 shares of itscommon stock which was determined to have a fair value of $5.91 per share. The Company recorded expense of $43,000during year ended December 31, 2014 which was recorded as research and development expense in the accompanyingconsolidated statement of operations and comprehensive loss. In October 2014, the Company entered into an agreement to license certain patent rights owned or co‑owned by, oramong, the Institutions. Consideration for the granting of the license included, amongst other payments, the issuance ofshares of the Company’s common stock equal to an aggregate of 4.2% of the Company’s outstanding stock on a fully dilutedbasis and the future issuance of shares of common stock to maintain the Institutions ownership following the third tranche ofthe Series A Preferred Stock financing (e.g., anti‑dilution protection obligation). In 2014, the Company issued to theInstitutions an aggregate of 561,531 shares of its common stock which was determined to have a fair value of $0.65 per share.During the year ended December 31, 2015, the Company issued to the Institutions an aggregate of 293,076 shares of itscommon stock which was determined to have a fair value of $5.91 per share. The Company recorded expense of $0.4 millionfor the year ended December 31, 2014 which was recorded as research and development expense in the accompanyingconsolidated statement of operations and comprehensive loss. The Company concluded that the anti‑dilution obligation in both agreements represents a liability under ASCTopic 480, Distinguishing Liabilities from Equity, because the anti‑dilution obligation meets the definition of a freestandingfinancial instrument as the obligation was legally detachable and separately exercisable from the original issuance ofcommon stock, and it represented a conditional obligation to issue a variable number of shares that the monetary value of theobligation is based on something other than the fair value of the equity shares. As such the liability was recorded at its grantdate fair value of $322,000 with the initial fair value of the common stock recorded as research and development expense in2014. The liability was re‑measured at each subsequent balance sheet date through and including the date immediatelybefore the June 2015 settlement of the obligation. The changes to the fair value of the liability were recorded to otherexpense in the accompanying consolidated statement of operations. The Company recorded other expense of $5,000 duringthe year ended December 31, 2014 and $1.6 million during the year ended December 31, 2015 related to the remeasurementof the anti‑dilution liability. In June 2015, upon the closing of the final tranche of the Series A Preferred Stock financing, theCompany issued an aggregate of 327,970 shares of common stock to the Institutions and MGH to settle the anti‑dilutionobligations, and the fair value of the liability of $1.9 million was reclassified to equity. Stock‑based compensation expense Total compensation cost recognized for all stock‑based compensation awards in the consolidated statements ofoperations and comprehensive loss was as follows (in thousands): Period from September 3, 2013 Year Ended (Inception) to December 31, December 31, 2015 2014 2013 Research and development $3,015 $55 $20 General and administrative 498 — — Total stock-compensation expense $3,513 $55 $20 165 Table of ContentsRestricted Stock From time to time, upon approval by the Board of Directors, certain employees and advisors have been grantedrestricted shares of Common Stock. These shares of restricted stock are subject to repurchase rights. Accordingly, theCompany has recorded the proceeds from the issuance of restricted stock as a liability in the consolidated balance sheetsincluded as a component of accrued expenses or other long term liabilities based on the scheduled vesting dates. Therestricted stock liability is reclassified into stockholders’ (deficit) equity as the restricted stock vests. A summary of the statusof and changes in unvested restricted stock as of December 31, 2014 and 2015 is as follows: Weighted Average Grant Date Fair Value Shares Per Share Unvested Restricted Common Stock as of December 31, 2014 2,574,735 $0.0189 Issued — Vested (977,882) $0.0190 Unvested Restricted Common Stock as of December 31, 2015 1,596,853 $0.0188 The expense related to restricted stock awards granted to employees and non‑employees was $0 and $2.3 million,respectively, for the year ended December 31, 2015. The expense related to restricted stock awards granted to employees andnon‑employees was $0 and $48,000 respectively for the year ended December 31, 2014.The expense related to restrictedstock awards granted to non‑employees was $20,000 for the period ended December 31, 2013. As of December 31, 2015, the Company had no unrecognized stock‑based compensation expense related to itsemployee unvested restricted stock awards. As of December 31, 2015, the Company had unrecognized stock‑basedcompensation expense related to its non‑employee unvested restricted stock awards of $9.1 million which is expected to berecognized over the remaining weighted average vesting period of 1.6 years. The fair value of employee restricted stock awards vested during the years ended December 31, 2015 and 2014,based on estimated fair values of the stock underlying the restricted stock awards on the day of vesting, was $4.1 million and$15,000, respectively. The fair value of non‑employee restricted stock awards vested during the years ended December 31,2015 and 2014, based on estimated fair values of the stock underlying the restricted stock awards on the day of vesting,was $1.9 million and $48,000, respectively. Stock Options The Company’s stock option agreements allow for the exercise of unvested awards. During 2014, options topurchase 75,304 shares of common stock for $0.03 per share were exercised prior to their vesting. The unvested shares aresubject to repurchase by the Company if the employees ceases to provide service to the Company, with or without cause. Assuch, the Company does not treat unvested options exercised as a substantive exercise. The Company has recorded theproceeds from the exercise of unvested stock options as a liability in the consolidated balance sheets as a component ofaccrued expenses or other long term liabilities based on the scheduled vesting dates. The liability for unvested commonstock subject to repurchase is reclassified into stockholders’ (deficit) equity as the shares vest. A summary of the status of and changes in stock options as of December 31, 2014 and 2015 is as follows. The tablebelow reflects unvested stock options as exercised on the dates that the shares are no longer subject to repurchase.166 Table of ContentsThe Company had 75,304 and 39,338 shares of unvested common stock at December 31, 2014 and December 31, 2015related to the exercise of unvested stock options. Weighted Average Remaining Aggregate Intrinsic Shares Exercise Price Contractual Life Value (in thousands) Outstanding at December 31, 2014 95,495 $0.03 9.3 $59 Granted 1,705,584 $6.44 Exercised (64,617) $0.11 Cancelled (23,077) 7.25 Outstanding at December 31, 2015 1,713,385 $6.31 9.6 $15,580 Vested and expected to vest at December 31, 2015 1,685,525 $6.31 9.6 $15,327 Exercisable at December 31, 2015 51,337 $4.55 9.4 $557 Using the Black‑Scholes option pricing model, the weighted average fair value of options granted to employees anddirectors during the years ended December 31, 2015 and 2014 was $5.91 and $0.03, respectively. The expense related tooptions granted to employees was $0.7 million and $0, for the years ended December 31, 2015 and 2014, respectively. Therewere no stock options granted during the period from September 3, 2013 to December 31, 2013. The fair value of each option issued to employees and directors was estimated at the date of grant using theBlack‑Scholes option pricing model with the following weighted‑average assumptions: Year Ended December 31, 2015 2014 Risk free interest rate 1.7% 1.9%Expected dividend yield — — Expected term (in years) 6.25 6.25 Expected volatility 78.8% 87.6% The fair value of each option issued to non‑employees was estimated at the date of grant using the Black‑Scholesoption pricing model with the following weighted‑average assumptions: Year Ended December 31, 2015 2014 Risk free interest rate 2.2% 1.5%Expected dividend yield — — Expected term (in years) 10.0 9.5 Expected volatility 80.0% 80.5% As of December 31, 2015, the Company had unrecognized stock‑based compensation expense related to itsemployee stock options of $6.6 million which the Company expects to recognize over the remaining weighted averagevesting period of 3.5 years. 167 Table of Contents13. 401(k) Savings Plan The Company has a defined‑contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k)Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allowsparticipants to defer a portion of their annual compensation on a pretax basis. As currently established, the Company is notrequired to make and to date has not made any contributions to the 401(k) Plan. 14. Income taxes A reconciliation of the income tax expense computed using the federal statutory income tax rate to the Company’seffective income tax rate is as follows: Year Ended December 31, 2015 2014 Income tax computed at federal statutory tax rate 34.0% 34.0%State taxes, net of federal benefit 2.5% 4.9%General business credit carryovers 0.8% 1.3%Non-deductible expenses (17.9)% (2.5)%Change in valuation allowance (19.4)% (37.7)% —% —% The principal components of the Company’s deferred tax assets and liabilities consist of the following atDecember 31, 2015 and 2014 (in thousands): As of December 31, 2015 2014 Deferred tax assets: Net operating loss carryforwards $11,466 $3,234 Tax credit carryforwards 730 186 Accrued expenses 1,652 1,975 Capitalized patent costs 5,985 489 Other 242 2 Total deferred tax assets 20,075 5,886 Less valuation allowance (19,938) (5,845) Net deferred tax assets 137 41 Deferred tax liabilities—depreciation and amortization (137) (41) Net deferred taxes $ — $ — The Company has incurred net operating losses (“NOL”) since inception. At December 31, 2015 and 2014, theCompany had federal and state net operating loss carryforwards of $58.3 million (which include $0.1 million of NOLcarryforwards from stock-based compensation) and $16.4 million (which include no NOL carryforwards from stock-basedcompensation), respectively, which expire beginning in 2033. As of December 31, 2015 and 2014, the Company had federaland state research and development tax credits carryforwards of $0.8 million and $0.2 million, respectively, which expirebeginning in 2028. The Company has generated NOL carryforwards from stock-based compensation deductions in excess ofexpenses recognized for financial reporting purposes (“excess tax benefits”). Excess tax benefits are realized when theyreduce taxes payable, as determined using a “with and without” method, and are credited to additional paid-in capital ratherthan as a reduction of the income tax provision. Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the NOL and tax creditcarryforward are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOLand tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes168 Table of Contentsin the ownership interest of significant shareholders over a three‑year period in excess of 50%, as defined under Sections 382and 383 of the Code, respectively, as well as other similar state provisions. The Company has not performed a fullcomprehensive Section 382 study to determine any potential loss limitation in the United States or a Section 383 study todetermine the appropriate amount of tax credit carryforward. Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred taxassets, which principally comprise NOL carryforwards and research and development credit carryforwards. Management hasdetermined that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred taxassets, and as a result, a valuation allowance of $19.9 million and $5.8 million has been established at December 31, 2015and 2014, respectively. The change in the valuation allowance of $14.1 million for the year ended December 31, 2015 wasprimary due to additional operating losses and capitalized patent costs. The Company applies ASC 740 related to accounting for uncertainty in income taxes. The Company’s reservesrelated to income taxes are based on a determination of whether, and how much of, a tax benefit take by the Company in itstax filings or positions is more likely than not to be realized following resolution of any potential contingencies presentrelated to the tax benefit. At December 31, 2015 and 2014, the Company had no unrecognized tax benefits. Interest andpenalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanyingstatements of operations The Company has not as yet conducted a study of its research and development credit carry forwards. This studymay result in an adjustment to the Company’s research and development credit carryforwards; however, until a study iscompleted and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuationallowance has been provided against the Company’s research and development credits, and if an adjustment is required, thisadjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidatedbalance sheets or statements of operations if an adjustment were required. The Company files income tax returns in the U.S. federal tax jurisdiction and the Massachusetts state jurisdiction.Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal,state and local income tax authorities for all tax years in which a loss carryforward is available. The Company did not haveany international operations as of December 31, 2015. There are no federal or state audits in process. During November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes.This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. Thestandard is effective for public companies for fiscal years beginning after December 31, 2016, including interim periodswithin that reporting period. Early adoption is permitted for any interim and annual financial statements that have not yetbeen issued. The Company early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of thisASU resulted in a reclassification of the Company’s net current deferred tax asset to the net non-current deferred tax asset inthe Company’s Consolidated Balance Sheet as of December 31, 2015. No prior periods were retrospectively adjusted. 15. Related‑party transactions During the year ended December 31, 2015, the Company paid one of its investors an aggregate of $0.1 million inprofessional fees. In 2014, the Company paid one of its investors an aggregate of $0.2 million in professional fees. In 2013,the Company paid one of its investors $18,000 for rent of a facility, two of its investors for an aggregate of $0.3 million inprofessional fees, and $6,000 for other expenses. The rental agreement terminated as of December 31, 2013. 169 Table of Contents16. Selected Quarterly Financial Data (unaudited) The following table contains selected quarterly financial information from 2015 and 2014. The Company believesthat the following information reflects all normal recurring adjustments necessary for a fair statement of the information forthe periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Three months ended March 31,2015 June 30, 2015 September 30,2015 December 31,2015 (in thousands, except per share data) Total revenue$ — $167 $670 $792 Total operating expenses 5,161 10,563 8,052 13,165 Total other expense, net (130) (37,175) (23) (260) Net loss$(5,291) $(47,571) $(7,405) $(12,633) Net loss applicable to common stockholders$(5,386) $(47,667) $(7,509) $(12,732) Net loss per share applicable to commonstockholders — basic and diluted$(2.75) $(21.45) $(2.57) $(4.05) Three months ended March 31,2014 June 30, 2014 September 30,2014 December 31,2014 (in thousands, except per share data) Total revenue$ — $ — $ — $ — Total operating expenses 1,887 2,513 3,135 5,188 Total other expense, net (45) (479) (215) (223) Net loss$(1,932) $(2,992) $(3,350) $(5,411) Net loss applicable to common stockholders$(1,990) $(3,059) $(3,438) $(5,507) Net loss per share applicable to commonstockholders — basic and diluted$(2.35) $(3.13) $(3.17) $(3.50) 17. Subsequent events In connection with the Company’s initial public offering: (i)The Company’s board of directors and stockholders approved an amendment to the Company’s certificate ofincorporation. This amendment became effective on January 15, 2016. Pursuant to this amendment: §upon the closing of a firm commitment underwritten public offering in which the aggregate proceedsraised in the offering equal or exceed $50 million, the Company’s Preferred Stock will beautomatically converted into common stock at the applicable conversion price; §a one‑for‑2.6 reverse stock split of the Company’s common stock was effected; and §the authorized number of shares of common stock was increased to 110,000,000. 170 Table of ContentsAll share and per share amounts in the consolidated financial statements and notes thereto have beenretroactively adjusted for all periods presented to give effect to the reverse stock split, includingreclassifying an amount equal to the reduction in par value of common stock to additional paid‑in capital. (ii)The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentiveplan, or the 2015 Plan, which became effective immediately prior to the effectiveness of the registrationstatement on Form S‑1 related to the Company’s initial public offering. The 2015 Plan provides for the grant ofincentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, stockappreciation rights and other stock‑based awards, and 1,461,538 additional shares of common stock are reservedunder the 2015 Plan. The Company’s employees, officers, directors and consultants and advisors are eligible toreceive awards under the 2015 Plan. (iii)The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stockpurchase plan, which became effective upon the closing of the Company’s initial public offering. An additional384,615 shares of common stock became available for future issuance under this plan. (iv)On February 8, 2016, the Company filed a restated certificate of incorporation with the Secretary of State of theState of Delaware. The restated certificate amends and restates the Company’s certificate of incorporation in itsentirety to, among other things: §increase the authorized number of shares of common stock to 195,000,000 shares; §eliminate all references to the previously existing series of preferred stock; and §authorize 5,000,000 shares of undesignated preferred stock that may be issued from time to time by theCompany’s board of directors in one or more series. Relocation of corporate headquarters On February 12, 2016, the Company entered into a lease agreement for office and laboratory space located inCambridge, Massachusetts. The term of the lease will begin on September 1, 2016, unless the Company earlier occupies thepremises, the renovations are completed later than September 1, 2016, or certain other events specified in the lease agreementoccur. Under the terms of the lease, starting on the commencement date, the Company will lease approximately 59,783square feet at the premises at $65.00 per square foot per year in base rent, which base rent is subject to scheduled annualincreases, plus certain operating expenses and taxes, and an additional rent of approximately $0.926 per square foot per yearrelated to certain tenant improvements to the premises requested by the Company. The lease will continue until the end ofthe 84 th full calendar month following the first day of the first full month immediately following the commencementdate. The Company has the option to extend the lease for an additional five-year term. In connection with the lease and as a security deposit, the Company deposited with the landlord a letter of creditin the amount of approximately $1.6 million. The lease contains certain events of default, including failure to pay rent or other payments when due, failure tomaintain insurance, abandonment of the premises, improper transfer of the Company’s interest in the lease or the premises,and certain events of insolvency. In the event of a default by the Company, the landlord may, subject to certain limitations,terminate the lease and recover from the Company, as and for liquidated damages, the sum of (a) base rent, additional rentand other amounts payable by the Company under the lease then due or accrued and unpaid, (b) the amount equal to theaggregate of all base rent and additional rent which would have been payable if the lease had not been terminated prior to theend of the term of the lease, discounted to its then-present value, and (c) other damages and expenses sustained by thelandlord, less (i) the net proceeds of any re-letting actually received by the landlord and (ii) the amount of damages theCompany proves could have been avoided had the landlord taken reasonable steps to mitigate its damages.171 Table of ContentsITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. ITEM 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures as of December 31, 2015. The term “disclosure controls andprocedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act,means controls and other procedures of a company that are designed to ensure that information required to be disclosed by acompany in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported,within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed to ensure that information required to be disclosedby a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to thecompany’s management, including its principal executive and principal financial officers, as appropriate to allow timelydecisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving their objectives and our management necessarilyapplies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluationof our disclosure controls and procedures as of December 31, 2015, our Chief Executive Officer and Chief Financial Officerconcluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal controlover financial reporting or an attestation report of our registered public accounting firm due to a transition period establishedby rules of the SEC for newly public companies. Changes in Internal Control over Financial Reporting In connection with the preparation of the consolidated financial statements included in this Annual Report on Form10-K, we concluded that the material weakness that was previously disclosed in our registration statement on Form S-1 (FileNo. 333-208856), or the Registration Statement, had been remediated as of December 31, 2015. See “Risk Factors” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls andProcedures” contained in the Registration Statement for disclosure of information about such material weakness. Wedetermined that this material weakness had been remediated as of December 31, 2015 as a result of the corrective measureswe described in the Registration Statement as having been completed. There were no other changes in our internal controlover financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting. Item 9B. Other Information. None.172 Table of ContentsPART III Item 10. Directors, Executive Officers and Corporate Governance. Executive Officers and Directors The following table sets forth the name, age, and position of each of our executive officers and directors as of March18, 2016. Name Age PositionExecutive Officers Katrine S. Bosley 47 President and Chief Executive Officer, DirectorAndrew A. F. Hack, M.D., Ph.D. 42 Chief Financial OfficerAlexandra Glucksmann, Ph.D. 57 Chief Operating OfficerNon‑Employee Directors Kevin Bitterman, Ph.D. 39 DirectorAlexis Borisy 44 DirectorDouglas G. Cole, M.D. 55 DirectorJohn D. Mendlein, Ph.D. 56 DirectorBoris Nikolic, M.D. 45 Director (1)Member of audit committee (2)Member of compensation committee (3)Member of nominating and corporate governance committee Executive Officers Katrine S. Bosley has served as our President and Chief Executive Officer and a member of our board of directorssince June 2014. Prior to joining Editas, Ms. Bosley was the Entrepreneur‑in‑Residence at The Broad Institute fromSeptember 2013 to May 2014. She served as Chief Executive Officer of Avila Therapeutics Inc., or Avila, a biotechnologycompany, from May 2009 to March 2012, when Avila was acquired by Celgene Corporation, or Celgene, a publicbiopharmaceutical company. Ms. Bosley served as President, Celgene Avilomics Research at Celgene from March 2012 toMay 2012. Before Avila, she was Vice President, Strategic Operations at Adnexus, a Bristol‑Myers Squibb Company and wasVice President, Business Development at Adnexus Therapeutics Inc., or Adnexus, a biotechnology company, before that. Shejoined Adnexus from Biogen Idec, Inc., a public biotechnology company, where she held roles in business development,commercial operations, and portfolio strategy in the United States and Europe. Earlier, she was part of the healthcare team atthe venture firm Highland Capital Partners. Ms. Bosley currently serves as chairman of the board of directors of GenoceaBiosciences, Inc., a public biotechnology company, and is a director of Galapagos NV, a public biotechnology company, andof Scholar Rock, Inc., a private biotechnology company. She also serves on the board of directors of the BiotechnologyIndustry Organization, a not‑for‑profit organization, and is a review committee member of the Wellcome Trust. Ms. Bosleygraduated from Cornell University with a B.A. in biological sciences. We believe that Ms. Bosley’s operational and historicalexperience with Editas gained from serving as our President and Chief Executive Officer and member of our board ofdirectors, combined with her prior experiences in creating strategic and business development value and her network in thebiopharmaceutical industry, qualifies her to serve as a member of our board of directors. Andrew A. F. Hack, M.D., Ph.D., has served as our Chief Financial Officer since July 2015. Prior to joining Editas,from May 2011 to June 2015, Dr. Hack was a portfolio manager at Millennium Management LLC, an institutional assetmanager, where he ran a healthcare fund focused on biotechnology, pharmaceutical, and medical device companies. Beforejoining Millennium Management, Dr. Hack was a healthcare analyst at HealthCor Management, L.P., a registered investmentadvisor, from December 2008 to May 2011. Prior to HealthCor, Dr. Hack173 (1)(2)(1)(2)(3)(2)(3)(1)(3)Table of Contentsserved as a healthcare analyst for hedge fund Carlyle‑Blue Wave Partners and as principal of the MPM BioEquities Fund, ahedge fund that was affiliated with MPM Capital. Dr. Hack began his investment career covering the biotechnology sector atinvestment banks Banc of America Securities LLC and Rodman & Renshaw, LLC. Dr. Hack co‑founded Reify Corporation, alife science tools and drug discovery company. Dr. Hack received his B.A. in biology with special honors from the Universityof Chicago, where he also received his M.D. and Ph.D. Alexandra Glucksmann, Ph.D., has served as our Chief Operating Officer since April 2015. From November 2013 toApril 2015, she served as our interim Chief Operating Officer. Prior to joining Editas, she served as Senior Vice President ofResearch and Business Operations at Cerulean Pharma Inc., then a private pharmaceutical company, from 2006 until June2013. Prior to joining Cerulean, Dr. Glucksmann spent 13 years at Millennium Pharmaceuticals, Inc., a pharmaceuticalcompany, where she held a series of positions. She is the chairperson of the board of directors of Women Entrepreneurs inScience and Technology, or WEST. Dr. Glucksmann was a post‑doctoral fellow at the Massachusetts Institute of Technologyand holds a Ph.D. with honors from the University of Chicago and a B.S. in molecular biology from the University ofWisconsin. Non‑Employee Directors Kevin Bitterman, Ph.D., has served as a member of our board of directors since June 2014. From November 2013until June 2014, Dr. Bitterman served as our President. Dr. Bitterman currently serves as a partner at venture firm PolarisPartners, or Polaris, where he has been employed since 2004 and where he focuses on investments in life sciences companies.Dr. Bitterman is a cofounder of Sirtris Pharmaceuticals, Inc., which was acquired by GlaxoSmithKline plc., and was thefounding CEO at Visterra Inc. and Morphic Rock, LLC. Dr. Bitterman serves as a director of Genocea Biosciences, Inc., apublic biopharmaceutical company, and of Direct Vet Marketing, Inc., Epacing Inc., Kala Pharmaceuticals, Inc., KSQTherapeutics, Inc., Morphic Rock Therapeutic Inc., Neuronetics, Inc., and TARIS Biomedical, Inc., each a private company.Dr. Bitterman received a Ph.D. in genetics from Harvard Medical School and a B.A. in biological sciences from RutgersCollege. We believe that Dr. Bitterman’s extensive experience investing in, guiding, and leading start‑up and early phasecompanies, as well as his experience as a director of other companies, qualifies him to serve as a member of our board ofdirectors. Alexis Borisy has served as a member of our board of directors since November 2013. Mr. Borisy joined Third RockVentures, a life sciences venture capital firm focused on the formation, development and strategy of new companies, in 2009,and has been a partner since 2010. He co‑founded Foundation Medicine, Inc., a public molecular information company, in2009 and served as its interim Chief Executive Officer through May 2011; he currently serves as chairman. Mr. Borisy alsoco‑founded Blueprint Medicines Corporation, a public oncology company, in 2010, served as its interim chief executiveofficer from 2013 to 2014, and he currently serves on its board of directors. In addition, since 2011, Mr. Borisy has served aschairman of Warp Drive Bio, LLC, a private life sciences company focusing on genomics, where he served as chief executiveofficer from 2011 to July 2013. Mr. Borisy also serves on the board of directors of Magneta Therapeutics, a private lifesciences company, Relay Therapeutics, a private life sciences company, and Revolution Medicines, Inc., a private companyfocused on the discovery and development of innovative drugs derived from natural compounds. From 2007 through 2012,Mr. Borisy served as chairman of FORMA Therapeutics, Inc., a private life science company focused on targeting cancers fortreatment. In 2000, Mr. Borisy founded CombinatoRx, Inc. (now EPIRUS Biopharmaceuticals, Inc.), a public drugdevelopment company, and served as its chief executive officer and on its board of directors from 2000 to 2009. Mr. Borisyholds a B.S. in chemistry from the University of Chicago and an A.M. from Harvard University. We believe Mr. Borisy’sexperience working with and serving on the boards of directors of life sciences companies and his experience working in theventure capital industry qualifies him to serve on our board of directors. Douglas G. Cole, M.D., has served as a member of our board of directors since November 2013. Dr. Cole is amanaging partner of venture firm Flagship Ventures, where he has focused on life science investments since 2001. Hecurrently serves on the board of directors of Agios Pharmaceuticals, Inc., a public biopharmaceutical company. He also serveson the boards of directors of several private biopharmaceutical and diagnostics companies, including DenaliTherapeutics, Inc., Ensemble Therapeutics Corporation, KSQ Therapeutics, Inc., Quanterix Corporation, and TorqueTherapeutics, Inc. In the past five years, Dr. Cole has served on the boards of the following public biopharmaceuticalcompanies: Concert Pharmaceuticals, Inc., Receptos, Inc., which was acquired by Celgene, Inc., and Tetraphase174 Table of ContentsPharmaceuticals, Inc. and of the following private biopharmaceutical companies: Avedro, Inc., Moderna Therapeutics,Resolvyx Pharmaceuticals, Inc., Selecta Biosciences, Inc., Seventh Sense Biosystems, Inc., and Syros Pharmaceuticals Inc.Dr. Cole holds a B.A. in English from Dartmouth College and an M.D. from the University of Pennsylvania School ofMedicine. We believe Dr. Cole’s qualifications to sit on our board of directors include his substantial experience as aninvestor in emerging biopharmaceutical and life sciences companies, as well as his experience serving on the board ofdirectors for several biopharmaceutical companies. John D. Mendlein, Ph.D., joined our board of directors in January 2016. Since July 2010, he has served as ExecutiveChairman of aTyr Pharma, Inc., or aTyr, a public biopharmaceutical company, and since September 2011, he has also servedas aTyr’s Chief Executive Officer. Dr. Mendlein is Vice Chairman of the Board of Fate Therapeutics, Inc., a publicbiopharmaceutical company, and also serves on the boards of directors of Moderna Therapeutics, Inc. and PronutriaBiosciences, Inc., both private biopharmaceutical companies, and BIO (Biotechnology Industry Organization) emergingcompanies board. From 2005 to 2008, Dr. Mendlein served as the Chief Executive Officer of Adnexus Therapeutics, Inc., aprivate biopharmaceutical company, which was purchased by Bristol‑Myers Squibb Company in 2008. Dr. Mendlein alsoserved on the board of directors of Monogram Biosciences, Inc., then a public HIV and oncology diagnostic company thatwas acquired by Laboratory Corporation of America Holdings in 2009. Before that, he served as Chairman and ChiefExecutive Officer of Affinium Pharmaceuticals, Ltd., a private specialty pharmaceutical company (acquired by DebiopharmGroup), from 2000 to 2005, and as a director, General Counsel, and Chief Knowledge Officer at Aurora BioscienceCorporation, then a public drug discovery company (acquired by Vertex Pharmaceuticals), from August 1996 to September2001. Dr. Mendlein holds a Ph.D. in physiology and biophysics from the University of California, Los Angeles, a J.D. fromthe University of California, Hastings College of the Law, and a B.S. in biology from the University of Miami. We believethat Dr. Mendlein’s experience working as an executive for, and serving on the boards of directors of, numerous public andprivate life sciences companies qualifies him to serve as a member of our board of directors. Boris Nikolic, M.D., has served as a member of our board of directors since August 2015. Dr. Nikolic has served asmanaging partner of investment fund bng0, LLC since February 2015 and has served as Managing Partner of investment fundBiomatics Capital since April 2014. From April 2009 to April 2014, he served as Chief Advisor for Science and Technologyto Bill Gates at bgC3, the private office of Bill Gates. From 2002 to 2010, Dr. Nikolic was an assistant professor at HarvardMedical School. Dr. Nikolic earned his M.D. from the Zagreb Medical School in Zagreb, Croatia. He has currently serves onthe board of directors of BlueTalon, Inc. and Digisight Technologies, Inc., both private software companies, Omniome, Inc., aprivate biotechnology company, and he previously served on the board of directors of Schrödinger, LLC, a private chemicalsimulation software company. We believe Dr. Nikolic’s qualifications to sit on our board of directors include his substantialexperience as an investor in life sciences companies, as well as his medical experience. Family Relationships There are no family relationships among any of our directors or executive officers. Audit Committee The members of our audit committee are Alexis Borisy, Kevin Bitterman, Ph.D., and Boris Nikolic, M.D. Mr. Borisyis the chair of our audit committee. Our board of directors has determined that each of Mr. Borisy and Dr. Nikolic isindependent within the meaning of Rule 10A‑3 under the Exchange Act. Our board of directors has determined that we donot have an “audit committee financial expert” as defined by applicable SEC rules serving on our audit committee. Ourboard of directors believes that, given the size and stage of development of our company, an audit committee financial expertis not necessary at this time because the collective financial and business expertise of the members of the audit committee issufficient to satisfy the functions of the audit committee under the terms of the audit committee charter. In making thisdetermination, our board of directors has considered the formal education and nature and scope of our audit committeemembers’ previous experience, coupled with past and present service on various audit committees. 175 Table of ContentsOur audit committee assists our board of directors in its oversight of our accounting and financial reporting processand the audits of our financial statements. Our audit committee's responsibilities include: ·appointing, approving the compensation of, and assessing the independence of the our registered publicaccounting firm; ·overseeing the work of our independent registered public accounting firm, including through the receipt andconsideration of reports from such firm; ·reviewing and discussing with management and our independent registered public accounting firm our annualand quarterly financial statements and related disclosures; ·monitoring our internal control over financial reporting, disclosure controls and procedures, and code ofbusiness conduct and ethics; ·overseeing our internal audit function, if any; ·discussing our risk management policies; ·establishing procedures for the receipt and retention of accounting related complaints and concerns; ·meeting independently with our internal auditing staff, our independent registered public accounting firm,and management; ·reviewing and approving or ratifying any related person transactions; and ·preparing the audit committee report required by SEC rules. We expect to satisfy the member independence requirements for the audit committee prior to the end of thetransition period provided under current NASDAQ Listing Rules and SEC rules and regulations for companies that haverecently completed their initial public offering. Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10%of our common stock to file reports of holdings and transactions in our common stock and other securities of the Companywith the Securities Exchange Commission. Our directors, executive officers and beneficial owners of more than 10% of ourcommon stock did not become subject to such Section 16(a) reporting requirements until February 2, 2016, after thecompletion of our fiscal year ended December 31, 2015. Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers, and employees,including our principal executive officer, principal financial officer, principal accounting officer or controller, or personsperforming similar functions. A copy of the code is posted on the Corporate Governance section of our website, which islocated at www.editasmedicine.com. If we make any substantive amendments to, or grant any waivers from, the code ofbusiness conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on ourwebsite or in a current report on Form 8-K. Item 11. Executive Compensation. This section discusses the material elements of our executive compensation policies for our “named executiveofficers” and the most important factors relevant to an analysis of these policies. It provides qualitative information regardingthe manner and context in which compensation is awarded to and earned by our executive officers named in176 Table of Contentsthe “Summary Compensation Table” below, or our “named executive officers,” and is intended to place in perspective thedata presented in the following tables and the corresponding narrative. 2015 Summary Compensation Table The following table sets forth information regarding compensation earned by our President and Chief ExecutiveOfficer and our Chief Operating Officer during the year ended December 31, 2014 and by our President and Chief ExecutiveOfficer, our Chief Operating Officer, and our Chief Financial Officer during the year ended December 31, 2015. We refer tothese individuals as our named executive officers. Non-Equity Stock Option Incentive Plan Salary Awards Awards Compensation Total Name and Principal Position ($) ($) ($) ($) ($) Katrine S. Bosley 2015 386,200 — — 121,653 507,853 President and Chief Executive Officer 2014 205,833 35,437 — 51,300 292,570 Alexandra Glucksmann, Ph.D. 2015 322,000 — 1,019,143 111,573 1,452,716 Chief Operating Officer 2014 310,000 — — 77,500 387,500 Andrew A. F. Hack, M.D., Ph.D. 2015 157,500 — 1,432,624 54,574 1,644,698 Chief Financial Officer (1)Reflects the aggregate grant date fair value of stock and option awards granted during the year in questioncalculated in accordance with the provisions of Financial Accounting Standards Board Accounting StandardCodification Topic 718, Compensation—Stock Compensation. See Note 12 to our consolidated financial statementsappearing elsewhere in this Annual Report on Form 10-K regarding assumptions underlying the valuation of equityawards. (2)2014 amounts represent a cash bonus award paid to our named executive officers under our bonus program. 2015amounts represent a cash bonus award earned by our named executive officers during 2015 and paid to each of themin 2016. (3)Ms. Bosley’s employment with us commenced on June 16, 2014. The 2014 salary reported reflects the pro rataportion of Ms. Bosley’s annual salary of $380,000 from commencement of her employment through December 31,2014. The 2014 Non-Equity Incentive Plan Compensation reflects the pro-rated amount paid to Ms. Bosley.Ms. Bosley also serves as a member of our board of directors but does not receive any additional compensation forher service as a director. (4)Dr. Hack’s employment with us commenced on July 1, 2015. The 2015 salary reported reflects the pro rata portion ofDr. Hack’s annual salary of $315,000 from commencement of his employment through December 31, 2015. The2015 Non-Equity Incentive Plan Compensation reflects the pro-rated amount paid to Dr. Hack. Narrative Disclosure to Summary Compensation Table Base Salary. In 2014, we paid annual base salaries of $380,000 to Ms. Bosley and $310,000 to Dr. Glucksmann. In2015, we paid annual base salaries of $386,200, $322,000 and $315,000 to Ms. Bosley, Dr. Glucksmann, and Dr. Hack,respectively. Ms. Bosley’s, Dr. Glucksmann’s and Dr. Hack’s base salaries for 2016 have been increased to $450,000,$332,465 and $334,450, respectively. We use base salaries to recognize the experience, skills, knowledge, andresponsibilities required of all our employees, including our named executive officers. None of our named executive officersis currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduledincreases in base salary. Annual Bonus. Our board of directors may, in its discretion, award bonuses to our named executive officers fromtime to time. We typically establish annual bonus targets based around a set of specified corporate goals for our namedexecutive officers and conduct an annual performance review to determine the attainment of such goals. Our managementmay propose bonus awards to our board of directors primarily based on such review process. Our board of177 (1)(1)(2)(3)(4)Table of Contentsdirectors makes the final determination of the eligibility requirements for and the amount of such bonus awards. With respectto 2014, we awarded bonuses of $51,300 to Ms. Bosley and $77,500 to Dr. Glucksmann, in each case based on ourachievement of company goals. Ms. Bosley’s awarded bonus for 2014 represented a pro-rated amount due to her employmentwith us commencing during 2014. With respect to 2015, we awarded bonuses of $121,653 to Ms. Bosley, $111,573 toDr. Glucksmann and $54,574 to Dr. Hack, in each case based on our achievement of company goals. Dr. Hack’s awardedbonus for 2015 represents a pro-rated amount due to his employment with us commencing during 2015. Equity Incentives. Although we do not have a formal policy with respect to the grant of equity incentive awards toour executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provideour executives with a strong link to our long‑term performance, create an ownership culture and help to align the interests ofour executives and our stockholders. In addition, we believe that equity grants with a time‑based vesting feature promoteexecutive retention because this feature incentivizes our executive officers to remain in our employment during the vestingperiod. Accordingly our board of directors periodically reviews the equity incentive compensation of our named executiveofficers and from time to time may grant equity incentive awards to them in the form of stock options. Pursuant to her employment agreement with the company, Ms. Bosley elected to receive her initial equity award inJune 2014 in the form of 1,362,966 shares of restricted common stock. In 2015, we granted options to purchase an aggregateof 149,416 and 267,204 shares of common stock to Dr. Glucksmann and Dr. Hack, respectively. We did not make any equityawards to Dr. Glucksmann in 2014 or to Ms. Bosley in 2015. We granted Ms. Bosley an option to purchase 38,461 shares ofcommon stock upon the commencement of trading of our common stock on the NASDAQ Global Select Market, effective asof February 3, 2016. We typically grant stock option awards at the start of employment to each executive and our other employees. Todate, we have not maintained a practice of granting additional equity on an annual basis, but we have retained discretion toprovide additional targeted grants in certain circumstances. We award our stock options on the date our board of directors approves the grant. Prior to the closing of our IPO, weset the option exercise price and grant date fair value based on our per‑share estimated valuation on the date of grant.Following our IPO, we set the option exercise price equal to the closing price on The NASDAQ Global Select Market on thedate of the applicable grant. For grants in connection with initial employment, vesting begins on the initial date ofemployment. Time vested stock option grants to our executives and other employees typically vest 25% on the firstanniversary of grant or, if earlier, the initial employment date and in equal monthly installments thereafter, through the fourthanniversary of the vesting commencement date, and have a term of ten years from the grant date. Outstanding Equity Awards at 2015 Fiscal Year End The following table sets forth information regarding outstanding equity awards held by our named executiveofficers as of December 31, 2015. Option Awards Stock Awards Number of Number of Number of securities securities shares or Market value underlying underlying units of of shares or unexercised unexercised Option Option stock that units of stock options (#) options (#) exercise expiration have not that have not Name exercisable unexercisable price ($) date vested (#) vested ($)(1) Katrine S. Bosley — — — — 851,856(2) 13,629,696 Alexandra Glucksmann, Ph.D. — 38,461(3) 0.65 4/15/2025 51,540(4) 824,640 — 110,955(5) 11.21 10/29/2025 Andrew A. F. Hack, M.D., Ph.D. — 173,076(6) 3.23 7/13/2025 — 84,513(7) 6.48 9/13/2025 — 9,615(5) 11.21 10/29/2025 178 Table of Contents(1)There was no public market for our common stock at December 31, 2015. We have estimated the fair market value ofthe unvested stock awards as $16.00 per share, the initial public offering price of our common stock in our initialpublic offering. (2)1,362,966 shares of restricted common stock were awarded on June 18, 2014. 25% of the shares vested on June 16,2015, and the remainder are scheduled to vest in equal monthly installments thereafter through June 18, 2018. (3)This option was granted on April 16, 2015. 25% of the shares vested on March 9, 2016, and the remaining 75% ofthe shares are scheduled to vest in equal monthly installments thereafter until March 9, 2019. (4)117,788 shares of restricted common stock were awarded on November 4, 2013. 12.5% of the shares vested onMarch 20, 2014, and the remainder are scheduled to vest in monthly increments thereafter at a rate of 2.083% of thesize of the total award per month through September 20, 2017. (5)This option was granted on October 30, 2015. 25% of the shares are scheduled to vest on October 27, 2016, and theremaining 75% of the shares are scheduled to vest in equal monthly installments thereafter until October 27, 2019. (6)This option was granted on July 14, 2015. 25% of the shares are scheduled to vest on July 1, 2016, and theremaining 75% of the shares are scheduled to vest in equal monthly installments thereafter until July 1, 2019. (7)This option was granted on September 14, 2015. 25% of the shares are scheduled to vest on July 1, 2016, and theremaining 75% of the shares are scheduled to vest in equal monthly installments thereafter until July 1, 2019. Agreements with our Executive Officers We have entered into written employment agreements with each of our named executive officers. These agreementsset forth the terms of the named executive officer’s compensation, including his or her initial base salary, and an annual cashbonus opportunity. In addition, the agreements provide that the named executive officers are eligible to participate incompany‑sponsored benefit programs that are available generally to all of our employees. Under these agreements, each of our named executive officers is eligible to receive an annual cash bonus, asdetermined by our board of directors in its sole discretion, with a target of a specified percentage of such officer’s annual basesalary earned in such particular calendar year, which percentage shall be subject to adjustment from time to time by our boardof directors in its sole discretion. Our board of directors determines the amount of the bonus, if any, based on its assessment ofthe named executive officer’s performance and that of the company against appropriate goals established annually by ourboard of directors. The current target annual bonus percentage for each of our named executive officers is 30%. Potential Payments upon Termination or Change in Control Our severance benefits plan, which we refer to as the Severance Plan, provides severance benefits to certain of ourexecutives, including our named executive officers, and other employees designated by our board of directors or anauthorized committee thereof, if their employment is terminated by us “without cause” or, only in connection with a “changein control” of our company, they terminate employment with us for “good reason” (as each of those terms is defined in theSeverance Plan). Under the Severance Plan, if we terminate an eligible executive’s employment without cause prior to or more than12 months following the closing of a change in control of our company, the executive is entitled to (a) continue receiving hisor her base salary for a specified period (in the case of our Chief Executive Officer, other C‑level officers, and Senior VicePresidents, for 12 months, and, in the case of Vice Presidents, for six months) following the date of termination, which werefer to as the Severance Period, (b) company contributions to the cost of health care continuation179 Table of Contentsunder the Consolidated Omnibus Budget Reconciliation Act, or COBRA, for the Severance Period, and (c) the amount of anyunpaid annual bonus determined by our board of directors to be payable to the executive for any completed bonus periodwhich ended prior to the date of such executive’s termination. The Severance Plan also provides that, if, within 12 months following the closing of a change in control of ourcompany, we terminate an eligible executive’s employment without cause or such executive terminates his or heremployment with us for good reason, each of which events we refer to as a Change in Control Termination, the executive isentitled to (a) continue receiving his or her base salary for a specified period (in the case of our Chief Executive Officer, otherC‑level officers, and Senior Vice Presidents, for 12 months, and, in the case of Vice Presidents, for nine months) following thedate of termination, which we refer to as the Change in Control Severance Period, (b) company contributions to the cost ofhealth care continuation under COBRA during the Change in Control Severance Period, (c) the amount of any unpaid annualbonus determined by our board of directors to be payable to the executive for any completed bonus period which ended priorto the date of such executive’s termination, and (d) an additional single lump sum bonus payment in an amount equal to themultiple of (i) a fraction the numerator of which is the numbers of months in the Change in Control Severance Period and thedenominator of which is 12 and (ii) the eligible executive’s target annual bonus for the year of the Change in ControlTermination. In addition, in the event of a Change in Control Termination, all of the executive’s outstanding unvestedequity awards will immediately vest in full on the date of such termination. All payments and benefits provided under the Severance Plan are contingent upon the execution and effectivenessof a release of claims by the executive in our favor and continued compliance by the executive with any proprietaryinformation and inventions, nondisclosure, non‑competition, and non‑solicitation (or similar) agreement to which we and theexecutive are party. Drs. Glucksmann and Hack have acknowledged that their entitlement to severance benefits shall be governed by theterms of the Severance Plan, and the terms of their offer letters with respect to such benefits have been superseded in theirentirety by the terms of the Severance Plan. Ms. Bosley is also entitled to severance benefits pursuant to the Severance Plan.Additionally, if Ms. Bosley terminates her employment for good reason at a time that is prior to or more than 12 monthsfollowing a change in control of our company, she is entitled, pursuant to the terms of her offer letter, to (i) continuereceiving her base salary for a period of 12 months following the date of termination and (ii) company contributions to thecost of health care continuation under COBRA for 12 months. Other Agreements We have also entered into employee confidentiality, non‑solicitation, non‑competition and proprietary informationagreements with each of our named executive officers. Under these agreements, each of our named executive officers hasagreed (1) not to compete with us during his or her employment and for a period of one year after the termination of his or heremployment, (2) not to solicit our employees during his or her employment and for a period of one year after the terminationof his or her employment, (3) to protect our confidential and proprietary information, and (4) to assign to us relatedintellectual property developed during the course of his or her employment. Stock Option and Other Compensation Plans The three equity incentive plans described in this section are our 2013 Stock Incentive Plan, as amended to date, orthe 2013 plan; our 2015 Stock Incentive Plan, or the 2015 plan; and our 2015 Employee Stock Purchase Plan, or the 2015ESPP. Prior to our IPO, we granted awards to eligible participants under the 2013 plan. Following the effectiveness of theregistration statement relating to our IPO, we grant awards to eligible participants under the 2015 plan and may grant awardsunder the 2015 ESPP. 2015 Stock Incentive Plan In connection with our IPO, our board of directors and our stockholders approved the 2015 plan, which becameeffective on February 2, 2016. The 2015 plan provides for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, awards of restricted stock, restricted stock units, and other stock‑based awards. The180 Table of Contentsnumber of shares of our common stock was reserved for issuance under the 2015 plan upon its effectiveness was 4,310,168shares, which included 2,848,630 shares of common stock that remained available for grant under the 2013 plan immediatelyprior to the effectiveness of the registration statement for our initial public offering. The number of shares reserved forissuance under the 2015 plan will increase by (a) the number of shares of our common stock that are subject to outstandingawards under the 2013 plan that expire, terminate or are otherwise surrendered, cancelled, forfeited, or repurchased by us attheir original issuance price pursuant to a contractual repurchase right and (b) an annual increase, to be added the first day ofeach fiscal year, beginning with the fiscal year ending December 31, 2017 and continuing until, and including, the fiscalyear ending December 31, 2026, equal to the lowest of 2,923,076 shares of our common stock, 4% of the number of shares ofour common stock outstanding on the first day of the fiscal year and an amount determined by our board of directors. Our employees, officers, directors, consultants, and advisors are eligible to receive awards under the 2015 plan;however, incentive stock options may only be granted to our employees. We granted under the 2015 plan options topurchase an aggregate of 496,727 shares to certain of our employees and one of our non‑employee directors upon thecommencement of trading of our common stock on the NASDAQ Global Select Market. Pursuant to the terms of the 2015 plan, our board of directors (or a committee delegated by our board of directors)administers the 2015 plan and, subject to any limitations set forth in the 2015 plan, will select the recipients of awards anddetermine: ·the number of shares of common stock covered by options and the dates upon which those options becomeexercisable; ·the type of options to be granted; ·the exercise price of options, which price must be at least equal to the fair market value of our common stockon the date of grant; ·the duration of options, which may not be in excess of ten years; ·the methods of payment of the exercise price of options; and ·the number of shares of our common stock subject to and the terms of any stock appreciation rights, awards ofrestricted stock, restricted stock units, or other stock‑based awards and the terms and conditions of suchawards, including the issue price, conditions for repurchase, repurchase price, and performance conditions(though the measurement price of stock appreciation rights must be at least equal to the fair market value ofour common stock on the date of grant and the duration of such awards may not be in excess of ten years), ifany. Our board of directors may delegate authority to an executive officer to grant awards under the 2015 plan to all ofour employees, except executive officers and certain other officers provided that our board of directors fixes the terms of theawards to be granted by such executive officer, including the exercise price of such awards (or a formula for establishing suchprice), and the maximum number of shares subject to awards that such executive officer may make. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares,reclassification of shares, spin‑off, or other similar change in capitalization or event, or any dividend or distribution toholders of our common stock other than an ordinary cash dividend, we are required by the 2015 plan to make equitableadjustments (or make substitute awards, if applicable), in a manner determined by our board of directors, to: ·the number and class of securities available under the 2015 plan; ·the share counting rules under the 2015 plan; ·the number and class of securities and exercise price per share of each outstanding option;181 Table of Contents ·the share and per‑share provisions and measurement price of each outstanding stock appreciation right; ·the number of shares and the repurchase price per share subject to each outstanding restricted stock award orrestricted stock unit award; and ·the share and per‑share related provisions and purchase price, if any, of any outstanding other stock‑basedaward. Upon a reorganization event (as defined in the 2015 plan), our board of directors, may, on such terms as our board ofdirectors determines (except to the extent specifically provided otherwise in an applicable award agreement or otheragreement between the participant and us), take any one or more of the following actions pursuant to the 2015 plan, as tosome or all outstanding awards, other than restricted stock awards: ·provide that all outstanding awards will be assumed or substantially equivalent awards will be substituted bythe acquiring or succeeding corporation (or an affiliate thereof); ·upon written notice to a participant, provide that the participant’s unvested and/or unexercised options orother awards will terminate immediately prior to the consummation of the reorganization event unlessexercised by the participant; ·provide that outstanding awards will become exercisable, realizable, or deliverable, or restrictions applicableto an award will lapse, in whole or in part, prior to or upon the reorganization event; ·in the event of a reorganization event pursuant to which holders of our common stock will receive a cashpayment for each share surrendered in the reorganization event, make or provide for a cash payment to theparticipants with respect to each award held by a participant equal to (a) the number of shares of our commonstock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occursupon or immediately prior to such reorganization event) multiplied by (b) the excess, if any, of the cashpayment for each share surrendered in the reorganization event over the exercise, measurement, or purchaseprice of such award and any applicable tax withholdings, in exchange for the termination of such award; ·provide that, in connection with a liquidation or dissolution, awards convert into the right to receiveliquidation proceeds (if applicable, net of exercise, measurement, or purchase price thereof and any applicabletax withholdings); or ·any combination of the foregoing. Our board of directors is not obligated by the 2015 plan to treat all awards, all awards held by a participant, or allawards of the same type, identically. In the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock unitswill instead be settled in accordance with the terms of the applicable restricted stock unit agreement. Upon the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and otherrights of Editas with respect to each outstanding restricted stock award will continue for the benefit of the successor companyand will, unless our board of directors may otherwise determine, apply to the cash, securities, or other property into or forwhich our common stock is converted or exchanged pursuant to the reorganization event, unless our board of directorsprovides for the termination or deemed satisfaction of such repurchase or other rights under the restricted stock awardagreement or any other agreement between the participant and us. Upon the occurrence of a reorganization event involving aliquidation or dissolution, all restrictions and conditions on each outstanding restricted stock award will automatically bedeemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award or in anyother agreement between the participant and us.182 Table of Contents Our board of directors may at any time provide that any award under the 2015 plan shall become immediatelyexercisable in whole or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part, as thecase may be. No award may be granted under the 2015 plan after February 1, 2026. Our board of directors may amend, suspend, orterminate the 2015 plan at any time, except that stockholder approval will be required to comply with applicable law orstock market requirements. As of February 29, 2016, there were options to purchase 614,689 shares of our common stockoutstanding under the 2015 plan, at a weighted average exercise price of $17.04 per share, and no options to purchase sharesof our common stock have been exercised. 2013 Stock Incentive Plan The 2013 plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards,restricted stock units, stock appreciation rights, and other stock‑based awards. Our employees, officers, directors, consultants,and advisors are eligible to receive awards under the 2013 plan; however, incentive stock options may only be granted to ouremployees. Our board of directors administers the 2013 plan. The 2013 plan provides that a maximum of 6,317,769 shares of our common stock are authorized for issuance underthe plan. No awards may be granted under the 2013 plan after November 20, 2023, and our board of directors may amend,suspend, or terminate the 2013 plan at any time. Upon the occurrence of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares,reclassification of shares, spinoff, or other similar change in capitalization or event, or any dividend or distribution to holdersof our common stock other than an ordinary cash dividend, under the terms of the 2013 plan, we are required to equitablyadjust (or make substitute awards, if applicable), in the manner determined by our board of directors: ·the number and class of securities available under the 2013 plan; ·the number and class of securities and exercise price per share of each outstanding option; ·the share and per‑share provisions and the measurement price of each outstanding stock appreciation right; ·the number of shares subject to and the repurchase price per share subject to each outstanding restricted stockaward; and ·the share and per‑share‑related provisions and the purchase price, if any, of each outstanding other stock‑basedaward. Upon the occurrence of a merger or consolidation of our company with or into another entity as a result of which allof our common stock is converted into or exchanged for the right to receive cash, securities, or other property or is cancelled;any transfer or disposition of all of our common stock for cash, securities, or other property pursuant to a share exchange orother transaction; or a liquidation or dissolution of our company, our board of directors may, on such terms as our board ofdirectors determines (except to the extent specifically provided otherwise in an applicable award agreement or otheragreement between us and the plan participant), take any one or more of the following actions pursuant to the 2013 plan, asto some or all outstanding awards, other than restricted stock awards: ·provide that awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiringor succeeding corporation (or an affiliate thereof); ·upon written notice to a plan participant, provide that the participant’s unexercised awards will terminateimmediately prior to the consummation of such transaction unless exercised by the participant (to the extentthen exercisable) within a specified period;183 Table of Contents ·provide that outstanding awards shall become exercisable, realizable, or deliverable, or restrictions applicableto an award shall lapse, in whole or in part prior to or upon such transaction; ·in the event of a transaction under the terms of which holders of common stock will receive uponconsummation thereof a cash payment for each share surrendered in the transaction, make or provide for a cashpayment to a plan participant; ·provide that, in connection with a liquidation of dissolution of the company, awards shall convert into theright to receive liquidation proceeds; or ·any combination of the foregoing. Our board of directors is not obligated under the 2013 plan to treat all awards, all awards held by a participant, or allawards of the same type, identically. Upon the occurrence of any corporate transaction described above, other than our liquidation or dissolution, ourrepurchase and other rights under each outstanding restricted stock award will continue for the benefit of our successor andwill, unless our board of directors determines otherwise, apply to the cash, securities, or other property which our commonstock was converted into or exchanged for in the transaction in the same manner and to the same extent as they applied to thecommon stock subject to the restricted stock award; provided, however, that the board may provide termination or deemedsatisfaction of such repurchase or other rights under the restricted stock award agreement, either initially or by amendment.Upon our liquidation or dissolution, except to the extent specifically provided to the contrary in the restricted stock awardagreement or any other agreement between the plan participant and us, all restrictions and conditions on all restricted stockawards then outstanding will automatically be deemed terminated or satisfied. Our board of directors, in its sole discretion, may accelerate the exercisability of any option or time at which anyrestrictions shall lapse or be removed from any restricted stock award, as the case may be. As of February 29, 2016, there were options to purchase 1,672,605 shares of our common stock outstanding underthe 2013 plan, at a weighted average exercise price of $6.46 per share, and options to purchase 105,397 shares of ourcommon stock had been exercised. We have awarded 1,691,137 shares of restricted common stock under the 2013 plan.Following the closing our IPO, no further stock options or other awards have been or will be granted under our 2013 plan.However, any shares of common stock subject to awards under our 2013 plan that expire, terminate, or are otherwisesurrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock beingissued will become available for issuance under our 2015 plan. 2015 Employee Stock Purchase Plan Our board of directors adopted and our stockholders approved the 2015 ESPP, which became effective on February8, 2016. The 2015 ESPP is administered by our board of directors or by a committee appointed by our board of directors. The2015 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 384,615 sharesof our common stock. The number of shares of our common stock reserved for issuance under the 2015 ESPP willautomatically increase on the first day of each fiscal year, commencing on January 1, 2017 continuing until, and including,the fiscal year ending December 31, 2026, in an amount equal to the least of (a) 769,230 shares of our common stock, (b) 1%of the total number of shares of our common stock outstanding on the first day of the applicable year, and (c) an amountdetermined by our board of directors. All of our employees or employees of any designated subsidiary, as defined in the 2015 ESPP, are eligible toparticipate in the 2015 ESPP, provided that: ·such person is customarily employed by us or a designated subsidiary for more than 20 hours a week and formore than five months in a calendar year; 184 Table of Contents·such person has been employed by us or by a designated subsidiary for at least six months prior to enrolling inthe 2015 ESPP; and ·such person was our employee or an employee of a designated subsidiary on the first day of the applicableoffering period under the 2015 ESPP. No employee may purchase shares of our common stock under the 2015 ESPP and any of our other employee stockpurchase plans in excess of $25,000 of the fair market value of our common stock (as of the date of the option grant) in anycalendar year. In addition, no employee may purchase shares of our common stock under the 2015 ESPP that would result inthe employee owning 5% or more of the total combined voting power or value of our stock or the stock of any of oursubsidiaries. We expect to make one or more offerings to our eligible employees to purchase stock under the 2015 ESPPbeginning at such time as our board of directors may determine. Each offering will consist of a six‑month offering periodduring which payroll deductions will be made and held for the purchase of our common stock at the end of the offeringperiod. Our board of directors or a committee designated by the board of directors may, at their discretion, choose a differentperiod of not more than 12 months for offerings. On the commencement date of each offering period, each eligible employee may authorize up to a maximum of 15%of his or her compensation to be deducted by us during the offering period. Each employee who continues to be a participantin the 2015 ESPP on the last business day of the offering period will be deemed to have exercised an option to purchase fromus the number of whole shares of our common stock that his or her accumulated payroll deductions on such date will pay for,not in excess of the maximum numbers set forth above. Under the terms of the 2015 ESPP, the purchase price shall bedetermined by our board of directors for each offering period and will be at least 85% of the applicable closing price of ourcommon stock. If our board of directors does not make a determination of the purchase price, the purchase price will be 85%of the lesser of the closing price of our common stock on the first business day of the offering period or on the last businessday of the offering period. An employee who is not a participant on the last day of the offering period is not entitled to purchase shares underthe 2015 ESPP, and the employee’s accumulated payroll deductions will be refunded. An employee’s rights under the 2015ESPP terminate upon voluntary withdrawal from an offering under the 2015 ESPP at any time, or when the employee ceasesemployment for any reason. We will be required to make equitable adjustments to the number and class of securities available under the 2015ESPP, the share limitations under the 2015 ESPP, and the purchase price for an offering period under the 2015 ESPP to reflectstock splits, reverse stock splits, stock dividends, recapitalizations, combinations of shares, reclassifications of shares,spin‑offs and other similar changes in capitalization or events or any dividends or distributions to holders of our commonstock other than ordinary cash dividends. In connection with a reorganization event, as defined in the 2015 ESPP, our board of directors or a committee of ourboard of directors may take any one or more of the following actions as to outstanding options to purchase shares of ourcommon stock under the 2015 ESPP on such terms as our board or committee determines: ·provide that options shall be assumed, or substantially equivalent options shall be substituted, by theacquiring or succeeding corporation (or an affiliate thereof); ·upon written notice to employees, provide that all outstanding options will be terminated immediately prior tothe consummation of such reorganization event and that all such outstanding options will become exercisableto the extent of accumulated payroll deductions as of a date specified by our board or committee in suchnotice, which date shall not be less than ten days preceding the effective date of the reorganization event; 185 Table of Contents·upon written notice to employees, provide that all outstanding options will be cancelled as of a date prior tothe effective date of the reorganization event and that all accumulated payroll deductions will be returned toparticipating employees on such date; ·in the event of a reorganization event under the terms of which holders of our common stock will receive uponconsummation thereof a cash payment for each share surrendered in the reorganization event, change the lastday of the offering period to be the date of the consummation of the reorganization event and make or providefor a cash payment to each employee equal to (a) the cash payment for each share surrendered in thereorganization event times the number of shares of our common stock that the employee’s accumulatedpayroll deductions as of immediately prior to the reorganization event could purchase at the applicablepurchase price, where the acquisition price is treated as the fair market value of our common stock on the lastday of the applicable offering period for purposes of determining the purchase price and where the number ofshares that could be purchased is subject to the applicable limitations under the 2015 ESPP minus (b) theresult of multiplying such number of shares by the purchase price; and/or ·provide that, in connection with our liquidation or dissolution, options shall convert into the right to receiveliquidation proceeds (net of the purchase price thereof). Our board of directors may at any time, and from time to time, amend or suspend the 2015 ESPP or any portionthereof. We will obtain stockholder approval for any amendment if such approval is required by Section 423 of the InternalRevenue Code. Further, our board of directors may not make any amendment that would cause the 2015 ESPP to fail tocomply with Section 423 of the Internal Revenue Code. The 2015 ESPP may be terminated at any time by our board ofdirectors. Upon termination, we will refund all amounts in the accounts of participating employees. 401(k) Retirement Plan We maintain a 401(k) retirement plan that is intended to be a tax‑qualified defined contribution plan underSection 401(k) of the Internal Revenue Code. In general, all of our employees are eligible to participate, beginning on thefirst day of the month following commencement of their employment. The 401(k) plan includes a salary deferral arrangementpursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equalto $18,000 in 2016, and have the amount of the reduction contributed to the 401(k) plan. Limitation of Liability and Indemnification Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law.Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of theirfiduciary duties as directors, except liability for: ·any breach of the director’s duty of loyalty to us or our stockholders; ·any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; ·any unlawful payments related to dividends or unlawful stock repurchases, redemptions, or other distributions;or ·any transaction from which the director derived an improper personal benefit. These limitations do not apply to liabilities arising under federal securities laws and do not affect the availability ofequitable remedies, including injunctive relief or rescission. If Delaware law is amended to authorize the further eliminationor limiting of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted byDelaware law as so amended. 186 Table of ContentsAs permitted by Delaware law, our certificate of incorporation also provides that: ·we will indemnify our directors and officers to the fullest extent permitted by law; ·we may indemnify our other employees and other agents to the same extent that we indemnify our officers anddirectors, unless otherwise determined by our board of directors; and ·we will advance expenses to our directors and officers in connection with legal proceedings in connectionwith a legal proceeding to the fullest extent permitted by law. The indemnification provisions contained in our certificate of incorporation are not exclusive. In addition, we haveentered into indemnification agreements with our directors and our executive officers, including our named executiveofficers. These indemnification agreements require us, among other things, to indemnify each such director for someexpenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by him or her in any action orproceeding arising out of his or her service as one of our directors or as one of our officers. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors andofficers. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act,may be permitted to directors, officers, or persons controlling our company pursuant to the foregoing provisions, weunderstand that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Actand is therefore unenforceable. In addition, we maintain standard policies of insurance under which coverage is provided to our directors andofficers against losses arising from claims made by reason of breach of duty or other wrongful act, and to us with respect topayments which may be made by us to such directors and officers pursuant to the above indemnification provisions orotherwise as a matter of law. Rule 10b5‑1 Sales Plans Our directors and executive officers may adopt written plans, known as Rule 10b5‑1 plans, in which they willcontract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5‑1 plan, a brokerexecutes trades pursuant to parameters established by the director or officer when entering into the plan, without furtherdirection from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Ourdirectors and executive officers may also buy or sell additional shares outside of a Rule 10b5‑1 plan when they are not inpossession of material, nonpublic information. Director Compensation From our inception to our IPO, we did not provide any compensation to our non-employee directors, althoughduring this period we reimbursed our non-employee directors for reasonable travel and out-of-pocket expenses incurred inconnection with attending board of director and committee meetings. In connection with our IPO, we adopted a directorcompensation program effective as of February 2, 2016, under which we pay our non-employee directors a cash retainer forservice on the board of directors and for service on each committee on which the director is a member. The chairman of theboard and of each committee will receive higher retainers for such service. These fees are payable in arrears in four equalquarterly installments on the last day of each quarter, provided that the amount of such payment will be prorated for anyportion of such quarter that the director is not serving on our board of directors and no fee shall be payable in respect of anyperiod prior to February 2, 2016. The fees paid to non‑employee directors for service on the187 Table of Contentsboard of directors and for service on each committee of the board of directors on which the director is a member are asfollows: Member Chairman Annual Fee Annual Fee Board of Directors $35,000 $75,000 Audit Committee $7,500 $15,000 Compensation Committee $5,000 $10,000 Nominating and Corporate Governance Committee $4,000 $8,000 We also will continue to reimburse our non‑employee directors for reasonable travel and other expenses incurred inconnection with attending our board of director and committee meetings. We do not pay any compensation to our President and Chief Executive Officer in connection with her service on ourboard of directors. The compensation that we pay to our President and Chief Executive Officer is discussed earlier in this“Executive Compensation” section. There were no outstanding equity awards held by our non‑employee directors as of December 31, 2015. Inconnection with Dr. Mendlein’s appointment to our board of directors in January 2016, our board of directors granted toDr. Mendlein an option to purchase 96,153 shares of common stock, effective as of February 3, 2016, which option will vestin equal monthly installments over three years. In addition, under our director compensation program, each non‑employee director will receive under the 2015 plan,upon his or her initial election to our board of directors, an option to purchase 23,076 shares of our common stock. Each ofthese options will vest as to one‑third of the shares of our common stock underlying such option on each anniversary of thegrant date until the third anniversary of the grant date, subject to the non‑employee director’s continued service as a director.Further, on the date of the first board meeting held after each annual meeting of stockholders, each non‑employee directorthat has served on our board of directors for at least six months will receive, under the 2015 plan, an option to purchase11,538 shares of our common stock. Each of these options will vest in full on the one‑year anniversary of the grant dateunless otherwise provided at the time of grant, subject to the non‑employee director’s continued service as a director. Alloptions issued to our non‑employee directors under our director compensation program will be issued at exercise prices equalto the closing price of our common stock on the NASDAQ Global Select Market on the date of grant and will becomeexercisable in full upon a change in control of our company. Compensation Committee Interlocks and Insider ParticipationNone of our executive officers serves as a member of the board of directors or compensation committee, or othercommittee serving an equivalent function, of any other entity that has one or more of its executive officers serving as amember of our board of directors or our compensation committee. Other than Kevin Bitterman, who served as our Presidentfrom November 2013 until June 2014, none of the members of our compensation committee is, or has ever been, an officer oremployee of our company. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth information with respect to the beneficial ownership of our common stock, as ofMarch 18, 2016 by: ·each person known by us to beneficially own more than 5% of our common stock; ·each of our directors; ·each of our named executive officers; and ·all of our executive officers and directors as a group. 188 Table of ContentsThe column entitled “Percentage of Shares Beneficially Owned” is based on a total of 36,605,251 shares of ourcommon stock outstanding as of March 18, 2016. The number of shares beneficially owned by each stockholder is determined under rules issued by the Securities andExchange Commission and includes voting or investment power with respect to securities. Under these rules, beneficialownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Incomputing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person,shares of common stock subject to options, warrants, or other rights held by such person that are currently exercisable or willbecome exercisable within 60 days after March 18, 2016 are considered outstanding, although these shares are notconsidered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated,the address of all listed stockholders is 300 Third Street, First Floor, Cambridge, Massachusetts 02142. Each of thestockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholderunless noted otherwise, subject to community property laws where applicable. Shares Percentage of Beneficially Shares Beneficially Name of Beneficial Owner Owned Owned 5% Stockholders Entities affiliated with FMR LLC 5,124,699 14.0%Entities affiliated with Flagship Ventures Management, Inc. 4,955,316 13.5%Third Rock Ventures III, L.P. 4,656,176 12.7%Entities affiliated with Polaris Ventures Partners VI, L.P. 4,656,173 12.7%Entities affiliated with Viking Global Investors LLP 2,729,808 7.5%bng0, LLC 2,649,572 7.2%Named Executive Officers and Directors Katrine S. Bosley 1,441,095 3.9%Alexandra Glucksmann, Ph.D. 129,006 * Andrew A. F. Hack, M.D., Ph.D. — — Kevin Bitterman, Ph.D. 4,656,173 12.7%Alexis Borisy — — Douglas G. Cole, M.D. — — John D. Mendlein, Ph.D. 8,013 * Boris Nikolic, M.D. 2,649,572 7.2%All executive officers and directors as a group (8 persons) 8,883,859 24.3%*Less than 1%. (1)FMR LLC reports sole voting power with respect to 482,856 shares and sole dispositive power with respect to5,124,699 shares. Abigail P. Johnson is a Director, the Vice Chairman, the Chief Executive Officer and the Presidentof FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly orthrough trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC.The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreementunder which all Series B voting common shares will be voted in accordance with the majority vote of Series Bvoting common shares. Accordingly, through their ownership of voting common shares and the execution of thestockholders’ voting agreement, members of the Johnson family may be deemed, under the Investment CompanyAct of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson hasthe sole power to vote or direct the voting of the shares owned directly by the various investment companiesregistered under the Investment Company Act, or the Fidelity Funds, advised by Fidelity Management & ResearchCompany, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards ofTrustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelinesestablished by the Fidelity Funds’ Boards of Trustees. The address for FMR LLC is 245 Summer Street, Boston MA,02210. For information regarding FMR LLC and its affiliates, we have relied on a Schedule 13G filed by FMR LLCwith the SEC on March 10, 2016. 189 (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)Table of Contents(2)Consists of (i) 3,964,256 shares of common stock held by Flagship Ventures Fund IV, L.P. and (ii) 991,060 shares ofcommon stock held by Flagship Ventures Fund IV‑Rx, L.P. (together with Flagship Ventures Fund IV, L.P., the“Flagship Funds”). Flagship Ventures Fund IV General Partner LLC (“Flagship GP”) is the general partner of theFlagship Funds. Noubar B. Afeyan, Ph.D., and Edwin M. Kania, Jr. are the managers of Flagship GP. As a result, eachof Flagship GP, Mr. Afeyan, and Mr. Kania may be deemed to possess voting and investment control over, and maybe deemed to have indirect beneficial ownership with respect to, all shares held by the Flagship Funds. Each ofFlagship GP, Mr. Afeyan, and Mr. Kania disclaims beneficial ownership of such shares, except to the extent of theirrespective pecuniary interests therein. Dr. Cole, a member of our board of directors, is a member of Flagship GP anddoes not have voting or investment control over the shares held by the Flagship Funds. Dr. Cole disclaims beneficialownership of all shares held by the Flagship Funds, except to the extent of his pecuniary interest therein. Theaddress of the Flagship Funds is One Memorial Drive, 7th Floor, Cambridge, Massachusetts 02142. (3)Consists of 4,656,176 shares of common stock held by Third Rock Ventures III, L.P. (“TRV III LP”). Each of(i) Third Rock Ventures III GP, L.P. (“TRV III GP”), the general partner of TRV III LP, (ii) Third Rock Ventures GPIII, LLC (“TRV III LLC”), the general partner of TRV III GP, and (iii) Mark Levin, Kevin Starr, and Robert Tepper,the managers of TRV III LLC, may be deemed to have voting and investment power over the shares held of recordby TRV III LP. Each of TRV III GP, TRV III LLC, Mark Levin, Kevin Starr, and Robert Tepper disclaims beneficialownership of such shares, except to the extent of their respective pecuniary interests therein. The address of TRVIII LP is 29 Newbury Street, Suite 401, Boston, MA 02116. (4)Consists of (i) 4,399,103 shares of common stock held by Polaris Venture Partners VI, L.P. and (ii) 257,070 shares ofcommon stock held by Polaris Venture Partners Founders’ Fund VI, L.P. (together with Polaris Venture PartnersVI, L.P., the “Polaris Funds”). Polaris Venture Management Co. VI, L.L.C. (“Polaris Management”) is the generalpartner of the Polaris Funds. North Star Venture Management 2010, LLC directly or indirectly provides investmentadvisory services to various venture capital funds, including the Polaris Funds. Jonathan Flint, Terrance McGuire,Brian Chee, David Barrett, Amir Nashat, and Bryce Youngren, managing members of North Star VentureManagement 2010, LLC, exercise voting and investment power with respect to North Star Venture Management2010, LLC. Each of the Polaris Funds has the sole voting and investment power with respect to the shares of ourcompany directly held by the applicable Polaris Fund. Polaris Management may be deemed to have sole voting andinvestment power with respect to the shares held by the Polaris Funds. Polaris Management disclaims beneficialownership of all the shares held by the Polaris Funds except to the extent of its pecuniary interests therein. Themembers of North Star Venture Management 2010, LLC (the “Polaris Management Members”) are also members ofPolaris Management. Jonathan Flint, Terrance McGuire, Brian Chee, David Barrett, Amir Nashat, and BryceYoungren, managing members of Polaris Management, exercise voting and investment power with respect to PolarisManagement. As members of Polaris Management and North Star Venture Management 2010, LLC, the PolarisManagement Members may be deemed to share voting and investment powers for the shares held by the PolarisFunds. The Polaris Management Members disclaim beneficial ownership of all such shares held by the funds exceptto the extent of their pecuniary interests therein. Dr. Bitterman, a member of our board of directors, has an assigneeinterest in Polaris Management. To the extent that he is deemed to share voting and investment powers with respectto the shares held by the Polaris Funds, Dr. Bitterman disclaims beneficial ownership of all the shares held by thefunds except to the extent of his pecuniary interest therein. The address of the Polaris Funds is 1000 Winter Street,Suite 3350, Waltham, Massachusetts 02451. 190 Table of Contents(5)Consists of shares of common stock held by entities affiliated with Viking Global Investors LP (“VGI”). O. AndreasHalvorsen, David C. Ott and Daniel S. Sundheim are Executive Committee members of certain management entities,including Viking Global Partners LLC, the general partner of VGI, Viking Global Performance LLC ("VGP"), VikingLong Fund GP LLC ("VLFGP") and Viking Global Opportunities GP LLC ("Opportunities GP"), the sole owner ofViking Global Opportunities Portfolio GP LLC ("Opportunities Portfolio GP"). VGI provides managerial services tovarious investment funds, including Viking Global Opportunities Illiquid Investments Sub-Master LP("Opportunities Fund"), Viking Global Equities LP ("VGE"), Viking Global Equities II LP ("VGE II"), VGE IIIPortfolio Ltd. ("VGE III") and Viking Long Fund Master Ltd. ("VLFM," and together with VGE, VGE II, VGE III andOpportunities Fund, the "Viking Funds"). Each of Viking Global Opportunities Portfolio GP LLC (the “SubsidiaryGeneral Partner”), the general partner of Viking Sub‑Master Fund, Viking Global Opportunities GP LLC (the“General Partner”), the sole owner of the Subsidiary General Partner, Viking Global Investors LP, which providesmanagerial services to Viking Sub‑Master Fund (the “Management Company”), and O. Andreas Halvorsen, David C.Ott, and Daniel S. Sundheim, the executive committee members of the General Partner and Viking GlobalPartners LLC, the general partner of the Management Company, may be deemed to have voting and investmentpower over the shares held of record by the entities affiliated with VGI. The business address of the entities andindividuals associated with VGI is 55 Railroad Avenue, Greenwich, Connecticut 06830. Beneficial ownership isderived from a Schedule 13G filed on February 8, 2016. (6)Consists of shares of common stock held by bng0, LLC. Boris Nikolic, M.D., a member of our board of directors, is amember and the managing director of bng0, LLC. He has voting and investment power over such shares and may bedeemed the indirect beneficial owner of such shares. Dr. Nikolic disclaims beneficial ownership over such shares,except to the extent of any pecuniary interest therein. The address of bng0, LLC is 1107 First Avenue, Apt. 1305,Seattle, WA 98101. (7)Consists of shares of common stock, of which 709,883 remain subject to vesting 60 days after March 18, 2016. (8)Consists of 117,788 shares of common stock, of which 41,726 remain subject to vesting 60 days after March 18,2016, and 11,218 shares of common stock issuable upon the exercise of options exercisable within 60 days afterMarch 18, 2016. (9)Consists of the shares described in note (4) above. Dr. Bitterman, a member of our board of directors, has an assigneeinterest in Polaris Management. To the extent that he is deemed to share voting and investment powers with respectto the shares held by the Polaris Funds, Dr. Bitterman disclaims beneficial ownership of all the shares held by thefunds except to the extent of his pecuniary interest therein. (10)Consists of 8,013 shares of common stock issuable upon the exercise of options exercisable within 60 days afterMarch 18, 2016. (11)Consists of the shares described in note (6) above. Dr. Nikolic is a member and the managing director of bng0, LLCand may be deemed the indirect beneficial owner of such shares. Dr. Nikolic disclaims beneficial ownership oversuch shares, except the extent of his pecuniary interest therein. (12)Includes 751,609 shares of common stock that remain subject to vesting 60 days after March 18, 2016 and 19,231shares of common stock issuable upon the exercise of options exercisable within 60 days after March 18, 2016. 191 Table of ContentsSecurities authorized for issuance under equity compensation plansThe following table contains information about our equity compensation plans as of December 31, 2015. As ofDecember 31, 2015, we had one equity compensation plan, our 2013 plan, which was approved by our stockholders. Equity Compensation Plan Information Plan category Number of securities tobe issued upon exerciseof outstanding options,warrants and rights Weighted-average exerciseprice ofoutstandingoptions,warrants andrights Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in column(a)) (a) (b) (c) Equity compensation plans approved bysecurity holders 1,674,047 $6.45 2,848,630 Equity compensation plans not approvedby security holders — — — Total 1,674,047 $6.45 2,848,630 As described above under “Item 11. Executive Compensation—2015 Plan” and “Item 11. Executive Compensation—2015 Employee Stock Purchase Plan”, in connection with our initial public offering, our board of directors andstockholders approved two new equity compensation plans, the 2015 plan and the 2015 ESPP. The 2015 plan becameeffective on February 2, 2016, and the 2015 ESPP became effective February 8, 2016. The table above does not include anyamounts issuable under either the 2015 plan or the 2015 ESPP. Item 13. Certain Relationships and Related Transactions, and Director Independence. The following is a description of transactions since January 1, 2015 to which we have been a party, and in whichany of our directors, executive officers and holders of more than 5% of our voting securities and affiliates of our directors,executive officers and holders of more than 5% of our voting securities, had or will have a direct or indirect material interest.We believe that all of the transactions described below were made on terms no less favorable to us than could have beenobtained from unaffiliated third parties. Management Services Pursuant to an arrangement with Third Rock Ventures, LLC, an affiliate of one of our 5% stockholders and of one ofour directors, during the year ended December 31, 2015 we have paid Third Rock Ventures, LLC an aggregate of$0.1 million in connection with certain consulting services provided to us by employees of Third Rock Ventures, LLC. Series B Preferred Stock Financing In August 2015, we issued and sold an aggregate of 26,666,660 shares of our Series B preferred stock at a price pershare of $4.50, for an aggregate purchase price of $120.0 million. The following table sets forth the number of shares192 Table of Contentsof our Series B preferred stock purchased by our directors, executive officers, and 5% stockholders and their respectiveaffiliates and the aggregate purchase price for such shares. Shares of Series B Name Preferred Stock Purchase Price bng0, LLC 6,888,888 $30,999,996 Deerfield Healthcare Innovations Fund, L.P. 2,222,222 9,999,999 Deerfield Private Design Fund III, L.P. 2,222,222 9,999,999 Entities affiliated with FMR LLC 4,444,444 19,999,998 Viking Global Opportunities Illiquid Investments Sub-Master LP 4,444,444 19,999,998 Entities affiliated with T. Rowe Price Associates, Inc. 2,222,222 9,999,999 Flagship Ventures Fund IV, L.P. 800,001 3,600,004.5 Flagship Ventures Fund IV-Rx, L.P. 199,999 899,995.5 Polaris Venture Partners VI, L.P. 209,953 944,788.5 Polaris Venture Partners Founders’ Fund VI, L.P. 12,269 55,210.5 Third Rock Ventures III, L.P. 222,222 999,999 Katrine S. Bosley 11,111 49,999.5 (1)Consists of (i) 458,236 shares of Series B preferred stock purchased by Fidelity Securities Fund: Fidelity OTCPortfolio, (ii) 7,421 shares of Series B preferred stock purchased by Fidelity OTC Commingled Pool, (iii) 33,344shares of Series B preferred stock purchased by Pyramis Lifecycle Blue Chip Growth Commingled Pool,(iv) 718,519 shares of Series B preferred stock purchased by Fidelity Securities Fund: Fidelity Blue Chip GrowthFund, (v) 250,353 shares of Series B preferred stock purchased by Fidelity Securities Fund: Fidelity Series BlueChip Growth Fund, (vi) 4,788 shares of Series B preferred stock purchased by Fidelity Blue Chip GrowthCommingled Pool, (vii) 428,184 shares of Series B preferred stock purchased by Fidelity Growth CompanyCommingled Pool, (viii) 391,509 shares of Series B preferred stock purchased by Fidelity Mt. Vernon Street Trust:Fidelity Series Growth Company Fund, (ix) 1,424,062 shares of Series B preferred stock purchased by Fidelity Mt.Vernon Street Trust: Fidelity Growth Company Fund, (x) 588,811 shares of Series B preferred stock purchased byFidelity Select Portfolios: Biotechnology Portfolio, and (xi) 139,217 shares of Series B preferred stock purchased byFidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund. (2)Consists of (i) 909,096 shares of Series B preferred stock purchased by T. Rowe Price Health Sciences Fund, Inc.,(ii) 50,916 shares of Series B preferred stock purchased by TD Mutual Funds—TD Health Sciences Fund, (iii) 55,131shares of Series B preferred stock purchased by VALIC Company I—Health Sciences Fund, (iv) 46,929 shares ofSeries B preferred stock purchased by T. Rowe Price Health Sciences Portfolio, (v) 23,787 shares of Series Bpreferred stock purchased by John Hancock Variable Insurance Trust—Health Sciences Trust, (vi) 25,252 shares ofSeries B preferred stock purchased by John Hancock Funds II—Health Sciences Fund, (vii) 1,008,617 shares ofSeries B preferred stock purchased by T. Rowe Price New Horizons Fund, Inc., (viii) 100,443 shares of Series Bpreferred stock purchased by T. Rowe Price New Horizons Trust, and (ix) 2,051 shares of Series B preferred stockpurchased by T. Rowe Price U.S. Equities Trust. (3)Ms. Bosley is our President and Chief Executive Officer. Participation in initial public offering In our initial public offering, funds affiliated with FMR LLC, Viking Global Investors L.P. and DeerfieldManagement Company, L.P., each of whom was one of our 5% stockholders at the time of our initial public offering,purchased 2,500,000, 1,000,000 and 100,000 shares of our common stock, respectively. Such purchases were made throughthe underwriters at the initial public offering price of $16.00 per share for an aggregate purchase price of $57.6 million. 193 (1)(2)(3)Table of ContentsDirector Affiliations Some of our directors are affiliated with and serve on our board of directors as representatives of entities whichbeneficially own or owned 5% or more of our common stock, as indicated in the table below: Director Principal StockholderKevin Bitterman, Ph.D. Polaris Venture Partners VI, L.P. and affiliateAlexis Borisy Third Rock Ventures III, L.P.Douglas G. Cole, M.D. Flagship Ventures Fund IV, L.P. and affiliateBoris Nikolic, M.D. bng0, LLC Investors’ Rights Agreement We are a party to an amended and restated investors’ rights agreement, or the Investors’ Rights Agreement, dated asof August 4, 2015, with holders of our previously-outstanding preferred stock, including certain of our 5% stockholders andtheir affiliates and entities affiliated with certain of our officers and directors. The Investors’ Rights Agreement provides theseholders the right to demand that we file a registration statement or request that their shares be covered by a registrationstatement that we are otherwise filing. Employment Agreements See the “Executive Compensation—Agreements with our Executive Officers” section of this Annual Report onForm 10-K for a further discussion of these arrangements. Indemnification of Officers and Directors Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extentpermitted by Delaware law. In addition, we have entered into indemnification agreements with our current and formerdirectors that may be broader in scope than the specific indemnification provisions contained in the General CorporationLaw of the State of Delaware. Policies and Procedures for Related Person Transactions We have adopted a written related person transaction policy, effective as of February 2, 2016, the effective date ofthe registration statement for our IPO, that sets forth policies and procedures for the review and approval or ratification ofrelated person transactions. This policy covers any transaction, arrangement, or relationship, or any series of similartransactions, arrangements, or relationships, in which we were or are to be a participant, the amount involved exceeds$120,000, and a related person had or will have a direct or indirect material interest, including, without limitation, purchasesof goods or services by or from the related person or entities in which the related person has a material interest, indebtedness,guarantees of indebtedness, and employment by us of a related person. Our related person transaction policy contains exceptions for any transaction or interest that is not considered arelated person transaction under SEC rules as in effect from time to time. In addition, the policy provides that an interestarising solely from a related person’s position as an executive officer of another entity that is a participant in a transactionwith us will not be subject to the policy if each of the following conditions is met: ·the related person and all other related persons own in the aggregate less than a 10% equity interest in suchentity; ·the related person and his or her immediate family members are not involved in the negotiation of the terms ofthe transaction with us and do not receive any special benefits as a result of the transaction; and ·the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual grossrevenue of the company receiving payment under the transaction.194 Table of Contents The policy provides that any related person transaction proposed to be entered into by us must be reported to ourChief Financial Officer and will be reviewed and approved by our audit committee in accordance with the terms of thepolicy, prior to effectiveness or consummation of the transaction whenever practicable. The policy provides that if our ChiefFinancial Officer determines that advance approval of a related person transaction is not practicable under the circumstances,our audit committee will review and, in its discretion, may ratify the related person transaction at the next meeting of theaudit committee following such transaction or following the date that such transaction comes to the attention of the ChiefFinancial Officer. The policy also provides that alternatively, our Chief Financial Officer may present a related persontransaction arising in the time period between meetings of the audit committee to the chair of and audit committee, who willreview and may approve the related person transaction, subject to ratification by the audit committee at the next meeting ofthe audit committee. In addition, the policy provides that any related person transaction previously approved by the audit committee orotherwise already existing that is ongoing in nature will be reviewed by the audit committee annually to ensure that suchrelated person transaction has been conducted in accordance with the previous approval granted by the audit committee, ifany, and that all required disclosures regarding the related person transaction are made. The policy provides that transactions involving compensation of executive officers will be reviewed and approvedby our compensation committee in the manner to be specified in the charter of the compensation committee. A related person transaction reviewed under this policy will be considered approved or ratified if it is authorized bythe audit committee in accordance with the standards set forth in the policy after full disclosure of the related person’sinterests in the transaction. As appropriate for the circumstances, the policy provides that the audit committee will review andconsider: ·the related person’s interest in the related person transaction; ·the approximate dollar value of the amount involved in the related person transaction; ·the approximate dollar value of the amount of the related person’s interest in the transaction without regard tothe amount of any profit or loss; ·whether the transaction was undertaken in the ordinary course of business of our company; ·whether the transaction with the related person is proposed to be, or was, entered into on terms no lessfavorable to us than the terms that could have been reached with an unrelated third party; ·the purpose of, and the potential benefits to us of, the transaction; and ·any other information regarding the related person transaction or the related person in the context of theproposed transaction that would be material to investors in light of the circumstances of the particulartransaction. The policy provides that the audit committee will review all relevant information available to it about the relatedperson transaction. The policy provides that the audit committee may approve or ratify the related person transaction only ifthe audit committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our bestinterests. The policy provides that the audit committee may, in its sole discretion, impose such conditions as it deemsappropriate on us or the related person in connection with approval of the related person transaction. Director Independence Rule 5605 of the NASDAQ Listing Rules requires a majority of a listed company's board of directors to becomprised of independent directors within one year of listing. In addition, the NASDAQ Listing Rules require that,195 Table of Contentssubject to specified exceptions, each member of a listed company's audit, compensation and nominating and corporategovernance committees be independent under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Auditcommittee members must also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act, andcompensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the ExchangeAct. Under Rule 5605(a)(2), a director will only qualify as an "independent director" if, in the opinion of our board ofdirectors, that person does not have a relationship that would interfere with the exercise of independent judgment in carryingout the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an auditcommittee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board ofdirectors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory feefrom the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of itssubsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board must consider, for each member ofa compensation committee of a listed company, all factors specifically relevant to determining whether a director has arelationship to such company which is material to that director's ability to be independent from management in connectionwith the duties of a compensation committee member, including, but not limited to: the source of compensation of thedirector, including any consulting advisory or other compensatory fee paid by such company to the director; and whether thedirector is affiliated with the company or any of its subsidiaries or affiliates. In January 2016, our board of directors undertook a review of the composition of our board of directors and itscommittees and the independence of each director. Based upon information requested from and provided by each directorconcerning his or her background, employment and affiliations, including family relationships, our board of directors hasdetermined that each of Mr. Borisy and Drs. Cole, Mendlein, and Nikolic is an "independent director" as defined underNASDAQ Listing Rules. In making such determination, our board of directors considered the relationships that each suchnon-employee director has with our company and all other facts and circumstances our board of directors deemed relevant indetermining independence, including the beneficial ownership of our capital stock by each non-employee director. Mr.Borisy and Drs. Bitterman and Nikolic are the current members of our audit committee; Drs. Cole and Mendlein and Mr.Bitterman are the current members of our compensation committee; and Drs. Cole, Mendlein, and Nikolic are the currentmembers of our nominating and corporate governance committee. Although the board of directors did not determine that Mr.Bitterman is independent, under NASDAQ rules, we are permitted to phase in our compliance with the independentcommittee requirements for each committee as follows: (1) one independent member of each committee at the time of listing,(2) a majority of independent members of each committee within 90 days of listing and (3) all independent members of eachcommittee within one year of listing. Within one year of our listing on The NASDAQ Global Select Market, we expect that the composition of each of our committees will satisfy independence requirements under applicable NASDAQ rules. 196 Table of ContentsItem 14. Principal Accounting Fees and Services. The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed usfor each of the last two fiscal years. Year Ended December 31, 2015 2014 Audit Fees (1) $1,251,259 $250,000 Audit-Related Fees — — Tax Fees (2) 7,500 — All Other Fees — — $1,258,759 $250,000 (1)Audit fees consist of fees billed for professional services by Ernst & Young LLP for audit and quarterly review of ourconsolidated financial statements and review of the registration statement on Form S-1 for our IPO, and relatedservices that are normally provided in connection with statutory and regulatory filings or engagements. (2)Tax fees consist of fees for professional services performed by Ernst & Young LLP with respect to tax compliance,tax advice and tax planning. The aggregate fees included in the Audit Fees are those fees billed for the fiscal year. The aggregate fees included inthe Audit-Related Fees and Tax Fees are those fees billed in the fiscal year.Pre-Approval Policies and ProceduresThe audit committee of our board of directors has adopted policies and procedures for the pre-approval of audit andnon-audit services for the purpose of maintaining the independence of our independent auditor. We may not engage ourindependent auditor to render any audit or non-audit service unless either the service is approved in advance by the auditcommittee, or the engagement to render the service is entered into pursuant to the audit committee’s pre-approval policiesand procedures. Notwithstanding the foregoing, pre-approval is not required with respect to the provision of services, otherthan audit, review or attest services, by the independent auditor if the aggregate amount of all such services is no more than5% of the total amount paid by us to the independent auditor during the fiscal year in which the services are provided, suchservices were not recognized by us at the time of the engagement to be non-audit services and such services are promptlybrought to the attention of the audit committee and approved prior to completion of the audit by the audit committee.From time to time, our audit committee may pre-approve services that are expected to be provided to us by theindependent auditor during the following 12 months. At the time such pre-approval is granted, the audit committee mustidentify the particular pre-approved services in a sufficient level of detail so that our management will not be called upon tomake a judgment as to whether a proposed service fits within the pre-approved services and, at each regularly scheduledmeeting of the audit committee following such approval, management or the independent auditor shall report to the auditcommittee regarding each service actually provided to us pursuant to such pre-approval.The audit committee has delegated to its chairman the authority to grant pre-approvals of audit or non-audit services tobe provided by the independent auditor. Any approval of services by the chairman of the audit committee is reported to thecommittee at its next regularly scheduled meeting.197 Table of ContentsPART IV Item 15. Exhibits and Financial Statement Schedules. (1)Financial StatementsOur consolidated financial statements are set forth in Part II, Item 8 of this Annual Report on Form 10-K and areincorporated herein by reference. (2)Financial Statement SchedulesSchedules have been omitted since they are either not required or not applicable or the information is otherwiseincluded herein.(3)ExhibitsThe exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index immediately precedingsuch Exhibits, which Exhibit Index is incorporated herein by reference. 198 Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EDITAS MEDICINE, INC. Dated: March 29, 2016By:/s/ Katrine S. Bosley Katrine S. Bosley President and Chief Executive Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on the dates indicated. SignatureTitleDate/s/ Katrine S. BosleyPresident and Chief Executive Officer, Director(principal executive officer)March 29, 2016Katrine S. Bosley/s/ Andrew A. F. HackChief Financial Officer (principal financial andaccounting officer)March 29, 2016Andrew A.F. Hack, M.D., Ph.D./s/ Kevin BittermanDirectorMarch 29, 2016Kevin Bitterman, Ph.D./s/ Alexis BorisyDirectorMarch 29, 2016Alexis Borisy/s/ Douglas G. ColeDirectorMarch 29, 2016Douglas G. Cole, M.D./s/ John D. MendleinDirectorMarch 29, 2016John D. Mendlein, Ph.D./s/ Boris NikolicDirectorMarch 29, 2016Boris Nikolic, M.D. 199 Table of ContentsEXHIBIT INDEX Incorporated by Reference ExhibitNumber Description of Exhibit Form File No. Date ofFiling ExhibitNumber FiledHerewith3.1 Restated Certificate of Incorporation of theRegistrant 8-K 001-37687 2/8/2016 3.1 3.2 By‑laws of the Registrant 8-K 001-37687 2/8/2016 3.2 4.1 Specimen Stock Certificate evidencing the sharesof common stock S-1 333-208856 1/4/2016 4.1 10.1+ Amended and Restated Investors’ RightsAgreement, dated August 4, 2015, among theRegistrant and the other parties thereto S-1 333-208856 1/4/2016 10.1 10.2 Warrant to purchase shares of Series A‑1 PreferredStock issued by the registrant to Silicon ValleyBank S-1 333-208856 1/4/2016 10.2 10.3 Loan and Security Agreement, dated May 29,2014, between the Registrant and Silicon ValleyBank S-1 333-208856 1/4/2016 10.3 10.4 First Amendment to Loan and SecurityAgreement, dated July 27, 2015, by and betweenthe Registrant and Silicon Valley Bank S-1 333-208856 1/4/2016 10.4 10.5+ 2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.5 10.6+ Form of Incentive Stock Option Agreement under2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.6 10.7+ Form of Nonstatutory Stock Option Agreementunder 2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.7 10.8+ Form of Early Exercise Nonstatutory Stock OptionAgreement under 2013 Stock Incentive Plan, asamended S-1 333-208856 1/4/2016 10.8 10.9+ Form of Restricted Stock Agreement under 2013Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.9 10.10+ 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.10 10.11+ Form of Incentive Stock Option Agreement under2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.11 10.12+ Form of Nonstatutory Stock Option Agreementunder 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.12 10.13+ Employment Offer Letter, dated June 12, 2014,between the Registrant and Katrine S. Bosley S-1 333-208856 1/4/2016 10.13 10.14+ Amended and Restated Offer of Employment,dated April 8, 2015, between the Registrant andAlexandra Glucksmann, Ph.D. S-1 333-208856 1/4/2016 10.14 10.15+ Employment Offer Letter, dated June 8, 2015,between the Registrant and Andrew A. F. Hack,M.D., Ph.D. S-1 333-208856 1/4/2016 10.15 10.16 Form of Director Indemnification Agreementbetween the Registrant and each of KevinBitterman, Ph.D., Alexis Borisy, Douglas G. Cole,M.D., and Boris Nikolic, M.D. during the yearended December 31, 2015 S-1 333-208856 1/4/2016 10.16 10.17 Sublease, dated December 31, 2013, between theRegistrant and Alnylam Pharmaceuticals, Inc. S-1 333-208856 1/4/2016 10.17 10.18 Consent to Sublease, dated December 31, 2013,among the Registrant, AlnylamPharmaceuticals, Inc. and ARE‑MA RegionNo. 28, LLC S-1 333-208856 1/4/2016 10.18 200 Table of Contents10.19† License Agreement, dated August 29, 2014,between the Registrant and The General HospitalCorporation, d/b/a Massachusetts GeneralHospital S-1 333-208856 1/4/2016 10.19 10.20† License Agreement, dated October 10, 2014,between the Registrant and Duke University S-1 333-208856 1/4/2016 10.20 10.21 Letter Agreement, dated October 9, 2015, betweenthe Registrant and Duke University S-1 333-208856 1/4/2016 10.21 10.22† License Agreement, dated October 29, 2014,among the Registrant, the President and Fellowsof Harvard College, and the Broad Institute, Inc.(Incorporated by reference to Exhibit 10.22 to theRegistrant’s Registration Statement on Form S-1/A filed with the SEC on January 25, 2016) S-1/A 333-208856 1/25/2016 10.22 10.23† License and Collaboration Agreement, datedMay 26, 2015, between the Registrant and JunoTherapeutics, Inc. S-1 333-208856 1/4/2016 10.23 10.24+ Summary of Director Compensation Program S-1 333-208856 1/4/2016 10.24 10.25+ 2015 Employee Stock Purchase Plan S-1 333-208856 1/4/2016 10.25 10.26 Real Estate License Agreement, datedNovember 25, 2015, between the Registrant andMass Innovation Labs, LLC S-1 333-208856 1/4/2016 10.26 10.27+ Severance Benefits Plan S-1 333-208856 1/4/2016 10.27 10.28 Form of Indemnification Agreement between theRegistrant and each of its directors and executiveofficers S-1 333-208856 1/4/2016 10.28 10.29 Lease Agreement, dated February 12, 2016,between Registrant and ARE-MA Region No. 55Exchange Holding LLC 8-K 001-37687 2/19/2016 99.1 21.1 Subsidiaries of the Registrant X23.1 Consent of Ernst & Young X31.1 Rule 13a-14(a) Certification of PrincipalExecutive Officer X31.2 Rule 13a-14(a) Certification of Principal FinancialOfficer X32.1 Certification of Principal Executive Officer andPrincipal Financial Officer pursuant to 18 U.S.C.§1350 X †Confidential treatment has been granted as to certain portions, which portions have been omitted and filedseparately with the Securities and Exchange Commission.+Management contract or compensatory plan or arrangement. 201Exhibit 21.1SubsidiariesEntity State of Incorporation or OrganizationEditas Securities Corporation Delaware Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the2013 Stock Incentive Plan, the 2015 Stock Incentive Plan and the 2015 Employee Stock Purchase Plan of EditasMedicine, Inc. of our report dated March 29, 2016, with respect to the consolidated financial statements of EditasMedicine, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2015. /s/ Ernst & Young LLP Boston, MassachusettsMarch 29, 2016 Exhibit 31.1CERTIFICATIONS I, Katrine S. Bosley, certify that: 1. I have reviewed this Annual Report on Form 10-K of Editas Medicine, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting. 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Date: March 29, 2016By:/s/ Katrine S. Bosley Katrine S. Bosley Chief Executive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATIONSI, Andrew A.F. Hack, certify that: 1. I have reviewed this Annual Report on Form 10-K of Editas Medicine, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting. 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. Date: March 29, 2016By:/s/ Andrew A. F. Hack Andrew A.F. Hack, M.D., Ph.D. Chief Financial Officer (Principal Financial Officer) Exhibit 32.1 CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with this Annual Report on Form 10-K of Editas Medicine, Inc. (the “Company”) for the year endedDecember 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of theundersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to(section) 906 of the Sarbanes-Oxley Act of 2002, that to the best of her or his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Actof 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. Dated: March 29, 2016 By:/s/ Katrine S. Bosley Katrine S. Bosley President and Chief Executive Officer By:/s/ Andrew A.F. Hack Andrew A.F. Hack, M.D., Ph.D. Chief Financial Officer 

Continue reading text version or see original annual report in PDF format above