Editas Medicine
Annual Report 2017

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, 2017 ☐☐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.) 11 Hurley Street Cambridge, Massachusetts 02141(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 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 of this chapter) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. Seedefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. Large accelerated filer ☐Accelerated filer ☒Non‑accelerated filer ☐(Do not check if asmaller reporting company) Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒ As of June 30, 2017, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s Common Stock held by non-affiliates of theregistrant was approximately $502,961,068, based upon the closing price of the registrant’s Common Stock on June 30, 2017. The number of shares of the registrant’s Common Stock outstanding as of February 28, 2018 was 46,884,857. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for its 2018 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days of the end of the registrant’sfiscal year ended December 31, 2017 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Table of ContentsEditas Medicine, Inc.TABLE OF CONTENTS PART I 4 Item 1. Business4Item 1A. Risk Factors56Item 1B. Unresolved Staff Comments108Item 2. Properties108Item 3. Legal Proceedings108Item 4. Mine Safety Disclosures109 PART II 110 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities110Item 6. Selected Financial Data112Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations114Item 7A. Quantitative and Qualitative Disclosures About Market Risk133Item 8. Financial Statements and Supplementary Data135Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure177Item 9A. Controls and Procedures177Item 9B. Other Information177 PART III 178 Item 10. Directors, Executive Officers and Corporate Governance178Item 11. Executive Compensation178Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters178Item 13. Certain Relationships and Related Transactions, and Director Independence178Item 14. Principal Accounting Fees and Services178 PART IV 179 Item 15. Exhibits, Financial Statement Schedules179Item 16. Form 10-K Summary181 SIGNATURES182 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, whetheras a 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 We are a leading genome editing company dedicated to developing transformative genomic medicines with the aimto treat a broad range of serious diseases. The promise of genomic medicines is supported by the advancing knowledge of thehuman genome, and harnessing the progress in technologies for cell therapy, gene therapy, and, most recently, genomeediting. We believe this progress sets the stage for us to create unprecedented medicines with the potential to have a durablebenefit for patients. At Editas Medicine, our core capability in genome editing uses the technology known as CRISPR(clustered, regularly interspaced, short palindromic repeats) with which we can create molecules that efficiently andspecifically edit DNA. Our mission is to translate the promise of this science into a broad class of medicines to help peopleliving with serious diseases around the world.We have developed a proprietary genome editing platform based on CRISPR technology and we continue toexpand its capabilities. CRISPR uses a protein‑RNA complex composed of an enzyme, including either Cas9 (CRISPRassociated protein 9) or Cpf1 (CRISPR from Prevotella and Francisella 1), bound to a guide RNA molecule designed torecognize a particular DNA sequence. Once the complex binds to the DNA sequence it was designed to recognize, thecomplex makes a specific cut in the DNA, ultimately triggering the cell’s DNA repair machinery to change the targetedsequence. Our platform consists of four interrelated components: nuclease and guide RNA engineering, delivery, control andspecificity, and directed editing. These interrelated components are designed to develop medicines that specifically address awide variety of genetic targets, reach the site of disease safely and effectively, tightly and specifically control the editingprocess, and drive the right kind of genetic repair.We believe we are the only human genome editing company with a platform that includes CRISPR/Cas9,CRISPR/Cpf1, and engineered forms of both of these CRISPR systems. Because of the broad nature of this platform, webelieve we can create genome editing molecules for almost any site in the human genome. Each of our product candidatesderives from our platform, and we plan to continue to use our platform to create and advance a broad range of experimentalmedicines for both genetically defined and genetically treatable diseases.Our initial product development strategy is to primarily target genetically defined diseases with a focus ondebilitating illnesses where there are poor or no approved treatments and where the genetic basis of disease is wellunderstood. A genetically defined disease may be treated by correcting a disease causing gene, whereas a geneticallytreatable disease is a disease that does not necessarily have a single, disease causing gene, but which nonetheless may betreated by editing genes to ameliorate or eliminate the signs or symptoms of that disease. While our discovery efforts haveranged across several different diseases and therapeutic areas, the two areas where our programs are more mature are oculardiseases and engineered cell medicines. In ocular diseases, our most advanced program is designed to address Leber Congenital Amaurosis type 10(“LCA10”), which is a specific genetic form of vision loss that leads to blindness in childhood. LCA10 has no approvedtherapies in either the United States or European Union, and we are aware of only one potential treatment in clinical trials inthe United States and Europe. LCA10 patients have a mutation in the CEP290 gene that causes the disease. We havedemonstrated that our lead product candidate, EDIT-101, can achieve high levels of editing of the CEP290 gene in humanretinal tissue that has been explanted and maintained in vitro and in the retinas of non-human primates in vivo. We haveinitiated a clinical natural history study to evaluate the clinical course and characteristics of LCA10 more extensively, andwe aim to file an investigational new drug application (“IND”) by mid-2018 for EDIT-101. We believe results to date inLCA10 validate our platform technology, including its potential application to other ocular diseases, such as UsherSyndrome 2A (“USH2A”) and recurrent ocular Herpes Simplex Virus 1 (“HSV-1”) infection, as well as diseases of otherorgans and tissues.In March 2017 we entered into a strategic alliance and option agreement with Allergan PharmaceuticalsInternational Limited (“Allergan”), which we believe has the potential to expand and enhance our research and developmentefforts for ocular diseases. Under this agreement, Allergan received exclusive access and the option to license up to five ofour genome editing ocular programs, including our lead program for LCA10, and will be responsible for development andcommercialization of any program with respect to which it exercises its option. For 4 Table of ContentsLCA10 and one additional program, we retain the option to co-develop and co-commercialize products in the United States.We received an upfront payment of $90.0 million and have the potential to receive greater than $1.0 billion in contingentmilestone payments, as well as high single-digit royalties. With Allergan, we aim to advance a broad portfolio of first-in-classgenome editing medicines to treat serious diseases of the eye.In addition to developing medicines for ocular diseases, the development of engineered cell medicines is a core partof our research effort and product pipeline. We believe that advances in genome editing will both improve the characteristicsof current cellular medicines and also expand the universe of cellular medicines that can be created. To this end, we havedeveloped capabilities to efficiently and specifically edit T cells and hematopoietic stem cells, which we believe have thepotential to lead to best-in-class medicines for cancer and hemoglobinopathies. More broadly, we believe that our editingcapabilities can be applied to many additional cell types.In May 2015 we established a collaboration with Juno Therapeutics, Inc. (“Juno Therapeutics”) to developengineered T cell medicines for cancer. These therapies have the potential to substantially advance the field of cancerimmunotherapy and expand the range of cancers that can be treated with engineered T cells. Under the collaboration, wereceived an upfront payment of $25.0 million, and we have received two milestone payments totaling $5.0 million related totechnical progress in research programs under the collaboration. We also have the potential to receive approximately$700.0 million in aggregate in potential milestone payments, as well as tiered royalties. In addition, we are eligible to receiveresearch support of up to $22.0 million over the initial five year research term, subject to adjustment in accordance with theterms of the collaboration.We are also developing multiple gene editing approaches to treating hemoglobinopathies. These programs takeadvantage of our genome editing capabilities in hematopoietic stem cells (“HSCs”), which include two distinct genomeediting approaches at the hemoglobin gene locus. We believe one or both of these approaches has the potential to effectivelyand durably treat sickle cell disease and beta thalassemia.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 has the potential to be one of the next major newcategories. At Editas Medicine, we believe we can make that potential a reality.Our Values, Culture, and TeamOur values are the critical foundation upon which we have built our organization. They reflect how we think aboutthe patients we aspire to help, how we operate as a company, and who we hire. 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 5 Table of ContentsWe believe that our values, culture, and team 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 team’s substantial experience in translating groundbreaking scientificplatforms into therapeutic products and product candidates in many different diseases. This experience extends to our boardof directors, which is composed of people with deep experience in guiding biotechnology companies through rapid growthand the development of complex, breakthrough science.Our Strategy and Long Term GoalsWe aim to transform the treatment of a broad range of serious diseases by building an integrated genomic medicinecompany. Key elements of our strategy are to:·build the preeminent genomic medicine company;·advance therapeutic programs rapidly and rigorously to address patients’ needs;·perfect the tools to edit DNA;·accelerate the translational science of genome editing;·collaborate to realize the full potential of genome editing to create medicines; and·commercialize products to bring new medicines to patients. As part of our long term strategy, we have developed and articulated goals for our pipeline of experimental medicines andour company that we are working to achieve by the end of 2022. These goals, which we call “EM22”, include having at leastthree experimental medicines in early stage clinical trials and at least two additional experimental medicines in or ready forlate stage clinical trials. In addition, we aim to have a pipeline characterized by potential best-in-class medicines and to be acompany with the leading genome editing platform and organizational culture.Our Core Capability — Genome EditingHumans possess a genome sequence of roughly three billion base pairs of nucleotides, the building blocks of theDNA double helix. DNA serves as the blueprint for cellular structure and function. Small changes, or mutations, can occur inthe sequence of base pairs of our DNA. At the molecular level, these mutations can be categorized as single base pairchanges, small insertions or deletions, large deletions, duplications, or repetitive sequence expansions. A mutation couldoccur on one or both alleles, or copies, of a gene in a cell. In some cases, these mutations can lead to a failure to produceproteins that are necessary for normal function or the production of abnormal proteins, either of which can cause disease.Abnormal proteins can interfere with the function of the normal protein or lead to a new deleterious effect called a toxic gainof function. Genetically defined diseases vary dramatically in their pathologies, their sites of manifestation, and the specificnatures of their root causes. Familiar examples of genetically defined diseases include cystic fibrosis, Duchenne musculardystrophy, Huntington’s disease, retinitis pigmentosa, and sickle cell anemia.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. Genomic medicine harnessesthe knowledge of genetics to guide the care of patients and create new therapies. There are several technologies that have thepotential to create medicines in this field. These technologies can be grouped into two broad categories: gene therapy andgenome editing. Each approach seeks to address genetically defined diseases at the level of DNA.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 6 Table of Contentstransfers new DNA into cells, however it does not remove or modify the defective DNA and it generally introduces the newgenetic material in a location where it is not subject to the cell’s normal control and feedback mechanisms. This approach issuited for a finite set of genetically defined diseasesGenome editing is the process of revising, removing, or repairing defective DNA in situ. In general, genome editingcorrects the defective DNA in its native location, and consequently the repaired genetic region retains the cell’s normalcontrol and feedback mechanisms. Genome editing typically takes advantage of naturally occurring DNA repair mechanisms,including non-homologous end joining (“NHEJ”) and homology directed repair (“HDR”), to achieve its desired therapeuticoutcome. Edits that are repaired by NHEJ typically disrupt a gene or eliminate a disease causing mutation. Edits that arerepaired by HDR, including targeted insertion, aim to correct or replace aberrant DNA sequences. The diversity of geneticdrivers of disease demands a variety of solutions. Genome editing has the potential to deliver a variety of types of genomemodification to address a broad range of genetically defined diseases.Advantages of CRISPR for Genome EditingCRISPR technology uses a protein‑RNA complex composed of a type of enzyme, referred to as a DNAendonuclease, bound to an RNA molecule, referred to as a guide RNA, that has been designed to recognize a particular DNAsequence. A DNA endonuclease is an enzyme that cleaves DNA. This combination of a DNA endonuclease and a guide RNAonly bind and cut DNA when two criteria are met: first, the protein recognizes a short DNA specific to the enzyme called theprotospacer adjacent motif (“PAM”), and second, the appropriate portion of the guide RNA matches the adjacent DNAsequence. The PAM sequence that is recognized by the DNA endonuclease creates a second layer of recognition in additionto the guide RNA. We believe that CRISPR technology has three principal advantages for genome editing:·Rapid, comprehensive, and systematic identification of product candidates. The key targeting mechanism forthe endonuclease, whether it is Cas9 or Cpf1, is a guide RNA, which can be rapidly replaced with a differentguide RNA or optimized by changes as small as a single nucleotide. This allows for the flexible design,synthesis, and testing of hundreds of guide RNA/endonuclease combinations for each genetic target in order tofind those that cut the DNA target with the optimal efficiency and specificity. In contrast, other commonly usedDNA nucleases for genome editing have inherently limited flexibility. For example, zinc finger nucleases,engineered meganucleases, and transcription activator‑like effector nucleases (“TALENs”) use proteins for DNAsequence recognition to bring the endonuclease to the site of the genome where cleavage is desired, requiringthe creation of an entirely new protein for each target site.·Simultaneous and efficient targeting of multiple sites. In CRISPR technology, multiple guide RNAs can beprovided along with the same endonuclease, enabling the simultaneous and efficient targeting of multiple sites.This ability to target multiple DNA sequences expands the applicability of CRISPR technology and also createsthe potential for self‑regulating systems that control exposure to the editing machinery. To address more thanone target, other genome editing technologies require the engineering, characterization, manufacture, anddelivery of distinct nuclease proteins for each target.·Ability to achieve a range of different types of edits. The inherent differences in Cas9 and Cpf1 and theavailability of different engineered variants of both enzymes allow for different types of cuts for genomeediting. We are able to make a blunt cut, cut either strand of the DNA, or create overhangs of differing length.This may be a critical component of improved HDR‑driven approaches because the type of DNA cut caninfluence the type of repair mechanism used by a cell in response to that cut. We believe the ability to modifyCRISPR technology to allow for different types of cuts will expand the potential of our genome editingplatform.Our Genome Editing PlatformWe have developed a proprietary genome editing platform consisting of four interrelated components that aredesigned to address four key goals of genome editing:·creating a comprehensive toolbox for robust and selective genome engineering; 7 Table of Contents·providing efficient and targeted delivery to any tissue or cell;·effecting spatial and temporal control of gene editing and specificity; and·orchestrating 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 diseases. All of our programs to developmedicines leverage aspects of this platform while also providing insights that help improve our ongoing and future drugdevelopment capabilities. We believe our genome editing platform forms the basis for our ongoing leadership in the fieldand differentiates us from other companies working in genome editing.Nuclease and Guide RNA EngineeringWe use our genome editing platform to identify and optimize both the enzyme, including Cas9 and Cpf1, as well asadvanced forms of each, and the guide RNA molecule, to create what we believe will be the optimal endonuclease‑guideRNA complex for a given disease target. We have made substantial advances in the characterization and modification ofdifferent natural and engineered variants of Cas9 and Cpf1 enzymes and in the design, synthesis, modification, analysis, andcharacterization of guide RNAs. We believe the diversity of the Cas9 and Cpf1 enzymes that we are currently employing andthose that we are continuing to further develop and characterize have the potential to provide us with a competitiveadvantage as we develop a range of products with different technical needs. We believe our systematic approach tomeasurement of both the efficiency and specificity of multiple possible enzyme and guide RNA combinations enables us tooptimize the identification of lead molecules to progress into more advanced testing. Our aim is to continue to develop newengineered Cas9 and Cpf1 enzymes with altered PAM specificities, different DNA cutting capabilities, and additionaladvanced properties. For example, we are using directed evolution, a form of guided protein engineering, to develop Cas9enzymes that have higher fidelity than naturally occurring Cas9. We believe that further developing our nuclease and guideRNA engineering capabilities will allow us to further broaden the range of diseases we can treat while at the same timeensuring that our products have the best possible safety profiles.We have characterized different Cas9 and Cpf1 enzymes for several reasons. Firstly, a smaller enzyme will haveadvantages for delivering the endonuclease using a viral vector due to the inherent size limitations of most such deliverysystems. For example, the Cas9 enzyme from Staphylococcus aureus (“S. aureus” or “SaCas9”) is significantly smaller thanthat from Streptococcus pyogenes (“S. pyogenes” or “SpCas9”) (3,159 vs. 4,104 base pairs), and this is important whenworking with adeno-associated virus (“AAV”) as a delivery vector, which has an effective packaging limit of approximately4,700 base pairs. Secondly, identifying Cas9 and Cpf1 enzymes with different editing properties will expand the number ofpotential editing sites in the human genome. As shown below, the range of natural and engineered variants of Cas9 and Cpf1have significantly expanded the number of sites in the human genome that we can potentially target. As compared to themost commonly used, naturally occurring version of Cas9, from the bacterial species S. pyogenes, the range of endonucleasesin our platform can target approximately ten times as many genomic sites. Thus, while the S. pyogenes Cas9 can targetapproximately 1 in 10 bases in the human genome, we have the potential to hit over 95% of all bases due to the wide rangeof endonucleases at our disposal. 8 Table of ContentsComparison of Number of Genomic Sites Targetable by Various Enzymes and VariantsIn 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.Of critical importance in determining the activity and specificity of an endonuclease-guide RNA complex isunderstanding the quality and composition of the guide RNA. The ability to understand the quality and composition of theguide RNA will be an essential component to developing product candidates that have the potential to be safe andefficacious medicines. We have developed significant analytical and synthetic capabilities as a result of acquiring assets andcapabilities of i2 Pharmaceuticals, Inc. and certain of its affiliated companies in January 2018. In addition to state of the artmass spectrometry and sequencing methodologies to understand the absolute composition of our guide RNAs, we havedeveloped two-step synthesis methods which results in guide RNAs which we believe are significantly superior to thosegenerated by other approaches. This method allows us to independently synthesize and purify guide RNAs in multiple partsand covalently couple them using a proprietary catalyst-free chemistry. These covalently coupled, dual guide RNAs retainthe advantages afforded by a single guide RNA and we believe are of higher quality than a guide RNA made by a singlesynthesis reaction. We believe this method will lead to higher quality genome editing medicines.DeliveryOur genome editing platform includes multiple modular delivery modes that can be efficiently adapted to deliverdifferent CRISPR genome editing components to address the specific needs of each disease targeted. Our strategy is toleverage existing delivery technologies to target cell types of interest while developing next generation capabilities aswarranted. We are currently exploring, and will continue to explore, a variety of delivery approaches, including AAVs, lipidnanoparticles (“LNPs”), and the use of electroporation. For example, we have taken advantage of the smaller S. aureus Cas9and existing AAV technology to construct an “all‑in‑one” viral vector that is able to deliver the DNA coding for the nucleaseprotein and one or two guide RNAs directly to cells. We believe our ability to configure all the components for genomeediting in an “all‑in‑one” AAV vector has substantial advantages for manufacturing and delivery compared to approachesthat rely on multiple vectors. In addition, we have also made substantial advances in the ex vivo delivery of CRISPR systemsto mature human T cells and hematopoietic stem cells derived from the bone marrow. We have been able to demonstrategreater than 90% ex vivo editing on multiple genetic targets simultaneously in human T cells and greater than 75% ex vivoediting in hematopoietic stem cells using ribonucleoprotein complexes, which consist of the Cas9 or Cpf1 endonucleasecomplexed with its guide RNA. These results are consistent across multiple cell donors and multiple target genes.Control and SpecificityControl of cellular exposure to the endonuclease‑guide RNA complex and specificity of the DNA cut are importantto optimizing the location and duration of editing activity. We believe these features are critical to designing medicines thatare both safe and effective, and we are developing and applying technologies in these areas. We strive to identify, measure,and eliminate off‑target activity in a systematic and scalable manner as we optimize our molecules. To 9 Table of Contentsaccomplish this, we have combined multiple orthogonal methods in the design, testing, and optimization process. Ourstrategy to assess specificity during the research stage includes:·Establish industry‑leading computational tools to design guide RNAs. In order to design highly selective guideRNAs, we compare the targeted DNA sequence to the sequence of the entire human genome to identify allsequences that have significant similarity to the targeted DNA sequence. Based on our internal algorithms, weeliminate any guide RNAs that have certain defined degrees of similarity to other sites across the genome. Wecontinually refine our guide RNA design algorithms based on results from large‑scale guide RNA screens andfurther confirmation and refinement experiments. We expect that this will enhance our ability to design efficientand specific guide RNAs as our database expands over time.·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 use multiplemethods to empirically assess specificity in order to test for a variety of potential off‑target cuts at sites bothsimilar and dissimilar to the targeted DNA site so that we can select for advancement those molecules with nooff-target activity in these assays.·Create validated assay panels composed of potential off‑target sites identified by both computationalapproaches and other unbiased methods. These verification assay panels, or targeted resequencing assay, willthen be applied to in vitro and in vivo experimental systems to confirm specificity as we advance to the clinic.Included in these assay panels are genome detection methods that allow detection of multiple editing events ina single reaction. Our proprietary Uni-Directional Targeted Sequencing method (“UDiTaS”) is a simple, efficientway to simultaneously measure small and large editing events at single nucleotide resolution and provideaccurate quantification of these events.To optimize the specificity of our product candidates, there are a number of different aspects of the productconfiguration that we customize in addition to the sequence and quality of the guide RNA, including the length of the guideRNA, the type of Cas9 or Cpf1 enzyme, the delivery vector, the use of tissue‑selective promoters, and the duration ofexposure all contribute to overall specificity. For example, to reduce the potential persistence of genome editing activity, weare developing self‑regulating genome editing systems designed to deliver not only the endonuclease‑guide RNA complex,but also an “off switch” that reduces the presence of the endonuclease‑guide RNA complex over time. We have completedstudies of these systems that demonstrate the ability to both maintain on‑target editing and also reduce levels of editingcomponents once the on‑target edit is expected to have been completed.Directed EditingThere are different mechanisms that a cell can use to repair cuts in DNA. Each mechanism results in different kindsof genetic changes. We are developing approaches to selectively harness specific DNA repair mechanisms to be able to drivethe appropriate type of repair for a given disease. The ability to direct the DNA repair mechanism and influence theutilization of a DNA repair template 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 our existing programsand opens up new opportunities to develop medicines, including medicines that rely on specific template utilization events.We have achieved significant levels of DNA template directed genetic change in ex vivo edited primary human Tcells and hematopoietic stem cells. Using long single stranded DNA template molecules, we have achieved greater than 40%directed editing. Using vial donor templates, we have achieved greater than 70% targeted insertion at specific genomiclocations. We believe that these advancements will enable us to create medicines that may be superior to traditional genetherapy.Our Genomic Medicine ProgramsWe have initiated a diversified range of research programs across multiple therapeutic areas. Our initial productdevelopment strategy is to primarily target genetically defined diseases with a focus on debilitating illnesses where there 10 Table of Contentsare poor or no approved treatments and where the genetic basis of disease is well understood. While our discovery effortshave ranged across several different diseases and therapeutic areas, the two areas where programs are more mature are oculardiseases and engineered cell medicines. We believe the therapeutic programs and delivery technologies we have chosen todate will demonstrate the depth and breadth of our ability to deploy our genome editing platform to treat patients in needwith either genetically defined or genetically treatable diseases. A summary of our experimental medicines underdevelopment is presented in the following graphic:Eye DiseasesWe have granted Allergan an exclusive option to exclusively license from us up to five collaboration developmentprograms for the treatment of ocular disorders, including our LCA10 program, subject to our right to elect to participate in aprofit-sharing arrangement with Allergan in the United States with respect to our LCA10 program and up to one othercollaboration development program. See “Our Collaboration and Licensing Strategy" below for more information.Leber Congenital Amaurosis 10Leber Congenital Amaurosis (“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, painful eye response to bright light, and absence of measurable electroretinogramrecordings due to a lack of functional photoreceptor cells. The most common form of the disease is LCA10, a monogenicdisorder that represents approximately 20-30% of all LCA subtypes. LCA10 is caused by autosomal recessive mutations inthe CEP290 gene, which encodes a protein required for the survival and proper function of photoreceptor cells. The mostfrequently found mutation within the CEP290 gene, occurring in approximately 85% of north and west European patientswith LCA10, is an A to G nucleotide change that disrupts 11 Table of Contentsnormal splicing, or processing, of the gene message, ultimately resulting in a deficiency of functional CEP290 protein.Decreased CEP290 protein leads to loss of photoreceptor function and cells over time, which leads to blindness.We are developing a genome editing therapeutic for LCA10 that uses an AAV5 vector to deliver the DNA encodingCas9 and two guide RNAs to photoreceptor cells in the eye. Our product candidate is called EDIT-101 and it is designed toeliminate the A to G nucleotide change in a non-coding region, or intron, of the CEP290 gene by cutting out that nucleotideand surrounding DNA. We believe this genome editing approach has the potential to restore normal protein expression andfunction of the remaining photoreceptor cells, which could arrest or improve the further loss of vision in LCA patients.We have tested combinations of Cas9 and guide RNA pairs in vitro in cells that were obtained from patients with theCEP290 mutation to determine whether they could successfully edit the mutation and lead to correctly spliced messengerRNA (“mRNA”) and correctly produced CEP290 protein. We isolated and analyzed DNA from these edited cells andobserved removal of the mutation-containing region in the DNA. These studies also demonstrated that the edit restoredsignificant levels of normal mRNA and lowered the levels of mutant mRNA, as compared to controls of untreated patientcells. This restoration of normal mRNA expression suggests that we successfully edited the LCA10 gene defect in these cells.In these studies, we also observed two-fold and greater increases in full-length CEP290 protein expression comparedto untreated patient cell controls. We believe this demonstrates that successful editing of the genetic defect that causesLCA10 also leads to increased expression of the normal CEP290 protein. It is our view that increased expression of normalCEP290 protein could improve or arrest the further loss of vision in LCA10 patients.Certain clinical research studies estimated that retention of 10% of photoreceptors can impart meaningful vision inhumans. Based on these studies, we have prespecified a therapeutic target of 10% productive editing of photoreceptors withthe assumption that each productively edited photoreceptor will be fully functional.To investigate genome editing in vivo, we conducted studies in nonhuman primates using subretinal injection of anAAV5 expressing Cas9 and nonhuman primate specific guide RNAs. After either six or 13 weeks, animals were euthanizedand retinal tissue from the injected region was removed for analysis. These studies showed that AAV genomes and Cas9expression were limited to photoreceptors. In addition, we estimate that 12-22% and 50% of CEP-290 alleles wereproductively edited at six weeks and at 13 weeks, respectively. In these studies, productive editing is defined as theproportion of photoreceptor cells edited in a manner that we believe will restore CEP290 protein function. All of these valuesexceed our prespecified therapeutic target of 10% productive editing.In addition, we developed a retinal explant system to explore the potential effectiveness EDIT-101 in human tissue.In these studies, retinas from human cadavers were dissected, placed in culture, and exposed to EDIT-101 at a low and a highdose. After 14 days or 28 days in culture, genome editing was analyzed to determine the rate of productive editing inphotoreceptors. These studies showed time-dependent and dose-dependent editing that exceeded our therapeutic target at alltimes and doses tested, including over 50% editing after 28 days at the high dose.To characterize editing specificity, we have applied a combination of methods to quantify the frequency ofmodification at the targeted DNA location and to assess the potential for modification at off-target locations in the genome.For each guide RNA included in the studies above, we measured the potential for off-target activity using multiple analyticaltechniques, including GUIDE-Seq, Digenome-Seq, our proprietary UDiTaS system, and bi-directional polymerase chainreaction and deep sequencing. With these techniques we have assessed the specificity of each guide RNA in certain cellculture systems and tissue types and we were able to clearly identify several guide RNAs that showed no detectable off-targetactivity. We believe our detailed characterization of editing specificity allows us to select guide RNA and endonucleasecombinations with the highest likelihood of providing clinical benefit in patients while working to minimize potential safetyrisks.Other Eye DiseasesWe are also pursuing the development of therapies for eye diseases other than LCA10, including HSV‑1, infectionsand USH2A. We believe that our experience with the LCA10 program will support the development of 12 Table of Contentstherapies for these other eye diseases. For example, the successful construction, packaging, and testing of the components ofthe AAV vector we are pursuing for LCA10 will continue to inform our approach to treating the most common cause ofUSH2A.Herpes Simplex Virus 1HSV‑1 causes lifelong infections mainly leading to ocular and oral disease. Infected individuals develop persistentlatent infections, mainly in the nerves in the affected part of the body. During latency, the HSV‑1 DNA does not integrateinto the infected individual’s genome, but rather it remains within the individual’s cells as independent viral genomicmaterial. The latent HSV‑1 virus can then be reactivated by illness, emotional or physical stress, and other conditions. Ocularinfection with HSV‑1 is a major health problem, especially in developed countries. It is the most common infectious cause ofblindness in developed economies with over 25,000 recurrent cases each year. Recurrent activation of HSV-1 virus causescorneal damage and scarring, which impairs the ability to see. Existing therapies have only partial benefit in preventing theinitial HSV‑1 infection or recurrences. As a result, there is a need for an effective therapy that prevents or reduces reactivationof latent HSV‑1. Our ongoing research program aims to deliver the CRISPR molecular machinery to the eye and specificallycleave and inactivate latent HSV‑1 DNA with the goal of eliminating or reducing reactivation.Usher Syndrome 2AUSH2A gene mutations are the most common cause of Usher syndrome, a form of retinitis pigmentosa that alsoincludes hearing loss. Loss of the usherin protein encoded by the USH2A gene leads to a degeneration of the retina andprogressive vision loss. More than 200 mutations have been identified for this gene. Our initial goal in this research programis to address mutations within exon 13, which is the location of the highest percentage of USH2A gene mutations. Webelieve there are approximately 14,000 USH2A patients including up to approximately 4,000 Usher syndrome patients withthe mutation we aim to correct.We have granted Allergan an exclusive option to exclusively license from us up to five collaborationdevelopment programs for the treatment of ocular disorders, including our LCA10 program, subject to our right to elect toparticipate in a profit-sharing arrangement with Allergan in the United States with respect to our LCA10 program and upto one other collaboration development program. See “Our Collaboration and Licensing Strategy" below for moreinformation.Engineered Cell MedicinesCollaboration with Juno Therapeutics on Engineered T Cells to Treat CancerEngineered T cells have shown encouraging clinical activity against multiple cancers, culminating in the recentapproval of two such therapies in the United States. Because of these promising results, there is significant interest in themedical community in expanding the application of this technology across a broader range of cancers and patients. Webelieve that our genome editing technology has the potential to improve multiple properties of these T cell therapies. If weare successful, genome-edited engineered T cells have the potential to significantly expand the types of cancers treatable bychimeric antigen receptor (“CAR”)/engineered T cell receptor (“Engineered TCR”) T cells and to improve the outcomes ofthese therapies. Through our collaboration with Juno Therapeutics, a leader in the emerging field of immuno-oncology, we haveapplied our genome editing technology to multiple gene targets in order to improve the efficacy and safety of CAR/Engineered TCR T cells directed against a range of tumor types. In addition, we are currently optimizing genome editingcomponents and delivery methods compatible with engineered T cell manufacturing methods developed by JunoTherapeutics. We have achieved success in a number of areas within our collaboration with Juno Therapeutics and havereceived two milestone payments to date, totaling $5.0 million.One important challenge in the field of T cell therapies for cancer has been to use Engineered TCRs to direct theelimination of cancers based on the presence of intracellular cancer antigens. Engineered TCRs differ from CARs in that theyrecognize small peptides that are generally derived from proteins that reside inside the cell. These intracellular 13 Table of Contentsproteins are important potential targets for cancer immunotherapy. With Juno Therapeutics, we have demonstrated inpreclinical studies that disruption of the natural T cell receptor combined with the introduction of an Engineered TCRresulted in significantly improved in vitro T cell function. Furthermore, the elimination of the natural T cell receptor (“TCR”)has the potential to make a safer medicine as the Engineered TCR will not be able to interact with the natural TCR to createnew, and potentially unwanted, functionality. We believe this innovation may broaden the therapeutic opportunity forengineered T cells.Non‑malignant Hematologic DiseasesWe are developing approaches for genome editing in HSCs to support the advancement of research programs to treatnon-malignant hematological diseases. For example, we are actively pursuing multiple gene editing approaches to treatinghemoglobinopathies and assessing other opportunities to develop medicines for diseases where we believe gene editing ofHSCs is likely to produce a therapeutic effect.We have taken two distinct genome editing approaches at the hemoglobin locus with the aim of developing best-in-class medicines for sickle cell disease and beta thalassemia. Our first approach is focused on editing a novel site within thehemoglobin locus that we believe has the potential to create superior expression of fetal hemoglobin. Based on theobservation that patients with elevated fetal hemoglobin levels have better clinical outcomes, we believe this approachcould significantly benefit people with sickle cell disease. Our second genome editing approach uses CRISPR editing andtargeted insertion to restore natural hemoglobin expression and eliminate the sickle cell mutation. Using this approach, wehave shown in studies that we can achieve greater than 30% targeted insertion at the beta globin gene locus, the gene locusthat contains the sickle cell mutation, in CD34+ human stem cells, and we believe that this may restore hemoglobinexpression and eliminate the sickle cell mutation.Early Discovery ProgramsDuchenne Muscular DystrophyDuchenne muscular dystrophy (“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. The United States Food and Drug Administration (the “FDA”) has approved only twotherapies for the treatment of DMD. The disease is caused by mutations in the gene that encodes dystrophin, a structuralprotein that is important for normal muscle health. Loss of dystrophin function leads to muscle degeneration. We believe thatrestoring dystrophin activity before the onset of severe loss of muscle function could significantly and favorably alter diseaseprogression.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.Cystic FibrosisCystic fibrosis (“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. The gene that causes CF encodes the cysticfibrosis transmembrane conductance regulator (“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. Correcting the CF mutations in lung epithelial 14 Table of Contentscells will require efficient editing of these cells and development of advanced pulmonary delivery modalities. We aim toestablish multiple collaborations with academics, foundations, and other companies developing novel lung deliveryapproaches to achieve these goals. To that end, in May 2016 we entered into an award agreement with Cystic FibrosisFoundation Therapeutics, Inc. (“CFFT”) pursuant to which CFFT has agreed to pay us up to $5.0 million over theagreement’s three year term to support our CF development program and related technology research and development.Under the terms of the agreement, we are required to contribute additional funds to the program in an amount equal to thefunds contributed by CFFT and to pay certain amounts to CFFT upon the achievement of specified events.Alpha‑1 Antitrypsin DeficiencyAlpha‑1 antitrypsin deficiency is a genetic disease caused by production of an abnormal alpha‑1 antitrypsin(“A1AT”) protein, leading to lung and liver disease. A1AT is one of the primary proteins made in the liver and its normalactivity protects the lungs from pro‑inflammatory enzymes. This disease affects about one in 1,500 to 3,500 individuals ofEuropean ancestry. Mutations in A1AT lead to accumulation of A1AT aggregates in the liver and may cause cirrhosis. Inaddition, loss of A1AT activity in the lung may result in emphysema. The current standards of care are weekly intravenousinfusions of functional A1AT protein obtained from human donor plasma, and lung or liver transplant for severe cases. Ourgenome editing approach starts with deleting, through NHEJ, the gene in the liver to prevent liver disease, followed by genecorrection in the liver to address both liver and lung disease.Our Collaborations and Licensing StrategyJuno Therapeutics Collaboration and License AgreementIn May 2015, we entered into a collaboration and license agreement with Juno Therapeutics for the research anddevelopment of engineered T cells with CARs and TCRs that have been genetically modified to recognize and kill othercells. In particular, Juno Therapeutics and we will research and develop CAR and TCR engineered T cell products acrossthree research programs over a five‑year period, ending on May 26, 2020. Juno Therapeutics has the option to extend theresearch period through May 26, 2022, upon payment of one‑year extension fees in the mid‑single‑digit millions of dollarsper year. We refer to the five‑ to seven‑year period as the research 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 (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 Therapeutics under the mutually agreed research plan and to our genome editing reagents forfurther research and development of CAR and TCR engineered T cell products. Juno Therapeutics granted to us anon‑exclusive, worldwide, royalty‑free, and non‑sublicensable license to certain Juno Therapeutics patents solely for thepurpose of our conducting the research activities assigned to us under the mutually agreed research plan. 15 Table of ContentsDuring 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 agreementand except pursuant to the collaboration agreement, we may not conduct or participate in, and may not license, fund, orotherwise enable a third party to conduct or participate in, research, development, manufacturing, or commercializationactivities with respect to a certain type of CAR or TCR engineered T cell product for use in the Exclusive Field, where suchproduct targets a protein designated by Juno Therapeutics during the research program term as a target for Juno Therapeutics’further research and 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 with respect to anengineered T cell within a program, then we can, as our exclusive remedy to Juno Therapeutics’ failure, convert the exclusivelicense we granted to Juno Therapeutics to a non‑exclusive license to Juno Therapeutics with respect to the particularengineered T cell to which Juno Therapeutics’ failure relates.The collaboration is supervised by a joint research committee (“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 and we have received two milestone payments totaling $5.0 million under the collaboration for technicalprogress in two research programs. In addition, we have the potential to receive up to $22.0 million in research support over afive year term across the three programs under our collaboration, subject to adjustment in accordance with the terms of theagreement, of which we had recognized $12.2 million as of December 31, 2017, inclusive of the $5.0 million in milestonepayments. We are eligible to receive future research and regulatory milestones of approximately $160.0 million for each ofthe first products developed in each of the three research programs, of which we have achieved two milestone payments of$2.5 million each. We also are eligible to receive future commercial sales milestones of $75.0 million based on certainspecified thresholds of aggregate, worldwide net sales of all engineered T cell products within each of the three researchprograms. Further, we are eligible to receive tiered royalties of low double‑digit percentages of Juno Therapeutics’ net salesof products licensed under our collaboration agreement. Juno Therapeutics’ obligation to pay royalties on a licensed productwill expire on a product‑by‑product and 16 Table of Contentscountry‑by‑country basis upon the later of the tenth anniversary of the first commercial sale of such licensed product and theexpiration of the last to expire valid claim within the licensed patents covering such licensed product. If Juno Therapeutics isrequired to pay royalties on net sales of a licensed product to a third party because the licensed product is covered under thethird party’s patent, then Juno Therapeutics can credit a certain percentage of its payments to the third party against theroyalties 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.As of the date of this Annual Report on Form 10-K, Juno Therapeutics has been acquired by Celgene Corporation.We do not anticipate that this acquisition will have a significant impact on our collaboration with Juno Therapeutics.Allergan Strategic Alliance and Option AgreementIn March 2017, we entered into a strategic alliance and option agreement with Allergan to discover, develop, andcommercialize new gene editing medicines for a range of ocular disorders. Over a seven-year research term, Allergan willhave an exclusive option to exclusively license from us up to five collaboration development programs for the treatment ofocular disorders (each, a “Collaboration Development Program”), including our LCA10 Program. We will use commerciallyreasonably efforts to develop at least five Collaboration Development Programs and deliver preclinical results and datameeting specified criteria with respect to each Collaboration Development Program (each, an “Option Package”) toAllergan. We will generally have responsibility for the conduct of each Collaboration Development Program and soleresponsibility for all development costs of each Collaboration Development Program prior to any exercise by Allergan of itsoption to acquire an exclusive license to such Collaboration Development Program under the terms of the agreement. If at theend of the seven-year research term we have not delivered five Collaboration Development Programs that satisfy the OptionPackage criteria for each such program, the research term shall automatically extend by one-year increments until suchobligation is satisfied, up to three additional years (the “Research Term”). In connection with entering into this agreement,Allergan paid us a one-time up-front payment of $90.0 million. In addition, within 45 days of the acceptance by theapplicable regulatory authority of our submission of an investigational new drug application with respect to the LCA10Program, Allergan is required to pay us a one-time payment of $25.0 million, whether or not Allergan exercises its optionunder the agreement to acquire an exclusive license with respect to the LCA10 Program.Upon delivery of an Option Package with respect to a Collaboration Development Program to Allergan, Allergan isentitled, for specified periods of time thereafter (each, an “Initial Option Period”), to exercise an option (an “Option”) toacquire from us an exclusive (even as to us and our affiliates) world-wide right and license to our background intellectualproperty and our interest in the Collaboration Development Program intellectual property to 17 Table of Contentsdevelop, commercialize, make, have made, use, offer for sale, sell, and import any gene editing therapy product that resultsfrom such Collaboration Development Program during the term of the agreement (a “Licensed Product”) in any category ofhuman diseases and conditions other than the diagnosis, treatment or prevention of any cancer in humans through the use ofengineered T-cells and subject to specified other limitations. Following the exercise of an Option, Allergan will have theright to grant sublicenses subject to specified terms, under Allergan’s exclusive license to our background intellectualproperty and our interest in the Collaboration Development Program intellectual property, to develop, commercialize, make,have made, use, offer for sale, sell, and import Licensed Products. Upon the exercise of an Option within the Initial Option Period, Allergan is required to pay to us an option exercisefee of $15.0 million. At any time during the Initial Option Period, Allergan may also elect to extend the period of time inwhich it may exercise the Option to permit additional development work with respect to the Collaboration DevelopmentProgram, and in connection with such extension Allergan will be required to pay us an option extension fee of $5.0million. If, following such an extension, Allergan exercises the Option following the Initial Option Period, Allergan will berequired to pay us a higher option exercise fee of $22.5 million plus specified costs incurred by us in connection with theadditional development work. If Allergan does not exercise an Option within a specified option exercise period and anyextension thereof, such Option will terminate.In addition, subject to specified limitations, at the end of the Research Term, Allergan will have the right, for aspecified period of time, to exercise an Option with respect to each Collaboration Development Program for which we havenot yet delivered an Option Package. Upon the exercise by Allergan of any such option, Allergan is required to pay to us anoption exercise fee in the low-seven digits. Following the exercise by Allergan of an Option with respect to a Collaboration Development Program, Allerganwill be responsible for the development, manufacturing and commercialization of any Licensed Products thereunder and willbe required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize at least oneLicensed Product thereunder. If Allergan exercises its Option for the LCA10 Program, subject to Allergan’s financialresponsibility and final decision-making authority with respect to any development activities following such exercise, wewill remain primarily responsible for conducting the LCA10 Program through the acceptance for filing of the first INDapplication with respect to the LCA10 Program.We are entitled to receive clinical, regulatory, and launch milestone payments from Allergan up to a low-nine-digitamount in the aggregate and further commercial milestone payments up to a high-eight-digit amount in the aggregate withrespect to each Collaboration Development Program for which Allergan exercises its Option, with certain of such milestonepayments subject to reduction under certain circumstances. In the aggregate, we are eligible to receive clinical, regulatory,launch, and commercial milestone payments that could exceed $200.0 million for an indication in the first field perCollaboration Development Program, as well as the potential for additional regulatory milestones for indications in up to twoadditional fields. We are also entitled to receive royalties in the high-single digit percentages with respect to net sales ofLicensed Products, subject to certain reductions under specified circumstances, and we will remain obligated to pay alllicense fees, milestone payments, and royalties due to its upstream licensors based on Allergan’s exercise of its license rightswith respect to Licensed Products. Allergan’s obligation to pay royalties will expire on a country-by-country/LicensedProduct-by-Licensed Product basis upon the latest of the expiration of patent-based exclusivity with respect to the applicableLicensed Product in the applicable country, expiration of regulatory-based exclusivity with respect to the applicableLicensed Product in the applicable country and the tenth anniversary of the first commercial sale by Allergan of theapplicable Licensed Product in the applicable country. We are generally required to pay to Allergan royalties in the low- tomid-single digit percentages on net sales of products developed under Collaboration Development Programs that Allerganterminated following exercise of its Option, in each case over royalty terms equivalent to those for the royalties due to usunder the agreement.With respect to the LCA10 Program and up to one other Collaboration Development Program of our choosing,following the exercise by Allergan of its Option to such programs, we will have the right to elect to participate in a profit-sharing arrangement with Allergan in the United States, on terms mutually agreed by us and Allergan and subject to a right ofAllergan to reject such election under certain circumstances, under which we and Allergan would share equally in net profitsand losses on specific terms to be agreed between us and Allergan, in lieu of Allergan paying royalties on net sales of anyapplicable Licensed Products in the United States and in such event Allergan’s milestone payment obligations would bereduced, with our being eligible to receive clinical, regulatory, and launch milestone 18 Table of Contentspayments up to a low nine-digit amount in the aggregate and further commercial milestone payments up to a high-eight digitamount in the aggregate, subject to reduction under certain circumstances. If we elect to participate in a profit-sharingarrangement, we are obligated to reimburse Allergan for half of the development costs incurred by Allergan with respect tothe applicable Collaboration Development Program and Allergan will retain control of all development andcommercialization activities for the applicable Licensed Products. Under the agreement, we and Allergan will establish analliance steering committee (“ASC”) comprised of three members from each of us and Allergan, which will have review,oversight and decision-making responsibility for selecting the targets and indications and certain Option Package criteria forthe Collaboration Development Programs and determining whether the Option Package criteria for a CollaborationDevelopment Program have been satisfied. With respect to a given Collaboration Development Program, all decisions of theASC will be made by consensus, subject to specified final decision-making rights, with each of us and Allergan having onevote.During the Research Term, neither we nor any of our affiliates will, subject to specified exceptions in the agreement,develop, manufacture or commercialize any gene editing therapy in the ocular field, or grant a license or sublicense todevelop, manufacture or commercialize any gene editing therapy in the ocular field. During the Research Term, neitherAllergan nor any of its affiliates will, subject to specified exceptions in the agreement, develop, manufacture orcommercialize, or grant a license or sublicense to develop, manufacture or commercialize, any gene editing therapy in theocular field directed to any ocular indication to which any gene editing therapy in any non-terminated CollaborationDevelopment Program is directed or the same target to which any gene editing therapy in any non-terminated CollaborationDevelopment Program is directed. After the Research Term, neither we, Allergan nor any of their respective affiliates will,subject to specified exceptions in the agreement, develop, manufacture or commercialize, or grant a license or sublicense todevelop, manufacture or commercialize, any gene editing therapy in the ocular field directed to any ocular indication towhich any Licensed Product is directed or any target to which any Licensed Product is directed. Unless earlier terminated, the term of the agreement will expire upon (i) the expiration of the Research Term ifAllergan does not exercise any Option or (ii) the expiration of all payment obligations under the agreement. In addition toother termination rights, Allergan has the right to terminate the agreement (i) in its entirety for an uncured material breach byus and (ii) in its entirety for any reason on a program-by-program basis for the Collaboration Development Programs forwhich Allergan has exercised its Option with 90 days’ written notice. Additionally, Allergan may terminate the ResearchTerm (a) on a Collaboration Development Program-by-Collaboration Development Program basis upon written notice to usin the event of a change of control of us or (b) for all Collaboration Development Programs, provided that, Allergan will nothave any right to exercise any Option for any such Collaboration Development Program following any such termination. IfAllergan terminates the Agreement for our material breach, subject to Allergan’s continued payment, reporting, and auditobligations under the agreement, Allergan has the right to retain all licenses granted under the agreement and Allergan willno longer have any diligence obligations with respect to the Licensed Products.Intellectual Property LicensesWe 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 and transcriptionactivator‑like effector (“TALE”)‑related compositions of matter and their use for genome editing. These licenses imposevarious diligence and financial payment obligations on us. We expect to continue to enter into these types of licenseagreements in the future. We consider the following license agreements to be material to our business.The Broad Institute and President and Fellows of Harvard College License AgreementIn October 2014, we entered into a license agreement with The Broad Institute, Inc. (“Broad”) and the President andFellows of Harvard College (“Harvard”), for specified patent rights. In December 2016, we amended and restated this licenseagreement and further amended the agreement in March 2017 (the “Cas9‑I License Agreement”). Among other things, theCas9‑I License Agreement amended the original license agreement by excluding additional fields from the scope of theexclusive license granted to us; converting the exclusive license to three specified targets to a non‑exclusive license, subjectto specified limitations; revising certain provisions relating to the rights of Harvard and Broad to grant further licenses underspecified circumstances to third parties that wish to develop and commercialize 19 Table of Contentsproducts that target a particular gene and that otherwise would fall within the scope of our exclusive license; and providingHarvard and Broad with certain rights to designate, and reserve all rights to, gene targets for which the designating institutionhas an interest in researching and developing products that would otherwise be covered by rights licensed to us. The licensesgranted to us under the Cas9‑I License Agreement include rights to certain patents solely owned by Harvard (the “HarvardCas9‑I Patent Rights”), certain patents co‑owned by the Massachusetts Institute of Technology (“MIT”) and Broad, certainpatents co-owned by MIT, The Rockefeller University (“Rockefeller”), and Broad, and certain patents co‑owned by MIT,Broad and Harvard. We refer to all the patents and patent applications licensed to us under the Cas9‑I License Agreement asthe Harvard/Broad Cas9‑I Patent Rights.Certain patent applications in the Harvard/Broad Cas9-I Patent Rights are jointly owned by Rockefeller. In February2017, Broad and Rockefeller entered into an inter-institutional agreement pursuant to which Rockefeller authorized Broad toact as its sole and exclusive agent for the purposes of licensing Rockefeller’s rights in such Harvard/Broad Cas9-I PatentRights and any additional related patents or patent applications that Rockefeller may jointly own with Broad. The March2017 amendment to the Cas9-I License Agreement included a license to Rockefeller’s rights in such patents and patentapplications.The Harvard/Broad Cas9‑I Patent Rights are directed, in part, to certain CRISPR/Cas9 and TALE‑relatedcompositions of matter and their use for genome editing and to certain CRISPR/Cas9 and TALE‑related deliverytechnologies. Pursuant to the Cas9‑I License Agreement, and as of December 31, 2017, we have certain rights under 37 U.S.patents, 64 pending U.S. patent applications, 11 European patents and related validations, 38 pending European patentapplications, and other related patent applications in jurisdictions outside of the United States and Europe.Pursuant to the Cas9‑I License Agreement, Harvard and Broad granted us an exclusive, worldwide, royalty‑bearing,sublicensable license to the Harvard/Broad Cas9‑I Patent Rights to make, have made, use, sell, offer for sale, have sold,import, and export products and services in the field of the prevention and treatment of human disease, subject to certainlimitations and retained rights. The exclusive license granted by Broad and Harvard excludes certain fields, including themodification of animals or animal cells for the creation and sale of organs suitable for xenotransplantation into humans; theresearch, development and commercialization of products or services in the field of livestock applications; plant‑basedagricultural products; and, subject to certain limitations, products providing nutritional benefits. Moreover, the licensegranted by Broad is non‑exclusive with respect to the treatment of medullary cystic kidney disease 1 and three otherspecified targets, subject to the limitation that for such three targets, each of Broad and Harvard is only permitted to grant anon‑exclusive license to one third party at a time with respect to each such target within the field of exclusive license grantedto us. Harvard and Broad also granted us a non‑exclusive, worldwide, royalty‑bearing, sublicensable license to theHarvard/Broad Cas9‑I Patent Rights for all purposes, with the exception that the non‑exclusive license to certain HarvardCas9‑I Patent Rights excludes the modification of animals or animal cells for the creation and sale of organs suitable forxenotransplantation into humans and the development and commercialization of products or services in the field of livestockapplications. In addition to the exclusions described above, the following are excluded from the scope of both the exclusiveand non‑exclusive licenses granted to us under the Cas9‑I License Agreement: human germline modification; the stimulationof biased inheritance of particular genes or traits within a population of plants or animals; the research, development,manufacturing, or commercialization of sterile seeds; and the modification of the tobacco plant with specified exceptions.We are obligated to use commercially reasonable efforts to research, develop, and commercialize products for theprevention or treatment of human disease under the Cas9‑I License Agreement. Also, we are required to achieve certaindevelopment milestones within specified time periods for products incorporating the CRISPR/Cas9, TAL, anddelivery‑related technologies covered by the Harvard/Broad Cas9‑I Patent Rights. Harvard and Broad have the right toterminate our license with respect to the Harvard/Broad Cas9‑I Patent Rights covering the technology or technologies withrespect to which we fail to achieve these development milestones.The licenses granted by Broad and Harvard to us under the Cas9‑I License Agreement are subject to retained rightsof the U.S. government in the Harvard/Broad Cas9‑I Patent Rights and the rights retained by Broad, Harvard, MIT, andRockefeller on behalf of themselves and other academic, government and non‑profit entities, to practice the Harvard/BroadCas9‑I Patent Rights for research, educational, or teaching purposes. In addition, certain rights granted to us under the Cas9‑ILicense Agreement are further subject to a non‑exclusive license to the Howard Hughes Medical Institute for researchpurposes. Our exclusive license rights also are subject to rights retained by Broad, Harvard, MIT, 20 Table of Contentsand Rockefeller any third party to research, develop, make, have made, use, offer for sale, sell, have sold, import or otherwiseexploit the Harvard/Broad Cas9‑I Patent Rights and licensed products as research products or research tools, or for researchpurposes.We have the right to sublicense our licensed rights provided that the sublicense agreement must be in complianceand consistent with the terms of the Cas9‑I License Agreement. Any sublicense agreement cannot include the right to grantfurther sublicenses without the written consent of Broad and Harvard. In addition, any sublicense agreements must containcertain terms, including a provision requiring the sublicensee to indemnify Harvard, Broad, MIT, and Howard HughesMedical Institute according to the same terms as are provided in the Cas9‑I License Agreement and a statement that Broad,Harvard, MIT, and Howard Hughes Medical Institute are intended third party beneficiaries of the sublicense agreement forcertain 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 a third party requests alicense under the Harvard/Broad Cas9‑I Patent Rights for the development and commercialization of a product that would besubject to our exclusive license grant from Harvard and Broad under the Cas9‑I License Agreement, Harvard and Broad maynotify us of the request (the “Cas9‑I Third Party Proposed Product Requests”). A Cas9‑I Third Party Proposed ProductRequest must be accompanied by a research, development and commercialization plan reasonably satisfactory to Harvardand Broad, including evidence that the third party has, or reasonably expects to have, access to any necessary intellectualproperty and funding. Harvard and Broad may not grant a Cas9‑I Third Party Proposed Product Request (i) if we, directly orthrough any of our affiliates, sublicensees, or collaborators are researching, developing, or commercializing a productdirected to the same gene target that is the subject of the Cas9‑I Third Party Proposed Product Request (“Cas9‑I LicenseeProduct”) and we can demonstrate such ongoing efforts to Harvard’s and Broad’s reasonable satisfaction, or (ii) if we, directlyor through any of our affiliates or sublicensees, wish to do so either alone or with a collaboration partner, and we candemonstrate to Harvard and Broad’s reasonable satisfaction that we are interested in researching, developing, andcommercializing the Cas9‑I Licensee Product, that we have a commercially reasonable research, development, andcommercialization plan to do so, and we commence and continue reasonable commercial efforts under such plan. If we,directly or through any of our affiliates, sublicensees, or collaborators, are not researching, developing, or commercializing aCas9‑I Licensee Product nor able to develop and implement a plan reasonably satisfactory to Harvard and Broad, Harvardand Broad may grant an exclusive or non‑exclusive license to the third party on a gene target‑by‑gene target basis.Beginning in December 2018, our process to address Cas9‑I Third Party Proposed Product Requests will conform to theprocess established in our Cpf1 license agreement described below.The Cas9‑I License Agreement also provides Broad with the right, after a specified period of time and subject tocertain limitations, to designate gene targets for which Broad, whether alone or together with an affiliate or third party, has aninterest in researching and developing products that would otherwise be covered by rights licensed to us under the Cas9‑ILicense Agreement. Broad may not so designate any gene target for which we, directly or through any of our affiliates,sublicensees, or collaborators, are researching, developing, or commercializing a product, or for which we can demonstrate toBroad’s reasonable satisfaction that we are interested in researching, developing, and commercializing a product, that wehave a commercially reasonable research, development, and commercialization plan to do so, and we commence andcontinue reasonable commercial efforts under such plan. If we directly or through any of our affiliates, sublicensees, orcollaborators, are not researching, developing, or commercializing a product directed toward the gene target designated byBroad and are not able to develop and implement a plan reasonably satisfactory to Broad, Broad is entitled to reserve allrights under the Cas9‑I License Agreement, including the right to grant exclusive or non‑exclusive licenses to third parties,to develop and commercialize products directed to such gene target and our license granted with respect to such gene targetwill terminate, and we will not be entitled under the Cas9‑I License Agreement to develop and commercialize productsdirected to that gene target.Under the Cas9‑I License Agreement, we paid Broad and Harvard an upfront license fee in the low six figures andissued a single‑digit percentage of shares of our common stock to Broad (with Broad holding a right to request re‑issuance toits designees, including MIT or MIT’s designee) and Harvard. We also must pay an annual license maintenance fee rangingfrom the low‑ to mid‑five figures to the low‑six figures, depending on the calendar year. This annual license maintenance feeis creditable against royalties owed on licensed products and services in the same year as 21 Table of Contentsthe maintenance fee is paid. We are obligated to reimburse Broad and Harvard for expenses associated with the prosecutionand maintenance of the Harvard/Broad Cas9‑I Patent Rights, including expenses associated with any interferenceproceedings in the USPTO, any opposition proceedings in the EPO, or any other inter partes or other post grant proceedingsin these 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 under “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K).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, the 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 Cas9‑I License Agreement, these clinical and regulatorymilestone payments will be increased by a certain percentage in the mid double‑digits. We are also obligated to makeadditional payments to Broad and Harvard, collectively, of up to an aggregate of $54.0 million upon the occurrence ofcertain sales milestones per licensed product for the prevention or treatment of a human disease that afflicts at least aspecified number of patients in the aggregate in the United States. Broad and Harvard are collectively entitled to receiveclinical and regulatory milestone payments totaling up to $4.1 million in the aggregate per licensed product approved in theUnited States and at least one jurisdiction outside the United States for the prevention or treatment of a human disease thatafflicts fewer than a specified number of patients in the aggregate in the United States or a specified number of patients peryear in the United States, which we refer to as an ultra‑orphan disease. We are also obligated to make additional payments toBroad and Harvard, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones perlicensed product 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 licensedproducts for the prevention or treatment of human disease, and ranging from low single‑digit to high single‑digit percentageroyalties on net sales of other licensed products and services, made by us, our affiliates, or our sublicensees. The royaltypercentage depends on the licensed product and licensed service, and whether such licensed product or licensed service iscovered by a valid claim within the Harvard/Broad Cas9‑I Patent Rights. If we are legally required to pay royalties to a thirdparty on net sales of our licensed products because such third party holds patent rights that cover such licensed product, thenwe can credit up to a mid double‑digit percentage of the amount paid to such third party against the royalties due to Harvardand Broad in the same period. Our obligation to pay royalties will expire on a product‑by‑product and country‑by‑countrybasis upon the later of the expiration of the last to expire valid claim of the Harvard/Broad Cas9‑I Patent Rights that coverthe composition, manufacture, or use of each covered product or service in each country or the tenth anniversary of the dateof the first commercial sale of the licensed product or licensed service. If we sublicense any of the Harvard/Broad Cas9‑IPatent Rights to a third party pursuant to our exclusive license under the Cas9‑I License Agreement, Broad and Harvard,collectively, have the right to receive a low double‑digit percentage of the sublicense income, which percentage decreases toa high single‑digit percentage for licensed products for the prevention or treatment of human disease under sublicensesexecuted 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 Cas9‑I Patent Rights, then our prosecution relatedrights, 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. An interference was filed with respect to 12 U.S. patents and one U.S. patent application that are co-owned byBroad and MIT, and in some cases, Harvard, in-licensed by us under the Cas9-I License Agreement. For more informationregarding this interference proceeding, see Intellectual Property below, “Risk Factors—Risks Related to Our IntellectualProperty” in Part I, Item 1A, and “Legal Proceedings” in Part I, Item 3. We are responsible for the cost of the interferenceproceeding and appeal with respect to these patents and this patent application. Broad and Harvard are required to maintainany application or patent within the Harvard/Broad Patents Rights so long as we meet our obligation to reimburse Broad andHarvard for expenses related to prosecution and there is a good faith basis for doing so. If we cease payment for theprosecution of any Harvard/Broad Patent Right, then any license granted to us with respect to such Harvard/Broad PatentRight will terminate. 22 Table of ContentsWe have the first right, but not the obligation, to enforce the Harvard/Broad Cas9‑I 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 and Rockefeller,if applicable). Any sums recovered in such lawsuits will be shared between us, Broad, and Harvard.Unless terminated earlier, the term of the Cas9‑I License Agreement will expire on a country‑by‑country basis, uponthe expiration of the last to expire valid claim of the Harvard/Broad Cas9‑I Patent Rights in such country. However, ourroyalty obligations, discussed above, may survive expiration or termination. We have the right to terminate the agreement atwill upon four months’ written notice to Broad and Harvard. Broad and Harvard may terminate the agreement upon aspecified period of notice in the event of our uncured material breach, such notice period varying depending on the nature ofthe breach. Both Broad and Harvard may terminate the Cas9‑I License Agreement immediately if we challenge theenforceability, validity, or scope of any Harvard/Broad Patent Right or assist a third party to do so, or in the event of ourbankruptcy or insolvency. Neither Broad nor Harvard acting alone has the right to terminate the Cas9‑I License Agreement.However, Broad and Harvard may separately terminate the licenses granted to us with respect to their respective patent rightsupon the occurrence of the same events that would give rise to the right of both institutions acting collectively to terminatethe Cas9‑I License Agreement.The Broad Institute—Cpf1 License AgreementIn December 2016, we entered into a license agreement with Broad, for specified patent rights (“Cpf1 PatentRights”) related primarily to Cpf1 compositions of matter and their use for gene editing (the “Cpf1 License Agreement”).Pursuant to the Cpf1 License Agreement, Broad, on behalf of itself, Harvard, MIT, Wageningen University (“Wageningen”),and the University of Tokyo (“Tokyo” and collectively with the other institutions, the “Cpf1 Institutions”) granted us anexclusive, worldwide, royalty‑bearing, sublicensable license to the Cpf1 Patent Rights, to make, have made, use, have used,sell, offer for sale, have sold, export and import products solely in the field of the prevention or treatment of human diseaseusing gene therapy, editing of genetic material, or targeting of genetic material, subject to certain limitations and retainedrights (collectively, the “Exclusive Cpf1 Field”), as well as a non‑exclusive, worldwide, royalty‑bearing, sublicensablelicense to the Cpf1 Patent Rights for all other purposes, subject to certain limitations and retained rights. The licensesgranted to us under the Cpf1 License Agreement exclude certain fields, including human germline modification; thestimulation of biased inheritance of particular genes or traits within a population of plants or animals; the research,development, manufacturing, or commercialization of sterile seeds; and the modification of the tobacco plant with specifiedexceptions.Tokyo and the National Institute of Health (“NIH”) are joint owners on certain Cpf1 Patent Rights. Broad has onlygranted a license to us with respect to its interests and to Tokyo’s interests in these U.S. patent applications but not to anyforeign equivalents thereof. Broad does not, and does not purport to, grant any rights in NIH’s interest in these U.S. patentapplications under our agreement. As a result, we may not have exclusive rights under any U.S. patents that issue from theseU.S. patent applications and we may not have any rights under any foreign patents that issue from any foreign equivalentsthereof.Pursuant to the Cpf1 License Agreement, and as of December 31, 2017, we have certain rights under one U.S. patent,three pending U.S. patent applications, one European patent and related validations, two pending European patentapplications, five pending PCT patent applications, and other related patent applications in jurisdictions outside of theUnited States and Europe.We are obligated to use commercially reasonable efforts to research, develop, and commercialize licensed productsin the Exclusive Cpf1 Field. We are also required to achieve certain development milestones within specified time periodsfor products covered by the Cpf1 Patent Rights, with Broad having the right to terminate the Cpf1 License Agreement if wefail to achieve these milestones within the required time periods. We have the right to sublicense our licensed rights providedthat the sublicense agreement must be in compliance and consistent with the terms of the Cpf1 License Agreement. Anysublicense agreement cannot include the right to grant further sublicenses without the written consent of Broad. In addition,any sublicense agreements must contain certain terms, including a provision requiring the sublicensee to indemnify the Cpf1Institutions according to the same terms as are provided in the Cpf1 License 23 Table of ContentsAgreement and a statement that the Cpf1 Institutions are intended third party beneficiaries of the sublicense agreement forcertain purposes.The licenses granted to us under the Cpf1 License Agreement are subject to retained rights of the U.S. government inthe Cpf1 Patent Rights and rights retained by the Cpf1 Institutions on behalf of themselves and other academic, governmentand non‑profit entities, to practice the Cpf1 Patent Rights for research, teaching, or educational purposes. Our exclusivelicense rights also are subject to rights retained by the Cpf1 Institutions for themselves and any third party to research,develop, make, have made, use, offer for sale, sell, have sold, import or otherwise exploit the Cpf1 Patent Rights and licensedproducts as research products or research tools, or for research purposes.Under the Cpf1 License Agreement, Broad also retained rights to grant further licenses under specifiedcircumstances to third parties that wish to develop and commercialize products that target a particular gene and thatotherwise would fall within the scope of our exclusive license from Broad. Beginning in December 2018, if a third partyrequests a license under the Cpf1 Patent Rights for the development and commercialization of a product that would besubject to our exclusive license grant from Broad (a “Cpf1 Third Party Proposed Product Request”), Broad may notify us ofsuch request. A Cpf1 Third Party Proposed Product Request must be accompanied by a research, development andcommercialization plan reasonably satisfactory to Broad, including evidence that the third party has, or reasonably expectsto have, access to any necessary intellectual property and funding. Broad may not grant a Cpf1 Third Party Proposed ProductRequest (i) if we, directly or through any of our affiliates, sublicensees, or collaborators are researching, developing, orcommercializing a product directed to the same gene target that is the subject of the Cpf1Third Party Proposed ProductRequest (“Cpf1 Licensee Product”) and we can demonstrate such ongoing efforts to Broad’s reasonable satisfaction, or (ii) ifwe, directly or through any of our affiliates or sublicensees, wish to do so either alone or with a collaboration partner, and wecan demonstrate to Broad’s reasonable satisfaction that we are interested in researching, developing, and commercializing aCpf1 Licensee Product, that we have a commercially reasonable research, development, and commercialization plan to do so,and we commence and continue reasonable commercial efforts under such plan. If we, directly or through any of ouraffiliates, sublicensees, or collaborators, are not researching, developing, or commercializing a Cpf1 Licensee Product norable to develop and implement a plan reasonably satisfactory to Broad, Broad may grant an exclusive or non‑exclusivelicense to the third party on a gene target‑by‑gene target basis.The Cpf1 License Agreement also provides Broad with the right, beginning in December 2017 and subject to certainlimitations, to designate gene targets for which Broad, whether alone or together with a Cpf1 Institution, affiliate or thirdparty, has an interest in researching and developing products that would otherwise be covered by rights licensed to us underthe Cpf1 License Agreement. Broad may not so designate any gene target for which we, directly or through any of ouraffiliates, sublicensees, or collaborators, are researching, developing, or commercializing a product, or for which we candemonstrate to Broad’s reasonable satisfaction that we are interested in researching, developing, and commercializing aproduct, that we have a commercially reasonable research, development, and commercialization plan to do so, and wecommence and continue reasonable commercial efforts under such plan. If we, directly or through any of our affiliates,sublicensees, or collaborators, are not researching, developing, or commercializing a product directed toward the gene targetdesignated by Broad and are not able to develop and implement a plan reasonably satisfactory to Broad, Broad is entitled toreserve all rights under the Cpf1 License Agreement, including the right to grant exclusive or non‑exclusive licenses to thirdparties, to develop and commercialize products directed to such gene target, our license with respect to such gene target willterminate, and we will not be entitled under the Cpf1 License Agreement to develop and commercialize products directed tosuch gene target.Under the Cpf1 License Agreement, we paid Broad and Wageningen an aggregate upfront license fee in the midseven digits and issued to Broad and Wageningen promissory notes (the “Initial Promissory Notes”) in an aggregate principalamount of $10.0 million. The Initial Promissory Notes bore interest at 4.8% per annum. Principal and interest on the InitialPromissory Notes were payable on the first anniversary of the issuance date (or if earlier, a specified period of time followinga sale of our company). We could elect to make any payment of amounts outstanding under the Initial Promissory Noteseither in the form of cash or, subject to certain conditions, in shares of our common stock of equal value, with such sharesbeing valued for such purpose at the closing price of our common stock as reported the Nasdaq Stock Market for the tradingday immediately preceding the date of such payment if our common stock was then listed on the Nasdaq Stock Market. In theevent of a change of control of our company or a sale of our company, we were required to pay all remaining principal andaccrued interest on the Initial Promissory Notes in cash within a specified 24 Table of Contentsperiod following such event. We settled the Initial Promissory Notes in shares of our common stock in 2017 and they are nolonger outstanding.Broad and Wageningen are collectively entitled to receive clinical and regulatory milestone payments totaling upto $20.0 million in the aggregate per licensed product approved in the United States, the 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 Cpf1 License Agreement, certain of these clinical andregulatory milestone payments will be increased by a certain percentage in the mid double‑digits. We are also obligated tomake additional payments to Broad and Wageningen, collectively, of up to an aggregate of $54.0 million upon theoccurrence of certain sales milestones per licensed product for the prevention or treatment of a human disease that afflicts atleast a specified number of patients in the aggregate in the United States. Broad and Wageningen are collectively entitled toreceive clinical and regulatory milestone payments totaling up to $6.0 million in the aggregate per licensed productapproved in the United States, the European Union and Japan for the prevention or treatment of an ultra‑orphan disease. Weare also obligated to make additional payments to Broad and Wageningen, collectively, of up to an aggregate of$36.0 million upon the occurrence of certain sales milestones per licensed product for the prevention or treatment of anultra‑orphan disease.Broad and Wageningen, collectively, are entitled to receive mid single‑digit percentage royalties on net sales ofproducts for the prevention or treatment of human disease, and ranging from sub single‑digit to high single‑digit percentageroyalties on net sales of other products and services, made by us, our affiliates, or our sublicensees. The royalty percentagedepends on the product and service, and whether such licensed product or licensed service is covered by a valid claim withinthe Cpf1 Patent Rights. If we are legally required to pay royalties to a third party on net sales of our products because suchthird party holds patent rights that cover such licensed product, then we can credit up to a mid double‑digit percentage of theamount paid to such third party against the royalties due to Broad and Wageningen in the same period. Our obligation to payroyalties 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 Cpf1 Patent Rights that covers each licensed product or licensed service in each country or the tenthanniversary of the date of the first commercial sale of the product or service. If we sublicense any of the Cpf1 Patent Rights toa third party, Broad and Wageningen, collectively, have the right to receive high single‑digit to low double‑digitpercentages of the sublicense income, depending on the stage of development of the products or services in question at thetime of the sublicense.Under the Cpf1 License Agreement, Broad and Wageningen are also entitled, collectively, to receive successpayments in the event our market capitalization reaches specified thresholds ascending from a high nine digit dollar amountto $10.0 billion (“Market Cap Success Payments”) or sale of our company for consideration in excess of those thresholds,(“Company Sale Success Payments,” which with the Market Cap Success Payments, the “Success Payments”). The SuccessPayments that may be paid to Broad and Wageningen range from a mid-seven digit dollar amount to a mid-eight digit dollaramount, and collectively will not exceed, in aggregate, $125.0 million, which maximum would be payable only if weachieve a market capitalization threshold of $10.0 billion and have at least one product candidate covered by a claim of apatent right licensed to us under either the Cpf1 License Agreement or the Cas9‑I License Agreement that is or was thesubject of a clinical trial pursuant to development efforts by us or any of our affiliates or sublicensees. Market Cap SuccessPayments are payable by us in cash or in the form of promissory notes on substantially the same terms and conditions as theInitial Promissory Notes, except that the maturity date of such notes will, subject to certain exceptions, be 150 daysfollowing issuance. Following a change in control of our company, Market Cap Success Payments are required to be made incash. Company Sale Success Payments are payable solely in cash.In March 2017, a Market Cap Success Payment in the amount of $5.0 million under the Cpf1 License Agreementbecame due upon our market capitalization reaching $750 million, and we issued promissory notes to Broad andWageningen in the aggregate original principal amount of $5.0 million (the “March Success Payment Notes”). The principaland interest on the March Success Payment Notes was due and payable in August 2017. In August 2017, we issued anaggregate of 271,347 shares of our common stock to Broad and paid $0.4 million to Wageningen as payment of alloutstanding principal and interest under the March Success Payment Notes. Upon such issuance and payment, the MarchSuccess Payment Notes were cancelled. In September 2017, Wageningen designated Broad as the recipient of any futurepromissory notes that are owed to Wageningen pursuant to the Cpf1 License Agreement. 25 Table of ContentsIn December 2017, a success payment in the amount of $5.0 million under the Cpf1 License Agreement became dueupon our market capitalization reaching $1.0 billion for a specified period of time, and we issued a promissory note to Broadin the original principal amount of $5.0 million (the “December Cpf1 Success Payment Note”). The principal and interest onthe December Cpf1 Success Payment Note was due and payable in May 2018. In January 2018, we issued 150,606 shares ofour common stock to Broad as payment of all outstanding principal and interest under the December Cpf1 Success PaymentNote. Upon such issuance and payment, the December Cpf1 Success Payment Note was cancelled.In addition, in the event that a sale of our company or change of control has occurred and the maximum amount ofpotential Success Payments under the Cpf1 License Agreement has not been paid to Broad and Wageningen, Broad andWageningen are entitled to receive, upon the subsequent achievement of specified regulatory milestones, percentagesranging from high single digits to mid‑to‑low double digits of the remaining unpaid maximum amount of Success Payments.Broad and Wageningen are further entitled to receive up to the full remaining unpaid maximum amount of Success Paymentsupon the subsequent achievement of specified sales milestones. All such post‑sale or post‑change of control milestonepayments are required to be made in cash.Broad retains control of the prosecution and maintenance of the Cpf1 Patent Rights. We have the right to provideinput in the prosecution of the Cpf1 Patent Rights, including to direct Broad to file and prosecute patents in certaincountries. We are also obligated to reimburse Broad and Wageningen for all unreimbursed expenses incurred by them inconnection with the prosecution and maintenance of the Cpf1 Patent Rights prior to the date of the Cpf1 License Agreement,and to reimburse Broad for expenses associated with the prosecution and maintenance of the Cpf1 Patent Rights followingthe date of the Cpf1 License Agreement.We have the first right, but not the obligation, to enforce the Cpf1 Patent Rights with respect to our licensedproducts in the Exclusive Cpf1 Field so long as certain conditions are met, such as providing Broad and the applicable Cpf1Institutions with evidence demonstrating a good faith basis for bringing suit against a third party. We are solely responsiblefor the costs of any lawsuits we elect to initiate and cannot enter into a settlement without the prior written consent of Broad.Any sums recovered in such lawsuits will be shared between Broad, Wageningen, and us.Unless terminated earlier, the term of the Cpf1 License Agreement will expire on a country‑by‑country basis, uponthe expiration of the last to expire valid claim of the Cpf1 Patent Rights in such country. However, our royalty obligations,discussed above, may survive expiration or termination. We have the right to terminate the Cpf1 License Agreement at willupon four months’ written notice to Broad. Either party may terminate the Cpf1 License Agreement upon a specified periodof notice in the event of the other party’s uncured material breach of a material obligation, such notice period varyingdepending on the nature of the breach. Broad may terminate the Cpf1 License Agreement immediately if we challenge theenforceability, validity, or scope of any Cpf1 Patent Right or assist a third party to do so, or in the event of our bankruptcy orinsolvency.The Broad Institute—Cas9‑II License AgreementIn December 2016, we entered into a license agreement with Broad for specified patent rights (the “Cas9‑II PatentRights”) related primarily to certain Cas9 compositions of matter and their use for gene editing (the “Cas9‑II LicenseAgreement”). Pursuant to the Cas9‑II License Agreement, Broad, on behalf of itself, MIT, Harvard, and the University of IowaResearch Foundation (“Iowa,” and collectively with the other institutions, the “Cas9‑II Institutions”), granted us anexclusive, worldwide, royalty‑bearing sublicensable license to certain of the Cas9‑II Patent Rights in the field of theprevention or treatment of human disease using gene therapy, editing of genetic material, or targeting of genetic material,subject to certain limitations and retained rights, as well as a non‑exclusive, worldwide, royalty‑bearing sublicensable licenseto all of the Cas9‑II Patent Rights for all purposes, subject to certain limitations and retained rights, in each case on termssubstantially similar to the licenses granted to us under Cpf1 License Agreement, except that:·the terms relating to retained rights of the Cas9‑II Institutions to grant licenses to the Cas9‑II Patent Rightsunder specified circumstances to third parties, including to third parties that wish to develop and commercializeproducts that target a particular gene and that otherwise would fall within the scope of our exclusive license areon terms substantially similar to those under the Cas9‑I License Agreement; 26 Table of Contents·the upfront license fee is in the low seven digits and is payable in cash;·we are required to pay an annual license maintenance fee in the mid‑five figures;·the clinical and regulatory milestone payments per licensed product approved in the United States, theEuropean Union and Japan for the prevention or treatment of a human disease that afflicts at least a specifiednumber of patients in the aggregate in the United States total up to $3.7 million in the aggregate, and the salesmilestone payments for any such licensed product total up to $13.5 million in the aggregate;·we are required to pay clinical and regulatory milestone payments totaling up to $1.1 million in the aggregateper licensed product approved in the United States and the European Union or Japan for the prevention ortreatment of a human disease that afflicts fewer than a specified number of patients in the United States, plussales milestone payments of up to $9.0 million for any such licensed product;·the royalty rate on net sales of licensed products for the prevention or treatment of human disease that arecovered by the Cas9‑II Patent Rights subject to our exclusive license is a low single‑digit percentage, and theroyalty rate on net sales of other licensed products and licensed services covered by the Cas9‑II Patent Rightssubject to our exclusive license ranges from sub single‑digit to low single‑digit percentages;·the royalty rates for the sale of licensed products and licensed services covered by the Cas9‑II Patent Rightssubject only to our non‑exclusive license are 50% of the applicable royalty rates for licensed products andlicensed services covered by the Cas9‑II Patent Rights subject to our exclusive license;·the potential Success Payments are payable based on our market capitalization reaching specified thresholdsascending from a low ten digit dollar amount to $9.0 billion or a sale of our company for consideration inexcess of those thresholds, and will not exceed, in the aggregate, $30.0 million, which maximum would beowed only if we reach a market capitalization threshold of $9.0 billion and have at least one product candidatecovered by a claim of a patent right licensed to us under either the Cas9‑II License Agreement or the Cas9‑ILicense Agreement that is or was the subject of a clinical trial pursuant to development efforts by us or any ofour affiliates or sublicensees;·many of our rights and obligations with respect to the control and enforcement of the Cas9‑II Patent Rights,including our right to direct Broad to file and prosecute patents in certain countries, our obligation to reimburseBroad for expenses associated with the prosecution and maintenance of patent rights following the effectivedate, and our first right to enforce and defend the patent rights, only apply to the Cas9‑II Patent Rights that aresubject to our exclusive license, and do not apply to the Cas9‑II Patent Rights that are subject only to ournon‑exclusive license; and·we have the first right, but not obligation, to enforce the Cas9‑II Patent Rights that are subject to our exclusivelicense, and Broad has the sole and exclusive right, at Broad’s expense, to enforce and defend the Cas9‑II PatentRights subject to our non‑exclusive license.Pursuant to the Cas9‑II License Agreement, and as of December 31, 2017, we have certain rights under 13 pendingU.S. patent applications, 13 pending European patent applications, and other related patent applications in jurisdictionsoutside of the United States and Europe. In December 2017, a success payment in the amount of $2.5 million under our Cas9-II License Agreement becamedue upon our market capitalization reaching $1.0 billion for a specified period of time, and we issued a promissory note toBroad in the original principal amount of $2.5 million (the “December Cas9-II Success Payment Note”). The principal andinterest on the December Cas9-II Success Payment Note was due and payable in May 2018. In January 2018, we issued75,303 shares of our common stock to Broad as payment of all outstanding principal and interest under the December Cas9-IISuccess Payment Note. Upon such issuance and payment, the December Cas9-II Success Payment Note was cancelled. 27 Table of ContentsThe General Hospital Corporation License AgreementsIn August 2014, we entered into a license agreement with The General Hospital Corporation, d/b/a MassachusettsGeneral Hospital (“MGH”), for specified patent rights (the “First License MGH Patent Rights”) and specified know‑how andbiological materials (the “First MGH License Agreement”). The First License MGH Patent Rights are directed, in part, toCRISPR/Cas9 and TALE‑related compositions of matter and their use for genome editing. Pursuant to the First MGH LicenseAgreement, and as of December 31, 2017, we have certain rights under two U.S. patents, 14 pending U.S. patent applications,one European patent and related validations, ten pending European patent applications, and other related patent applicationsin jurisdictions outside of the United States and Europe.Pursuant to the First MGH License Agreement, MGH granted us an exclusive, worldwide, royalty‑bearing,sublicensable license to the First License MGH Patent Rights, to make, have made, use, have used, sell, offer for sale, andimport products and processes in the fields of the prevention or treatment of human or animal disease and agriculture, whichincludes plants and animals bred and raised for human consumption (such field, the “First MGH Exclusive License Field”).Products and processes used for clinical diagnostic assays, and the research, development and sale of research tools, kits, andreagents in the field of agriculture are specifically excluded from our exclusive license to the First License MGH PatentRights. MGH also granted us a non‑exclusive, worldwide, royalty‑bearing, sublicensable license to the First License MGHPatent Rights to make, have made, use, have used, sell, offer for sale, and import products and processes in substantially allfields other than the First MGH Exclusive License Field. Products and processes used for clinical diagnostic assays arespecifically excluded from our non‑exclusive license to the First License MGH Patent Rights. In addition, MGH granted us anon‑exclusive, worldwide, royalty‑bearing sublicensable license under specified MGH know‑how and biological materials tomake, have made, use, have used, sell, offer for sale, and import products and processes in all fields, except for products andprocesses used for clinical diagnostic assays. The licenses granted to us by MGH under the First MGH License Agreement aresubject to retained rights of the U.S. government in the First License MGH Patent Rights and a royalty‑free right of MGH,academic, and not‑for‑profit institutions, to practice the First License 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 First MGH Exclusive License Field under the First MGH LicenseAgreement. Also, we are required to achieve certain development milestones within specified time periods for products andprocesses in the First MGH Exclusive License Field and outside the First MGH Exclusive License Field. MGH has the rightto terminate our license if we fail to achieve these development milestones.Under the First MGH License Agreement, we paid MGH an upfront license fee in the low six digit dollar amount andissued less than one percent of our common stock to MGH. We also must pay an annual license maintenance fee ranging fromlow‑ to mid‑five digit dollar amount, depending on the calendar year, beginning in 2017. We are obligated to reimburseMGH for expenses associated with the prosecution and maintenance of the First License MGH Patent Rights, includingexpenses associated with any interference proceedings in the USPTO, any opposition proceedings in the EPO, or any otherinter partes or other post grant 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 First License MGHPatent Rights. If we pay royalties to a third party on net sales of our products, then we can credit up to a mid double‑digitpercentage of the amount paid to such third party against the royalties due to MGH. Our obligation to pay royalties willexpire on a product‑by‑product and country‑by‑country basis upon the later of the expiration of the 28 Table of Contentslast to expire valid claim of the First License MGH Patent Rights that cover the composition, manufacture or use of eachcovered product or service in each country or the tenth anniversary of the date of the first commercial sale of the product orservice. If we sublicense any of the First License MGH Patent Rights or know‑how or materials licensed under the First MGHLicense Agreement to a third party in the First MGH Exclusive License Field, MGH has the right to receive a lowdouble‑digit percentage of the sublicense income, which percentage decreases to a high single‑digit percentage after aspecified period of time. If we sublicense any of the First License MGH Patent Rights or know‑how or materials licensedunder the First MGH License Agreement to a third party in the field of research products or processes, MGH has the right toreceive a high double‑digit percentage of the sublicense income. If we sublicense any of the First License MGH Patent Rightsor know‑how or materials licensed under the First MGH License Agreement to a third party in any field outside the FirstMGH Exclusive License Field and outside the field of research products or processes, MGH has the right to receive a lowdouble‑digit percentage of the sublicense income.MGH retains control of the prosecution and maintenance of the First License MGH Patent Rights. We have the rightto provide input in the prosecution of the First License MGH Patent Rights, including directing MGH to file and prosecutepatents in certain countries. MGH controls the enforcement of the First License MGH Patent Rights, except for theenforcement of the rights exclusively licensed to us, which we control at our expense. We may not enter into any settlementwithout the prior written consent of MGH. We also retain the first right to defend against any legal or administrative actiontaken by a third party against a First License MGH Patent Right at our own costs.Unless terminated earlier, the term of the First MGH License Agreement will expire, on a country‑by‑country basis,upon the expiration or abandonment of all First License MGH Patent Rights in such country. However, our royaltyobligations, discussed above, may survive expiration or termination. We have the right to terminate the First MGH LicenseAgreement at will upon 90 days’ written notice to MGH. MGH may terminate the First MGH License Agreement upon aspecified period of written notice in the event of our uncured material breach, such notice period varying depending on thenature of the breach. MGH also may terminate the First MGH License Agreement immediately if we challenge theenforceability, validity, or scope of any First License MGH Patent Right or assist a third party to do so, or in the event of ourbankruptcy or insolvency.In August 2016, we entered into a second license agreement with MGH for specified patent rights (the “SecondLicense MGH Patent Rights” and such agreement, the “Second MGH License Agreement”). Pursuant to the Second MGHLicense Agreement, and as of December 31, 2017, we have certain rights under two issued U.S. patents, six pending U.S.patent applications, one pending European patent application, one pending PCT patent application, and other related patentapplications in jurisdictions outside of the United States and Europe. The Second License MGH Patent Rights are directed, inpart, to CRISPR/Cas9 compositions of matter and their use for genome editing.Pursuant to the Second MGH License Agreement, MGH granted us an exclusive, worldwide, royalty‑bearing,sublicensable license to the Second License MGH Patent Rights, to make, have made, use, have used, sell, offer for sale andhave sold products and processes in the fields of the prevention and treatment of human and animal disease, or collectively,the Second MGH Exclusive Field. MGH also granted us a non‑exclusive, worldwide, royalty‑bearing, sublicensable licenseto use research data and other information pertaining to the Second License MGH Patent Rights to make, have made, use,have used, sell, offer for sale and have sold products and processes in the Second MGH Exclusive Field. The licenses grantedto us by MGH under the Second MGH License Agreement are subject to retained rights of the U.S. government in the SecondLicense MGH Patent Rights and the royalty‑free right of MGH, its affiliates, and academic, government, and not‑for‑profitinstitutions to practice the Second License MGH Patent Rights for research and educational purposes.We are obligated under the Second MGH License Agreement to use commercially reasonable efforts to research,develop, and commercialize products and processes in the Second MGH Exclusive Field. As part of these obligations, we arerequired to achieve certain development milestones within specified time periods, with MGH having the right to terminatethe Second MGH License Agreement if we fail to achieve these milestones within the required time periods.Under the Second MGH License Agreement, we paid MGH an upfront license fee in the high six digits. We alsomust pay an annual license maintenance fee beginning in 2018 that increases over time within a specified dollar range in thelow six digits, with such maintenance fee being creditable against any royalties due to MGH under the 29 Table of ContentsSecond MGH License Agreement in the same calendar year. We are obligated to reimburse MGH for expenses associated withthe prosecution and maintenance of the Second License MGH Patent Rights.MGH is entitled to receive clinical and regulatory milestone payments totaling less than $1.0 million in theaggregate for up to four licensed products or processes to achieve the specified clinical and regulatory milestones. Inaddition, MGH is entitled to receive commercial sales milestone payments totaling up to $4.9 million in the aggregate uponthe achievement of milestones relating to first commercial sales of up to four licensed products or processes in the UnitedStates and abroad as well as milestones relating to annual net sales of products or processes meeting specified thresholds.We are also obligated to pay MGH royalties of less than 1% on net sales of products and processes for theprevention or treatment of human disease, and royalties of a low single‑digit percentage on net sales of products andprocesses for the prevention or treatment of a non‑human animal disease, made by us, our affiliates, or our sublicensees. Ourobligation to pay royalties will expire on a product/process‑by‑product/process and country‑by‑country basis upon the laterof the expiration of the last to expire valid claim of the Second License MGH Patent Rights that covers the applicableproduct or process and the tenth anniversary of the date of the first commercial sale of the applicable product or process. Theroyalty percentages that we are obligated to pay are subject to reduction if at the time of sale the applicable product orprocess is not covered by a valid claim within the Second License MGH Patent Rights. If we pay royalties to a third party onnet sales of a product or process for which a royalty is due under both First MGH License Agreement and the Second MGHLicense Agreement, we can credit up to a mid double‑digit percentage of the amount paid to such third party against theroyalties due to MGH under the Second MGH License Agreement, provided that the royalties due to MGH under the SecondMGH License Agreement may not be reduced by more than a low to mid double‑digit percentage.Under the Second MGH License Agreement, MGH is also entitled to receive certain payments in the event ourmarket capitalization reaches specified thresholds ranging from low to high ten digit dollar amounts (the “MGH Market CapSuccess Payments”). The MGH Market Cap Success Payments payable to MGH range from a low seven digit dollar amount toa low eight digit dollar amount, which low eight digit dollar amount would be payable only if we achieve at least marketcapitalization of a high ten digit dollar amount and if we have one licensed product that (i) is the subject of a Phase 1 clinicaltrial of which we or one of our affiliates or sublicensees is the sponsor, (ii) was the subject of a Phase 1 clinical trial of whichwe or one of our affiliates or sublicensees was the sponsor with us having determined to conduct a subsequent clinical trialwith respect to such product candidate, or (iii) has been approved for sale in either the United States or the European Union.In addition, in the event of an asset sale or merger of our company to a third party for consideration in excess of one or moremarket capitalization thresholds, we must pay MGH all MGH Market Cap Success Payments corresponding to such marketcapitalization thresholds that have not previously been paid (the “MGH Company Sale Success Payments”). MGH MarketCap Success Payments are payable in cash or shares of our common stock at our discretion, and MGH Company Sale SuccessPayments are payable solely in cash. In December 2017, an MGH Market Cap Success Payment of $2.0 million became dueunder our Second MGH License Agreement in connection with our market capitalization reaching $1.0 billion, which wesettled in January 2018 through the issuance of 80,000 shares of our common stock to MGH.MGH retains control of the prosecution and maintenance of the Second License MGH Patent Rights. We have theright to provide input in the prosecution of the Second License MGH Patent Rights, including to direct MGH to file andprosecute patents in certain countries at our cost. We control, at our expense, the enforcement of the rights exclusivelylicensed to us. We may not enter into any settlement without the prior written consent of MGH. We also retain the first rightto defend against any legal or administrative action taken by a third party against a Second License MGH Patent Right at ourown cost.Unless terminated earlier, the term of the Second MGH License Agreement will expire upon the expiration orabandonment of all the Second License MGH Patent Rights. However, our royalty obligations may survive expiration ortermination. We have the right to terminate the Second MGH License Agreement at will upon 90 days written notice toMGH. MGH may terminate the Second MGH License Agreement upon specified periods of written notice in the event of ouruncured material breach, with the length of such notice period varying depending on the nature of the breach. MGH also mayterminate the license agreement immediately if we challenge the validity of any Second License MGH Patent Rights or in theevent of our bankruptcy or insolvency. 30 Table of ContentsIntellectual PropertyOur 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 and patent applications cover various aspects of our genome editing platform technology,including CRISPR systems that employ Cas9 including S. aureus Cas9, high‑fidelity Cas9 nucleases and Cas9 PAM variants,self‑inactivating forms of Cas9, Cas9 nickases, CRISPR systems that employ Cpf1 including Cpf1 nickases and othervariants and self‑inactivating forms of Cpf1, and also CRISPR systems that employ viral vectors for delivery, single guideRNAs, or modified guide RNAs. We also have filed patent applications and have in‑licensed rights to filed patentapplications directed to each of the four components of our genome editing platform technology. We intend to pursue, whenpossible, additional patent protection, including composition of matter, method of use, and process claims, directed to eachcomponent of our platform technology. We also intend to obtain rights to existing delivery technologies through one ormore 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 “Risk Factors—Risks Related to Our Intellectual Property.”As of December 31, 2017, we owned one U.S patent, 19 pending U.S. non‑provisional patent applications, 16pending European patent applications, 16 pending U.S. provisional patent applications, 16 pending Patent CooperationTreaty (“PCT”) patent applications, and other related patent applications in jurisdictions outside the United States andEurope, which include claims to compositions of matter and methods of use. One of these U.S. patents and its U.S. andforeign counterpart applications are co‑owned with Broad and Iowa and we have obtained an exclusive license to suchco‑ownership rights from these third parties in the field of prevention or treatment of human disease using gene therapy orgenome editing. In addition, three of these pending PCT patent applications and four of these pending U.S. provisionalpatent applications are co‑owned with certain of our collaborators because they encompass inventions developed under ourcollaborations. We intend to pursue, when possible, composition of matter, method of use, dosing, and formulation patentprotection for genome editing products that we develop during the course of our business.As of December 31, 2017, we in‑licensed 44 U.S. patents, which include claims to compositions of matter, methodsof use, and certain processes as well as approximately 103 pending U.S. non‑provisional patent applications, 13 Europeanpatents and related validations, 66 pending European patent applications, six pending PCT patent applications, and otherrelated patent applications in jurisdictions outside the United States and Europe, which include claims to compositions ofmatter, methods of use, and certain processes. The patents and patent applications outside of the United States and Europe areheld primarily in Canada, Japan, and Australia, although some of our in‑licensed patent families were filed in a larger numberof countries. Our in‑licensed patents and patent applications claim the inventions of investigators at various universities andinstitutions and the majority of these licensed patents and patent applications are licensed on an exclusive basis. Theexclusive licenses are, in some cases, limited to certain technical fields. Certain U.S. patent applications licensed to us byBroad include Tokyo and NIH as joint applicants. Broad has only granted a license 31 Table of Contentsto us with respect to its interests and to Tokyo’s interests in these U.S. patent applications but not to any foreign equivalentsthereof. Broad does not and does not purport to grant any rights in NIH’s interest in these U.S. patent applications under ouragreement. As a result, we may not have exclusive rights under any U.S. patents that issue from these U.S. patent applicationsand we may not have any rights under any foreign patents that issue from any foreign equivalents thereof. For moreinformation regarding these license agreements, please see the section of this Annual Report on Form 10-K titled “Business—Intellectual Property Licenses.”On January 11, 2016, the Patent Trial and Appeal Board of the USPTO (the “PTAB”) declared an interferencebetween a 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 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 areco‑owned by Broad and MIT, and in some cases Harvard, and in‑licensed by us. On March 17, 2016, the PTAB re‑declaredthe interference to add a pending U.S. patent application (U.S. Serial No. 14/704,551) that is co‑owned by Broad, MIT, andHarvard, and in‑licensed by us. An interference is a proceeding within the USPTO to determine priority of invention of thesubject matter of patent claims filed by different parties. In the interference, the University of California, the University ofVienna and Emmanuelle Charpentier asserted that inventors from the University of California and the University of Vienna,and Emmanuelle Charpentier made certain inventions claimed in the Broad, MIT and Harvard patents before the inventorsfrom Broad, MIT and, in certain cases, Harvard. The declaration of interference defined the invention that was subject to thedeclaration of interference, also referred to as “the count,” as relating to a method that involves contacting a target DNA in aeukaryotic cell with certain defined CRISPR/Cas9 components for the purpose of cleaving or editing a target DNA moleculeor modulating transcription of at least one gene encoded thereon. All of the claims in the pending U.S. patent applicationthat is owned by the University of California, the University of Vienna, and Emmanuelle Charpentier and all of the claims inthe 12 U.S. patents and one pending U.S. patent application that are co-owned by Broad and MIT, and in some cases,Harvard, and in-licensed by us were implicated in the interference.On February 15, 2017, the PTAB held that there is no interference‑in‑fact between the parties for the subject matterof the count. A judgment of no interference‑in‑fact means that no interference is needed to resolve priority between theparties because the PTAB determined that our in-licensed claims are directed to subject matter that is patentably distinct fromthose of the University of California, the University of Vienna, and Emmanuelle Charpentier. The interference proceedinghas therefore ended. Therefore, the 12 U.S. patents and one U.S. patent application that we have in‑licensed from Broad,acting on behalf of itself, MIT, and Harvard, as well as the U.S. patent application owned by the University of California, theUniversity of Vienna, and Emmanuelle Charpentier, with respect to which the PTAB had declared an interference were notmodified or revoked as a result of this interference proceeding.Having filed a notice of appeal on April 12, 2017, the University of California, the University of Vienna, andEmmanuelle Charpentier filed an appeal brief to the Court of Appeals for the Federal Circuit on July 25, 2017 for review ofthe no interference-in-fact decision made by the PTAB in the interference proceeding. Broad filed its responsive brief onOctober 25, 2017. The University of California, the University of Vienna and Emmanuelle Charpentier filed a reply brief onNovember 22, 2017. It is uncertain when or in what manner the Federal Circuit will act on this appeal. A final,non‑appealable judgment of no interference‑in‑fact bars any further interference between the same parties for claims to thesame invention as the count of the interference. However, as discussed below, certain of these 12 U.S. patents and one U.S.patent application are, or may in the future be, subject to further intellectual property proceedings and disputes, includinginterference proceedings.Separately, ToolGen Inc. (“Toolgen”) filed Suggestions of Interference in the USPTO on April 13, 2015 suggestingthat it believes some of the claims pending in its applications (U.S. Serial No. 14/685,568 and U.S. Serial No. 14/685,510)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 had declared an 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. The Suggestions of Interference that were filed by ToolGen are stillpending, and it is uncertain when and in what manner the USPTO will act on them.A request for ex parte re‑examination was filed with the USPTO on February 16, 2016 against one patent that wehave in‑licensed from Broad, acting on behalf of itself and MIT (U.S. Patent No. 8,771,945), which was subject to 32 Table of Contentsthe interference proceeding involving the University of California, the University of Vienna, and Emmanuelle Charpentierand referenced in the Suggestions of Interference filed by ToolGen. 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 willre‑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 grants there‑examination request and re‑examines the patent after giving the patent owner the option of filing an initial statement. Therequest for ex parte re‑examination of U.S. Patent No. 8,771,945 was granted on May 9, 2016 thereby initiating are‑examination procedure between the USPTO and Broad, acting on behalf of itself and MIT. The third party requestor doesnot participate in the re‑examination procedure after filing the request except that it has the option of responding if thepatent owner chooses to file an initial statement. On May 12, 2016, the PTAB suspended the re‑examination of U.S. PatentNo. 8,771,945 noting that it has jurisdiction over any file that involves a patent involved in the interference. It is uncertainwhen the PTAB will lift the suspension, however the PTAB may do so in light of the PTAB’s no interference‑in‑fact holding.If Broad is unsuccessful during the re‑examination, U.S. Patent No. 8,771,945 may be revoked or narrowed.The 12 in‑licensed U.S. patents and one in‑licensed U.S. patent application that were 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 and the one in‑licensed U.S. patent that is the subject of the request for exparte re‑examination) relate generally to the CRISPR/Cas9 system and its use in eukaryotic cells. The claims of the 12in‑licensed U.S. patents and one in‑licensed U.S. patent application vary in scope and coverage and include claims that aredirected to CRISPR/Cas9 systems that employ viral vectors for delivery, single guide RNAs, modified guide RNAs, S. aureusCas9, or a Cas9 nickase and are relevant to our genome editing platform technology. The loss or narrowing in scope of one ormore 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, patent applications, or other intellectual property as an inventor orco‑inventor. If we are unable to obtain an exclusive license to any such third party co‑owners’ interest in such patents orpatent applications, such co‑owners may be able to license their rights to other third parties, including our competitors. Inaddition, we may need the cooperation of any such co‑owners to enforce such patents against third parties, and suchcooperation may not be provided to us.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. On January 17, 2018, the European Patent Office Opposition Division (the “OppositionDivision”) revoked in the European Patent Office (the “EPO”) a European patent that we have in‑licensed from Broad, actingon behalf of itself, MIT and Harvard (European Patent No. EP 2,771,468 B1). On January 18, 2018, Broad, acting on behalf ofitself, MIT and Harvard filed a notice of appeal to the Boards of Appeal of the EPO for review of the Opposition Division’sdecision to revoke this patent. It is uncertain when or in what manner the Boards of Appeal will act on this appeal. TheOpposition Division has also initiated opposition proceedings against six other European patents that we have in‑licensedfrom Broad, acting on behalf of itself, MIT and Harvard (European Patent Nos. EP 2,784,162 B1, EP 2,896,697 B1, EP2,898,075 B1, EP 2,921,557 B1, EP 2,931,898 B1, and EP 3,009,511 B1), one European patent that we have in‑licensed fromBroad, acting on behalf of itself and MIT (European Patent No. EP 2,764,103 B1), and two European patents that we have in-licensed from Broad, acting on behalf of itself, MIT, Harvard and Rockefeller (European Patent Nos. EP 2,825,654 B1 and EP2,840,140 B1). The EPO opposition proceedings may involve issues including, but not limited to, procedural formalitiesrelated to filing the European patent application, priority, and the patentability of the involved claims. One or more of thethird parties that have filed oppositions against European Patent Nos. EP 2,771,468 B1, EP 2,784,162 B1, EP 2,764,103 B1,EP 2,825,654 B1, EP 2,840,140 B1, EP 2,896,697 B1, EP 2,898,075 B1, EP 2,921,557 B1, EP 2,931,898 B1, and/or EP3,009,511 B1 or other third parties may file future oppositions against other European patents that we in‑license or own. Forexample, we are aware that notices of opposition have been filed against one other European patent that we in-license fromBroad, acting on behalf of itself, MIT and Harvard (European Patent No. EP 2,931,897 B1). The deadline for filingoppositions against this European patent is August 1, 2018. There may be other oppositions against this European patentthat have not yet been filed or that 33 Table of Contentshave not yet been made available to the public. 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 interference, the Suggestions of Interference, therequest for ex parte re‑examination, the European oppositions, and other potential third party intellectual property relateddisputes, please see “Risk Factors—Risks Related to Our Intellectual 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.CRISPRAs of December 31, 2017, we owned one U.S. patent, 19 pending U.S. non‑provisional patent applications, 16pending European patent applications, 16 pending U.S. provisional patent applications, 16 pending PCT patentapplications, and other related patent applications in jurisdictions outside the United States and Europe that are related toour CRISPR technology and which include claims directed to our genome editing platform, including our directed editingcomponent, as well as composition of matter and method of use claims for our therapeutic programs, including LCA10 andother genetic and infectious eye disorders, and engineered T cells. One of these U.S. patents and its U.S. and foreigncounterpart applications is co‑owned with Broad and Iowa and we have obtained an exclusive license to such co‑ownershiprights from these third parties in the field of prevention or treatment of human disease using gene therapy or genome editing.In addition, three of these pending PCT patent applications and four of these pending U.S. provisional patent applicationsare co‑owned with certain of our collaborators because they encompass inventions developed under our collaborations. Ifissued as U.S. patents, and if the appropriate maintenance fees are paid, the U.S. patent applications would be expected toexpire between 2034 and 2038, excluding any additional term for patent term adjustments or patent term extensions.As of December 31, 2017, we in‑licensed 35 U.S. patents, 11 European patents and related validations, and over 500pending patent applications, including approximately 91 pending U.S. non‑provisional patent applications, 57 pendingEuropean patent applications, six pending PCT patent applications, and other related patent applications in jurisdictionsoutside the United States and Europe that are related to our CRISPR technology collectively from various universities andinstitutions. The claims from our in‑licensed portfolio include claims to compositions of matter, methods of use, and certainprocesses. These include claims directed to CRISPR systems that employ Cas9 including Cas9 nickases, S. aureus Cas9,high‑fidelity Cas9 nucleases, Cas9 PAM variants and self‑inactivating forms of Cas9, CRISPR systems that employ Cpf1including Cpf1 nickases and other variants and self-inactivating forms of Cpf1, and also CRISPR systems that employ viralvectors for delivery, single guide RNAs, or modified guide RNAs. Our current in‑licensed U.S. patents, if the appropriatemaintenance fees are paid, are expected to expire between 2033 and 2036, excluding any additional term for patent termadjustments or patent term extensions.LCA10As of December 31, 2017, we owned two pending U.S. non‑provisional patent applications, one pending Europeanpatent application, one pending Canadian patent application, and one pending PCT patent application which are directed tocompositions of matter, including guide RNAs directed to CEP290, and methods of use for the treatment of LCA10. If issuedas a U.S. patent, and if the appropriate maintenance fees are paid, the U.S. patent applications would be expected to expirebetween 2035 and 2037, excluding any additional term for patent term adjustments or patent term extensions. 34 Table of ContentsTrademarksAs of December 31, 2017, our registered trademark portfolio consisted of registrations in the United States forEDITAS, EDITAS in Stylized Letters and the Infinity Logo, registrations in Australia, China, the European Union, Japan andSwitzerland for EDITAS, registrations in Australia, the European Union and Switzerland for the Infinity Logo and aregistration in the European Union for UDITAS. CompetitionThe 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, biotechnology companies, governmental agencies, and public and private research institutions.Any product candidates that we successfully develop and commercialize may compete with existing therapies and newtherapies 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 andproduct focus is the development of therapies using CRISPR technology. Other companies developing CRISPR technologyinclude Caribou Biosciences, Casebia Therapeutics, CRISPR Therapeutics, ERS Genomics, Exonics Therapeutics, IntelliaTherapeutics, and TRACR Hematology. In addition, there have been and may continue to be discoveries of newCRISPR‑based gene editing technologies. There are additional companies developing therapies using other genome editingtechnologies, including TALENs, meganucleases, Mega‑TALs, and zinc finger nucleases. The companies developing theseother genome editing technologies include bluebird bio, Cellectis, Poseida Therapeutics, Precision Biosciences, andSangamo Therapeutics. Additional companies developing gene therapy products include Abeona Therapeutics, AdverumBiotechnologies, AGTC Therapeutics, Audentes Therapeutics, Homology Medicines, Nightstar Therapeutics, REGENXBIO,Spark Therapeutics, uniQure, and Voyager Therapeutics. In addition to competition from other genome editing therapies orgene therapies, any products that we develop may also face competition from other types of therapies, such as smallmolecule, antibody, protein, oligonucleotide, or ribonucleic acid therapies.In addition, many of our current or potential competitors, either alone or with their collaboration partners, may havegreater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinicaltrials, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology, andgene therapy industries may result in even more resources being concentrated among a smaller number of our competitors.Smaller or early‑stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies. These competitors also compete with us in recruiting and retainingqualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials,as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could bereduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or lesssevere side effects, are more convenient or are less expensive than any products that we may develop. 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. The keycompetitive factors affecting the success of all of our programs are likely to be their efficacy, safety, convenience, andavailability 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. 35 Table of ContentsManufacturingWe currently contract with third parties for the manufacturing of our materials for preclinical studies and ourplanned clinical trials. We do not own or operate manufacturing facilities for the production of our program materials. Wecurrently have no plans to build our own clinical or commercial scale manufacturing capabilities. The use of contractedmanufacturing and reliance on collaboration partners is relatively cost‑efficient and has eliminated the need for our directinvestment 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. We expectthird‑party manufacturers to be capable of providing sufficient quantities of our program materials to meet anticipated needsfor preclinical studies and clinical trials. To meet our projected needs for commercial manufacturing, third parties with whomwe currently work might need to increase their scale of production or we will need to secure alternate suppliers. We believethat there are alternate sources of supply that can satisfy our preclinical, clinical, and commercial requirements, although wecannot be certain that identifying and establishing relationships with such sources, if necessary, would not result insignificant delay or material additional costs.CommercializationWe 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.Government RegulationGovernment 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 StatesIn the United States, our candidate products would be regulated as biological products, or biologics, under thePublic Health Service Act (the “PHSA”) and the Federal Food, Drug and Cosmetic Act (the “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 36 Table of Contentsprocess, may subject an applicant to delays in the conduct of the study, regulatory review and approval, and/oradministrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA’s refusal to allow anapplicant to proceed with clinical testing, refusal to approve pending applications, license suspension, or revocation,withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension ofproduction or distribution, injunctions, fines, and civil or criminal investigations and penalties brought by the FDA or theDepartment of Justice (“DOJ”) and other governmental entities, including state agencies.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 regulations;·submission to the FDA of an IND application for human clinical testing, which must become effective beforehuman clinical trials may begin;·approval by an independent institutional review board (“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(“GCP”);·preparation and submission to the FDA of a Biologic License Application (“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 (“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 (“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;·payment of user Prescription Drug User Free Act (“PDUFA”) securing FDA approval of the BLA and licensure ofthe new biologic product; and·compliance with any post‑approval requirements, including the potential requirement to implement a RiskEvaluation and Mitigation Strategy (“REMS”) and any post‑approval studies required by the FDA.Preclinical Studies and Investigational New Drug ApplicationBefore 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 IND application. 37 Table of ContentsAn IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstatecommerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigationalproduct to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time theFDA raises concerns or questions about the product or conduct of the proposed clinical trial, including concerns that humanresearch subjects will be exposed to unreasonable health risks. In that case, the IND sponsor and the FDA must resolve anyoutstanding 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(“RAC”) of the NIH decides that full public review of the protocol is warranted, the FDA will request at the completion of itsIND review that sponsors delay initiation of the protocol until after completion of the RAC review process. The FDA alsomay impose clinical holds on a biologic product candidate at any time before or during clinical trials due to safety concernsor non‑compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then onlyunder terms authorized by the FDA.Human Clinical Trials in Support of a BLAClinical 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. When a foreign clinical trial is conducted under an IND, all FDA INDrequirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor mustensure that the trial complies with certain regulatory requirements of the FDA in order to use the trial as support for an IND orapplication for marketing approval. Specifically, the FDA requires that such trials be conducted in accordance with GCP,including review and approval by an independent ethics committee and informed consent from subjects. The GCPrequirements encompass both ethical and data integrity standards for clinical trials. The FDA’s regulations are intended tohelp ensure the protection of human subjects enrolled in non-IND foreign clinical trials, as well as the quality and integrity ofthe resulting data. They further help ensure that non-IND foreign trials are conducted in a manner comparable to that requiredfor clinical trials in the United States.Further, each clinical trial must be reviewed and approved by an IRB either centrally or individually at eachinstitution at which the clinical trial will be conducted. The IRB will consider, among other things, clinical trial design,patient informed consent, ethical factors, the safety of human subjects, and the possible liability of the institution. An IRBmust operate in compliance with FDA regulations. The FDA, IRB, or the clinical trial sponsor may suspend or discontinue aclinical trial at any time for various reasons, including a finding that the clinical trial is not being conducted in accordancewith FDA requirements or the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also mustsatisfy extensive GCP rules and the requirements for informed consent.Additionally, some clinical trials are overseen by an independent group of qualified experts organized by theclinical trial sponsor, known as a data safety monitoring board or committee. This group may recommend continuation of thestudy as planned, changes in study conduct, or cessation of the study at designated check points based on access to certaindata from the study. Finally, research activities involving infectious agents, hazardous chemicals, recombinant DNA, andgenetically altered organisms and agents may be subject to review and approval of an Institutional Biosafety 38 Table of ContentsCommittee in accordance with 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 ProductsIt is possible that the procedures and standards applied to gene therapy products and cell therapy products may beapplied to any CRISPR product candidates we may develop, but that remains uncertain at this point. The FDA has defined agene therapy product as one that mediates its effects by transcription and/or translation of transferred genetic material and/orby integrating into the host genome and which are administered as nucleic acids, viruses, or genetically engineeredmicroorganisms. The products may be used to modify cells in vivo or transferred to cells ex vivo prior to administration to therecipient. Within the FDA, the Center for Biologics Evaluation and Research (“CBER”) regulates gene therapy products.Within the CBER, the review of gene therapy and related products is consolidated in the Office of Cellular, Tissue and GeneTherapies, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on itsreviews. The CBER works closely with the NIH and the RAC, which makes recommendations to the NIH on gene therapyissues and engages in a public discussion of scientific, safety, ethical, and societal issues related to proposed and ongoinggene therapy protocols. The FDA and the NIH have published guidance documents with respect to the development andsubmission of gene therapy protocols. The FDA also has published guidance documents related to, among other things, genetherapy products in general, their preclinical assessment, observing subjects involved in gene therapy studies for delayedadverse events, potency testing, and chemistry, manufacturing, and control 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 39 Table of Contentseach of the above stages of development and relate to, among other things, the proper preclinical assessment of genetherapies; the chemistry, manufacturing, and control information that should be included in an IND application; the properdesign of tests to measure product potency in support of an IND or BLA application; and measures to observe delayedadverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high.Further, the FDA usually recommends that sponsors observe subjects for potential gene therapy‑related delayed adverseevents for a 15‑year period, including a minimum of five years of annual examinations followed by 10 years of annualqueries, either in person or by 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 be submitted to, and the study registered with, the NIH Office ofBiotechnology Activities (“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 RAC, a federal advisory committee, to discuss protocolsthat raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly public meetings.The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol.RAC proceedings and reports are posted to the OBA web site and may 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. Investigatorsand sponsors of a human gene transfer trials can utilize this web‑based system to report serious adverse events and annualreports. GeMCRIS also allows members of the public to access basic reports about human gene transfer trials registered withthe NIH and to search for information such as trial location, the names of investigators conducting trials, and the names ofgene transfer products being studied.Compliance with cGMP and GTP RequirementsBefore 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 (“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 deemedmisbranded 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. 40 Table of ContentsReview and Approval of a BLAThe 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. Under federal law, the submission of most BLAs is subject toan application user fee, which for federal fiscal year 2018 is $2,421,495 for an application requiring clinical data. Thesponsor of an approved BLA is also subject to an annual program fee, which for fiscal year 2018 is $304,162. Certainexceptions and waivers are available for some of these fees, such as an exception from the application fee for products withorphan designation and a waiver for certain small businesses.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 PDUFA, the FDA has ten months in which to complete its initialreview of a standard application and respond to the applicant, and six months for a priority review of the application. TheFDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may often besignificantly extended by FDA requests for additional information or clarification. The review process and the PDUFA goaldate may be extended by three months if the FDA requests or if the applicant otherwise provides additional information orclarification regarding information already provided in the submission within the last three months before the PDUFA goaldate.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 help ensure that the benefits ofthe product outweigh the potential risks. REMS can include medication guides, communication plans for healthcareprofessionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training orcertification for prescribing or dispensing, dispensing only under certain 41 Table of Contentscircumstances, special monitoring, and the use of patent registries. The FDA may prevent or limit further marketing of aproduct based on the results of post‑market studies or surveillance programs. After approval, many types of changes to theapproved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject tofurther testing requirements and FDA review and approval.Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy DesignationsThe 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, priority review designation and regenerative advanced therapy 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 (“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.With passage of the 21st Century Cures Act (the “Cures Act”) in December 2016, Congress authorized the FDA toaccelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for thisdesignation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product has the potential to addressunmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation includeearly interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potentialeligibility for priority review and accelerated approval based on surrogate or intermediate endpoints. 42 Table of ContentsAccelerated Approval PathwayThe 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 (“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 availability or lack ofalternative 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 RegulationIf 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, 43 Table of Contentsthe FDA will conduct laboratory research related to the safety, purity, potency, and effectiveness of pharmaceutical products.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements 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 approved labeling to add new safetyinformation; imposition of post‑market studies or clinical trials to assess new safety risks; or imposition of distribution orother restrictions under a REMS program. Other potential consequences include, among other things:·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.The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placedon the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising,communications regarding unapproved uses, industry-sponsored scientific and educational activities and promotionalactivities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibitedbefore the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved bythe FDA, as reflected in the product’s prescribing information. In the United States, health care professionals are generallypermitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA doesnot regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow conditions,for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such asdistributing scientific or medical journal information.If a company is found to have promoted off-label uses, it may become subject to adverse public relations andadministrative and judicial enforcement by the FDA, the DOJ, or the Office of the Inspector General of the Department ofHealth and Human Services, as well as state authorities. This could subject a company to a range of penalties that could havea significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner inwhich a company promotes or distributes drug products. The federal government has levied large civil and criminal finesagainst companies for alleged improper promotion, and has also requested that companies enter into consent decrees orpermanent injunctions under which specified promotional conduct is changed or curtailed.Orphan Drug DesignationOrphan 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 44 Table of ContentsStates and for which there is no reasonable expectation that the cost of developing and making available the biologic for thedisease or condition will be recovered from sales of the product in the United States.Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following 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 at the FDA based on acceptableconfidential requests made under the regulatory provisions. The product must then go through the review and approvalprocess 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 ExclusivityUnder 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 pediatric subpopulations, andto support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsorsmust also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposedpediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiverrequests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committeemust then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicantmay request an amendment to the plan at any time.For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request ofan applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatricassessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with sponsors andFDA must meet with sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by nolater than 90 days after FDA’s receipt of the study plan.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 45 Table of Contentspatent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extendsthe regulatory period during which the FDA cannot approve another application.Biosimilars and ExclusivityThe 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 (“BPCIA”). The BPCIA established a regulatory schemeauthorizing the FDA to approve biosimilars and interchangeable biosimilars. As of January 1, 2018, the FDA has approvednine biosimilar products for use in the United States. No interchangeable biosimilars, however, have been approved. TheFDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Additionalguidances are 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.Patent Term Restoration and ExtensionA 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 DiagnosticsIn 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. In July 2016, the FDAissued a draft guidance intended to assist sponsors of the drug therapeutic and in vitro companion diagnostic device onissues related to co-development of the products. 46 Table of ContentsUnder the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In theUnited States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern,among other things, medical device design and development, preclinical and clinical testing, premarket clearance orapproval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, exportand import, and post‑market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance orapproval from the FDA prior to commercial distribution.The FDA previously has required in vitro companion diagnostics intended to select the patients who will respond tothe product candidate to obtain pre-market approval (“PMA”) simultaneously with approval of the therapeutic productcandidate. The PMA process, including the gathering of clinical and preclinical data and the submission to and review by theFDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must prepare andprovide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and itscomponents regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to anapplication fee, which exceeds $250,000 for most PMAs; for federal fiscal year 2018, the standard fee for review of a PMA is$310,764 and the small business fee is $77,691. After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devicesmay be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must alsoestablish registration and device listings with the FDA. A medical device manufacturer’s manufacturing processes and thoseof its suppliers are required to comply with the applicable portions of the Quality System Regulation, which covers themethods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packagingand shipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic unscheduledinspections by the FDA. The FDA also may inspect foreign facilities that export products to the United States.The 21st Century Cures ActOn December 13, 2016, President Obama signed the Cures Act into law. The Cures Act is designed to modernize andpersonalize healthcare, spur innovation and research, and streamline the discovery and development of new therapiesthrough increased federal funding of particular programs. It authorizes increased funding for the FDA to spend on innovationprojects. The new law also amends the Public Health Service Act (“PHSA”) to reauthorize and expand funding for the NIH.The Cures Act establishes the NIH Innovation Fund to pay for the cost of development and implementation of a strategicplan, early stage investigators and research. It also charges the NIH with leading and coordinating expanded pediatricresearch. Further, the Cures Act directs the Centers for Disease Control and Prevention to expand surveillance of neurologicaldiseases.With amendments to the FDCA and the PHSA, Title III of the Cures Act seeks to accelerate the discovery,development, and delivery of new medicines and medical technologies. To that end, and among other provisions, the CuresAct reauthorizes the existing priority review voucher program for certain drugs intended to treat rare pediatric diseases until2020; creates a new priority review voucher program for drug applications determined to be material national security threatmedical countermeasure applications; revises the FDCA to streamline review of combination product applications; requiresthe FDA to evaluate the potential use of “real world evidence” to help support approval of new indications for approveddrugs; provides a new “limited population” approval pathway for antibiotic and antifungal drugs intended to treat serious orlife-threatening infections; and authorizes the FDA to designate a drug as a “regenerative advanced therapy,” thereby makingit eligible for certain expedited review and approval designations.Regulation and Procedures Governing Approval of Medicinal Products in the European UnionIn 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 generally follows the same linesas in the United States. It entails satisfactory completion of preclinical studies and adequate and 47 Table of Contentswell‑controlled clinical trials to establish the safety and efficacy of the product for each proposed indication. It also requiresthe submission to the relevant competent authorities of a marketing authorization application (“MAA”) and granting of amarketing authorization by these authorities before the product can be marketed and sold in the European Union.Clinical Trial ApprovalPursuant 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 European Union has been implemented through national legislation of themember states. Under this system, an applicant must obtain approval from the competent national authority of a EuropeanUnion member state in which the clinical trial is to be conducted, or in multiple member states if the clinical trial is to beconducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a specific study site afterthe competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by aninvestigational medicinal product dossier with supporting information prescribed by Directive 2001/20/EC and Directive2005/28/EC and corresponding national laws of the member states and further detailed in applicable guidance documents.In April 2014, the European Union adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set toreplace the current Clinical Trials Directive 2001/20/EC. The new Clinical Trials Regulation (EU) No 536/2014 will becomeapplicable no earlier than 2019. It will overhaul the current system of approvals for clinical trials in the European Union.Specifically, the new legislation, which will be directly applicable in all member states, aims at simplifying and streamliningthe approval of clinical trials in the European Union. For instance, the new Clinical Trials Regulation provides for astreamlined application procedure via a single-entry point and strictly defined deadlines for the assessment of clinical trialapplications.PRIME Designation in the EUIn March 2016, the European Medicines Agency (“EMA”) launched an initiative to facilitate development ofproduct candidates in indications, often rare, for which few or no therapies currently exist. The PRIority Medicines(“PRIME”) scheme is intended to encourage drug development in areas of unmet medical need and provides acceleratedassessment of products representing substantial innovation reviewed under the centralized procedure. Products from small-and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than larger companies. Many benefitsaccrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactiveregulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements,and accelerated marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicatedEMA contact and rapporteur from the Committee for Human Medicinal Products (“CHMP”) or Committee for AdvancedTherapies are appointed early in the PRIME scheme facilitating increased understanding of the product at the EMA’sCommittee level. A kick-off meeting initiates these relationships and includes a team of multidisciplinary experts at theEMA to provide guidance on the overall development and regulatory strategies.Marketing AuthorizationTo obtain a marketing authorization for a product under the European Union regulatory system, an applicant mustsubmit an MAA, either under a centralized procedure administered by the EMA or one of the procedures administered bycompetent authorities in European Union Member States (decentralized procedure, national procedure, or mutual recognitionprocedure). A marketing authorization may be granted only to an applicant established in the European Union. Regulation(EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, an applicant mustdemonstrate compliance with all measures included in an EMA‑approved Pediatric Investigation Plan (“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 48 Table of Contentsfor the treatment of certain diseases, including products for the treatment of cancer. For products with a new active substanceindicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is inthe interest of patients, 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 CHMP established at the EMA is responsible for conducting an initialassessment of a product. Under the centralized procedure in the European Union, the maximum timeframe for the evaluationof an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be providedby the applicant in response to questions of the CHMP. Accelerated evaluation may be granted by the CHMP in exceptionalcases, when a medicinal product is of major interest from the point of view of public health and, in particular, from theviewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days will be reduced to150 days, but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determinesthat it is no longer appropriate to conduct an accelerated assessment.Regulatory Data Protection in the European UnionIn 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, a generic marketingauthorization application can be submitted, and the innovator’s data may be referenced, but no generic medicinal productcan be marketed until the expiration of the market exclusivity. The overall ten‑year period will be extended to a maximum ofeleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization forone or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring asignificant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemicalentity so that the innovator gains the prescribed period of data exclusivity, another company may market another version ofthe product if such company obtained marketing authorization based on an MAA with a complete independent data packageof pharmaceutical tests, preclinical tests and clinical trials.Periods of Authorization and RenewalsA 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. 49 Table of ContentsRegulatory Requirements after Marketing AuthorizationFollowing 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 theEuropean Union’s stringent pharmacovigilance or safety reporting rules, pursuant to which post‑authorization studies andadditional monitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which aseparate manufacturer’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP requirementsand comparable requirements of other regulatory bodies in the European Union, which mandate the methods, facilities, andcontrols used in manufacturing, processing and packing of drugs to assure their safety and identity. Finally, the marketingand promotion of authorized products, including industry‑sponsored continuing medical education and advertising directedtoward the prescribers of drugs and/or the general public, are strictly regulated in the European Union under Directive2001/83EC, as amended.Orphan Drug Designation and ExclusivityRegulation (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 European Union when the application is made, or (2) a life‑threatening, seriously debilitating orserious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the drugin the European Union would generate sufficient return to justify the necessary investment. For either of these conditions, theapplicant must demonstrate that there exists no satisfactory method of diagnosis, prevention, or treatment of the condition inquestion that has been authorized in the European Union or, if such method exists, the drug will be of significant benefit tothose 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 European Union marketing authorization. Marketing authorization for an orphan drugleads to a ten‑year period of market exclusivity. During this market exclusivity period, neither the EMA nor the EuropeanCommission or the member states can accept an application or grant a marketing authorization for a “similar medicinalproduct.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substancesas contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. Themarket exclusivity period for the authorized therapeutic indication may, however, be reduced to six years if, at the end of thefifth year, it is established that the product no longer meets the criteria for orphan drug designation because, for example, theproduct is sufficiently profitable not to justify market exclusivity.Brexit and the Regulatory Framework in the United KingdomOn June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union (commonlyreferred to as “Brexit”). Thereafter, on March 29, 2017, the country formally notified the European Union of its intention towithdraw pursuant to Article 50 of the Lisbon Treaty. The withdrawal of the United Kingdom from the European Union willtake effect either on the effective date of the withdrawal agreement or, in the absence of agreement, two years after the UnitedKingdom provides a notice of withdrawal pursuant to the EU Treaty. Since the regulatory framework for pharmaceuticalproducts in the United Kingdom. covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketingauthorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives andregulations, Brexit could materially impact the future regulatory regime which applies to products and the approval ofproduct candidates in the United Kingdom. It remains to be seen how, if at all, Brexit will impact regulatory requirements forproduct candidates and products in the United Kingdom.Coverage, Pricing, and ReimbursementSignificant 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 50 Table of Contentssignificant portion of the cost of such product candidates. Even if any product candidates we may develop are approved,sales of such product candidates will depend, in part, on the extent to which third‑party payors, including government healthprograms in the United States such as Medicare and Medicaid, commercial health insurers, and managed care organizations,provide coverage, and establish adequate reimbursement levels for, such product candidates. The process for determiningwhether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursementrate that the payor will pay for the product once coverage is approved. Third‑party payors are increasingly challenging theprices charged, examining the medical necessity, and reviewing the cost‑effectiveness of medical products and services andimposing controls to manage costs. Third‑party payors may limit coverage to specific products on an approved list, alsoknown as a formulary, which might not include all of the approved products for a particular indication.In order to secure coverage and reimbursement for any product that might be approved for sale, a company may 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) in order to obtain reimbursement or pricing approval. For example, theEuropean Union provides options for its member states to restrict the range of products for which their national healthinsurance systems provide reimbursement and to control the prices of medicinal products for human use. European Unionmember states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on theprofitability of the company placing the product on the market. Other member states allow companies to fix their own pricesfor products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently,many countries in the European Union have increased the amount of discounts required on pharmaceuticals and these effortscould continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crisesexperienced by many countries in the European Union. The downward pressure on health care costs in general, particularlyprescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of newproducts. Political, economic, and regulatory developments may further complicate pricing negotiations, and pricingnegotiations may continue after reimbursement 51 Table of Contentshas been obtained. Reference pricing used by various European Union member states, and parallel trade (arbitrage betweenlow‑priced and high‑priced member states), can further reduce prices. There can be no assurance that any country that hasprice controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricingarrangements for any of our products, if approved in those countries.Healthcare Law and RegulationHealthcare 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 (“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 (“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 (“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·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. 52 Table of ContentsHealthcare ReformA 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” forcalculating 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 (“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; and·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 53 Table of Contentsthe legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicarepayments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through2024 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, which was enacted inJanuary 2013, among other things, further reduced Medicare payments to several providers, including hospitals, imagingcenters, and cancer treatment centers, and increased the statute of limitations period for the government to recoveroverpayments to providers from three to five years.These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affectthe prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequencywith which any such product candidate is prescribed or used. Further, there have been several recent U.S. congressionalinquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drugpricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs underMedicare and reform government program reimbursement methodologies for drug products. At the federal level, Congressand the Trump administration have each indicated that it will continue to seek new legislative and/or administrativemeasures to control drug costs. At the state level, individual states are increasingly aggressive in passing legislation andimplementing regulations designed to control pharmaceutical and biological product pricing, including price or patientreimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparencymeasures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition,regional health care authorities and individual hospitals are increasingly using bidding procedures to determine whatpharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.Further, since enactment of the PPACA, there have been numerous legal challenges and Congressional actions torepeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which wassigned by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision,which requires most Americans to carry a minimal level of health insurance, will become effective in 2019. According to theCongressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in2027 and premiums in insurance markets may rise. Additionally, on January 22, 2018, President Trump signed a continuingresolution on appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees,including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed oncertain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices.The Congress will likely consider other legislation to replace elements of the PPACA, during the next Congressional session.The Trump Administration has also taken executive actions to undermine or delay implementation of the PPACA. InJanuary 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilitiesunder the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA thatwould impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers ofpharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use ofassociation health plans and short-term health insurance, which may provide fewer health benefits than the plans soldthrough the PPACA exchanges. At the same time, the Administration announced that it will discontinue the payment of cost-sharing reduction (“CSR”) payments to insurance companies until Congress approves the appropriation of funds for suchCSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified healthplans under the PPACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the futureof that bill is uncertain.There have been, and likely will continue to be, additional legislative and regulatory proposals at the foreign,federal, and state levels directed at broadening the availability of healthcare and containing or lowering the cost ofhealthcare. Such reforms could have an adverse effect on anticipated revenues from product candidates that we maysuccessfully develop and for which we may obtain marketing approval and may affect our overall financial condition andability to develop product candidates. 54 Table of ContentsAdditional regulationIn 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.Foreign OperationsWe did not have any foreign operations in any of the fiscal years ended December 31, 2017, 2016 and 2015.EmployeesAs of January 1, 2018, we had 112 full‑time employees, including 41 employees with M.D. or Ph.D. degrees. Ofthese full‑time employees, 75 employees are engaged in research and development activities. None of our employees isrepresented by a labor union or covered by a collective bargaining agreement. We consider our relationship with ouremployees to be good.Segment Reporting and Financial and Geographical Information We are engaged solely in the discovery and development of medicines in the field of genome editing. Accordingly,we have determined that we operate in one operating segment. For segment and geographical financial information, see Note2, Summary of Significant Accounting Policies, to the financial statements appearing elsewhere in this Annual Report onForm 10-K, which are incorporated herein by reference. Financial information about our research and development expensesin each of the last three fiscal years is provided in Item 7, “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and is incorporated herein by reference. Our Corporate Information We were incorporated under the name Gengine, Inc. as a Delaware corporation in September 2013, and we changedour name to Editas Medicine, Inc. in November 2013. Our executive offices are located at 11 Hurley St., Cambridge,Massachusetts, 02141, 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., Washington, DC 20549. Please call the SEC at1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. You can review ourelectronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. Wealso make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10%stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filingsare provided to us by those persons. In addition, we regularly use our website to post information regarding our business,product development programs and governance, and we encourage investors to use our website, particularly the informationin the section entitled “Investors & Media,” as a source 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. 55 Table of Contents Item 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 CapitalWe 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 $120.3 million, $97.2 million,and $72.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had anaccumulated deficit of $305.9 million. We have financed our operations primarily through public offerings of our commonstock, private placements of our preferred stock, our collaboration with Juno Therapeutics, Inc. (“Juno Therapeutics”), and anupfront payment from Allergan Pharmaceuticals International Limited (“Allergan”). We have devoted all of our efforts toresearch and development. We expect to continue to incur significant expenses and increasing operating losses for theforeseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that ourexpenses 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 (“cGMP”) manufacturing facility; and·continue to 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 56 Table of Contentsdevelop and eventually commercialize a medicine or medicines with significant market potential. This will require us to besuccessful in a range of challenging activities, including identifying product candidates, completing preclinical testing andclinical 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‑marketing requirements.We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enoughto achieve profitability. We are currently only in the preclinical testing stages for our most advanced research programs. If wedo achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure tobecome and remain profitable would decrease the value of our company and could impair our ability to raise capital,maintain our research and development efforts, expand our business, or continue our operations. A decline in the value of ourcompany 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 2016 and 2017 we incurred, and infuture years we expect to continue to incur, significant costs associated with operating as a public company. Accordingly, wewill need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raisecapital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and productdevelopment programs or future commercialization efforts.We expect that our existing cash, cash equivalents, and marketable securities at December 31, 2017, anticipatedinterest income, and anticipated research support under our collaboration agreement with Juno Therapeutics, will enable usto fund our operating expenses and capital expenditure requirements for at least the next 24 months following the date of thisAnnual Report on Form 10-K. Our future capital requirements will depend on many factors, including:·the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, andclinical or natural history study 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 and our strategic alliance with Allergan;·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);·whether Allergan exercises any of its options under our strategic alliance; ·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;·the costs of reimbursing our licensors for the prosecution and maintenance of the patent rights in‑licensed by us;and 57 Table of Contents·the costs of operating as a public company.Identifying 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 significant committed external source of funds, other than our right to payments under ourcollaboration agreement with Juno Therapeutics, and payments from our subtenant, each of which is limited in scope andduration. To the extent that we raise additional capital through the sale of equity or convertible debt securities, theownership interests of our stockholders may be materially diluted, and the terms of these securities may include liquidationor other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreementsthat include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, makingcapital 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 fromquarter‑to‑quarter and year‑to‑year due to a variety of factors, many of which are beyond our control. Accordingly, ourstockholders should not rely upon the results of any quarterly or annual periods as indications of future operatingperformance. 58 Table of ContentsWe 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 necessary tocommercialize, product candidates we may identify for development. We do not anticipate generating revenues from productsales for the next several years, if ever. Our ability to generate future revenues from product sales depends heavily on our, orour 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 arrangements;·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 (the “FDA”), the European MedicinesAgency (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. 59 Table of ContentsRisks Related to Discovery, Development, and CommercializationWe 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 therapeutic products that utilize genome editingtechnology have been approved in the United States or in Europe, and there have only been a limited number of humanclinical trials of a genome editing product candidate.We have concentrated our research and development efforts on our genome editing platform, which uses CRISPRtechnology. Our future success depends on the successful development of this novel genome editing therapeutic approach. To date, no therapeutic product that utilizes genome editing, including CRISPR technology, has been approved in theUnited States or Europe and there have been only a limited number of clinical trials involving the use of a therapeuticutilizing genome editing technologies. For example, we are aware of a limited number of groups initiating clinical trialsusing CRISPR technology. Because our programs are all in the research or preclinical stage, we have not yet been able toassess safety in humans, and there may be long‑term effects from treatment with any of our future product candidates that wecannot predict at this time. Any product candidates we may develop will act at the level of DNA, and, because animal DNAdiffers from human DNA, it will be difficult for us to test our future product candidates in animal models for either safety orefficacy. Also, animal models do not exist for some of the diseases we expect to pursue in our programs. As a result of thesefactors, it is more difficult for us to predict the time and cost of product candidate development, and we cannot predictwhether the application of our genome editing platform, or any similar or competitive genome editing platforms, will resultin the identification, development, and regulatory approval of any medicines. There can be no assurance that anydevelopment problems we experience in the future related to our genome editing platform or any of our research programswill not cause significant delays or unanticipated costs, or that such development problems can be solved. We may alsoexperience delays in developing a sustainable, reproducible, and scalable manufacturing process or transferring that processto commercial partners. Any of these factors may prevent us from completing our preclinical studies or any clinical trials thatwe may initiate 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 genomic medicine field, we are aware of a limited number of gene therapyproducts that have received marketing authorization from the FDA and the European Commission. Even with respect to moreestablished products that fit into the categories of gene therapies or cell therapies, the regulatory landscape is stilldeveloping. Regulatory requirements governing gene therapy products and cell therapy products have changed frequentlyand will likely continue to change in the future. Moreover, there is substantial, and sometimes uncoordinated, overlap inthose responsible for regulation of existing gene therapy products and cell therapy products. For example, in the UnitedStates, the FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation andResearch (“CBER”) to consolidate the review of gene therapy and related products, and the Cellular, Tissue and GeneTherapies Advisory Committee to advise CBER on its review. Gene therapy clinical trials are also subject to review andoversight by an institutional biosafety committee (“IBC”), a local institutional committee that reviews and oversees basicand clinical research conducted at the institution participating in the clinical trial. Gene therapy clinical trials conducted atinstitutions that receive funding for recombinant DNA research from the United States National Institutes of Health (the“NIH”) are also subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee.Although the FDA decides whether individual gene therapy protocols may proceed, the review process and determinations ofother reviewing bodies can impede or delay the initiation of a clinical trial, even if the FDA has reviewed the trial andapproved its initiation. The same applies in the European Union. The EMA’s Committee for Advanced Therapies (“CAT”) isresponsible for assessing the quality, safety, and efficacy of advanced‑therapy medicinal products. The role of the CAT is toprepare a draft opinion on an application for marketing authorization for a gene therapy medicinal candidate that issubmitted to the EMA. In the European Union, the development and evaluation of a gene therapy medicinal product must beconsidered in the context of the relevant European Union guidelines. The EMA may issue new guidelines concerning thedevelopment and marketing authorization for gene therapy medicinal products and require that we comply with these newguidelines. As a 60 Table of Contentsresult, the procedures and standards applied to gene therapy products and cell therapy products may be applied to anyCRISPR product candidates 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 or other genome editing technology may cause the FDA, the EMA,and other regulatory bodies to revise the requirements for approval of any product candidates we may develop or limit theuse of products utilizing genome editing technologies, either of which could materially harm our business. In addition, theclinical 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. While the National Academy of Sciences released a report in February 2017 suggesting that itmay be advisable to permit clinical trials for germline genome editing if undertaken for compelling reasons and under strictoversight, it maintained that any such research should only proceed with broad public input. Laws in the United Kingdomprohibit genetically modified embryos from being implanted into women, but embryos can be altered in research labs underlicense from the Human Fertilisation and Embryology Authority. Research on embryos is more tightly controlled in manyother European countries. Notwithstanding, we are aware of certain groups conducting research in human embryo genomeediting. 61 Table of ContentsMoreover, in 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, our agreementwith CFFT and our strategic alliance with Allergan, may fail to identify potential product candidates for clinicaldevelopment for a number of reasons. Our research methodology may be unsuccessful in identifying potential productcandidates, or our potential product candidates may be shown to have harmful side effects or may have other characteristicsthat may make the products impractical to manufacture, unmarketable, or unlikely to receive marketing approval.If any of these events occur, we may be forced to abandon our development efforts for a program or programs, 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 gene editing technology using Cas9 and Cpf1 enzymes, but other genome editing technologies may bediscovered that provide significant advantages over CRISPR/Cas9 or CRISPR/Cpf1, which could materially harm ourbusiness.To date, we have focused our efforts on genome editing technologies using CRISPR and the Cas9 and Cpf1enzymes. Other companies have previously undertaken research and development of genome editing technologies using zincfinger nucleases, engineered meganucleases, and transcription activator‑like effector (“TALE”) nucleases, but to date nonehas obtained marketing approval for a product candidate. There can be no certainty that the CRISPR/Cas9 or CRISPR/Cpf1technology will lead to the development of genomic medicines, that other genome editing technologies will not beconsidered better or more attractive for the development of medicines or that either Cas9 or Cpf1, the two CRISPR associatedproteins that we use, may be useful or successful in developing therapeutics. For example, Cas9 or Cpf1 may be determinedto be less attractive than other CRISPR enzymes, including CRISPR enzymes that have yet to be discovered. Similarly, a newgenome editing technology that has not been discovered yet may be determined to be more attractive than CRISPR.Moreover, if we decide to develop genome technologies other than CRISPR technology using a Cas9 or Cpf1 enzyme, wecannot be certain we will be able to obtain rights to such technologies. Although all of our founders who currently provideconsulting and advisory services to us in the areas of Cas9 and TALE genome editing technologies have assignment ofinventions obligations to us with respect to the services they perform for us, these assignment of inventions obligations aresubject to limitations and do not extend to their work in other fields or to 62 Table of Contentsthe intellectual property arising from their employment with their respective academic and research institutions. To obtainintellectual property rights assigned by these founders to such institutions, we would need to enter into license agreementswith such institutions. Any of these factors could reduce or eliminate our commercial opportunity, and could have a materialadverse 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 type 10 (“LCA10”). Our ability togenerate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successfuldevelopment and eventual commercialization of a product candidate for the treatment of LCA10 and other productcandidates that we may identify in the future. The success of product candidates we may identify and develop will depend onmany 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 investigational new drug (“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 (a “BLA”) to the FDA or a marketing authorization application(an “MAA”) to the EMA. Not all BLAs or MAAs that are submitted to a regulatory agency are approved forcommercialization. Furthermore, even if we do receive regulatory approval to market any product candidates that we mayidentify and develop, any such approval may be subject to limitations on the indicated uses for 63 Table of Contentswhich we may market the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund ourresearch programs, we cannot assure you that we will successfully develop or commercialize our most advanced program, orany of our other research programs. If we or any of our future development partners are unable to develop, or obtainregulatory approval for, or, if approved, successfully commercialize, any product candidates we may identify and develop,we may not be 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 our proposed delivery modes, combinedwith CRISPR technology, have a limited, if any, history of being tested clinically. It is impossible to predict when or if anyproduct candidates we may develop will prove safe in humans. In the genomic medicine field, there have been severalsignificant adverse events from gene therapy treatments in the past, including reported cases of leukemia and death. Therecan be no assurance that genome editing technologies will not cause undesirable 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 and develop product candidates, and may harm ourbusiness, financial condition, result of operations, and prospects significantly. 64 Table of ContentsAdditionally, if we successfully develop a product candidate and it receives marketing approval, the FDA couldrequire us to adopt a Risk Evaluation and Mitigation Strategy (“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, combined with our product candidates, have a limited, if any, history of beingevaluated in human clinical trials. Any product candidates we develop may fail to show the desired safety and efficacy inlater stages of clinical development despite having successfully advanced through initial 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 meaningful results (reflecting atangible benefit to patients). In addition, the resulting clinical data and results may be difficult to analyze. Even if the FDAdoes find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre‑specifiedendpoints to a degree of statistical significance. This may be a particularly significant risk for many of the geneticallydefined diseases for which we plan to develop product candidates because many of these diseases have small patientpopulations, and designing and executing a rigorous clinical trial with appropriate statistical 65 Table of Contentspower is more difficult than with diseases that have larger patient populations. Further, even if we do achieve thepre‑specified criteria, we may produce results that are unpredictable or inconsistent with the results of the non‑primaryendpoints or other relevant data. The FDA also weighs the benefits of a product against its risks, and the FDA may view theefficacy results in the context of safety as not being supportive of regulatory approval. Other regulatory authorities in theEuropean Union and other countries, such as the CAT, may make similar comments with respect to these endpoints and data.Any product candidates we may develop will be based on a novel technology that makes it difficult to predict the time andcost of development and of subsequently obtaining regulatory approval. No genome editing therapeutic product has beenapproved in the United States or in Europe.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, institutional review boards (“IRBs”) or independent ethics committees may not authorize us or ourinvestigators to commence a clinical 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 (“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;·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; 66 Table of Contents·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;·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 67 Table of Contents·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 genomeediting 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;·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 68 Table of Contents·proximity and availability of clinical trial sites for prospective patients.In particular, our most advanced program is focused on a rare genetically defined disease with a limited patient poolfrom which to draw for enrollment in a clinical trial, as the global incidence of LCA10 is estimated to be two to three per100,000 live births worldwide. The eligibility criteria of our clinical trials will further limit the pool of available trialparticipants. 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.If 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 Leber Congenital Amaurosis (“LCA”) can be diagnosed based on a patient’ssymptoms and retinal scans, DNA samples are taken from LCA patients in order to test for the presence of the known genemutations that cause LCA and, where possible, to identify the specific genetically defined disease, such 69 Table of Contentsas LCA10. If we, or any third parties that we engage to assist us, are unable to successfully identify such patients, orexperience 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 affected.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, they maynonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors, and others in the medicalcommunity. The degree of market acceptance of any product candidates we may develop, if approved for commercial 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; 70 Table of Contents·the limitation to our targeted patient population and limitations or warnings contained in approved labeling bythe FDA or other regulatory authorities;·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 the 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.There 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: 71 Table of Contents·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 biotechnologyand pharmaceutical industries, including in the gene therapy and genome editing fields, are characterized by rapidlyadvancing technologies, intense competition, and a strong emphasis on intellectual property and proprietary products. Wewill face competition with respect to any product candidates that we may seek to develop or commercialize in the future frommajor pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potentialcompetitors also include academic institutions, government agencies, and other public and private research organizationsthat 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. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to ourapproach, and others are based on entirely different approaches.Our platform and product focus is the development of therapies using CRISPR technology. Companies developingCRISPR technology or therapies using CRISPR technology include Caribou Biosciences, Casebia Therapeutics, CRISPRTherapeutics, ERS Genomics, Intellia Therapeutics, and TRACR Hematology. There are additional companies developingtherapies using additional genome editing technologies, including transcription activator-like effector nucleases,meganucleases, Mega‑TALs, and zinc finger nucleases. These companies include bluebird bio, Cellectis, PoseidaTherapeutics, Precision Biosciences, and Sangamo Therapeutics. Additional companies developing gene therapy productsinclude Abeona Therapeutics, Adverum Biotechnologies, AGTC Therapeutics, Audentes Therapeutics, Exonic Therapeutics,Homology Medicines, Nightstar Therapeutics, REGENXBIO, Spark Therapeutics, uniQure, and Voyager Therapeutics. Inaddition to competition from other genome editing therapies or 72 Table of Contentsgene therapies, any products we may develop may also face competition from other types of therapies, such as smallmolecule, antibody, or protein therapies.Many of our current or potential competitors, either alone or with their collaboration partners, may havesignificantly greater financial resources and expertise in research and development, manufacturing, preclinical testing,conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers andacquisitions in the pharmaceutical, biotechnology, and gene therapy industries may result in even more resources beingconcentrated among a smaller number of our competitors. Smaller or early‑stage companies may also prove to be significantcompetitors, particularly through collaborative arrangements with large and established companies. These competitors alsocompete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trialsites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, ourprograms. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercializeproducts that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive thanany products that we may develop or that would render any products that we may develop obsolete or non‑competitive. Ourcompetitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approvalfor ours, which could result in our competitors establishing a strong market position before we are able to enter the market.Additionally, technologies developed by our competitors may render our potential product candidates uneconomical orobsolete, and we may 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. Governmentauthorities 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. 73 Table of ContentsThere 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;·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 74 Table of Contentscommercialize any product candidates we may develop. Even if coverage is provided, the approved reimbursement amountmay not be adequate to realize a sufficient 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 wesuccessfully 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 laboratory 75 Table of Contentsprocedures; 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, EMA or other comparable applicable foreign standards or specifications withconsistent and acceptable production yields and costs. 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. 76 Table of ContentsWe 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 PartiesWe expect to depend on collaborations with third parties for the research, development, and commercialization of certainof the product candidates we may develop or for development of certain of our research programs. If any suchcollaborations are not successful, we may not be able to capitalize on the market potential of those product candidates orresearch programs.We anticipate seeking third‑party collaborators for the research, development, and commercialization of certain ofthe product candidates we may develop or for development of certain of our research programs. For example, in May 2015,we entered into a collaboration with Juno Therapeutics focused on research and development of engineered T cellimmunotherapies that utilize or incorporate our genome editing technologies, and, in March 2017, we entered into a strategicalliance with Allergan focused on discovering, developing, and commercializing new gene editing medicines for a range ofocular disorders. 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 and, in the case of our strategic alliance with Allergan, whether they exercise an option to commercialize a product. Ourability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform thefunctions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.Collaborations involving our research programs or any product candidates we may develop, including ourcollaboration with Juno Therapeutics, and alliance arrangements we may enter into under which our research programs maybe involved and potential product candidates may be developed, including our strategic alliance with Allergan, pose thefollowing risks to us:·Collaborators may have significant discretion in determining the efforts and resources that they will apply tothese collaborations.·Collaborators may not pursue development and commercialization of any product candidates we may developor may elect not to continue or renew development or commercialization programs based on clinical trialresults, changes in the collaborator’s strategic focus or available funding or external factors such as anacquisition that diverts resources or creates competing priorities.·Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinicaltrial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of aproduct candidate for clinical testing. 77 Table of Contents·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 aremore likely to be successfully developed or can be commercialized under terms that are more economicallyattractive than ours.·Collaborators with marketing and distribution rights to one or more medicines may not commit sufficientresources to the marketing and distribution of such medicine or medicines.·Collaborators may not properly obtain, maintain, enforce, or defend our intellectual property or proprietaryrights or may use our proprietary information in such a way as to invite litigation that could jeopardize orinvalidate our proprietary information or expose us to potential litigation.·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 weundergo a change 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.·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 businesscombination, the continued pursuit and emphasis on our product development or commercialization programunder such collaboration 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, as the case may be. If we do not receive the funding we expect under these agreements, ourdevelopment of product candidates could be delayed, and we may need additional resources to develop product candidates.In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to find a suitablereplacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of usin the business and financial communities could be adversely affected. All of the risks relating to product development,regulatory approval, and commercialization described in this Annual Report on Form 10-K apply to the activities of ourcollaborators.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 developor certain of our research programs, we may decide to collaborate with other pharmaceutical and biotechnology companiesfor the development and potential commercialization of those product candidates or programs. 78 Table of ContentsWe 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 or allies. 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.We 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. 79 Table of ContentsWe 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.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. 80 Table of ContentsRisks Related to Our Intellectual PropertyIf 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 platform technology and any proprietary product candidates and technology wedevelop. We seek to protect our proprietary position by in‑licensing intellectual property relating to our platform technologyand filing patent applications in the United States and abroad related to our technologies and product candidates that areimportant to our business. If we or our licensors are unable to obtain or maintain patent protection with respect to ourCRISPR 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, including CRISPRtechnology, has emerged in the United States. The scope of patent protection outside of the United States is also uncertain.Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability toprotect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect thevalue of our intellectual property or narrow the scope of our owned and licensed patents. With respect to both in‑licensed andowned intellectual property, we cannot predict whether the patent applications we and our licensors are currently pursuingwill issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficientprotection 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 scientific literature often lag behind theactual discoveries, and patent applications in the United States and other jurisdictions are typically not published until18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make theinventions claimed in our owned or any licensed patents or pending patent applications, or that we were the first to file forpatent 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 or Cpf1. Our owned and in‑licensed patentsmay not cover CRISPR technology in conjunction with a protein other than Cas9 or Cpf1. If our competitors commercializethe CRISPR technology in conjunction with a protein other than Cas9 or Cpf1, our business, financial condition, results ofoperations, and prospects could be materially adversely affected. 81 Table of ContentsThe 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. Our licensors are currently, and we or ourlicensors may in the future become, subject to a third party pre‑issuance submission of prior art to the United States Patentand Trademark Office (the “USPTO”) or opposition, derivation, revocation, re‑examination, post‑grant and inter partesreview, or interference proceedings and other similar proceedings challenging our patent rights or the patent rights of others.An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, ourpatent rights, allow third parties to commercialize our technology or products and compete directly with us, without paymentto us, or result in our inability to manufacture or commercialize products without infringing third‑party patent rights.Moreover, we, or one of our licensors, may have to participate in interference proceedings declared by the USPTO todetermine priority of invention or in post‑grant challenge proceedings, such as oppositions in a foreign patent office, thatchallenge priority of invention or other features of patentability. Such challenges may result in loss of patent rights, loss ofexclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stopothers from using or commercializing similar or identical technology and products, or limit the duration of the patentprotection of our technology and product candidates. Such proceedings also may result in substantial cost and requiresignificant time from our scientists and management, even if the eventual outcome is favorable to us. As discussed below,some of our in‑licensed patents are subject to interference, opposition, and ex parte re‑examination proceedings and thereforesubject 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 or ourlicensors may need the cooperation of any such co‑owners of our owned and in‑licensed patents in order to enforce suchpatents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing couldhave a material adverse effect on our competitive position, business, financial conditions, results of operations, andprospects.Furthermore, 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 U.S. government has certain rights, including march‑in rights, to such patentrights and technology. When new technologies are developed with government funding, the government generally obtainscertain rights in any resulting patents, including a non‑exclusive license authorizing the government to use the invention.For example, our licensors, including The Broad Institute, Inc. (“Broad”), have granted the U.S. government a non‑exclusive,non‑transferable, irrevocable, paid‑up license to practice or have practiced for or on behalf of the United States, theinventions described in certain of our in‑licensed patents and patent applications, including certain aspects of our in‑licensedCRISPR technology. If the government decides to exercise these rights, it is not required to engage us as its contractor inconnection with doing so. These rights may permit the U.S. government to disclose our confidential information to thirdparties and to exercise march‑in rights to use or allow third parties to use our licensed technology. The U.S. government canexercise its march‑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 ofany of the foregoing rights could harm our competitive position, business, financial condition, results of operations, andprospects.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 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 our 82 Table of Contentstechnology 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 licenseagreements with Broad, and Broad and the President and Fellows of Harvard College (“Harvard”), the licensors may, undercertain circumstances, grant a license to the patents that are the subject of such license agreements to a third party. Such thirdparty would have full rights to the patent rights that are the subject of such licenses, which could impact our competitiveposition and enable a third party to commercialize products similar to our future product candidates and technology.Furthermore, under these license agreements, Broad has the right, after specified periods of time and subject to certainlimitations, to designate gene targets for which Broad, whether alone or together with an affiliate or third party, has aninterest in researching and developing products that would otherwise be covered by rights licensed to us under theagreements. Any of the foregoing would narrow the scope of our exclusive rights to the patents and patent applications wehave in‑licensed from Broad. The terms of these license agreements are described more fully under “Part I—Business—OurCollaborations and Licensing Strategy” in this Annual Report on Form 10-K. In addition, our rights to our in‑licensedpatents and patent applications are dependent, in part, on inter‑institutional or other operating agreements between the jointowners of such in‑licensed patents and patent applications. If one or more of such joint owners breaches suchinter‑institutional or operating agreements, our rights to such in‑licensed patents and patent applications may be adverselyaffected, which could have a material adverse effect on our competitive position, business, financial conditions, results ofoperations, and prospects.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, Harvard, and The General Hospital Corporation, d/b/a MassachusettsGeneral Hospital, our licensors retain control of preparation, filing, prosecution, and maintenance, and, in certaincircumstances, enforcement and defense of their patents and patent applications. Therefore, we cannot be certain that thesepatents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a mannerconsistent 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 or eliminated, and our rightto develop and commercialize any of our products that are subject of such licensed rights could be adversely affected. Additionally, given that we are required to reimburse our licensors for all of their expenses related to the prosecution,maintenance, enforcement and defense of patents and patent applications that we in‑license from them, the ongoing nature ofthe interference, opposition, and re‑examination proceedings involving the patents licensed to us under our licenseagreement with Harvard and Broad and our obligation to make such reimbursements are not subject to any limitations, weanticipate that our obligation to reimburse our licensors for expenses related to these matters will continue to be substantial. In connection with these reimbursement obligations, we incurred expenses in aggregate of $18.7 million, $23.6 million, and$9.4 million during the years ended December 31, 2017, 2016, and 2015, respectively.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, certain patent applicationslicensed to us by Broad are co‑owned with NIH. Broad does not and does not purport to grant any rights in NIH’s interest inthese patent applications under our agreement. If other third parties have ownership rights to our in‑licensed patents, theymay be able to license such patents to our competitors, and our competitors could market competing products andtechnology. This could have a material adverse effect on our competitive position, business, financial conditions, results ofoperations, 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 regulatory approval of, and to market,products identical to ours. In addition, we may seek to obtain additional licenses from our licensors and, in connection withobtaining such licenses, we may agree to amend our existing licenses in a manner that may be more favorable to thelicensors, including by agreeing to terms that could enable third parties (potentially including our competitors) to receivelicenses to a portion of the intellectual property that is subject to our existing licenses. Any of these events could have amaterial adverse effect on our competitive position, business, financial conditions, results of operations, and prospects. 83 Table of ContentsSome of our in‑licensed patents are subject to priority and validity disputes. In addition, our owned and in‑licensed patentsand other intellectual property may be subject to further priority and validity disputes, and other similar intellectualproperty proceedings including inventorship disputes. If we or our licensors are unsuccessful in any of these proceedings,we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms orat all, or to cease the development, manufacture, and commercialization of one or more of the product candidates we maydevelop, which could have a material adverse impact on our business.On January 11, 2016, the Patent Trial and Appeal Board of the USPTO (“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 the Massachusetts Institute of Technology (“MIT”), and in some cases Harvard, and in‑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 isco‑owned by Broad, MIT, and Harvard, and in‑licensed by us. An interference is a proceeding within the USPTO to determinepriority of invention of the subject matter of patent claims filed by different parties. This proceeding is only potentiallyavailable for patent applications filed in the United States on or before March 15, 2013 and related continuing patentapplications. In the interference, the University of California, the University of Vienna and Emmanuelle Charpentier assertedthat inventors from the University of California and the University of Vienna, and Emmanuelle Charpentier made certaininventions claimed in the Broad, MIT and Harvard patents before the inventors from Broad, MIT and, in certain cases,Harvard.In the declared interference, the University of California, acting on behalf of itself and the University of Vienna, andEmmanuelle Charpentier were designated as the senior party and Broad was designated as the junior party. In an interferenceproceeding, the junior party has the burden of proof and presents its priority evidence first. The declaration of interferencedefined the invention that is subject to the declaration of interference, also referred to as “the count,” as relating to a methodthat involves contacting a target DNA in a eukaryotic cell with certain defined CRISPR/Cas9 components for the purpose ofcleaving or editing a target DNA molecule or modulating transcription of at least one gene encoded thereon. All of the claimsin the pending U.S. patent application that is owned by the University of California, the University of Vienna, andEmmanuelle 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 were implicated in the interference. TheUniversity of California, the University of Vienna, and Emmanuelle Charpentier are listed as applicants on U.S. SerialNo. 13/842,859. The University of California derives rights in U.S. Serial No. 13/842,859 from an assignment by Dr. JenniferDoudna and certain other inventors listed on such application. Caribou Biosciences has reported that it has an exclusivelicense to patent rights from the University of California and the University of Vienna. Intellia Therapeutics has reported thatit has an exclusive license to such rights from Caribou Biosciences in certain fields. CRISPR Therapeutics, ERS Genomics,and TRACR Hematology, also our competitors, have reported that they have exclusively licensed such patent rights fromEmmanuelle Charpentier. Further, Dr. Doudna was a founder of our company and entered into a consulting agreement with usat 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.As a result of the declaration of interference, an adversarial proceeding in the USPTO before the PTAB was initiated.An interference is declared to ultimately determine priority, specifically which party was first to invent the commonlyclaimed invention. An interference is typically divided into two phases. The first phase is typically referred to as the motionsor preliminary motions phase while the second is referred to as the priority phase. In the first phase, each party may raiseissues 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.On February 15, 2017, the PTAB held that there is no interference‑in‑fact between the parties for the subject matterof the count. A judgment of no interference‑in‑fact means that no interference is needed to resolve priority between theparties because the PTAB determined that our in-licensed claims are directed to subject matter that is patentably distinct fromthose of the University of California, the University of Vienna, and Emmanuelle Charpentier. 84 Table of ContentsThe interference proceeding has therefore ended without reaching the second priority phase. Therefore, the 12 U.S. patentsand one U.S. patent application that we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard, as well asthe U.S. patent application owned by the University of California, the University of Vienna, and Emmanuelle Charpentier,with respect to which the PTAB had declared an interference were not modified or revoked as a result of this interferenceproceeding.Having filed a notice of appeal on April 12, 2017, the University of California, the University of Vienna, andEmmanuelle Charpentier filed an appeal brief to the Court of Appeals for the Federal Circuit on July 25, 2017 for review ofthe no interference-in-fact holding made by the PTAB in the interference proceeding. Broad filed its responsive brief onOctober 25, 2017. The University of California, the University of Vienna and Emmanuelle Charpentier filed a reply brief onNovember 22, 2017. It is uncertain when or in what manner the Federal Circuit will act on this appeal. A final,non‑appealable judgment of no interference‑in‑fact bars any further interference between the same parties for claims to thesame invention as the count of the interference. However, as discussed below, certain of these 12 U.S. patents and one U.S.patent application are, or may in the future be, subject to further intellectual property proceedings and disputes, includinginterference proceedings.The University of California, the University of Vienna, and Emmanuelle Charpentier or other third parties may file aseparate Suggestion of Interference against the Broad patents that were subject to the interference or other U.S. patents andpatent applications that we own or in‑license. For example, ToolGen Inc. (“ToolGen”) filed Suggestions of Interference in theUSPTO on April 13, 2015 suggesting that they believe some of the claims in pending U.S. applications owned by ToolGen(U.S. Serial No. 14/685,568 and U.S. Serial No. 14/685,510) interfere with certain claims in five U.S. patents, which we havein‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. These five U.S. patents are among the 12 U.S. patentswith respect to which the PTAB had declared an interference with the 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. TheSuggestions of Interference that were filed by ToolGen are still pending and it is uncertain when and in what manner theUSPTO will act on them.Our owned and in‑licensed patents and patent applications are, and may in the future become, subject to validitydisputes in the USPTO and other foreign patent offices. A request for ex parte re‑examination was filed with the USPTO onFebruary 16, 2016 against one patent that we have in‑licensed from Broad, acting on behalf of itself and MIT (U.S. PatentNo. 8,771,945), which was subject to the interference proceeding involving the University of California, the University ofVienna, and Emmanuelle Charpentier and referenced in the Suggestions of Interference filed by ToolGen. Ex partere‑examination is a procedure through which a third party can anonymously request the USPTO to re‑examine a grantedpatent because the third party believes the granted patent may not be patentable over prior art in the form of a printedpublication or another patent. Before the USPTO will re‑examine a granted patent, the third party requestor must establishthat the submitted prior art establishes a substantial and new question of patentability. If the USPTO determines there is asubstantial and new question of patentability, it grants the re‑examination request and re‑examines the patent after giving thepatent owner the option of filing an initial statement. The request for ex parte re‑examination of U.S. Patent No. 8,771,945was granted on May 9, 2016 thereby initiating a re‑examination procedure between the USPTO and Broad, acting on behalfof itself and MIT. The third party requestor does not participate in the re‑examination procedure after filing the requestexcept that it has the option of responding if the patent owner chooses to file an initial statement. On May 12, 2016, thePTAB suspended the re‑examination of U.S. Patent No. 8,771,945 noting that it has jurisdiction over any file that involves apatent involved in the interference. It is uncertain when the PTAB will lift the suspension, however the PTAB may do so inlight of the PTAB’s no interference‑in‑fact holding. If Broad is unsuccessful during the re‑examination, U.S. PatentNo. 8,771,945 may be revoked or narrowed, which could have a material adverse effect on the scope of our rights under suchpatent.The 12 in‑licensed U.S. patents and one in‑licensed U.S. patent application that were 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 and the one in‑licensed U.S. patent that is the subject of the re‑examination)relate generally to the CRISPR/Cas9 system and its use in eukaryotic cells. The claims of the 12 in‑licensed U.S. patents andone in‑licensed U.S. patent application vary in scope and coverage and include claims that are directed to CRISPR/Cas9systems that employ viral vectors for delivery, single guide RNAs, modified guide RNAs, S. aureus Cas9, or a Cas9 nickaseand are relevant to our genome editing platform technology. The loss or narrowing in 85 Table of Contentsscope of one or more of these in‑licensed patents could have a material adverse effect on the conduct of our business,financial condition, results of operations, and prospects. The loss or narrowing in scope 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 patent applications, or other intellectual property as an inventor orco‑inventor. If we are unable to obtain an exclusive license to any such third party co‑owners’ interest in such patents orpatent applications, such co‑owners may be able to license their rights to other third parties, including our competitors. Inaddition, we may need the cooperation of any such co‑owners to enforce any patents, including any patents that issue fromsuch patent applications, against third parties, and such cooperation may not be provided to us. Any of the foregoing couldhave a material adverse effect on the conduct of our business, financial condition, results of operations, and prospects.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. On January 17, 2018, the European Patent Office Opposition Division (the “OppositionDivision”) revoked in the European Patent Office (“EPO”) a European patent that we have in‑licensed from Broad, acting onbehalf of itself, MIT and Harvard (European Patent No. EP 2,771,468 B1). On January 18, 2018, Broad, acting on behalf ofitself, MIT and Harvard filed a notice of appeal to the Boards of Appeal of the EPO for review of the Opposition Division’sdecision to revoke this patent. It is uncertain when or in what manner the Boards of Appeal will act on this appeal. TheOpposition Division has also initiated opposition proceedings against six other European patents that we have in‑licensedfrom Broad, acting on behalf of itself, MIT and Harvard (European Patent Nos. EP 2,784,162 B1, EP 2,896,697 B1, EP2,898,075 B1, EP 2,921,557 B1,EP 2,931,898 B1, and EP 3,009,511 B1), one European patent that we have in‑licensed fromBroad, acting on behalf of itself and MIT (European Patent No. EP 2,764,103 B1), and two European patents that we have in-licensed from Broad, acting on behalf of itself, MIT, Harvard and The Rockefeller University (“Rockefeller”) (EuropeanPatent Nos. EP 2,825,654 B1 and EP 2,840,140 B1). The EPO opposition proceedings may involve issues including, but notlimited to, procedural formalities related to filing the European patent application, priority, and the patentability of theinvolved claims. One or more of the third parties that have filed oppositions against European Patent Nos. EP 2,771,468 B1,EP 2,784,162 B1, EP 2,764,103 B1, EP 2,825,654 B1, EP 2,840,140 B1, EP 2,896,697 B1, EP 2,898,075 B1, EP 2,921,557B1, EP 2,931,898 B1, and/or EP 3,009,511 B1 or other third parties may file future oppositions against other Europeanpatents that we in‑license or own. For example, we are aware that notices of opposition have been filed against one otherEuropean patent that we in-license from Broad, acting on behalf of itself, MIT and Harvard (European Patent No. EP2,931,897 B1). The deadline for filing oppositions against this European patent is August 1, 2018. There may be otheroppositions against this European patent that have not yet been filed or that have not yet been made available to the public.In addition, we are aware that Intellia Therapeutics filed petitions in two actions in United States District Court seekingdiscovery of information, including inventorship information, related to issues in these pending EPO oppositionproceedings. Both of these petitions were denied by the respective District Court and, in one of these two actions, IntelliaTherapeutics has filed a notice of appeal to the United States Court of Appeals. Disclosure of any such information may resultin additional validity challenges to our in‑licensed European patents and patent applications. The loss of priority for, or theloss of, these European patents could have a material adverse effect on the conduct of our business.If we or our licensors are unsuccessful in any patent related disputes, including interference proceedings, patentoppositions, re-examinations, or other priority, inventorship, or validity disputes to which we or they are subject (includingany of the proceedings discussed above), we may lose valuable intellectual property rights through the loss of one or morepatents owned or licensed or our owned or licensed patent claims may be narrowed, invalidated, or held unenforceable. Inaddition, if we or our licensors are unsuccessful in any inventorship disputes to which we or they are subject, we may losevaluable intellectual property rights, such as exclusive ownership of, or the exclusive right to use, our owned or in‑licensedpatents. If we or our licensors are unsuccessful in any interference proceeding or other priority or inventorship dispute, wemay be required to obtain and maintain licenses from third parties, including parties involved in any such interferenceproceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable termsor at all, or may be non‑exclusive. If we are unable to obtain and maintain such licenses, we may need to cease thedevelopment, manufacture, and commercialization of one or more of the product candidates we may develop. The loss ofexclusivity or the narrowing of our owned and licensed patent claims could limit our ability to stop others from using orcommercializing similar or identical technology and products. Any of the foregoing could result in a material adverse effecton our business, financial condition, results of operations, or prospects. Even if we are 86 Table of Contentssuccessful in any interference proceeding or other priority, inventorship, or validity disputes, it could result in substantialcosts and be a distraction to our 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 theUnited States. In addition, our intellectual property license agreements may not always include worldwide rights. Forexample, certain U.S. patent applications licensed to us by Broad include The University of Tokyo (“Tokyo”) and NIH asjoint applicants. Broad has only granted a license to us with respect to its interests and to Tokyo’s interests in these U.S.patent applications but not to any foreign equivalents thereof. Consequently, we may not be able to prevent third partiesfrom practicing our inventions in all countries outside the United States, or from selling or importing products made usingour inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictionswhere we have not obtained patent protection to develop their own products and, further, may export otherwise infringingproducts to territories where we have patent protection or licenses but enforcement is not as strong as that in the UnitedStates. These products may compete with our products, and our patents or other intellectual property rights may not beeffective 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. 87 Table of ContentsIf 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 may not be feasible on atechnical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected productcandidates, which could harm our business, financial condition, results of operations, and prospects significantly. We cannotprovide any assurances that third party patents do not exist which might be enforced against our current technology,including CRISPR genome editing technology, 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, including the amount, if any, that may become due and payable to our licensors in connection with sublicenseincome. If these events were to occur, they could have a material adverse effect on our business, financial condition, results ofoperations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our abilityto maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully developand commercialize 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 88 Table of Contentsbusiness. For example, we are aware of third party patents and patent applications that may be construed to cover ourCRISPR technology and product candidates. In order to avoid infringing these third party patents, or patents that issue fromthese third party patent applications, we may find it necessary or prudent to obtain licenses from such third party intellectualproperty holders. We may also require licenses from third parties for certain non‑CRISPR technologies including certaindelivery methods that we are evaluating for use with product candidates we may develop. In addition, with respect to anypatents we co‑own with third parties, we may require licenses to such co‑owners’ interest in such patents. However, we maybe unable to secure such licenses or otherwise acquire or in‑license any compositions, methods of use, processes, or otherintellectual property rights from third parties that we identify as necessary for our CRISPR technology and productcandidates we may develop. The licensing or acquisition of third party intellectual property rights is a competitive area, andseveral more established companies may pursue strategies to license or acquire third party intellectual property rights that wemay consider attractive or necessary. These established companies may have a competitive advantage over us due to theirsize, capital resources and greater clinical development and commercialization capabilities. In addition, companies thatperceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquirethird party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. For example, certain delivery modes, including certain adeno‑associated virus vectors and lipid nanoparticle technologies,we are evaluating for use are covered by patents held by third parties. If we are unable to successfully obtain rights torequired third party intellectual property rights or maintain the existing intellectual property rights we have, we may have toabandon development of the relevant program or product candidate, which could have a material adverse effect on ourbusiness, financial condition, results of operations, 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 (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. The America Invents Act and its implementation could increase the uncertainties andcosts surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all ofwhich could have a material adverse effect on our business, financial condition, results of operations, and prospects.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 were to initiate legal proceedings against a third party to enforce a patent covering a productcandidate we may develop or our technology, including CRISPR genome editing technology, the defendant couldcounterclaim that such patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaimsalleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an 89 Table of Contentsalleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non‑enablement.Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patentwithheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties haveraised challenges to the validity of certain of our in‑licensed patent claims and may in the future raise similar claims beforeadministrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms includere‑examination, post‑grant review, inter partes review, interference proceedings, derivation proceedings, and equivalentproceedings in foreign jurisdictions (e.g., opposition proceedings). For example, as discussed above, an interference wasdeclared, and multiple Suggestions of Interference have been filed against certain of our in‑licensed U.S. patents and patentapplications, one of these U.S. patents is subject to a re‑examination proceeding, opposition proceedings have been initiatedagainst nine of our in‑licensed European patents and additional interference, re‑examination, opposition, and otherintellectual property proceedings may be initiated in the future. For more information regarding these proceedings, see“Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. The opposition proceedings have so far resulted inthe revocation of one of our in-licensed European patents. In view of certain arguments made by the third parties against thisrevoked patent and similar arguments made by the third parties against additional other in-licensed European patents underopposition, the opposition proceedings could potentially lead to the revocation of additional in-licensed European patents.These and other proceedings could result in the revocation or cancellation of, or amendment to our patents in such a way thatthey no longer cover our technology or platform, or any product candidates that we may develop. The outcome followinglegal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, wecannot be certain that there is no invalidating prior art, of which we or our licensing partners and the patent examiner wereunaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we wouldlose at least part, and perhaps all, of the patent protection on our technology or platform, or any product candidates that wemay develop. Such a loss of patent protection would have a material adverse impact on our business, financial condition,results of operations, and prospects. The intellectual property landscape around genome editing technology, including CRISPR, is highly dynamic, and thirdparties 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 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 patents and patent applications in this landscape that may 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 2013/141680 (and its related U.S. Patent No.9,637,739 and other related U.S. patent applications and foreign counterparts) filed by Vilnius University (which is reportedto have exclusively licensed its rights to DuPont Pioneer, which is reported to have licensed certain rights to CaribouBiosciences, which is reported to have non-exclusively licensed certain rights to Intellia Therapeutics and CRISPRTherapeutics), WO 2013/176772 (and its related U.S. patent applications and foreign counterparts including European PatentNo. EP 2,800,811 B1, which is being opposed by several parties) filed by the University of California, the University ofVienna (both of which are reported to have 90 Table of Contentsexclusively 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, ERS Genomics and TRACR Hematology), WO 2014/065596 (and its related U.S. patent applications andforeign counterparts) filed by ToolGen, and WO 2014/089290 (and its related U.S. patent applications and foreigncounterparts including European Patent No. EP 3,138,910 B1, which is being opposed by several parties) filed by Sigma-Aldrich Co. LLC. We are also aware of U.S. Patent No. 9,738,908 filed by System Biosciences, LLC which is currently underre-examination. Each of these patent families are owned by a different third party and contain claims that may be construedto cover components and uses of CRISPR/Cas9 technology. If we are not able to obtain or maintain a license oncommercially reasonable terms to any third‑party patents that cover our product candidates or activities, such third partiescould potentially assert infringement claims against us, which could have a material adverse effect on the conduct of ourbusiness.Even 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. 91 Table of ContentsWe 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, priority, or validity disputes. To counter or defend against such claims can be expensiveand time consuming. 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.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. 92 Table of ContentsIf 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 (the “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 such extension is less than we request, ourcompetitors may obtain approval of competing products following our patent expiration, and our business, financialcondition, 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. 93 Table of ContentsShould 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 MattersEven 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 other regulatoryauthorities in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for aproduct candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not receivedapproval to market any product candidates from regulatory authorities in any jurisdiction. We have only limited experiencein filing and supporting the applications necessary to gain marketing approvals and expect to rely on third‑party CROs toassist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data andsupporting information to the various regulatory authorities for each therapeutic indication to establish the biologic productcandidate’s safety, purity, and potency. Securing regulatory approval also requires the submission of information about theproduct manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Anyproduct candidates we develop may not be effective, may be only moderately effective, or may prove to have undesirable orunintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent orlimit 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 94 Table of Contentsjurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals tocommercialize our medicines in any jurisdiction, which would materially impair our ability to generate revenue.Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union,commonly referred to as Brexit. On March 29, 2017, the country formally notified the European Union of its intention towithdraw pursuant to Article 50 of the Lisbon Treaty. Since a significant proportion of the regulatory framework in theUnited Kingdom is derived from European Union directives and regulations, the referendum could materially impact theregulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Anydelay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent usfrom commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability togenerate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delayefforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which couldsignificantly and materially harm our business.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, and requirements regarding thedistribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, theapproval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the conditions ofapproval, or contain requirements for costly post‑marketing testing and surveillance to monitor the safety or efficacy of themedicine.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: 95 Table of Contents·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;·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 96 Table of Contentsthe federal 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, as further amended by the HealthInformation Technology for Economic and Clinical Health Act, which imposes certain requirements, includingmandatory contractual terms, with respect to safeguarding the privacy, security, and transmission ofindividually identifiable health information without appropriate authorization by entities subject to the rule,such as health plans, health care clearinghouses, and health care providers;·the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing, or coveringup a material 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 information related to payments and other transfers of value to physicians and teachinghospitals, and ownership and investment interests held by physicians and other healthcare providers and theirimmediate family members and applicable group purchasing organizations; and·analogous state laws and regulations, such as state anti‑kickback and false claims laws, which may apply tosales or marketing arrangements and claims involving healthcare items or services reimbursed bynon‑governmental third‑party payors, including private insurers, and certain state laws that requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines andthe relevant compliance guidance promulgated by the federal government in addition to requiring drugmanufacturers to report information related to payments to physicians and other health care providers ormarketing expenditures.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 publicly 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 97 Table of Contentsadministrative sanctions, including exclusions from government funded healthcare programs. Liabilities they incur pursuantto these laws could result in significant costs or an interruption in operations, which could have a material adverse effect onour business, financial condition, results of operations, and prospects.The efforts of the Administration to pursue regulatory reform may limit the FDA’s ability to engage in oversight andimplementation activities in the normal course, and that could negatively impact our business. The Trump Administration has taken several executive actions, including the issuance of a number of executiveorders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routineregulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review andapproval of marketing applications. On January 30, 2017, President Trump issued an executive order, applicable to allexecutive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to beissued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law.These requirements are referred to as the “two-for-one” provisions. This executive order includes a budget neutralityprovision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealedregulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive orderrequires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by theOffice of Information and Regulatory Affairs within the Office of Management and on February 2, 2017, the administrationindicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agencyguidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they willimpact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability toengage in oversight and implementation activities in the normal course, our business may be negatively impacted.Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to obtainmarketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changesand proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approvalof our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any futurecollaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws,as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteriaand in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “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 in reimbursement that results from the MedicareModernization Act may result in a similar reduction in payments from private payors.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education AffordabilityReconciliation Act (the “PPACA”), which became law in 2010, contains provisions of importance to our business, including,without limitation, our ability to commercialize and the prices we may obtain for any of our product candidates and that areapproved for sale, the following:·an annual, non-deductible fee on any entity that manufactures or imports specified branded prescriptiondrugs and biologic agents; 98 Table of Contents·an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug RebateProgram;·expansion of federal healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;·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 pricingprogram new requirements to report financial arrangements with physicians and teaching hospitals;·a new requirement to annually report drug samples that manufacturers and distributors provide tophysicians; and·a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conductcomparative clinical effectiveness research, along with funding for such research.In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In August2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A JointSelect Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for theyears 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction toseveral government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2%per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressionalaction is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to severalproviders and increased the statute of limitations period for the government to recover overpayments to providers from threeto five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwiseaffect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or thefrequency with which any such product candidate is prescribed or used.We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in thefuture, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, newpayment methodologies and additional downward pressure on the price that we receive for any approved product and/or thelevel of reimbursement physicians receive for administering any approved product we might bring to market. Reductions inreimbursement levels may negatively impact the prices we receive or the frequency with which our potential products areprescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in asimilar reduction in payments from private payors. With the new Trump Administration and Congress, there may be additional legislative changes, includingpotentially repeal and replacement of certain provisions of the PPACA. For example, with enactment of the Tax Cuts andJobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate” ofthe PPACA. The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, willbecome effective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13million fewer Americans to be insured in 2027 and premiums in insurance markets may rise. Further, each chamber of theCongress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Although none of thesemeasures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements ofthe PPACA. The Congress will likely consider other legislation to replace elements of the PPACA, during the nextCongressional session. 99 Table of ContentsThe Trump Administration has also taken executive actions to undermine or delay implementation of the PPACA. InJanuary 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilitiesunder the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA thatwould impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers ofpharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use ofassociation health plans and short-term health insurance, which may provide fewer health benefits than the plans soldthrough the PPACA exchanges. At the same time, the Administration announced that it will discontinue the payment of cost-sharing reduction (“CSR”) payments to insurance companies until Congress approves the appropriation of funds for suchCSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified healthplans under the PPACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the futureof that bill is uncertain.The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussionin the United States, and members of Congress and the Administration have stated that they will address such costs throughnew legislative and administrative measures. To date, there have been several recent U.S. congressional inquiries andproposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review therelationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reformgovernment program reimbursement methodologies for drug products. The pricing of prescription pharmaceuticals is alsosubject to governmental control outside the United States. In these countries, pricing negotiations with governmentalauthorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement orpricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of ourproduct candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope oramount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process,and does not assure FDA approval of our product candidates.If a product candidate is intended for the treatment of a serious or life threatening condition and the productcandidate demonstrates the potential to address unmet medical need for this condition, the sponsor may apply for FDA fasttrack designation. However, a fast track designation does not ensure that the product candidate will receive marketingapproval or that approval will be granted within any particular timeframe. As a result, while we may seek and receive fasttrack designation for our product candidates, we may not experience a faster development process, review or approvalcompared to conventional FDA procedures. In addition, the FDA may withdraw fast track designation if it believes that thedesignation is no longer supported by data from our clinical development program. Fast track designation alone does notguarantee qualification for the FDA’s priority review procedures.Priority review designation by the FDA may not lead to a faster regulatory review or approval process and, in any event,does not assure FDA approval of our product candidates.If the FDA determines that a product candidate offers major advances in treatment or provides a treatment where noadequate therapy exists, the FDA may designate the product candidate for priority review. A priority review designationmeans that the goal for the FDA to review an application is six months, rather than the standard review period of ten months.We may request priority review for certain of our product candidates. The FDA has broad discretion with respect to whetheror not to grant priority review status to a product candidate, so even if we believe a particular product candidate is eligiblefor such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation does notnecessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval compared toconventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within the six‑monthreview cycle or thereafter.We may not be able to obtain orphan drug exclusivity for one or more of our product candidates, and even if we do, thatexclusivity may not prevent the FDA or the EMA from approving other competing products.Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug or biologic intendedto treat a rare disease or condition. A similar regulatory scheme governs approval of orphan products by the 100 Table of ContentsEMA in the European Union. Generally, if a product candidate with an orphan drug designation subsequently receives thefirst marketing approval for the indication for which it has such designation, the product is entitled to a period of marketingexclusivity, which precludes the FDA or the EMA from approving another marketing application for the same product for thesame therapeutic indication for that time period. The applicable period is seven years in the United States and ten years in theEuropean Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets thecriteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is nolonger justified.In order for the FDA to grant orphan drug exclusivity to one of our products, the agency must find that the product isindicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually inthe United States. The FDA may conclude that the condition or disease for which we seek orphan drug exclusivity does notmeet this standard. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect theproduct from competition because different products can be approved for the same condition. In addition, even after anorphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludesthat the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution topatient care. Orphan drug exclusivity may also be lost if the FDA or EMA determines that the request for designation wasmaterially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of thepatients with the rare disease or condition.On August 3, 2017, the Congress passed the FDA Reauthorization Act of 2017 (“FDARA”). FDARA, among otherthings, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinicalsuperiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order toreceive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Actunambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority.The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how theFDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect ourbusiness. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could beadversely impacted.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 business arrangements in the healthcare industry are subjectto 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, salescommission, customer incentive programs, and other business arrangements. Such misconduct also could involve theimproper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatoryauthorities, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code ofconduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and theprecautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks orlosses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply withthese laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves orasserting our rights, those actions could have a significant impact on our business, financial condition, results of operations,and prospects, including the imposition of significant fines or other sanctions. 101 Table of ContentsLaws and regulations governing any international operations we may have in the future may preclude us from developing,manufacturing and selling certain product candidates outside of the United States and require us to develop andimplement costly compliance programs.We are subject to numerous laws and regulations in each jurisdiction outside the United States in which we operate.The creation, implementation and maintenance of international business practices compliance programs is costly and suchprograms are difficult to enforce, particularly where reliance on third parties is required.The Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering,authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party orcandidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or businessin obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States tocomply with certain accounting provisions requiring the company to maintain books and records that accurately and fairlyreflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequatesystem of internal accounting controls for international operations. The anti‑bribery provisions of the FCPA are enforcedprimarily by the Department of Justice. The SEC is involved with enforcement of the books and records provisions of theFCPA.Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognizedproblem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries,hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certainpayments to hospitals in connection with clinical trials and other work have been deemed to be improper payments togovernment officials and have led to FCPA enforcement actions.Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, orthe sharing with certain non‑U.S. nationals, of information classified for national security purposes, as well as certainproducts and technical data relating to those products. Our expansion outside of the United States has required, and willcontinue to require, us to dedicate additional resources to comply with these laws, and these laws may preclude us fromdeveloping, manufacturing, or selling certain drugs and drug candidates outside of the United States, which could limit ourgrowth potential and increase our development costs. The failure to comply with laws governing international businesspractices may result in substantial penalties, including suspension or debarment from government contracting. Violation ofthe FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension ofthe right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of theFCPA can result in long‑term disqualification as a government contractor. The termination of a government contract orrelationship as a result of our failure to satisfy any of our obligations under laws governing international business practiceswould have a negative impact on our operations and harm our reputation and ability to procure government contracts. TheSEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accountingprovisions.Risks Related to Employee Matters, Managing Growth and Information TechnologyOur 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 102 Table of Contentsdevelopment and commercialization strategy. Our consultants and advisors may be employed by employers other than usand may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.The inability to recruit, or loss of services of certain executives, key employees, consultants, or advisors, may impede theprogress of our research, development, and commercialization objectives and have a material adverse effect on our business,financial condition, results of operations, and prospects.We have expanded and expect to further expand our development, regulatory, and future sales and marketing capabilities,and as a result, we may encounter 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, clinical development, manufacturing, and sales andmarketing. For example, our total number of employees grew from 55 as of December 31, 2015 to 112 as of January 1, 2017.To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, andfinancial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to our limitedfinancial resources and the limited experience of our management team in managing a company with such anticipatedgrowth, we may not be able to effectively manage the expected expansion of our operations or recruit and train additionalqualified personnel. Moreover, the expected physical expansion of our operations may lead to significant costs and maydivert our management and business development resources. Any inability to manage growth could delay the execution ofour business plans or disrupt our operations.Security breaches and other disruptions to our information technology structure could compromise our information,disrupt our business and expose us to liability, which would cause our business and reputation to suffer. In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, aswell as our proprietary business information and that of our suppliers and business partners, employee data, and we expect tocollect personally identifiable information of clinical trial participants when we begin clinical trials. We also rely to a largeextent on information technology systems to operate our business. We have outsourced elements of our confidentialinformation processing and information technology structure, and as a result, we are managing independent vendorrelationships with third parties who may or could have access to our confidential information. Similarly, our businesspartners and other third-party providers possess certain of our sensitive data. The secure maintenance of this information isimportant to our operations and business strategy. Despite our security measures, our information technology infrastructure(and those of our partners, vendors and third-party providers) may be vulnerable to attacks by hackers or breached due toemployee error, malfeasance or other disruptions. We, our partners, vendors, and other third-party providers could besusceptible to third party attacks on our, and their, information security systems, which attacks are of ever-increasing levelsof sophistication and are made by groups and individuals with a wide range of motives and expertise, including organizedcriminal groups, hacktivists, nation states and others. While we have invested in information technology security measuresand the protection of confidential information, there can be no assurance that our efforts will prevent service interruptions orsecurity breaches. Any such interruptions or breach may substantially impair our ability to operate our business and wouldcompromise our, and their, networks and the information stored could be accessed, publicly disclosed, lost, or stolen. Anysuch access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws thatprotect the privacy of personal information, disrupt our operations, and damage our reputation, any of which could adverselyaffect our business. Risks Related to Our Common StockAn active trading market for our common stock may not be sustained.Our shares of common stock began trading on The Nasdaq Global Select Market in February 2016. Given thelimited trading history of our common stock, there is a risk that an active trading market for our shares will not be sustained,which could put downward pressure on the market price of our common stock and thereby affect the ability of ourstockholders to sell their shares. 103 Table of ContentsThe market price of our common stock may be volatile, which could result in substantial losses for our stockholders.Our stock price has been, and is likely to remain, volatile. Some of the factors that may cause the market price of ourcommon stock to fluctuate include:·the success of existing or new competitive products or technologies;·the timing and results of preclinical and clinical studies for our LCA10 program and any product candidatesthat we may develop;·commencement or termination of collaborations for our product development and research programs;·failure or discontinuation of any of our product development and research programs;·results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, 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;·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; and·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. 104 Table of ContentsBroad 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 or fail to regularlypublish reports on us, we could lose visibility in the market for our stock, which in turn could cause our stock price todecline.A portion of our total outstanding shares may be sold into the market in the near future, which could cause the marketprice of our common stock to decline significantly, even if our business is doing well.Sales of a significant 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.We have registered substantially all shares of common stock that we may issue under our equity compensation plansor that are issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuanceand once vested, subject to volume limitations applicable to affiliates. In addition, under the terms of certain of our licenseagreements and certain promissory notes that we may issue in the future in connection with these license agreements, we mayelect to issue shares of our common stock in satisfaction of specified payment obligations of ours, which shares may besubject to rights requiring us to register such shares under the Securities Act of 1933, as amended (the “Securities Act”). Suchan election by us could result in the issuance of a substantial number of shares and upon registration under the Securities Actthese shares would be able to be freely sold in the public market, subject to volume limitations applicable to affiliates. If anyof the additional shares described above are sold, or if it is perceived that they will be sold, in the public market, the marketprice of our common stock could decline.In addition, certain of our employees, executive officers, directors, and affiliated stockholders have entered or mayenter into Rule 10b5‑1 plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5‑1 plan,a broker executes trades pursuant to parameters established by the employee, director or officer when entering into the plan,without further direction from the employee, officer, director, or affiliated stockholder. A Rule 10b5‑1 plan may be amendedor terminated in some circumstances. Our employees, executive officers, directors, and affiliated stockholders also may buyor sell additional shares outside of a Rule 10b5‑1 plan when they are not in possession of material, nonpublic information.Certain of our executive officers, directors, and 5% stockholders, if they choose to act together, maintain the ability tosignificantly influence all matters submitted to stockholders for approval.As of December 31, 2017, certain of our executive officers, directors, and a small group of 5% stockholders in theaggregate beneficially owned shares representing a meaningful percentage of our outstanding common stock. As a result,these stockholders, if they act together, may be able to influence our management and affairs and all matters requiringstockholder approval, including the election of directors and approval of significant corporate transactions. Thisconcentration of ownership may have the effect of delaying or preventing a change in control of our company and mightaffect the market price of our common stock. 105 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 (the “JOBSAct”) and may remain an emerging growth company until December 31, 2021. 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 (“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 consolidated financial statements, reduced disclosure obligations regarding executive compensation, and exemptionsfrom the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of anygolden parachute payments not previously approved. As a result, the information we provide stockholders will be differentthan the information that is available with respect to other public companies. In our proxy statement for our 2018 AnnualMeeting of Stockholders, we will not include all of the executive compensation related information that would be required ifwe were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive ifwe rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less activetrading market for our common stock, and our stock price may be more volatile.We incur increased costs as a result of operating as a public company, and our management is required to devotesubstantial 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 have had to hire additional accounting, finance, and other personnel in connection with our becoming, and our efforts tocomply with the requirements of being, a public company, and our management and other personnel devote a substantialamount of time towards maintaining compliance with these requirements. These requirements increase our legal and financialcompliance costs and make some activities more time‑consuming and costly. These rules and regulations are often subject tovarying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice mayevolve 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 are required to furnish a report by our management on our internal control overfinancial reporting. However, while we remain an emerging growth company, we will not be required to include anattestation report on internal control over financial reporting issued by our independent registered public accounting firm.To achieve compliance with SOX Section 404 within the prescribed period, we are engaged in a process to document andevaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need tocontinue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess anddocument 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 neither we nor ourindependent registered public accounting firm will be able to conclude, within the prescribed timeframe or at all, that ourinternal control over financial reporting is effective as required by SOX Section 404. If we identify one or more materialweaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of ourconsolidated 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 106 Table of Contentsapply these funds effectively could result in financial losses that could have a material adverse effect on our business, causethe price of our common stock to decline, and delay the development of our product candidates. Pending their use, we mayinvest our cash 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 restated certificate of incorporation and amended and restated bylaws or Delaware law mightdiscourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depressthe trading price of our common stock.Provisions in our restated certificate of incorporation and amended and restated bylaws or Delaware law maydiscourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable,including transactions in which you might otherwise receive a premium for your shares of our common stock. Theseprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisionsinclude:·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 amended and restated bylaws or restated certificate of incorporation;·the ability of our board of directors to make, alter, or repeal our amended and restated 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 which together withits affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the dateof the transaction in which the person became an interested stockholder, unless the business combination is approved in aprescribed manner.The existence of the foregoing provisions could 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. 107 Table of ContentsOur restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court locatedwithin the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forumfor certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuitsagainst the company and our directors and officers.Our restated certificate of incorporation provides that, unless our board of directors otherwise determines, the statecourts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court forthe District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf,any action 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 restated certificate of incorporation or amended and restatedbylaws, or any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine.This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that suchstockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against usand our directors and officers. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties. We lease 59,783 square feet of office and laboratory space in Cambridge, Massachusetts under a lease that expires inNovember 2023, of which we occupy approximately 50,130 square feet and sublease approximately 9,654 square feet undera sublease that expires in August 2018. We believe that our facilities are sufficient to meet our current needs and that suitableadditional space will be available as and when needed. Item 3. Legal Proceedings. From time to time, we may become involved in litigation or other legal proceedings relating to claims arising fromthe ordinary course of business. There can be no assurance that any proceedings that result from these third‑party actions willbe resolved in our favor. In addition, if they are not resolved in our favor, there can be no assurance that the result will nothave a material adverse effect on our business, financial condition, results of operations, or prospects. For additionalinformation regarding these matters set forth in this section, see “Item 1A. Risk Factors—Risks Related to Our IntellectualProperty—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 impact on us because of defense andsettlement costs, diversion of management resources, and other factors.On January 11, 2016 and March 17, 2016, the Patent Trial and Appeal Board (“PTAB”) of the United States Patentand Trademark Office (“USPTO”) 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) and a pending U.S. patent application (U.S. Serial No. 14/704,551) that areco‑owned by The Broad Institute, Inc. (“Broad”), the Massachusetts Institute of Technology (“MIT”), and in some cases thePresident and Fellows of Harvard College (“Harvard”), and in‑licensed by us. An interference is a proceeding within theUSPTO to determine priority of invention of the subject matter of patent claims filed by different parties. In the declaredinterference, the University of California, acting on behalf of itself and the University of Vienna, and EmmanuelleCharpentier were designated as the senior party and Broad was designated as the junior party.On February 15, 2017, the PTAB held that there is no interference‑in‑fact, which means that no interference isneeded to resolve priority between the parties because the PTAB determined that the Broad claims are directed to subjectmatter that is patentably distinct from those of the University of California, the University of Vienna, and EmmanuelleCharpentier. The interference proceeding has therefore ended. Therefore, the 12 U.S. patents and one U.S. patent applicationthat we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard, as well as the U.S. patent 108 Table of Contentsapplication owned by the University of California, the University of Vienna, and Emmanuelle Charpentier, with respect towhich the PTAB had declared an interference were not modified or revoked as a result of this interference proceeding.Having filed a notice of appeal on April 12, 2017, the University of California, the University of Vienna, andEmmanuelle Charpentier filed an appeal brief to the Court of Appeals for the Federal Circuit on July 25, 2017 for review ofthe no interference-in-fact holding made by the PTAB in the interference proceeding. Broad filed its responsive brief onOctober 25, 2017. The University of California, the University of Vienna and Emmanuelle Charpentier filed a reply brief onNovember 22, 2017. It is uncertain when or in what manner the Federal Circuit will act on this appeal.Separately, ToolGen Inc. (“ToolGen”) also filed Suggestions of Interference in the USPTO on April 13, 2015,against five U.S. patents, which are among the 12 U.S. patents with respect to which the PTAB had declared an interferenceand which we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard. 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.On May 9, 2016, the USPTO granted a request for ex parte re‑examination of U.S. Patent No. 8,771,945, which isamong the 12 U.S. patents with respect to which the PTAB had declared an interference and which we have in‑licensed fromBroad, acting on behalf of itself and MIT. On May 12, 2016, the PTAB suspended the re‑examination of U.S. Patent No.8,771,945 noting that it has jurisdiction over any file that involves a patent involved in the interference. It is uncertain whenthe PTAB will lift the suspension, however the PTAB may do so in light of the PTAB’s no interference‑in‑fact holding.On January 17, 2018, the European Patent Office Opposition Division (the “Opposition Division”) revoked in theEuropean Patent Office (“EPO”) a European patent that we have in‑licensed from Broad, acting on behalf of itself, MIT andHarvard (European Patent No. EP 2,771,468 B1). On January 18, 2018, Broad, acting on behalf of itself, MIT and Harvardfiled a notice of appeal to the Boards of Appeal of the EPO for review of the Opposition Division’s decision to revoke thispatent. It is uncertain when or in what manner the Boards of Appeal will act on this appeal. The Opposition Division has alsoinitiated opposition proceedings in the EPO against six other European patents that we have in‑licensed from Broad, actingon behalf of itself, MIT and Harvard, one European patent that we have in‑licensed from Broad, acting on behalf of itself andMIT and two European patents that we have in-licensed from Broad, acting on behalf of itself, MIT, Harvard and TheRockefeller University. In addition, notices of opposition have been filed against one other European patent that we have in-licensed from Broad, acting on behalf of itself, MIT and Harvard. Item 4. Mine Safety Disclosures. Not applicable. 109 Table of Contents PART 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 (the “IPO”). Prior to that time, there wasno established public trading market for our common stock. The following table sets forth for the period indicated the highand low sale prices per share for our common stock as reported on the Nasdaq Global Select Market for each quarter in theyears ended December 31, 2016 and 2017: Market Price2017 High LowFirst Quarter $29.20 $16.30Second Quarter $22.74 $13.12Third Quarter $24.50 $15.28Fourth Quarter $32.85 $20.29 Market Price2016 High LowFirst Quarter (beginning February 3, 2016) $43.99 $12.57Second Quarter $43.50 $22.50Third Quarter $28.63 $13.10Fourth Quarter $18.94 $12.43 Holders As of January 1, 2018, we had approximately 26 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. Performance Graph The following performance graph and related information shall not be deemed to be “soliciting material” or to be“filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), orotherwise subject to the liabilities under that Section, nor shall such information be incorporated by reference into any futurefiling under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except to the extent that wespecifically incorporate it by reference into such filing. The following graph compares the performance of our common stock to The Nasdaq Composite Index and to TheNasdaq Biotechnology Index from February 3, 2016 (the first date on which shares of our common stock were publiclytraded) through December 31, 2017. The comparison assumes $100 was invested after the market closed on 110 Table of ContentsFebruary 3, 2016 in our common stock and in each of the foregoing indices, and it assumes reinvestment of dividends, if any.The stock price performance included in this graph is not necessarily indicative of future stock price performance. Recent Sales of Unregistered Securities In December 2017, in connection with the triggering of a success payment under our Cpf1 License Agreement andour Cas9-II License Agreement, we issued promissory notes (the “Notes”), in an aggregate principal amount of $7.5 millionto the Broad Institute, Inc. The Notes were convertible, at our option, into shares of our common stock subject to certainconditions. No underwriters were involved in the foregoing issuances of securities. The securities were issued pursuant toSection 4(a)(2) under the Securities Act, relating to transactions by an issuer not involving any public offering. All recipientseither received adequate information about us or had access, through other relationships, to such information. Use of Proceeds from Registered Securities On February 8, 2016, we closed our initial public offering of common stock under a registration statement on FormS-1 (File No. 333-208856) that was declared effective by the Securities and Exchange Commission (the “SEC”) on February2, 2016. We received aggregate net proceeds from the offering of $97.5 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.As of December 31, 2017, we had used all of the net offering proceeds, primarily to fund preclinical studies for ourlead program, continued expansion of our platform technology, and preclinical studies of our research programs, as well asfor working capital and general corporate purposes. There was no material change in our use of the net proceeds from theoffering from that described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act. 111 Table of Contents Item 6. Selected Consolidated 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, 2017, 2016 and 2015 and theconsolidated balance sheet data as of December 31, 2017 and 2016 from our audited consolidated financial statementsincluded elsewhere in this Annual Report on Form 10-K. We have derived the consolidated statements of operations datafrom the period ended December 31, 2014 and 2013 and consolidated balance sheet data as of December 31, 2015, 2014 and2013 from our audited consolidated financial statements not included in this Annual Report on Form 10-K. Our historicalresults for any prior period are not necessarily indicative of the results that may be expected in any future period. Period from September 3,2013 Year Ended (Inception) to December 31, December 31, 2017 2016 2015 2014 2013 (in thousands, except share and per share data) Consolidated Statements ofOperations Data: Collaboration and other research anddevelopment revenues $13,728 $6,053 $1,629 $ — $ —Operating expenses: Research and development 83,159 56,979 18,846 5,073 530General and administrative 50,502 46,262 18,095 7,650 1,210Total operating expenses 133,661 103,241 36,941 12,723 1,740Operating loss (119,933) (97,188) (35,312) (12,723) (1,740)Other income (expense), net 587 (57) (37,445) (928) (18)Interest income (expense), net (978) 62 (143) (34) —Total other income (expense), net (391) 5 (37,588) (962) (18)Net loss $(120,324) $(97,183) $(72,900) $(13,685) $(1,758)Reconciliation of net loss to net lossattributable to commonstockholders: Net loss $(120,324) $(97,183) $(72,900) $(13,685) $(1,758)Accretion of redeemable convertiblepreferred stock to redemption value — (47) (394) (309) (25)Net loss attributable to commonstockholders $(120,324) $(97,230) $(73,294) $(13,994) $(1,783)Net loss per share attributable tocommon stockholders, basic anddiluted $(2.98) $(3.02) $(28.55) $(12.46) $(5.93)Weighted-average common sharesoutstanding, basic and diluted 40,323,631 32,219,717 2,566,916 1,123,098 300,480(1)See Note 15 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. 112 (1)(1)(1)(1)Table of Contents December 31, 2017 2016 2015 2014 2013 (in thousands)Consolidated Balance Sheet Data: Cash, cash equivalents, and marketable securities $329,139 $185,323 $143,180 $10,623 $2,012Working capital 295,492 154,100 138,060 4,555 (39)Total assets 373,260 229,182 149,363 12,188 2,481Deferred revenue, net of current portion 94,725 26,000 25,321 — —Construction financing lease obligation, net of currentportion 33,431 35,096 — — —Equipment loan, net of current portion and discounts — — — 344 —Redeemable convertible preferred stock — — 199,915 20,772 2,111Total stockholders’ equity (deficit) 208,080 134,607 (83,114) (15,292) (1,763) 113 Table of Contents Item 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 onForm 10-K contains forward-looking statements that involve substantial risks and uncertainties. The words “anticipate,”“believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “would” and similar expressions areintended to identify forward-looking statements, although not all forward-looking statements contain these identifyingwords. There are a number of important risks and uncertainties that could cause our actual results to differ materially fromthose indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosedin our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actualresults or events could differ materially from the plans, intentions and expectations disclosed in the forward-lookingstatements we make. We have included important factors in the cautionary statements included in this Annual Report onForm 10-K, particularly in the section entitled “Risk Factors” in Part I, Item 1A that could cause actual results or events todiffer materially from the forward-looking statements that we make. Our forward-looking statements do not reflect thepotential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that 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, whetheras a result of new information, future events or otherwise, except as required by applicable law. Overview We are a leading genome editing company dedicated to developing transformative genomic medicines with the aimto treat a broad range of serious diseases. The promise of genomic medicines is supported by the advancing knowledge of thehuman genome, and harnessing the progress in technologies for cell therapy, gene therapy, and, most recently, genomeediting. We believe this progress sets the stage for us to create unprecedented medicines with the potential to have a durablebenefit for patients. At Editas Medicine, our core capability in genome editing uses the technology known as CRISPR(clustered, regularly interspaced, short palindromic repeats) with which we can create molecules that efficiently andspecifically edit DNA. Our mission is to translate the promise of this science into a broad class of medicines to help peopleliving with serious diseases around the world. To this end, we have developed a proprietary genome editing platform basedon CRISPR technology and we continue to expand its capabilities. Our initial product development strategy is to primarilytarget genetically defined diseases with a focus on debilitating illnesses where there are poor or no approved treatments andwhere the genetic basis of disease is well understood. A genetically defined disease may be treated by correcting a diseasecausing gene, whereas a genetically treatable disease is a disease that does not necessarily have a single, disease causinggene, but which nonetheless may be treated by editing genes to ameliorate or eliminate the signs or symptoms of that disease. While our discovery efforts have ranged across several different diseases and therapeutic areas, the two areas where ourprograms are more mature are ocular diseases and engineered cell medicines. Our most advanced program is designed toaddress a specific genetic form of retinal degeneration called Leber Congenital Amaurosis type 10 (“LCA10”), a disease forwhich we are not aware of any available therapies and which we are aware of only one potential treatment in clinical trials inthe United States and Europe. We aim to file an investigational new drug (“IND”) application by mid-2018 for our LCA10program. In May 2015, we entered into a collaboration with Juno Therapeutics, Inc. (“Juno Therapeutics”), a leader in theemerging field of immuno‑oncology, to develop novel engineered T cell therapies for cancer and, in March 2017, we enteredinto a strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (“Allergan”), a wholly-owned subsidiary of Allergan plc, a leading global pharmaceutical company, to discover, develop, and commercialize newgene editing medicines for a range of ocular disorders. 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 in 114 Table of Contentsgenome 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 (the “IPO”), follow-on public offerings of our common stock including through an at-the-market offering, privateplacements of our preferred stock, payments received under our collaboration with Juno Therapeutics, and the upfrontpayment that we received under our strategic alliance with Allergan. From inception through December 31, 2017, we raisedan aggregate of $545.5 million to fund our operations. We raised an additional $48.5 million in net proceeds from an at-the-market offerings of our common stock in January 2018. In February 2016, we completed our IPO and received aggregate net proceeds of approximately $97.5 million, afterdeducting underwriting discounts and commissions and other offering expenses payable by us. In March 2017, we completeda follow-on offering and received net proceeds of approximately $96.7 million, after deducting underwriting discounts andcommissions and other offering expenses payable by us. In December 2017, we completed another follow-on offering andreceived net proceeds of approximately $57.2 million, after deducting underwriting discounts and other offering expensespayable by us. During January 2018, we completed at-the-market offerings and received net proceeds of approximately $48.5million. Since inception, we have incurred significant operating losses. Our net losses were $120.3 million, $97.2 millionand $72.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had anaccumulated deficit of $305.9 million. We expect to continue to incur significant expenses and operating losses for theforeseeable future. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate thatour expenses will increase substantially as we continue our current research programs and our preclinical developmentactivities; seek to identify additional research programs and additional product candidates; initiate preclinical testing andclinical trials for any product candidates we identify and develop; maintain, expand, and protect our intellectual propertyportfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license fromsuch licensors; further develop our genome editing platform; hire additional clinical, quality control, and scientificpersonnel; and incur additional costs associated with operating as a public company. We do not expect to be profitable forthe year ending December 31, 2018 or the foreseeable future. Financial Operations Overview Revenue To date, we have not generated any revenue from product sales and we do not expect to generate any revenue fromproduct sales for the foreseeable future. In connection with entering into our collaboration with Juno Therapeutics in May2015, we received an upfront payment of $25.0 million, and in each of May 2016 and July 2017, we received a milestonepayment of $2.5 million. In addition, we will receive up to $22.0 million in research support over the five years of thecollaboration and across the three programs under the collaboration, subject to adjustment in accordance with the terms ofthe agreement. Through December 31, 2017, we had recognized an aggregate of $12.2 million of research support from JunoTherapeutics since entering into the agreement, including $5.0 million recognized in connection with the achievement ofdevelopment milestones under the collaboration related to technical progress in two of the three research programs under thecollaboration. In connection with entering into our strategic alliance with Allergan in March 2017, we received an upfrontpayment of $90.0 million from Allergan (such payment, the “Allergan Upfront”). For the year ended December 31, 2017, werecognized $8.8 million in revenue in connection with the Allergan Upfront. As of December 31, 2017, we recorded $81.2million of deferred revenue, of which $68.3 million is classified as long-term on the consolidated balance sheet. Foradditional information about our revenue recognition policy related to the Juno Therapeutics collaboration or the Allerganagreement, see “—Critical Accounting Policies and Estimates—Revenue Recognition.”For the foreseeable future, we expect substantially all of our revenue will be generated from our collaboration withJuno Therapeutics, our strategic research alliance with Allergan to the extent Allergan exercises any of its options, any othercollaborations or agreements we may enter into and anticipated interest income. 115 Table of ContentsExpenses 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 acquiring and maintaining licenses under our third‑party licensing agreements, including anysublicensing or success payments made to our licensors. 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, IND-enabling studies and natural history 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 a product, if and when approved, whether alone or in collaboration with others; ·acceptance of a 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. 116 Table of Contents We do not track research and development costs on a program‑by‑program basis. 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 and prepare for the clinical development for our LCA10 program as well as our other researchprograms. General and Administrative Expenses General and administrative expenses consist primarily of salaries and other related costs, including stock‑basedcompensation for personnel in executive, finance, investor relations, business development, legal, corporate affairs,information technology, facilities, and human resource functions. Other significant costs include corporate facility costs nototherwise included in research and development expenses, legal fees related to patent and corporate matters, and fees foraccounting 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 for our headquarters and will likely include increased costsrelated to the hiring of additional personnel, and fees to outside consultants. We also anticipate increased expenses related toreimbursement of third‑party patent‑related expenses and increased expenses associated with being a public company,including costs for audit, legal, regulatory, and tax‑related services, director and officer insurance premiums, and investorrelations costs. With respect to reimbursement of third-party patent-related expenses specifically, given the ongoing nature ofthe interference and opposition proceedings involving the patents licensed to us under our license agreement with The BroadInstitute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”) as described in more detail in Part I,Item 1A “Risk Factors—Risks Related to Our Intellectual Property,” we anticipate general and administrative expenses willcontinue to be significant. Some of our in‑licensed patents under our license agreement with Broad and Harvard are subjectto priority disputes, and we anticipate that our obligation to reimburse Broad and Harvard for expenses related to theseinterference and opposition proceedings during future periods will be substantial until such proceedings are resolved. Other Income (Expense), Net Other income (expense), net consists primarily of interest expense on our construction financing lease obligationand promissory notes, and amortization of premiums associated with marketable securities, partially offset by rental incomefrom our subtenant, interest income, and accretion of discounts associated with marketable securities. Prior to 2017, other income (expense), net consisted primarily of interest income earned on cash equivalents andgovernment grant income, net of re-measurement losses associated with changes in the fair value of our liability for a warrantto purchase preferred stock. Upon the completion of the IPO, our outstanding warrant to purchase preferred stock convertedinto a warrant to purchase common stock and we reclassified the fair value of the warrant to additional paid-in capital. As aresult, there were no further remeasurement gains or losses associated with the warrant after the first quarter of 2016. 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 United States generally acceptedaccounting principles. The preparation of our consolidated financial statements requires us to make judgments and estimatesthat affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets andliabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events,and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from theseestimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in lightof changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected inthe consolidated financial statements prospectively from the date of change in estimates. 117 Table of Contents 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 Recognition As of December 31, 2017, revenue to date has primarily been generated from our collaboration agreement with JunoTherapeutics and our strategic alliance with Allergan. We recognize revenue in accordance with Financial AccountingStandards Board (“FASB”) Accounting Standards Codification (“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 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, Revenue Recognition—Multiple Element Arrangements (“ASC 605‑25”). Pursuant to the guidance in ASC 605‑25, we evaluate multiple elementarrangements to determine (1) the deliverables included in the arrangement and (2) whether the individual deliverablesrepresent separate units of accounting or whether they must be accounted for as a combined unit of accounting. Thisevaluation 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). Options 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. 118 Table of ContentsAllocation 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 (“VSOE”) of sellingprice, if available, third‑party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price(“BESP”) if neither VSOE or TPE is available. We have only used BESP to estimate selling price, since we have not hadVSOE or TPE of selling price for any units of accounting to date. Determining BESP for a unit of accounting requiressignificant judgment. In developing the BESP for a unit of accounting, we consider applicable market conditions andrelevant entity‑specific factors, including factors that were contemplated in negotiating the applicable agreement andestimated costs. We validate BESP for units of accounting by evaluating whether changes in the key assumptions used by usto determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units ofaccounting. 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 objectivelymeasurable 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 reasonably relative to allof 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 investment required toachieve the respective milestones in making this assessment. There is considerable judgment involved in determiningwhether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. In accordance with ASCTopic 605‑28, Revenue Recognition—Milestone Method, a clinical or regulatory milestone that is considered substantivewill be recognized as revenue in its entirety upon successful accomplishment of the milestone, assuming all other revenuerecognition criteria are met. Milestones that are not considered substantive would be recognized as revenue over theremaining period of performance, assuming all other revenue recognition criteria are met. Revenue from a commercialmilestone payment will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assumingall other revenue recognition criteria are met. 119 Table of ContentsWe 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. 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. Construction Financing Lease Obligation Beginning in 2016, we began recording certain estimated construction costs incurred and reported to us by alandlord as an asset and corresponding construction financing lease obligation on our consolidated balance sheets becausewe were deemed to be the owner of the building during the construction period for accounting purposes. In each reportingperiod, the landlord estimated and reported to us the costs incurred to date and provided supporting invoices for managementto review. We periodically met with the landlord and its construction manager to review the estimates and observeconstruction progress prior to recording such amounts. Construction was completed in October 2016 and we considered therequirements for sale-leaseback accounting treatment, which included an evaluation of whether all risks of ownership hadtransferred back to the landlord as evidenced by a lack of continuing involvement in the lease property. We determined thatthe arrangement did not qualify for sale lease-back accounting treatment, the building asset will remain on our balance sheetat its historical cost, and such asset would be depreciated over its estimated useful life of thirty years. Stock‑based CompensationWe account for our stock-based compensation awards in accordance with ASC Topic 718, Compensation—StockCompensation (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employee stockoptions, to be recognized as expense in the consolidated statements of operations based on their grant date fair values. Forstock options granted to employees and to members of our board of directors for their services on our board of directors, weestimate the grant date fair value of each option award using the Black-Scholes option-pricing model. For stock optionssubject to service-based vesting conditions, we recognize stock-based compensation expense equal to the grant date fairvalue of stock options on a straight-line basis over the requisite service period. 120 Table of Contents Share-based payments issued to non-employees are initially recorded at their fair values, and are revalued at eachreporting date and as the equity instruments vest and are recognized as expense over the related service period in accordancewith the provisions of ASC Topic 505-50, Equity-Based Payments to Non-Employees. 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 on thehistorical 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. If factors change or different assumptions are used, our stock-based compensationexpense could be materially different in the future. The weighted‑average assumptions used in the Black‑Scholes option pricing model to determine the fair value ofstock options granted to employees and directors were as follows: Year Ended December 31, 2017 2016 2015 Expected volatility 77.8% 78.4% 78.8% Expected term (in years) 6.25 6.25 6.25 Risk-free interest rate 2.1% 1.5% 1.7% 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 other than directors during 2016 and 2015 were as follows. There were no stockoptions granted to non-employees during 2017: Year Ended December 31, 2017 2016 2015 Expected volatility — 76.5% 80.0% Expected term (in years) — 10.0 10.0 Risk-free interest rate — 1.6% 2.2% Expected dividend yield — — — Stock-based compensation totaled approximately $23.4 million, $16.9 million, and $3.5 million for the years endedDecember 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had $10.3 million and $33.4 million ofunrecognized compensation expense related to restricted stock awards and stock option awards, respectively, which areexpected to be recognized over weighted‑average remaining vesting periods of approximately 4.7 and 2.5 years,respectively. We expect the impact of our stock‑based compensation expense for restricted stock and stock options grantedto employees and non‑employees to grow in future periods due to the potential increases in the value of our common stockand headcount. 121 Table of ContentsDetermination of Fair Value of Common Stock on Grant Dates prior to our Initial Public Offering 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 our IPO, the estimated fairvalues of our common stock as of grant dates prior to our IPO were determined contemporaneously by our board of directors.From 2014 through the date of our IPO, our board of directors’ determinations involved the preparation of valuationsperformed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid,Valuation of Privately‑Held Company Equity Securities Issued as Compensation, also known as the Practice Aid. Followingour IPO, it is no longer necessary for us to estimate the fair value of our common stock in connection with our accounting forstock options or other equity awards, as the fair value of our common stock can be determined by reference to its closingprice on The Nasdaq Global Select Market on the date of the applicable grant. Our board of directors performed contemporaneous common stock valuations as of August 4, 2015 and October 23,2015 and retrospective common stock valuations as of April 16, 2015, June 1, 2015, and September 14, 2015. In conductingthese valuation analyses, our board of directors considered all objective and subjective factors that it believed to be relevantfor each valuation conducted, including the lack of an active public market for our common and our convertible preferredstock; the prices of shares of our convertible preferred stock that we had sold to outside investors in arm’s length transactions,and the rights, preferences, and privileges of that convertible preferred stock relative to our common stock; our results ofoperations and financial condition; our entry into license agreements, pursuant to which we obtained rights to importantintellectual property; the material risks related to our business; our business strategy; the market performance of publiclytraded companies in the life sciences and biotechnology sectors; and the likelihood of achieving a liquidity event for theholders of our common stock, such as an IPO, given prevailing market conditions. Stock Option Grants in Connection with and Following Initial Public OfferingOur board of directors approved, effective upon the commencement of trading of our common stock on The NasdaqGlobal Select Market, grants of stock options to purchase an aggregate of 496,727 shares of common stock at a purchaseprice per share equal to the estimated fair market value of our common stock on such date of grant, which our board ofdirectors determined to be equal to the initial public offering price of our common stock.Since our IPO, the exercise price per share of all option grants has been set at the closing price of our common stockon The Nasdaq Global Select Market on the applicable date of grant, which our board of directors believes represents the fairvalue of our common stock. 122 Table of ContentsResults of Operations Comparison of Years ended December 31, 2017 and 2016 The following table summarizes our results of operations for the years ended December 31, 2017 and 2016, togetherwith the changes in those items in dollars (in thousands) and the respective percentage of changes, unless greater than 100%or less than (100)%, in which case we denoted such changes as not meaningful (n/m): Year Ended December 31, 2017 2016 Dollar Change PercentageChangeCollaboration and other research and development revenues $13,728 $6,053 $7,675 n/m Operating expenses: Research and development 83,159 56,979 26,180 46%General and administrative 50,502 46,262 4,240 9%Total operating expenses 133,661 103,241 30,420 29%Other income (expense), net Other income (expense), net 587 (57) 644 n/m Interest (expense) income, net (978) 62 (1,040) n/m Total other (expense) income, net (391) 5 (396) n/m Net loss $(120,324) $(97,183) $(23,141) (24)% Collaboration and Other Research and Development Revenues Collaboration and other research and development revenues were $13.7 million for the year ended December 31,2017 and consisted of $8.8 million of revenue recognized pursuant to our strategic alliance with Allergan and $4.9 million ofrevenue recognized pursuant to our collaboration with Juno Therapeutics, of which $2.5 million related to a milestonepayment. Collaboration and other research and development revenues were $6.1 million for the year ended December 31,2016 and consisted of $5.7 million of revenue recognized pursuant to our collaboration with Juno Therapeutics, including$2.5 million recognized in connection with a milestone payment, and $0.3 million of revenue recognized pursuant to ouragreement with Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”). Research and Development Expenses Research and development expenses increased by $26.2 million, to $83.2 million for the year ended December 31,2017 from $57.0 million for the year ended December 31, 2016. The following table summarizes our research anddevelopment expenses for the years ended December 31, 2017 and December 31, 2016, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2017 2016 Dollar Change PercentageChangeProcess and platform development expenses $17,117 $9,579 $7,538 79%Stock-based compensation expenses 15,131 12,647 2,484 20%Licensing and sublicensing payment expenses 14,610 18,469 (3,859) (21)%Success payment expenses 14,500 — 14,500 100%Employee related expenses 14,406 9,095 5,311 58%Facility expenses 4,416 5,671 (1,255) (22)%Other expenses 2,979 1,518 1,461 96%Total research and development expenses $83,159 $56,979 $26,180 46% 123 Table of ContentsThe increase in research and development expenses for the year ended December 31, 2017 compared to the yearended December 31, 2016 was primarily attributable to: ·approximately $14.5 million in increased success payments due to the triggering of multiple success paymentobligations under licensing agreements with Broad and The General Hospital Corporation, d/b/a MassachusettsGeneral Hospital (“MGH”); ·approximately $7.5 million in increased process and platform development expenses due to increased researchactivity, mostly relating to external research and development spend which we expect will increase further as wecontinue to support the preclinical studies and prepare for clinical development for our LCA10 program as wellas our other research programs; ·approximately $5.3 million in increased employee related expenses due to an increase in the size of ourworkforce; ·approximately $2.5 million in increased stock based compensation expense due to an increase in employeestock option expense and non-employee restricted stock expense; and·approximately $1.5 million in increased other expenses due to increased professional service and officeexpenses.These increases were partially offset by an approximate $3.8 million decrease in licensing and sublicensingpayment expenses due pursuant to license agreements that were executed in 2016 with Broad and MGH, partially offset by asublicensing fees in 2017 due to certain of our licensors in connection with receiving the Allergan Upfront, and anapproximately $1.3 million decrease in facility related expenses. General and Administrative Expenses General and administrative expenses increased by $4.2 million, to $50.5 million for the year ended December 31,2017 from $46.3 million for the year ended December 31, 2016. The following table summarizes our general andadministrative expenses for the year ended December 31, 2017 and December 31, 2016, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2017 2016 Dollar Change PercentageChangeIntellectual property and patent related fees $23,921 $26,963 $(3,042) (11)%Professional service expenses 6,010 5,483 527 10%Employee related expenses 8,915 6,881 2,034 30%Stock-based compensation expenses 8,233 4,234 3,999 94%Other expenses 3,423 2,701 722 27%Total general and administrative expenses $50,502 $46,262 $4,240 9% The increase in general and administrative expenses for the year ended December 31, 2017 compared to the yearended December 31, 2016 was primarily attributable to: ·approximately $4.0 million in increased stock-based compensation expenses due to an increase in employeestock option expense; ·approximately $2.0 million in increased employee related expenses due to an increase in the size of ourworkforce; ·approximately $0.7 million in increased other expenses including facility-related expenses; and·approximately $0.5 million in increased professional services expenses. 124 Table of Contents These increases were partially offset by an approximate $3.0 million decrease in intellectual property and patentrelated fees, including expenses associated with the prosecution and maintenance of patents and patent applications, whichwas primarily due to the fact that our in-licensors had additional legal costs during the year ended December 31, 2016 due tothe nationalization of certain patent applications and preparing for a U.S. patent interference proceeding. Other Income (Expense), Net For the year ended December 31, 2017, other income (expense), net was an expense of $0.4 million, which wasprimarily attributable to interest expense on our construction financing lease obligation and certain promissory notes, andamortization of premiums associated with marketable securities, partially offset by rental income from our subtenant, interestincome, and accretion of discounts associated with marketable securities. For the year ended December 31, 2016, other income (expense), net was income of $5 thousand, which was primarilyattributable to interest income earned on our cash equivalents and government grant income, partially offset by interestexpense on our construction financing lease obligation and loss on disposal of equipment. Comparison of Years Ended December 31, 2016 and 2015 The following table summarizes our results of operations for the years ended December 31, 2016 and 2015, togetherwith the changes in those items in dollars (in thousands) and respective percentages of change: Year Ended December 31, 2016 2015 Dollar Change PercentageChangeCollaboration and other research and development revenues $6,053 $1,629 $4,424 n/m Operating expenses: Research and development 56,979 18,846 38,133 n/m General and administrative 46,262 18,095 28,167 n/m Total operating expenses 103,241 36,941 66,300 n/m Other income (expense), net: Other expense, net (57) (37,445) 37,388 n/m Interest income (expense), net 62 (143) 205 n/m Total other income (expense), net 5 (37,588) 37,593 n/m Net loss $(97,183) $(72,900) $(24,283) (33)% Collaboration and Other Research and Development Revenues Collaboration and other research and development revenues were $6.1 million for the year ended December 31,2016 and consisted of $5.7 million of revenue recognized pursuant to our collaboration with Juno Therapeutics, including$2.5 million recognized in connection with a milestone payment, and $0.3 million of revenue recognized pursuant to ouragreement with CFFT. Collaboration and other research and development revenues were $1.6 million for the year ended December 31,2015 and consisted of revenue recognized pursuant to our collaboration with Juno Therapeutics. Research and Development Expenses Research and development expenses increased by $38.1 million, to $57.0 million for the year ended December 31,2016 from $18.8 million for the year ended December 31, 2015. The following table summarizes our research anddevelopment expenses for the years ended December 31, 2016 and December 31, 2015, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: 125 Table of Contents Year Ended December 31, 2016 2015 Dollar Change PercentageChangeLicensing and sublicensing payment expenses $18,469 $4,603 $13,866 n/m Stock-based compensation expenses 12,647 3,015 9,632 n/m Process and platform development expenses 9,579 3,957 5,622 n/m Employee related expenses 9,095 4,399 4,696 n/m Facility expenses 5,671 1,805 3,866 n/m Other expenses 1,518 1,067 451 42%Total research and development expenses $56,979 $18,846 $38,133 n/m The increase in research and development expenses for the year ended December 31, 2016 compared to the yearended December 31, 2015 was primarily attributable to: ·approximately $13.9 million in increased license fees related to our license agreements that were executed in2016 with MGH and Broad, partially offset by a decrease from fees paid to licensors during the second quarterof 2015 as a result of our entry into our collaboration agreement with Juno Therapeutics that did not recur in2016; ·approximately $9.6 million in increased stock-based compensation expense due to an increase in employeestock option expense and non-employee restricted stock expense; ·approximately $5.6 million in increased process and platform development costs due to increased researchactivity; ·approximately $4.7 million in increased employee related expenses, resulting from an increase in the size of ourworkforce and the hiring of key executives throughout 2016;·approximately $3.9 million in increased facilities costs, including rent, utilities, and depreciation expense as aresult of additional office and laboratory space; and ·approximately $0.5 million in increased other expenses. General and Administrative Expenses General and administrative expenses increased by $28.2 million, to $46.3 million for the year ended December 31,2016 from $18.1 million for the year ended December 31, 2015. The following table summarizes our general andadministrative expenses for the years ended December 31, 2016 and December 31, 2015, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2016 2015 Dollar Change PercentageChangeIntellectual property and patent related fees $26,963 $10,475 $16,488 n/m Employee related expenses 6,881 3,146 3,735 n/m Professional service expenses 5,483 3,144 2,339 74%Stock-based compensation expenses 4,234 498 3,736 n/m Other expenses 2,701 832 1,869 n/m Total general and administrative expenses $46,262 $18,095 $28,167 n/m The increase in general and administrative expenses for the year ended December 31, 2016 compared to the yearended December 31, 2015 was primarily attributable to: 126 Table of Contents·approximately $16.5 million in increased intellectual property legal and patent related fees, including expensesassociated with patents and patent applications, including expenses associated with the prosecution andmaintenance of such patents and patent applications, which was primarily due to the fact that our in-licensorshad additional legal costs during the year ended December 31, 2016 due to the nationalization of certain patentapplications and preparing for the U.S. patent interference proceeding; ·approximately $3.7 million in increased stock-based compensation expenses; ·approximately $3.7 million in increased employee compensation cost, resulting from an increase in the size ofour workforce and the hiring of key executives in 2016; ·approximately $2.3 million in increased professional service expenses; and ·approximately $1.9 million in increased other general and administrative expenses including office and facilityrelated costs resulting from our move to our new corporate headquarters during the fourth quarter of 2016. Other Income (Expense), Net For the year ended December 31, 2016, other income (expense), net was income of $5 thousand, which was primarilyattributable to interest income earned on our cash equivalents and government grant income, partially offset by interestexpense on our construction financing lease obligation and loss on disposal of equipment. For the year ended December 31, 2015, other income (expense), net was an expense of $37.6 million, which wasprimarily related to mark‑to‑market adjustments in our Series A preferred stock tranche right liability and mark‑to‑marketadjustments for the anti‑dilution protection liability related to our issuance of common stock to our licensors. The trancheright liability and anti‑dilution liability were both settled in June 2015. Liquidity and Capital Resources Sources of Liquidity From inception through December 31, 2017, we funded our operations primarily through proceeds from privateplacements of our preferred stock of $163.3 million, net proceeds of $251.4 million from public offerings of our commonstock, the Allergan Upfront, and an up-front payment, research and development payments, and milestone payments underour collaboration with Juno Therapeutics of $25.0 million, $8.1 million and $5.0 million, respectively. As of December 31,2017, we had cash, cash equivalents, and marketable securities of $329.1 million. In addition to our existing cash, cash equivalents, and marketable securities, we are eligible to earn milestonepayments and are entitled to cost reimbursement under our collaboration agreement with Juno Therapeutics. Additionally,under our strategic alliance with Allergan, we are eligible to earn milestone payments. Our ability to earn the milestonepayments and the timing of earning these amounts are dependent upon the timing and outcome of our development,regulatory and commercial activities, as well as whether Allergan exercises any of its options under the strategic alliance,and, as such, are uncertain at this time. As of December 31, 2017, our right to payments under our collaboration agreementwith Juno Therapeutics and our strategic alliance with Allergan, and payments from our subtenant were our only significantcommitted potential external sources of funds.At-the-Market OfferingIn March 2017, we entered into a sales agreement with Cowen and Company LLC (“Cowen”), under which we wereable from time to time to issue and sell shares of our common stock through Cowen in at-the-market offerings for aggregategross sales proceeds of $50.0 million. In January 2018, we sold 1,429,205 shares of our common stock to Cowen at aweighted-average price of $34.99 per share for gross proceeds of $50.0 million. We paid a 3% cash commission on the grosssales price per share of common stock sold resulting in us our receiving net proceeds from the offering of approximately$48.5 million. Following these sales, no shares of common stock remained available for sale 127 Table of Contentsunder the sales agreement. Shares sold pursuant to the sales agreement were sold pursuant to a shelf registration statement,which became effective on March 15, 2017.Indebtedness In December 2016, in connection with our entry into our Cpf1 license agreement with the Broad (the “Cpf1 LicenseAgreement”), we issued promissory notes (the “Initial Notes”) in an aggregate original principal amount of $10.0 million toBroad and Wageningen. We fully settled the outstanding principal and accrued interest on the Initial Notes by paying $0.2million in cash to Wageningen in August 2017 and issuing 108,104 shares and 371,166 shares of common stock to Broad inAugust 2017 and September 2017, respectively, in connection with such settlement. Upon such issuance and payment, theInitial Notes were cancelled. In March 2017, a success payment in the amount of $5.0 million under our Cpf1 License Agreement became dueupon our market capitalization reaching $750 million, and we issued promissory notes to Broad and Wageningen in theaggregate original principal amount of $5.0 million (the “March Notes”). In August 2017, we issued an aggregate of 271,347shares of our common stock to Broad and paid $0.4 million to Wageningen as payment of all outstanding principal andinterest under the March Notes. Upon such issuance and payment, the March Notes were cancelled. In September 2017,Wageningen designated Broad as the recipient of any future promissory notes that are owed to Wageningen pursuant to theCpf1 License Agreement. In December 2017, success payments in the aggregate amount of $7.5 million under our Cpf1 License Agreementand our Cas9-II license agreement with the Broad (the “Cas9-II License Agreement”) became due upon our marketcapitalization reaching $1.0 billion for a specified period of time, and we issued promissory notes to Broad in the aggregateoriginal principal amount of $7.5 million (the “December Notes”). In January 2018, we issued an aggregate of 225,909 sharesof our common stock to Broad as payment of all outstanding principal and interest under the December Notes. Upon suchissuance, the December Notes were cancelled. Under the terms of the Cpf1 License Agreement and Cas9-II License Agreement, we may be required to issueadditional promissory notes in connection with the achievement of success payment criteria. See Note 8 to our consolidatedfinancial statements for more information regarding such success payment criteria. Cash Flows The following table provides information regarding our cash flows for the years ended December 31, 2017, 2016and 2015, respectively (in thousands): Year Ended December 31, 2017 2016 2015 Net cash (used in) provided by: Operating activities $(9,417) $(50,246) $(5,443)Investing activities (183,810) (3,473) (1,431)Financing activities 154,534 97,161 139,391Net increase (decrease) in cash and cash equivalents $(38,693) $43,442 $132,517 Net Cash Used in Operating Activities Net cash used in operating activities was approximately $9.4 million for the year ended December 31, 2017, andconsisted primarily of a net loss of $120.3 million adjusted for non-cash items, including stock-based compensationexpenses of $23.4 million, non-cash research and development expenses of $14.5 million, depreciation expense of $2.7million, other non-cash items income of $0.3 million, and a net change in operating assets and liabilities of $70.6 million.The change in operating assets and liabilities was primarily related to an increase in deferred revenue of $81.7 million,primarily related to receiving the Allergan Upfront, partially offset by a decrease of $8.3 million in accrued expenses, adecrease of $1.5 million in accounts payable, an increase in accounts receivable of $0.6 million, and an increase in prepaidexpenses and other current assets of $0.6 million 128 Table of Contents Net cash used in operating activities was $50.2 million for the year ended December 31, 2016, and consistedprimarily of a net loss of $97.2 million adjusted for non-cash items, including stock-based compensation expenses of $16.9million, non-cash research and development expenses of $10.0 million, depreciation expense of $1.2 million, other non-cashitems expense of $0.9 million, re-measurement of warrant to purchase redeemable securities of $0.1 million, and a net changein operating assets and liabilities of $17.9 million. The change in operating assets and liabilities was related to an increase inaccrued expenses of $11.8 million, an increase in accounts payable of $3.3 million, a decrease in non-current assets of $2.2million, an increase in deferred revenue of $0.9 million, and a decrease in accounts receivable of $0.9 million, partially offsetby an increase in prepaid expenses and other current assets of $1.3 million. Net cash used in operating activities was $5.4 million for the year ended December 31, 2015, and consistedprimarily of a net loss of $72.9 million adjusted for non-cash items, including mark to market of our preferred stock trancheliability, anti-dilutive protection liability, and warrant liability of $37.4 million, stock-based compensation expenses of $3.5million, depreciation expense of $0.5 million, other non-cash items expense of $0.1 million, and a net change in operatingassets and liabilities of $26.0 million. The change in operating assets and liabilities was related to an increase in deferredrevenue of $25.3 million, primarily related to receiving the upfront payment under our collaboration agreement with JunoTherapeutics, and an increase in accrued expenses of $3.5 million, partially offset by a decrease in accounts payable of $1.4million, an increase in accounts receivable of $1.0 million, and an increase in prepaid expenses and other current assets of$0.4 million. Net Cash Used in Investing Activities Net cash used in investing activities was approximately $183.8 million for the year ended December 31, 2017, andconsisted of expenses to purchase marketable securities of $375.3 million and acquisitions of equipment of $2.1 million,partially offset by proceeds from maturities of marketable securities of $193.5 million. Net cash used in investing activities was $3.5 million for the year ended December 31, 2016 and consisted primarilyof acquisitions of equipment. Net cash used in investing activities was $1.4 million for the year ended December 31, 2015 and consisted primarilyof acquisitions of equipment. Net Cash Provided by Financing Activities Net cash provided by financing activities was approximately $154.5 million for the year ended December 31, 2017,primarily related to $154.1 million in proceeds received from public offerings of common stock, net of issuance costs thatwere paid as of December 31, 2017, and $1.8 million in proceeds from exercises of options for our common stock, partiallyoffset by payments on our construction financing obligation of $0.8 million and payments on our promissory notes of $0.6million. Net cash provided by financing activities was approximately $97.2 million for the year ended December 31, 2016and primarily related to $97.5 million in proceeds received from our IPO, net of issuance costs, and proceeds from exercise ofstock options of $0.2 million, partially offset by payments on our construction financing obligation of $0.6 million. Net cash provided by financing activities was approximately $139.4 million for the year ended December 31, 2015and primarily consisted of proceeds of $141.7 million related to the issuance of Series A-2 and Series B preferred stock andreceived proceeds of $1.5 million from our equipment loan, partially offset by payments on our equipment loan of $2.0million, fees related to our IPO of $1.7 million, and payments of the final fee for our loan payoff of $0.1 million. 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 129 Table of Contentsand additional research programs; initiate preclinical testing and clinical trials for any product candidates we identify anddevelop; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for expensesrelated to the intellectual property that we in-license from such licensors; hire additional clinical, quality control, andscientific personnel; and incur additional costs associated with operating as a public company. In addition, if we obtainmarketing approval for any product candidate that we identify and develop, we expect to incur significant commercializationexpenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing, anddistribution are not the responsibility of a collaborator. We do not expect to generate significant recurring revenue unlessand until we obtain regulatory approval for and commercialize a product candidate. Furthermore, in 2016 and 2017 weincurred, and in future years we expect to continue to incur, significant costs associated with operating as a public company.Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we areunable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research anddevelopment programs or future commercialization efforts. We expect that our existing cash, cash equivalents, and marketable securities at December 31, 2017, anticipatedinterest income, and anticipated research support under our collaboration agreement with Juno Therapeutics will enable us tofund our operating expenses and capital expenditure requirements for at least the next 24 months following the date of thisAnnual Report on Form 10-K. We have based our estimates on assumptions that may prove to be wrong, and we may use ouravailable 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 and our strategic alliance with Allergan; ·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); ·whether Allergan exercises any of its options under our strategic alliance; ·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; ·the costs of reimbursing our licensors for the prosecution and maintenance of the patent rights in-licensed by us;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. 130 Table of Contents 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. Contractual Obligations The following table summarizes our significant contractual obligations as of payment due date by period atDecember 31, 2017 (in thousands): Less Than More than Total 1 Year 1 to 3 Years 3 to 5Years 5 YearsSuccess payment and notes payable $9,500 $9,500 $ — $ — $ —Operating lease obligations 25,100 4,055 12,774 8,271 —Total $34,600 $13,555 $12,774 $8,271 $ —(1)In January 2018, we issued an aggregate of 80,000 shares of our common stock as payment of the $2.0 millionsuccess payment owed to MGH. In January 2018, we issued an aggregate of 225,909 shares of our common stock tothe Broad as payment of all outstanding principal and interest under the notes payable in the aggregate originalprincipal amount of $7.5 million and such notes were cancelled.The table above does not include potential milestone and success fees, sublicense fees, royalty fees, licensingmaintenance fees, and reimbursement of patent maintenance costs that we may be required to pay under agreements we haveentered into with certain institutions to license intellectual property. Our agreements to license intellectual property includepotential milestone payments that are dependent upon the development of products using the intellectual property licensedunder the agreements and contingent upon the achievement of development or regulatory approval milestones, as well ascommercial milestones. We have not included such potential obligations in the table above because they are contingentupon the occurrence of future events and the timing and likelihood of such potential obligations are not known withcertainty. For further information regarding these agreements, please see “Business—Our Collaborations and LicensingStrategy.”Pursuant to the license agreement with respect to Cas9 that we entered into with Broad and the President andFellows of Harvard College (“Harvard”) in October 2014, as amended and restated in December 2016 and as further amendedin March 2017 (the “Cas9-I License Agreement”), the Cpf1 License Agreement, and the Cas9-II License Agreement, we haveincurred an aggregate of $18.2 million, $23.1 million, and $9.4 million in expense during the years ended December 31,2017, 2016 and 2015, respectively, for reimbursement of expenses associated with the prosecution and maintenance of thepatents and patent applications licensed to us under such license agreements, including expenses associated with anyinterference proceedings in the United States Patent and Trademark Office, any opposition proceedings in the EuropeanPatent Office or any other inter partes or other post grant proceedings in these or other jurisdictions where we are seekingpatent protection (described in more detail in “Business—Our Collaborations and Licensing Strategy”). Given theinterference and opposition proceedings involving the patents licensed to us under the Cas9-I License Agreement areongoing (described in more detail under “—Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K), weanticipate that our obligation to reimburse Broad and Harvard under the Cas9-I 131 (1)Table of ContentsLicense Agreement for these expenses during future periods will be substantial until such interference and oppositionproceedings are resolved.Under the Cas9‑I License Agreement, Broad and Harvard are collectively entitled to receive clinical and regulatorymilestone payments totaling up to $14.8 million in the aggregate per licensed product approved in the United States, theEuropean Union, and Japan for the prevention or treatment of a human disease that afflicts at least a specified number ofpatients in the aggregate in the United States. If we undergo a change of control during the term of this license agreement,these clinical and regulatory milestone payments will be increased by a certain percentage in the mid double‑digits. We arealso obligated to make additional payments to Broad and Harvard, collectively, of up to an aggregate of $54.0 million uponthe occurrence of certain sales milestones per licensed product for the prevention or treatment of a human disease that afflictsat least a specified number of patients in the aggregate in the United States. Broad and Harvard are collectively entitled toreceive clinical and regulatory milestone payments totaling up to $4.1 million in the aggregate per licensed productapproved in the United States and at least one jurisdiction outside the United States for the prevention or treatment of ahuman disease that afflicts fewer than a specified number of patients in the aggregate in the United States or a specifiednumber of patients per year in the United States, which we refer to as an ultra‑orphan disease. We are also obligated to makeadditional payments to Broad and Harvard, collectively, of up to an aggregate of $36.0 million upon the occurrence ofcertain sales milestones per licensed product for the prevention or treatment of an ultra‑orphan disease.Under the Cpf1 License Agreement, Broad and Wageningen University (“Wageningen”) are collectively entitled toreceive clinical and regulatory milestone payments totaling up to $20.0 million in the aggregate per licensed productapproved in the United States, the European Union and Japan for the prevention or treatment of a human disease that afflictsat least a specified number of patients in the aggregate in the United States. If we undergo a change of control during the termof the Cpf1 License Agreement, certain of these clinical and regulatory milestone payments will be increased by a certainpercentage in the mid double‑digits. We are also obligated to make additional payments to Broad and Wageningen,collectively, of up to an aggregate of $54.0 million upon the occurrence of certain sales milestones per licensed product forthe prevention or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in theUnited States. Broad and Wageningen are collectively entitled to receive clinical and regulatory milestone paymentstotaling up to $6.0 million in the aggregate per licensed product approved in the United States, the European Union andJapan for the prevention or treatment of an ultra‑orphan disease. We are also obligated to make additional payments to Broadand Wageningen, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones perlicensed product for the prevention or treatment of an ultra‑orphan disease.Under the Cas9‑II Agreement, we are obligated to pay clinical and regulatory milestone payments per licensedproduct approved in the United States, European Union and Japan for the prevention or treatment of a human disease thatafflicts at least a specified number of patients in the aggregate in the United States totaling up to $3.7 million in theaggregate, and the sales milestone payments for any such licensed product totaling up to $13.5 million in the aggregate andclinical and regulatory milestone payments totaling up to $1.1 million in the aggregate per licensed product approved in theUnited States and the European Union or Japan for the prevention or treatment of a human disease that afflicts fewer than aspecified number of patients in the United States, plus sales milestone payments of up to $9.0 million for any such licensedproduct.Under the Cpf1 License Agreement, Broad and Wageningen are also entitled, collectively, to receive successpayments in the event our market capitalization reaches specified thresholds ascending from a high nine digit dollar amountto $10.0 billion (“Cpf1 Market Cap Success Payments”), or sale of our company for consideration in excess of thosethresholds (“Cpf1 Company Sale Success Payments” and collectively with the Cpf1 Market Cap Success Payments, the“Cpf1 Success Payments”). The Cpf1 Success Payments that may be paid to Broad and Wageningen range from a mid sevendigit dollar amount to a mid eight digit dollar amount, and collectively will not exceed, in aggregate, $125.0 million, whichmaximum would be payable only if we achieve a market capitalization threshold of $10.0 billion and have at least oneproduct candidate covered by a specified claim of a patent right licensed to us or was the subject of a clinical trial pursuant todevelopment efforts by us or any of our affiliates or sublicensees. Under the Cas9‑II Agreement, Broad is entitled to receivesimilar market cap success payments and company sale success payments in the event our market capitalization reachesspecified thresholds ascending from a low ten digit dollar amount to $9.0 billion (“Cas9‑II Success Payments”). The Cas9‑IISuccess Payments range from a low seven digit dollar 132 Table of Contentsamount to a low eight digit dollar amount and that will not exceed, in aggregate, $30.0 million, which maximum would beowed only if we reach a market capitalization threshold of $9.0 billion and have at least one product candidate covered by aclaim of a patent right licensed to us under either the Cas9‑II License Agreement or the Cas9‑I License Agreement that is orwas the subject of a clinical trial pursuant to development efforts by us or any of our affiliates or sublicensees. Market capsuccess payments are payable by us in cash or in the form of promissory notes on substantially the same terms and conditionsas the Notes, except that the maturity date of such notes will, subject to certain exceptions, be 150 days following issuance.Following a change in control of our company, market cap success payments are required to be made in cash. Company salesuccess payments are payable solely in cash. As discussed above, we have triggered a total of $12.5 million in successpayments under the Cpf1 License Agreement and the Cas9-II License Agreement and the maximum amount payable by us forsuch success payments described above has been correspondingly reduced.Under the exclusive patent license agreement we entered into in August 2016 with MGH (the “Second MGHLicense Agreement”), we are required to pay annual license fees and make clinical and regulatory milestone paymentstotaling less than $1 million in the aggregate for up to four licensed products or processes upon achievement of specifiedclinical and regulatory milestones and commercial sales milestone payments totaling up to $4.9 million in the aggregateupon the achievement of milestones relating to the first commercial sales of up to four licensed products or processes, as wellas milestones relating to annual net sales of products or processes meeting specified thresholds. We are also obligated toreimburse MGH for all patent costs and future reasonable costs associated with the prosecution, filing, and maintenance ofthe licensed patents. Under the Second MGH License Agreement, MGH is also entitled to receive certain payments in theevent our market capitalization reaches specified thresholds ascending from the low ten digit dollar amount to $9.0 billion(“MGH Market Cap Success Payments”). The MGH Market Cap Success Payments payable to MGH range from a low sevendigit dollar amount to a low eight digit dollar amount, and will not exceed $24.0 million in the aggregate, which maximumwould be payable only if we achieve a market capitalization of $9.0 billion and if we have one licensed product that meetscertain specified clinical or regulatory milestones. In addition, in the event of an asset sale or merger of our company to athird party for consideration in excess of one or more market capitalization thresholds, we must pay MGH all MGH MarketCap Success Payments corresponding to such market capitalization thresholds that have not previously been paid. InDecember 2017, an MGH Market Cap Success Payment of $2.0 million became due under our Second MGH LicenseAgreement in connection with our market capitalization reaching $1.0 billion, which we settled in January 2018 through theissuance of 80,000 shares of our common stock to MGH.Under each of our license agreements with MGH and Broad, we also may be obligated to pay royalties of low singledigit to low double digits as a percentage of net product sales depending on the terms of the applicable agreement.We enter into contracts in the normal course of business with contract research organizations to assist in theperformance 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. Effects of Inflation 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, 2017, 2016 and 2015. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk related to changes in interest rates. As of December 31, 2017, we had cash and cashequivalents of $146.6 million, primarily held in money market mutual funds consisting of U.S. government-backedsecurities, and marketable securities of $182.5 million, primarily consisting of U.S. government-backed securities. Our 133 Table of Contentsprimary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interestrates, particularly because our investments, including cash equivalents, are in the form, or may be in the form of, moneymarket funds or marketable securities and are or may be invested in U.S. Treasury and U.S. government agency obligations.Due to the short‑term maturities and low risk profiles of our investments, an immediate 100 basis point change in interestrates would not have a material effect on the fair market value of our investments. While we contract with certain vendors and institutions internationally, substantially all of our total liabilities as ofDecember 31, 2017 were denominated in the United States dollar and we believe that we do not have any material exposureto foreign currency exchange rate risk. 134 Table of Contents Item 8. Financial Statement and Other Supplementary Information. EDITAS MEDICINE, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 136Consolidated Balance Sheets 137Consolidated Statements of Operations 138Consolidated Statements of Comprehensive Loss 139Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) 140Consolidated Statements of Cash Flows 141Notes to Consolidated Financial Statements 142 135 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Editas Medicine, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Editas Medicine, Inc. (the Company) as ofDecember 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, redeemableconvertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period endedDecember 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financialstatements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2017, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with thePublic Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect tothe Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. As part of our audits we are required to obtain an understanding of internal cover overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, ona test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluatingthe accounting principles used and significant estimates made by management, as well as evaluating the overall presentationof the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLP We have served as the Company‘s auditor since 2015.Boston, MassachusettsMarch 8, 2018 136 Table of ContentsEditas Medicine, Inc.Consolidated Balance Sheets(amounts in thousands, except share and per share data) December 31, 2017 2016ASSETS Current assets: Cash and cash equivalents $146,630 $185,323Marketable securities 182,509 —Accounts receivable 679 88Prepaid expenses and other current assets 2,381 1,772Total current assets 332,199 187,183Property and equipment, net 39,442 40,378Restricted cash and other non-current assets 1,619 1,621Total assets $373,260 $229,182LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $4,020 $4,640Accrued expenses 11,049 17,439Notes payable 7,500 10,000Deferred revenue, current 13,238 256Other current liabilities 900 748Total current liabilities 36,707 33,083Deferred revenue, net of current portion 94,725 26,000Construction financing lease obligation, net of current portion 33,431 35,096Other non-current liabilities 317 396Total liabilities 165,180 94,575Commitments and contingencies (see note 8) Stockholders’ equity Preferred stock, $0.0001 par value per share: 5,000,000 shares authorized; no shares issued or outstanding — —Common stock, $0.0001 par value per share: 195,000,000 shares authorized; 45,025,448 and 36,662,724shares issued, and 44,507,960 and 35,818,131 shares outstanding at December 31, 2017 and December 31,2016, respectively 4 4Additional paid-in capital 514,002 320,129Accumulated other comprehensive loss (76) —Accumulated deficit (305,850) (185,526)Total stockholders’ equity 208,080 134,607Total liabilities and stockholders’ equity $373,260 $229,182 The accompanying notes are an integral part of the consolidated financial statements. 137 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Operations(amounts in thousands, except per share and share data) Year Ended December 31, 2017 2016 2015Collaboration and other research and development revenues$13,728 $6,053 $1,629Operating expenses: Research and development 83,159 56,979 18,846General and administrative 50,502 46,262 18,095Total operating expenses 133,661 103,241 36,941Operating loss (119,933) (97,188) (35,312)Other income (expense), net Other income (expense), net 587 (57) (37,445)Interest (expense) income, net (978) 62 (143)Total other (expense) income, net (391) 5 (37,588)Net loss$(120,324) $(97,183) $(72,900)Reconciliation of net loss to net loss attributable to common stockholders: Net loss$(120,324) $(97,183) $(72,900)Accretion of redeemable convertible preferred stock to redemption value — (47) (394)Net loss attributable to common stockholders$(120,324) $(97,230) $(73,294)Net loss per share attributable to common stockholders, basic and diluted$(2.98) $(3.02) $(28.55)Weighted-average common shares outstanding, basic and diluted 40,323,631 32,219,717 2,566,916 The accompanying notes are an integral part of the consolidated financial statements. 138 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Comprehensive Loss(amounts in thousands) Year Ended December 31, 2017 2016 2015Net Loss $(120,324) $(97,183) $(72,900)Other comprehensive loss: Unrealized loss on marketable securities (76) — —Comprehensive loss $(120,400) $(97,183) $(72,900) 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’ Equity (Deficit)(amounts in thousands except share data) Accumulated Total Redeemable Convertible Additional Other Stockholders’ Preferred Stock Common Stock Paid-In Accumulated Comprehensive (Deficit) Shares Amount Shares Amount Capital Deficit Loss EquityBalance 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 of issuancecosts of $1 thousand 16,890,699 21,989 — — — — — —Reclassification of tranche rights uponissuance of redeemable convertiblepreferred stock — 37,038 — — — — — —Issuance of Series B redeemableconvertible preferred stock, net of issuancecosts of $0.3 million 26,666,660 119,722 — — — — — —Accretion of redeemable convertiblepreferred stock to redemption value — 394 — — (394) — — (394)Issuance of common stock to licensorsupon settlement of anti-dilution protectionliability — — 327,970 — 1,936 — — 1,936Exercise of stock options — — 28,651 — 6 — — 6Vesting of restricted common stock andcommon stock subject to repurchase — — 653,272 — 17 — — 17Vesting of founder shares — — 360,576 — 2,345 — — 2,345Stock-based compensation expense — — — — 1,168 — — 1,168Net loss — — — — — (72,900) — (72,900)Balance at December 31, 2015 64,817,359 $199,915 3,233,638 $ — $5,234 $(88,348) $ — $(83,114)Accretion of redeemable convertiblepreferred stock to redemption value — 47 — — (47) — — (47)Conversion of redeemable convertiblepreferred stock into common stock uponclosing of the initial public offering (64,817,359) (199,962) 24,929,709 3 199,954 5 — 199,962Conversion of preferred stock warrant tocommon stock warrant upon closing ofinitial public offering — — — — 376 — — 376Issuance of common stock from initialpublic offering, net of issuance costs of$11.1 million — — 6,785,000 1 97,487 — — 97,488Exercise of common stock warrant — — 19,271 — — — — —Exercise of stock options — — 58,915 — 233 — — 233Vesting of restricted common stock andcommon stock subject to repurchase — — 431,018 — 11 — — 11Vesting of founder shares — — 360,580 — 8,315 — — 8,315Stock-based compensation expense — — — — 8,566 — — 8,566Net loss — — — — — (97,183) — (97,183)Balance at December 31, 2016 — $ — 35,818,131 $ 4 $320,129 $(185,526) $ — $134,607Issuance of common stock from publicoffering, net of issuance costs of $0.6million — — 4,600,000 — 96,685 — — 96,685Issuance of common stock for repaymentof notes payable — — 750,617 — 14,823 — — 14,823Issuance of common stock from publicoffering, net of issuance costs of $1.7million — — 2,265,500 — 57,223 — — 57,223Exercise of stock options — — 272,210 — 1,768 — — 1,768Vesting of restricted common stock andcommon stock subject to repurchase — — 561,118 — 4,096 — — 4,096Vesting of founder shares — — 240,384 — 3,989 — — 3,989Stock-based compensation expense — — — — 15,289 — — 15,289Unrealized losses on marketable securities — — — — — — (76) (76)Net loss — — — — — (120,324) — (120,324)Balance at December 31, 2017 — $ — 44,507,960 $ 4 $514,002 $(305,850) $(76) $208,080 The accompanying notes are an integral part of the consolidated financial statements. 140 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Cash Flows(amounts in thousands) Year Ended December 31, 2017 2016 2015Cash flow from operating activities Net loss$(120,324) $(97,183) $(72,900)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 23,364 16,881 3,513Depreciation 2,683 1,202 471Non-cash research and development expenses 14,500 10,000 —Re-measurement of warrant to purchase redeemable securities — 87 241Change in fair value of preferred stock tranche asset or liability — — 35,551Changes in fair value of anti-dilutive protection liability — — 1,609Other non-cash items, net (300) 869 53Changes in operating assets and liabilities: Accounts receivable (591) 931 (1,019)Prepaid expenses and other current assets (596) (1,306) (373)Other non-current assets 2 2,246 —Accounts payable (1,515) 3,251 (1,436)Accrued expenses (8,334) 11,841 3,526Deferred revenue 81,707 935 25,321Other current and non-current liabilities (13) — —Net cash used in operating activities (9,417) (50,246) (5,443)Cash flow from investing activities Purchases of property and equipment (2,059) (3,493) (1,431)Proceeds from the sale of equipment 15 20 —Purchases of marketable securities (375,266) — —Proceeds from maturities of marketable securities 193,500 — —Net cash used in investing activities (183,810) (3,473) (1,431)Cash flow from financing activities Proceeds from equipment loan, net of issuance costs — — 1,500Proceeds from offering of common stock, net of issuance costs 154,143 97,488 —Proceeds from exercise of stock options 1,755 233 —Payments on construction financing lease obligation (764) (560) —Proceeds from the issuance of redeemable convertible preferred stock and tranche rights,net of issuance costs — — 141,711Payments of notes payable (600) — —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 — 6Payments of initial public offering costs — — (1,746)Net cash provided by financing activities 154,534 97,161 139,391Net increase (decrease) in cash, cash equivalents, and restricted cash (38,693) 43,442 132,517Cash, cash equivalents, and restricted cash, beginning of period 186,942 143,500 10,983Cash, cash equivalents, and restricted cash, end of period$148,249 $186,942 $143,500Supplemental disclosure of cash and non-cash activities: Accretion of redeemable convertible preferred stock to redemption value$ — $47 $394Fixed asset additions included in accounts payable and accrued expenses 623 130 58Construction financing lease obligation — 35,941 —Conversion of anti-dilutive protection liability to common stock — — 1,936Reclassification of warrants to additional paid in capital — 376 —Conversion of preferred stock to common stock upon closing of the initial public offering — 199,962 —Reclassification of liability for common stock subject to repurchase 11 11 17Interest paid 13 465 91Offering expenses included in accounts payable and accrued expenses 235 — 502Reclassification of preferred stock tranche liability upon settlement — — 37,038Issuance of common stock for settlement of notes payable 14,823 — — 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”) is a research stage company dedicated to treating patients with geneticallydefined diseases by correcting their disease‑causing genes. The Company was incorporated in the state of Delaware inSeptember 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. The Company has primarily financed itsoperations through various equity and debt financings, including the initial public offering of its common stock (the “IPO”),its follow-on public offerings of its common stock in March 2017 and December 2017, and private placements of preferredstock, from upfront, milestone and research and development fees paid under a research collaboration with JunoTherapeutics, Inc. (“Juno Therapeutics”), and from an upfront payment paid under a strategic alliance and option agreementwith Allergan Pharmaceuticals International Limited (“Allergan”). 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 In February 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 option grantedto the underwriters in connection with the offering, at a price to the public of $16.00 per share. The shares began trading onthe Nasdaq Global Select Market on February 3, 2016. The aggregate net proceeds received by the Company from theoffering were $97.5 million, after deducting underwriting discounts and commissions and other offering expenses payable bythe Company. In March 2017, the Company completed a follow-on offering whereby the Company sold 4,600,000 shares of itscommon stock, inclusive of 600,000 shares of common stock sold by the Company pursuant to the full exercise of an optiongranted to the underwriters in connection with the offering, at a price to the public of $22.50 per share (the “MarchOffering”). The aggregate net proceeds received by the Company from the March Offering were $96.7 million, afterdeducting underwriting discounts and commissions and other offering expenses payable by the Company.In December 2017, the Company completed a public offering whereby the Company sold 2,265,500 shares of itscommon stock, inclusive of 295,500 shares of common stock sold by the Company pursuant to the full exercise of an optiongranted to the underwriter in connection with the offering, at a price to the public of $26.00 per share (the “DecemberOffering”). The aggregate net proceeds received by the Company from the December Offering were $57.2 million, afterdeducting underwriting discounts and other offering expenses payable by the Company. The Company has incurred annual net operating losses in every year since its inception. The Company expects thatits existing cash, cash equivalents, and marketable securities at December 31, 2017, anticipated interest income, andanticipated research support under the Company’s collaboration agreement with Juno Therapeutics will enable it to fund itsoperating expenses and capital expenditure requirements for at least the next 24 months following the date of this AnnualReport on Form 10-K. The Company had an accumulated deficit of $305.9 million at December 31, 2017, and will requiresubstantial additional capital to fund its operations. The Company has never generated any product revenue. 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. 142 Table of Contents 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”). Reclassification Certain prior period amounts have been reclassified for consistency with the current period presentation. Thesereclassifications had no effect on previously reported results of operations. 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, deferred tax valuation allowances andsub-license fees due to certain of its licensors. The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ fromthose estimates or assumptions. 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 representing the amount that would be received to sell an assetor paid to transfer a liability in an orderly transaction between market participants. As a basis for considering marketparticipant assumptions in fair value measurements, ASC 820 establishes a three‑tier fair value hierarchy that distinguishesbetween 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 quoted marketprices, 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. 143 Table of ContentsTo 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, restricted cash,marketable securities, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses,and other current liabilities approximate their fair values, due to their short‑term nature. The Company believes that thecarrying value of the notes payable approximates their fair value based on Level 3 inputs including a quoted rate. Cash, Cash Equivalents, and Restricted Cash 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 and U.S. government-backed securities. The Company had restricted cash of $1.6 million, $1.6 million, and $0.3 million held in the form of money marketaccounts as collateral for the Company’s facility lease obligation as of December 31, 2017, 2016 and 2015, respectively. The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balancesheets that equal the total amounts on the consolidated statements of cash flows (in thousands): Year Ended As of December 31, 2017 2016 2015Cash and cash equivalents $146,630 $185,323 $143,180Restricted cash included in "Prepaid expenses and other current assets" — — 320Restricted cash included in "Restricted cash and other non-current assets" 1,619 1,619 —Total $148,249 $186,942 $143,500 Marketable Securities The Company classifies marketable securities with a remaining maturity when purchased of greater than threemonths and less than one year from the balance sheet date as current. Marketable securities with a remaining maturity dategreater than one year are classified as non-current. The Company classifies all of its marketable securities as available-for-salesecurities. Available-for-sale securities are carried at fair value with the unrealized gains and losses included in othercomprehensive loss as a component of stockholders’ equity (deficit) until realized. Any premium or discount arising atpurchase is amortized and/or accreted to interest income and/or expense over the life of the of the underlying security.Realized gains and losses are included in other income (expense). If any adjustment to fair value reflects a decline in value ofthe investment, the Company considers all available evidence to evaluate the extent to which the decline is “other-than-temporary.” To determine whether an impairment is other-than-temporary, the Company considers whether it has the abilityand intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of theinvestment is recoverable outweighs evidence to the contrary. The Company does not intend to sell the investments and it isnot likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which maybe maturity. 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 with Juno Therapeutics. The Company believesthat credit risks associated with its collaborations partner is not significant. To date, the Company has 144 Table of Contentsnot had any write-offs of bad debt, and the Company did not have an allowance for doubtful accounts as of December 31,2017 and 2016. 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. 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 Building 30 years The Company records certain estimated costs incurred and reported by a landlord as an asset and correspondingfinancing lease obligation on the consolidated balance sheets. See Note 8, “Commitments and contingencies,” for additionalinformation. 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 31,2017. Revenue Recognition To date, the Company has primarily earned revenue under the collaboration and license agreement with JunoTherapeutics and the strategic research alliance with Allergan (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 Company 145 Table of Contentsevaluates 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, manufacturing andcommercialization capabilities of the collaboration partner and the availability of the associated expertise in the generalmarketplace. In addition, the Company considers whether the collaboration partner can use a deliverable for its intendedpurpose without the receipt of the remaining deliverable, whether the value of the deliverable is dependent on theundelivered 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 146 Table of Contentsevaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve theparticular milestone and the level of effort and investment required to achieve the particular milestone in making thisassessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria requiredto conclude that a milestone is substantive. Milestones that are not considered substantive are recognized as earned if thereare no remaining performance obligations or over the remaining period of performance, assuming all other revenuerecognition criteria are met. The 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 the Company’s behalf, the cost of purchasing lab supplies and non‑capital equipment used in preclinical activities and inmanufacturing preclinical study materials, consultant fees, facility costs including rent, depreciation, and maintenanceexpenses, and fees for acquiring and maintaining licenses under third party licensing agreements, including any sublicensingor success payments made to the Company’s licensors. In accruing service fees, the Company estimates the time period overwhich services will be performed and the level of effort to be expended in each period. If the actual timing of the performanceof services or the level of effort varies from the Company’s estimate, the accrual or prepaid is adjusted accordingly. TheCompany defers and capitalizes non-refundable advance payments made by the Company for research and developmentactivities until the related goods are received or the related services are performed. In circumstances where amounts havebeen paid in excess of costs incurred, the Company records a prepaid expense. Patent Costs The Company expenses patent and patent application costs and related legal costs for the prosecution andmaintenance of such patents and patent applications, including patents and patent applications the Company licenses, asincurred and classifies such costs as general and administrative expenses in the accompanying statements of operations. Construction Financing Lease Obligation Beginning in 2016, the Company began recording certain estimated construction costs incurred and reported to theCompany by a landlord as an asset and corresponding construction financing lease obligation on the Company’sconsolidated balance sheets because it was deemed to be the owner of the building during the construction period foraccounting purposes. In each reporting period, the landlord estimated and reported to the Company the costs incurred to dateand provided supporting invoices for the Company to review. The Company periodically met with the landlord and itsconstruction manager to review the estimates and observe construction progress prior to recording such amounts.Construction was completed in October 2016 and the Company considered the requirements for sale-leaseback accountingtreatment, which included an evaluation of whether all risks of ownership had transferred back to the landlord as evidencedby a lack of continuing involvement in the lease property. The Company determined that the arrangement did not qualify forsale lease-back accounting treatment, the building asset will remain on the Company’s balance sheet at its historical cost,and such asset would be depreciated over its estimated useful life of thirty years. Stock‑based Compensation Expense The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employeestock options, to be recognized as expense in the consolidated statements of operations based on their grant date fair values.For stock options granted to employees and to members of the Company’s board of directors for their services on the board ofdirectors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricingmodel. For stock options subject to service-based vesting conditions, the Company 147 Table of Contentsrecognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis overthe requisite service period. Share-based payments issued to non-employees are initially recorded at their fair values, and are revalued at eachreporting date and as the equity instruments vest and are recognized as expense over the related service period in accordancewith the provisions of ASC Topic 505-50, Equity-Based Payments to Non-Employees. 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 the Company’s common stock prior to the IPO, therewas a lack of company‑specific historical and implied volatility data. Accordingly, the Company bases its estimates ofexpected volatility on the historical volatility of a group of similar companies that are publicly traded. The Companycalculates historical volatility based on a period of time commensurate with the expected term. The Company computesexpected volatility based on the historical volatility of a representative group of companies with similar characteristics to theCompany, including their stages of product development and focus on the life science industry. The Company uses thesimplified method as prescribed by the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107,Share‑Based Payment, to calculate the expected term for options granted to employees as the Company does not havesufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For optionsgranted to non‑employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term.The Company determines the risk‑free interest rate based on a treasury instrument whose term is consistent with the expectedterm of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividendsand does not have current plans to pay any dividends on common stock. If factors change or different assumptions are used,the Company’s stock-based compensation expense could be materially different in the future. Determination of Fair Value of Common Stock on Grant Dates prior to our Initial Public Offering Prior to the IPO, the Company utilized significant estimates and assumptions in determining the fair value of itscommon stock. The board of directors determined the estimated fair value of the Company’s common stock based on anumber of objective and subjective factors, including the lack of an active public market for the Company’s common and convertible preferred stock; the prices of shares of the Company’s convertible preferred stock that the Company had sold tooutside investors in arm’s length transactions, and the rights, preferences, and privileges of that convertible preferred stockrelative to the Company’s common stock; the Company’s results of operations and financial condition; the Company’s entryinto license agreements, pursuant to which the Company obtained rights to important intellectual property; the material risksrelated to the Company’s business; the Company’s business strategy; the market performance of publicly traded companiesin the life sciences and biotechnology sectors; and the likelihood of achieving a liquidity event for the holders of theCompany’s common stock, such as an initial public offering, given prevailing market conditions. The Company utilizedvarious valuation methodologies in accordance with the framework of the American Institute of Certified PublicAccountants, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued asCompensation (the “AICPA Practice Aid”), to estimate the fair value of its common stock and in performing retrospectivevaluation analyses for certain grant dates prior to the IPO. The methodologies included the option pricing method utilizingthe back-solve method (a form of the market approach defined in the AICPA Practice Aid) and the probability-weightedexpected return method based upon the probability of occurrence of certain future liquidity events such as an initial publicoffering or sale of the Company. Each valuation methodology included estimates and assumptions that required theCompany’s judgment. Significant changes to the key assumptions used in the valuations could have resulted in different fairvalues of the Company’s common stock at each valuation 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. 148 Table of Contents 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. Other Income (Expense), Net Other income (expense), net consists primarily of interest income earned on cash equivalents and marketablesecurities, interest expense on the construction financing lease obligation and promissory notes, rental income from theCompany’s subtenant, interest income, accretion of discounts, and amortization of premiums associated with marketablesecurities. Prior to 2017, other income (expense), net consisted primarily of interest income earned on cash equivalents andgovernment grant income, net of re-measurement losses associated with changes in the fair value of the Company’s liabilityfor a warrant to purchase preferred stock. Upon the completion of the IPO, the outstanding warrant to purchase preferred stockconverted into a warrant to purchase common stock and the Company reclassified the fair value of the warrant to additionalpaid-in capital. As a result, there were no further remeasurement gains or losses associated with the warrant after the firstquarter of 2016. 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’ equity (deficit) that result from transactions and economic events other thanthose with stockholders. Comprehensive loss currently consists of net loss and changes in unrealized losses on marketablesecurities. Concentrations 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, cash equivalents, marketable securities and accounts receivable. The Company’s cash,cash equivalents and marketable securities are held in accounts at a financial institution that may exceed federally insuredlimits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to anysignificant credit risk on these funds. Accounts receivable primarily consist of amounts due under the collaborationagreement with Juno Therapeutics (see Note 9) for which the Company does not obtain collateral. As of December 31, 2017,substantially all of the Company’s revenue to date has been generated from the strategic alliance with Allergan and thecollaboration 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. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), whichsupersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance.The new standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customersin an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.The update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flowsarising from customer contracts, including significant judgments and changes in judgments and 149 Table of Contentsassets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years, and interimperiods within those years, beginning after December 15, 2017 and should be applied retrospectively to each prior reportingperiod presented or retrospectively with the cumulative effect of initially applying this update recognized at the date ofinitial application. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: IdentifyingPerformance Obligations and Licensing (“ASU 2016-10”), which clarifies certain aspects of identifying performanceobligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue fromContracts with Customers: Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), related to disclosuresof remaining performance obligations, as well as other amendments to guidance on collectability, non-cash considerationand the presentation of sales and other similar taxes collected from customers. These standards have the same effective dateand transition date as ASU 2014-09. The Company has three revenue arrangements, its license and collaboration with JunoTherapeutics, its award arrangement with the Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”), and its strategicalliance with Allergan, pursuant to which it has recognized since inception a total of $12.2 million, $0.3 million, and $8.8million, respectively, through December 31, 2017. The Company is analyzing the potential impact that ASU 2014-09, ASU2016-10 and ASU 2016-12 may have on its historical revenue recognition under these three arrangements. This analysisincludes, but is not limited to, reviewing variable consideration as it relates to its agreements and in particular, milestonepayments as the inclusion of milestone payments in the transaction price could accelerate revenue recognized under ASC606 compared to ASC 605, evaluating whether a significant financing component is present, determining the revenuerecognition method for services performed under the arrangement, and assessing potential disclosures and evaluating theimpact of each potential method of adoption on the Company’s consolidated financial statements. The Company adoptedthe new standard effective January 1, 2018 and will use the modified retrospective approach with a cumulative-effectadjustment to retained earnings in the first quarter of 2018. As the Company is still in the process of completing itsassessment of its arrangements, an estimate of the potential impact has not yet been made. The Company will complete itsassessment in the first quarter of 2018. However, the Company expects the adoption of ASU 2014-09 will have a significantchange on the financial statement disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and willrequire lessees to record most leases on the balance sheet, but recognize expense in a manner similar to the current standard.ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. Entitiesare required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginningof the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company isevaluating the potential impact that the adoption of ASU 2016-02 will have on the Company’s consolidated financialstatements. In March 2016, the FASB, issued ASU No. 2016-09, Compensation - Stock Compensation (“ASU 2016-09”). ASU2016-09 simplifies several aspects of the accounting for employee share-based payment transactions, including theaccounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statementof cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expenseor benefit in the income statement as the awards vest or are settled. ASU 2016-09 is effective for public companies for annualreporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Uponadoption of this standard on January 1, 2017, the Company recognized previously unrecognized excess tax benefits usingthe modified retrospective transition method, which resulted in a cumulative-effect increase of $179,000 to deferred taxassets which is offset by a corresponding decrease to the valuation allowance. The implementation of ASU 2016-09 did nothave a material impact on stock-based compensation expense. As part of the adoption of ASU 2016-09, the Company electedto record forfeitures as they occur. In October 2016, the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”), which requires that astatement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash orrestricted cash equivalents. Therefore, amounts described as restricted cash and restricted cash equivalents should beincluded with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shownon the statement of cash flows. ASU 2016-18 was effective for fiscal years beginning after December 15, 2017, and interimperiods within those years. Early adoption was permitted. The guidance is effective on a retrospective basis. The Companyelected to early adopt this guidance as of October 1, 2017. The Company reclassified restricted cash in the statements of cashflows to be included in the cash and cash equivalents balance. The reclassification was not material to the periods presented.See the “Cash, cash equivalents, and restricted cash” section of this note for additional information. 150 Table of Contents In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (“ASU 2017-01”), which clarified thedefinition of a business and provides a screen to determine when an integrated set of assets and activities is not a business.The screen requires that when substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated ina single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard was effective forfiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption was permitted. TheCompany adopted this new standard as of January 1, 2017, with prospective application to any business developmenttransactions. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (“ASU 2017-09”), whichprovided guidance about which changes to the terms or conditions of a share-based payment award require an entity to applymodification accounting. The new guidance requires modification accounting if the vesting condition, fair value or awardclassification is not the same both before and after a change to the terms and conditions of the award. This new standard waseffective for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption waspermitted. The Company does not anticipate a material impact to its consolidated financial statements as a result of theadoption of this standard. 3. Cash Equivalents & Marketable Securities Cash equivalents and marketable securities consisted of the following at December 31, 2017 (in thousands): Gross Gross Amortized Unrealized Unrealized FairDecember 31, 2017 Cost Gains Losses ValueCash equivalents: Money market funds $134,635 $ — $ — $134,635U.S. Treasuries 11,995 — — 11,995Marketable securities: U.S. Treasuries 123,606 — (47) 123,559Government agency securities 58,979 — (29) 58,950Total cash equivalents and marketable securities $329,215 $ — $(76) $329,139 Cash equivalents and marketable securities consisted of the following at December 31, 2016 (in thousands): Gross Gross Amortized Unrealized Unrealized FairDecember 31, 2016 Cost Gains Losses ValueCash equivalents: Money market funds $185,323 $ — $ — $185,323Total cash equivalents and marketable securities $185,323 $ — $ — $185,323 At December 31, 2017, the Company held 25 securities that were in an unrealized loss position. The aggregate fairvalue of securities held by the Company in an unrealized loss position for less than 12 months at December 31, 2017 was$174.0 million, and there were no securities held by the Company in an unrealized loss position for more than 12 months. Asof December 31, 2017, the Company did not intend to sell, and would not be more likely than not required to sell, thesecurities in an unrealized loss position before recovery of their amortized cost bases. Furthermore, the Company hasdetermined that there was no material change in the credit risk of these securities. As a result, the Company determined it didnot hold any securities with any other-than-temporary impairment as of December 31, 2017. There were no realized gains or losses on available-for-sale securities during the year ended December 31, 2017 and2016. 151 Table of Contents 4. Fair Value Measurements Assets measured at fair value on a recurring basis as of December 31, 2017 are as follows (in thousands): Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs InputsFinancial Assets 2017 (Level 1) (Level 2) (Level 3)Cash and cash equivalents Money market funds $134,635 $134,635 $ — $ —U.S. Treasuries 11,995 11,995 — —Marketable securities: U.S. Treasuries 123,559 123,559 — —Government agency securities 58,950 58,950 — —Money market funds, included in restricted cash 1,619 1,619 — —Total financial assets $330,758 $330,758 $ — $— Assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 are as follows (inthousands): Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs InputsFinancial Assets 2016 (Level 1) (Level 2) (Level 3)Cash and cash equivalents $185,323 $185,323 $ — $ —Money market funds, included in other current assets 1,619 1,619 — —Total financial assets $186,942 $186,942 $ — $— There were no transfers between fair value measurement levels during the years ended December 31, 2017 or 2016. 5. Prepaid Expenses and Other Current Assets Prepaid expense and other current assets consisted of the following (in thousands): As of December 31, 2017 2016Prepaid expenses $1,864 $1,662Other 517 110Total $2,381 $1,772 152 Table of Contents6. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): As of December 31, 2017 2016Building $35,167 $35,941Laboratory equipment 7,415 5,130Computer equipment 550 392Leasehold improvements 177 200Furniture and office equipment 96 170Software 95 101Total property and equipment 43,500 41,934Less: accumulated depreciation (4,058) (1,556)Property and equipment, net $39,442 $40,378 The Company recorded $2.7 million, $1.2 million, and $0.5 million in depreciation expense during the years endedDecember 31, 2017, 2016 and 2015, respectively. 7. Accrued Expenses Accrued expenses consisted of the following (in thousands): As of December 31, 2017 2016Employee related expenses $3,708 $2,480Intellectual property and patent related fees 2,370 13,251Process and platform development expenses 2,301 443Success payment expenses 2,000 —Professional service expenses 487 729Other expenses 183 536Total $11,049 $17,439 8. Commitments and Contingencies Hurley Street Lease In February 2016, the Company entered into a lease agreement for 59,783 square feet of office and laboratory spacelocated on Hurley Street in Cambridge, Massachusetts. The term of the lease began on October 1, 2016. In connection withthe lease and as a security deposit, the Company deposited with the landlord a letter of credit in the amount of approximately$1.6 million. Subject to the terms of the lease and certain reduction requirements specified therein, the $1.6 million securitydeposit may decrease over time. The letter of credit, which is collateralized by the Company with cash held in a moneymarket account, is recorded in restricted cash and other non-current assets in the accompanying consolidated financialstatement as of December 31, 2017 and December 31, 2016. In connection with this lease, the landlord provided a tenant improvement allowance for costs associated with thedesign, engineering, and construction of tenant improvements for the leased facility. For accounting purposes, the Companywas deemed the owner of the building during the construction period due to the fact that the Company was involved in theconstruction project, including having responsibilities for cost overruns for planned tenant improvements that did notqualify as “normal tenant improvements” under the lease accounting guidance. Throughout the construction period, theCompany recorded the project construction costs incurred as an asset, along with a corresponding facility lease obligation,on its balance sheet for the total amount of the project costs incurred whether funded by the Company or the landlord. 153 Table of ContentsConstruction was completed in October 2016, and the Company considered the requirements for sale-leasebackaccounting treatment, which included an evaluation of whether all risks of ownership had transferred back to the landlord, asevidenced by a lack of continuing involvement in the leased property. The Company determined that the arrangement didnot qualify for sale-leaseback accounting treatment, the building asset would remain on the Company’s balance sheet at itshistorical cost, and such asset would be depreciated over its estimated useful life of 30 years. The Company bifurcates its future lease payments pursuant to the Hurley Street lease into (i) a portion that isallocated to the building and (ii) a portion that is allocated to the land on which the building is located, which is recorded asrental expense. Although the Company did not begin making lease payments pursuant to the Hurley Street lease untilNovember 2016, the portion of the lease obligation allocated to the land is treated for accounting purposes as an operatinglease that commenced upon execution of the Hurley Street lease in February 2016. The lease will continue until October 2023. The Company has the option to extend the lease for an additional fiveyear term at market-based rates. The Company began using this space as its headquarters in October 2016 and rentalpayments for this property began in November 2016. The base rent is subject to increases over the term of the lease. The non-cancelable minimum annual lease payments, excluding the Company’s share of the facility operating expenses and othercosts that are reimbursable to the landlord under the lease, consist of the following (in thousands): Year ended December 31,11 Hurley Street Lease2018 4,0552019 4,1552020 4,2572021 4,3622022 4,4702023 and thereafter 3,801Total minimum lease payments$25,100 Rent expense of approximately $1.2 million, $2.5 million, and $1.0 million was incurred during the years endedDecember 31, 2017, 2016 and 2015, respectively. In February 2017, the Company subleased approximately 10,000 square feet of the Hurley Street premises pursuantto a sublease (the “Sublease”). Under the terms of the Sublease, the total minimum rental revenue to be received in the futureis $0.4 million as of December 31, 2017. The Sublease commenced in February 2017 and will expire on the eighteen monthanniversary thereof, unless it is extended for an additional eighteen month term by the subtenant. If the subtenant elects toextend the term of the lease, the base rent is subject to a minimal increase for the subsequent eighteen month period, which isrecorded as other income in the consolidated statements of operations Licensor Expense Reimbursement The Company is obligated to reimburse The Broad Institute, Inc. (“Broad”) and the President and Fellows of HarvardCollege (“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 the licenseagreement. 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 incurred an aggregate of $18.2 million, $23.1 million, and $9.4 million in expense during the years endedDecember 31, 2017, 2016 and 2015, respectively, for such reimbursement. Success Payments In 2016, the Company entered into patent license agreements with each of The General Hospital Corporation, d/b/aMassachusetts General Hospital (“MGH”), and Broad (collectively, the “2016 License Agreements”). Pursuant to the terms ofthe 2016 License Agreements, the Company is required to make certain success payments to MGH, Broad and WageningenUniversity (“Wageningen” and such payments, collectively, the “Success Payments”), payable in cash or, at the Company’selection common stock in the case of MGH or, in the case of Broad and Wageningen, promissory 154 Table of Contentsnotes payable in cash or, at the Company’s election subject to certain conditions, common stock of the Company. TheSuccess Payments are payable, if and when, the Company’s market capitalization reaches specified thresholds for a specificperiod of time or upon a sale of the Company for consideration in excess of those thresholds, as discussed more fully in Note9 (collectively, the “Payment Conditions”). The Success Payments were accounted for under the provisions of FASB ASC, Topic 505-50, Equity-BasedPayments to Non-Employees. The Company has the right to terminate any of the 2016 License Agreements at will uponwritten notice. Absent any of the Payment Conditions being achieved prior to termination, the Company would not beobligated to pay any Success Payments. As such, the Company will recognize the expense and liability associated with eachSuccess Payment upon achievement of the associated Payment Conditions, if ever. The expense is recorded as a research anddevelopment expense in the statements of operations. The Company triggered the first Success Payment under one of the 2016 License Agreements during the first quarterof 2017 when the Company’s market capitalization reached $750 million. On March 28, 2017, the Company issuedpromissory notes for an aggregate principal amount of $5.0 million to Broad and Wageningen and the Company settled suchnotes in August 2017. The Company triggered the second Success Payment under one of the 2016 License Agreements during the fourthquarter of 2017 when the Company’s market capitalization reached $1.0 billion. On December 6, 2017, the Company issuedpromissory notes for an aggregate principal amount of $7.5 million to Broad and the Company settled such notes in January2018. The Company triggered the first Success Payment under the MGH license agreement during the fourth quarter of2017 when the Company’s market capitalization reached $1.0 billion (the “First MGH Success Payment”). The Companyaccrued $2.0 million relating to the First MGH Success Payment owed to MGH which is included in accrued expense on theconsolidated balance sheet for the year ended December 31, 2017. The Company settled this liability in shares of commonstock in January 2018. The Broad and Wageningen Success Payments are discussed more fully within the Notes Payable section below. Notes Payable In December 2016, in connection with the Company’s entry into the Cpf1 license agreement with Broad (the “Cpf1License Agreement”), one of the 2016 License Agreements, it issued promissory notes in an aggregate principal amount of$10.0 million to Broad and Wageningen (the “Initial Notes”). Outstanding principal and accrued interest on the Initial Noteswere due and payable on the earlier of December 2017 or a specified period of time following a Company sale or change ofcontrol event. The Initial Notes accrued interest at a rate of 4.8% per annum. The Company fully settled the outstandingprincipal and accrued interest on the Initial Notes by paying $0.2 million in cash to Wageningen in August 2017 and issuing108,104 shares and 371,166 shares of common stock to Broad in August 2017 and September 2017, respectively, inconnection with such settlement. In March 2017, a $5.0 million Success Payment under the Cpf1 License Agreement became due upon the marketcapitalization of the Company’s common stock reaching $750 million. The Company issued a promissory note to each ofBroad and Wageningen in an aggregate original principal amount of $5.0 million (collectively, the “ March SuccessPayment Notes”). Outstanding principal and accrued interest on the March Success Payment Notes were due and payable inAugust 2017. The March Success Payment Notes were subject to the same interest and terms as the Initial Notes, other thanthe maturity date. The Company settled the outstanding principal and accrued interest on the March Success Payment Notesin August 2017 by paying $0.4 million in cash to Wageningen and issuing 271,347 shares of common stock to Broad inAugust 2017 in connection with the settlement of the March Success Payment Notes. In September 2017, Wageningendesignated Broad as the recipient of any future promissory notes that are owed to Wageningen pursuant to the Cpf1 LicenseAgreement. In December 2017, $7.5 million in Success Payments under the Cpf1 License Agreement and the Cas9-II licenseagreement with the Broad (the “Cas9-II License Agreement”), one of the 2016 License Agreements, became due 155 Table of Contentsupon the Company’s market capitalization reaching $1.0 billion. The Company issued promissory notes to Broad in anaggregate original principal amount of $7.5 million (collectively, the “December Success Payment Notes”). Outstandingprincipal and accrued interest on the December Success Payment Notes are due and payable in May 2018. The DecemberSuccess Payment Notes are subject to the same interest and terms as the Initial Notes, other than the maturity date. TheDecember Success Payment Notes were fully settled in shares of common stock in January 2018 (see Note 18). The Company believes that the carrying value of the December Success Payments Notes approximates their fairvalue based on Level 3 inputs including a quoted rate. Litigation The Company is not a party to any litigation and did not have contingency reserves established for any litigationliabilities as of December 31, 2017 and 2016. 9. Significant Agreements Juno Therapeutics Collaboration Agreement 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 cost, 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”). Under 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 the following activities requiredunder the specified research under the Collaboration Agreement: (i) conduct activities assigned to Juno Therapeutics underthe research 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 156 Table of ContentsT cell products in the Exclusive Field on a worldwide basis, specifically as it relates to certain targets selected by JunoTherapeutics pursuant to the research program. Furthermore, as it relates to the same two research areas, the Company grantedto Juno Therapeutics a non‑exclusive, milestone and royalty‑bearing, sub licensable license under certain of the intellectualproperty controlled by the Company to use genome editing reagents generated under the research program that are used inthe creation of certain CAR or TCR engineered T cell products on which Juno Therapeutics has filed an investigational newdrug (“IND”) application in the Exclusive Field for the treatment or prevention of a cancer in humans to research, develop,make and have made, use, offer for sale, sell, import and export those CAR or TCR engineered T cell products in all fieldsoutside of the Exclusive Field (the “Non‑Exclusive Field”) on a worldwide basis, specifically as it relates to certain targetsselected by Juno Therapeutics pursuant to the research program (together, the license in the Exclusive Field and the licensein the Non‑Exclusive Field are referred to as the “Development and Commercialization License” for each particular researcharea). Lastly, as it relates to the third research area, the Company granted to Juno Therapeutics a milestone androyalty‑bearing, sublicensable license under certain of the intellectual property controlled by the Company to use thegenome editing reagents generated under the research program that are associated with certain CAR or TCR engineered Tcell products to research, develop, make and have made, use, offer for sale, sell, import or export those CAR or TCRengineered T cell products in the Exclusive Field on a worldwide basis, specifically as it relates to certain products selectedby Juno Therapeutics pursuant to the research program. The license associated with the third research area is exclusive as itrelates to CAR or TCR engineered T cell products directed to certain targets as selected by Juno Therapeutics, but isotherwise non‑exclusive (referred to as the “Development and Commercialization License” for the third 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 is obligated to pay to the Company an aggregate of up to$22.0 million in research and development funding over the Initial Research Program Term across the three research areasconsisting primarily of funding for up to a specified maximum number of full time equivalents personnel each year over theInitial Research Program Term across three research areas. Under the terms of the Collaboration Agreement, there is noincremental compensation due to the Company with respect to the Development and Commercialization License granted toJuno Therapeutics associated with the first target or product, as applicable, designated by Juno Therapeutics within each ofthe three research areas. However, for two of the three research areas, Juno Therapeutics has the option to purchase up to threeadditional Development and Commercialization Licenses associated with other gene targets for an additional fee ofapproximately $2.5 million per target. In addition, Juno Therapeutics would be required to make certain milestone paymentsto the Company upon the achievement of specified development, regulatory and commercial events. More specifically, forthe first product to achieve the associated event in each of the three research areas, the Company is eligible to receive up to a$77.5 million in development milestone payments and up to $80.0 million in regulatory milestone payments. In addition,the Company is eligible to receive additional development and regulatory milestone payments for subsequent productsdeveloped within each of the three research areas. Moreover, the Company is eligible for up to $75.0 million in commercialmilestone payments associated with aggregate sales of all products within each of the three research areas. Developmentmilestone payments are triggered upon the achievement of certain specified development criteria or upon initiation of adefined phase of clinical research for a product candidate. Regulatory milestone payments are triggered upon approval tomarket a product candidate by the United States Food and Drug Administration (“FDA”) or other global regulatoryauthorities. Commercial milestone payments are triggered when an approved pharmaceutical product reaches certain definedlevels of net sales by the licensee. 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 157 Table of Contentsto be made by Juno Therapeutics related to a third‑party’s intellectual property rights, subject to an aggregate minimumfloor. 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. The Companyachieved $2.5 million development milestones under the Collaboration Agreement resulting from technical progress in aresearch program in each of May 2016 (the “First Milestone”) and July 2017 (the “Second Milestone”). Due to theuncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development,no additional milestone or royalty payments may ever be received from Juno Therapeutics. As of December 31, 2017, thenext potential milestone payment that the Company may be entitled to receive under the Collaboration Agreement is asubstantive milestone payment of $2.5 million for the achievement of certain development criteria. The Company wouldrecognize the milestone payment as revenue upon achievement. There are no cancellation, termination or refund provisionsin the Collaboration Agreement that contain material 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,at the 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 Therapeutics will terminate. Accounting Analysis The Company evaluated the Collaboration Agreement in accordance with the provisions of ASC, Topic 605-25, Revenue Recognition—Multiple Element Arrangements (“ASC 605-25”). The Company’s arrangement withJuno Therapeutics contains the following deliverables: (i) research and development services during the Initial ResearchProgram Term (the “R&D Services Deliverable”), (ii) the Research License, (iii) the Development and CommercializationLicenses related to each of the three research areas (each, the “Development and Commercialization License Deliverable” forthe respective research area), (iv) significant and incremental discount related to the option to purchase up to three additionalDevelopment and Commercialization Licenses for two of the research areas (each, the “Discount Deliverable” for theassociated option) and (v) JRC services during the Initial Research Program 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 158 Table of ContentsCompany is at risk with regard to whether Juno Therapeutics will exercise the options. However, the Company hasdetermined that the options to purchase additional development and commercialization licenses with respect to other genetargets within the two applicable research program areas are priced at a significant and incremental discount. As a result, theCompany has concluded that the discounts to purchase development and commercialization licenses for up to threeadditional gene targets within both of the research areas represent separate elements in the arrangement at inception.Accordingly, the deliverables identified at inception of the arrangement include six separate deliverables related to thesignificant and incremental discount inherent in the pricing of the option to purchase up to three additional developmentand commercialization licenses for two of the research 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) the R&D Services Unit of Accounting, (ii) three units ofaccounting related to the Development and Commercialization Licenses for each of the three research areas, (iii) six units ofaccounting related to each of the Discount Deliverables, and (iv) the JRC Deliverable. The Company has determined that neither vendor specific objective evidence of selling price nor third-partyevidence of selling price is available for any of the units of accounting identified at inception of the arrangement with JunoTherapeutics. Accordingly, the selling price of each unit of accounting was determined based on the Company’s BESP. TheCompany developed the BESP for all of the units of accounting included in the Collaboration Agreement with the objectiveof determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. TheCompany developed the BESP for the R&D Services Unit of Accounting and the JRC Deliverable primarily based on thenature of the services to be performed and estimates of the associated effort and cost of the services, adjusted for a reasonableprofit margin that would be expected to be realized under similar contracts. The Company developed the BESP for each ofthe Development and Commercialization License units of accounting based on the probability-weighted present value ofexpected future cash flows associated with each license related to each specific research area. In developing such estimate,the Company also considered applicable market conditions and relevant entity-specific factors, including those factorscontemplated in negotiating the agreement, probability of success and the time needed to commercialize a product candidatepursuant to the associated license. The Company developed the BESP for each of the Discount Deliverables based on theestimated value of the associated in-the-money options. In developing such estimate, the Company considered the period toexercise the option, an appropriate discount rate and the likelihood that a market participant who was entitled to the discountwould exercise 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 159 Table of Contentsfuture performance of research support services and development of specialized materials. The aggregate allocablearrangement consideration of $47.0 million was allocated among the separate units of accounting using the relative sellingprice method as follows: (i) R&D Services Unit of Accounting: $16.7 million, (ii) Development and CommercializationLicense for the first research area: $9.3 million, (iii) Development and Commercialization License for the second researcharea: $15.4 million, (iv) Development and Commercialization License for the third research area: $0.2 million, (v) the firstDiscount Deliverable for the first research area: $0.7 million, (vi) the second Discount Deliverable for the first research area:$0.4 million, (vii) the third Discount Deliverable for the first research area: $0.2 million, (viii) the first Discount Deliverablefor the second research area: $2.0 million, (ix) the second Discount Deliverable for the second research area: $1.3 million,and (x) the third Discount Deliverable for the second research area: $0.8 million. No amounts were allocated to the JRCDeliverable because the associated BESP was determined to be de minimis. The amounts allocated to each of thedevelopment and commercialization licenses are based on the respective BESP calculations, which reflect the level of riskand expected probability of success inherent 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, 2017, 2016 and 2015, the Company recognized revenue totalingapproximately $4.9 million, inclusive of the Second Milestone payment, $5.7 million, inclusive of the First Milestonepayment, and $1.6 million, respectively, under the collaboration with Juno Therapeutics. The revenue is classified as collaboration and other research and development revenue in the accompanyingconsolidated statement of operations. As of December 31, 2017 and 2016, there was approximately $26.4 million and $26.0million of deferred revenue related to the Company’s collaboration with Juno Therapeutics, respectively, all of which isclassified as long-term in the accompanying consolidated balance sheet. In addition, as of December 31, 2017, the Companyhas recorded accounts receivable of $0.5 million related to reimbursable research and development costs under theCollaboration Agreement for activities performed during the fourth quarter of 2017. There was no receivable balance as ofDecember 31, 2016. During the years ended December 31, 2017 and 2016, the Company paid $0.5 million and $0.5 million insublicense fees that were owed to certain of the Company’s licensors in connection with the Second Milestone and FirstMilestone, respectively, which the Company recorded as research and development expenses during such periods. 160 Table of Contents Allergan Pharmaceuticals Strategic Alliance and Option Agreement Summary of Agreement In March 2017, the Company entered into a Strategic Alliance and Option Agreement with Allergan to discover,develop, and commercialize new gene editing medicines for a range of ocular disorders (the “Allergan Agreement”). Over aseven-year research term, Allergan will have an exclusive option to exclusively license from the Company up to fivecollaboration development programs for the treatment of ocular disorders (each a “CDP”), including the Company’s Leber’sCongenital Amaurosis type 10 program (the “LCA10 Program”). Under the Allergan Agreement, the Company will use commercially reasonable efforts to develop at least five CDPsand deliver preclinical results and data meeting specified criteria with respect to each CDP (each, an “Option Package” andsuch criteria, the “Option Package Criteria”) to Allergan. The list of proposed targets that may be subject to a CDP may beamended from time to time by mutual agreement of the Company and Allergan. The Company is responsible for thepreparation and delivery of a written development plan for each particular CDP setting forth the discovery and researchactivities to be conducted which is subject to the approval of the alliance steering committee that was formed under theAllergan Agreement, comprised of three members from each of the Company and Allergan (the “Steering Committee”). TheCompany will maintain primary responsibility for the development efforts under each CDP. The Company is responsible forall research and development costs prior to the achievement of the Option Package Criteria. Upon achievement of theOption Package Criteria, as determined by the Steering Committee, Allergan will have the ability, for a defined period oftime (“Initial Option Period”) to exercise an option (each, an “Option”) to obtain a world-wide right and license to theCompany’s background intellectual property and the Company’s interest in the CDP intellectual property to develop,commercialize, make, have made, use, offer for sale, sell, and import any gene editing therapy product that results from suchCDP during the term of the Allergan Agreement (a “Licensed Product”) in any category of human diseases and conditionsother than the diagnosis, treatment or prevention of any cancer in humans through the use of engineered T-cells and subjectto specified other limitations. Allergan has the option to extend the Initial Option Period and require the Company toperform additional research and development services, subject to the payment of additional consideration. After exercise ofan Option with respect to a CDP, with the exception of any CDP’s where the Company has exercised its profit-sharingoption, Allergan will be responsible for all development, manufacturing, and commercialization activities in connectionwith licensed products arising from such CDP, other than with respect to the LCA10 Program, if LCA10 is designated as aCDP, for which the Company has retained the right to develop that program through the acceptance for filing of the first INDwith respect to the LCA10 Program. Upon achievement of IND approval for LCA10, unless the Company has exercised itsprofit sharing option on LCA10, Allergan will be responsible for all development, manufacturing, and commercializationactivities.The initial term of the Allergan Agreement commenced on March 14, 2017 (the “Effective Date”) and continues forseven years ending on March 14, 2024 (the “Research Term”). If the Company has not delivered an Option Package, whichincludes the results and data from the CDP, for five CDPs that satisfy the Option Package Criteria, then the Research Termwill automatically extend by one-year increments until such obligation is satisfied, up to a maximum of ten years from theEffective Date. The activities under the Allergan Agreement during the Research Term will be governed by the SteeringCommittee. The Steering Committee will review and monitor the direction of the development plan, evaluate and determinewhich targets are selected to become CDP, establish the Option Package Criteria for each CDP and evaluate the achievementof such criteria as well as oversee the development and commercialization activities after Allergan has licensed a CDP. Under the terms of the Allergan Agreement, the Company received a $90.0 million up‑front, non‑refundable,non‑creditable cash payment (the “Allergan Upfront”) related to the Company’s research and development costs for OptionPackages for at least five CDPs and for reimbursement of the Company’s past out of pocket costs with respect to theprosecution and defense of patents that it owns and in-licenses. Allergan has the option to purchase at least five developmentand commercialization licenses associated CDP that have satisfied the Option Package Criteria. The option exercise feeduring the Initial Option Period is $15.0 million per CDP. If Allergan elects to extend the Initial Option 161 Table of ContentsPeriod, Allergan is required to pay an additional fee of $5.0 million to extend the option, at which point the Company isrequired to perform additional research services. If Allergan elects to exercise its option to a development andcommercialization license after extending the Initial Option Period, Allergan must pay the Company the option exercise feeof $22.5 million, plus specified costs incurred by the Company in connection with the additional development work. Following the exercise by Allergan of an Option with respect to a CDP, Allergan would be required to make certainmilestone payments to the Company upon the achievement of specified development, product approval and launch andcommercial events, on a CDP by CDP basis. On a CDP by CDP basis, for the first product in the first field to achieve theassociated event, the Company is eligible to receive up to an aggregate of $42.0 million for development milestonepayments and $75.0 million for product approval and launch milestone payments, in each case, for an indication in the fieldper CDP. In addition, the Company is eligible to receive additional development and product approval and launch milestonepayments for subsequent products developed within two additional fields. The Company is also eligible for up to $90.0million in sales milestone payments on a CDP by CDP basis, associated with aggregate worldwide sales. Certain productapproval milestones are subject to certain reductions under specified circumstances, including for payments required to bemade by Allergan to obtain certain third party intellectual property rights. In addition, within 45 days of the acceptance bythe applicable regulatory authority of the Company’s submission of an IND application with respect to the LCA10 Program,Allergan is required to pay the Company a one-time payment of $25.0 million (the “LCA10 IND Payment”), whether or notAllergan exercises its option under the Allergan Agreement to acquire an exclusive license with respect to the LCA10Program. As of December 31, 2017, the next potential milestone payment that the Company may be entitled to receive underthe Allergan Agreement is a substantive milestone payment of $8.0 million for the achievement of certain clinical criteria. With respect to the LCA10 Program and up to one other CDP of the Company’s choosing, following the exercise byAllergan of its Option to such programs, the Company will have the right to elect to participate in a profit-sharingarrangement with Allergan in the United States, on terms mutually agreed by the Company and Allergan and subject to aright of Allergan to reject such election under certain circumstances, under which the Company and Allergan would shareequally in net profits and losses on specific terms to be agreed between the Company and Allergan, in lieu of Allerganpaying royalties on net sales of any applicable Licensed Products in the United States, and in such event Allergan’smilestone payment obligations would be reduced, with the Company being eligible to receive development and productapproval and launch milestone payments up to a low nine-digit amount in the aggregate and further sales milestonepayments up to a high-eight digit amount in the aggregate, subject to reduction under certain circumstances. If the Companyelects to participate in a profit-sharing arrangement, the Company is obligated to reimburse Allergan for half of thedevelopment costs incurred by Allergan with respect to the applicable CDP, and Allergan will retain control of alldevelopment and commercialization activities for the applicable Licensed Products. In addition, to the extent there is any Licensed Product, the Company would be entitled to receive tiered royaltypayments of high single digits based on a percentage of net sales of such Licensed Product, subject to certain reductionsunder specified circumstances, and the Company will remain obligated to pay all license fees, milestone payments, androyalties due to its upstream licensors based on Allergan’s exercise of its license rights with respect to Licensed Products.However, if a Licensed Product is subject to a profit sharing agreement the royalties will only be paid on ex-US net sales.Royalties are due on a Licensed Product‑by‑Licensed Product and country‑by‑country basis from the date of the firstcommercial sale of each Licensed Product in a country until the later of: (i) the tenth anniversary of the first commercial saleof such Licensed Product in such country (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 and (iii) theexpiration of an exclusive legal right granted by the regulatory authority in such country to market and sell such LicensedProduct. Unless earlier terminated, the Allergan Agreement will terminate upon (i) the expiration of the Research Term, ifAllergan does not exercise an Option, (ii) on a Licensed Product-by-Licensed Product and country-by-country basis, on thedate of the expiration of all payment obligations under the Allergan Agreement with respect to such Licensed Product insuch country or (iii) in its entirety upon the expiration of all payment obligations with respect to the last Licensed Product inall countries, unless terminated earlier due to the early termination provisions. Either party may terminate the AllerganAgreement if the other party has materially breached or defaulted in the performance of any of its material obligations andsuch breach or default continues after the specified cure period. During the Research Term, Allergan will have the right toterminate the Allergan Agreement on a CDP by CDP basis in the event of a change in 162 Table of Contentscontrol of the Company or for all CDPs, provided that Allergan will not have any right to exercise an Option for any CDPsfollowing such termination. After the exercise of an Option, Allergan will have the right, at its sole discretion, to terminatethe Allergan Agreement, on a CDP by CDP basis, upon 90 days’ written notice. The Company may terminate the AllerganAgreement in the event that Allergan brings, assumes, or participates in, or knowingly, willfully or recklessly assists inbringing a dispute or challenge against the Company related to its intellectual property. Lastly, Allergan may terminate theAllergan Agreement with respect to a CDP if a safety concern, as specified in the Allergan Agreement, arises. Termination of the Allergan Agreement for any reason will not release either party from any liability which, at thetime of such termination, has already accrued to the other party or which is attributable to a period prior to such termination.In addition, termination of the Allergan Agreement will not preclude either party from pursuing any rights and remedies itmay have under the agreement or at law or in equity with respect to any breach of the Allergan Agreement. If Allerganterminates the Allergan Agreement as a result of the Company’s uncured material breach or default, then: (i) the licenses andrights conveyed to Allergan will continue as set forth in the agreement for any CDP Allergan has already licensed and (ii)Allergan’s obligations related to milestones and royalties will continue as set forth in the agreement. If the AllerganAgreement is terminated for any other reason, then the options and licenses conveyed to Allergan under the agreement willterminate. Accounting Analysis The Company evaluated the Allergan Agreement in accordance with the provisions of ASC 605-25. The Company’sarrangement with Allergan contains the following deliverables: (i) research and development services during the ResearchTerm (the “Allergan R&D Services Deliverable”), and (ii) ASC services during the Research Term (the “ASC Deliverable”). The Company has determined that the Options with respect to the CDP are substantive options. Allergan is notcontractually obligated to exercise the Options and as a result of the uncertain outcome of the discovery, research anddevelopment activities as well as the significant option exercise fee payable upon exercise of an Option, there is significantuncertainty as to whether Allergan will decide to exercise its Option for any CDP. Consequently, the Company is at risk withregard to whether Allergan will exercise the Options. In addition, the option exercise fees are not priced at a significant andincremental discount. Accordingly, the substantive options are not considered deliverables at the inception of thearrangement and the associated option exercise payments are not included in allocable arrangement consideration. TheCompany has also determined that any obligations which are contingent upon the exercise of a substantive option are notconsidered deliverables at the outset of the arrangement. The Company has concluded that the services being provided as part of the ASC Deliverable does not qualify forseparation from the Allergan R&D Services Deliverable. The Steering Committee provides oversight and management of theoverall Allergan Agreement, and the members of the Steering Committee from the Company have specialized industryknowledge, particularly as it relates to genome editing technology. The Company has concluded that the SteeringCommittee is a participatory obligation of the Company and is meant to facilitate the early stage research being performedand coordinate the activities of both the Company and Allergan. Further, the Steering Committee services are critical to theselection of the CDP, the ongoing evaluation of the CDP and the development and evaluation of the Option PackageCriteria. Accordingly, the Company’s participation on the Steering Committee is essential to Allergan receiving value fromthe Allergan R&D Services Deliverable and as such, the ASC Deliverable along with the Allergan R&D Services Deliverableare considered one unit (the “CDP Services Unit”). As the Company concluded that the CDP Services Unit is the sole unit ofaccounting (the “CDP Services Unit of Accounting”), all of the initial arrangement consideration will be allocated to thatunit and no allocation of arrangement consideration is necessary. Allocable arrangement consideration at inception is comprised solely of the up‑front payment of $90.0 million. TheCompany will recognize revenue related to the CDP Services Unit of Accounting as the underlying services are performed. Inaddition, as the LCA10 IND Payment is payable upon acceptance of the IND, it is contingent consideration related to thelicensed technology. As such, if and when the LCA10 IND Payment is received, the Company will recognize revenue relatedto the LCA10 IND Payment in conjunction with the CDP Services Unit of Accounting as the underlying services areperformed. 163 Table of ContentsThe Company has evaluated all of the milestones that may be received in connection with the Allergan Agreement.In evaluating if a milestone is substantive, the Company assesses whether: (i) the consideration is commensurate with eitherthe Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of aspecific outcome resulting from the Company’s performance to achieve the milestone, (ii) the consideration relates solely topast performance, and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within thearrangement. All development and product approval and launch milestones are considered substantive on the basis of thecontingent nature of the milestones, specifically reviewing factors such as the scientific, clinical, regulatory, commercial andother risks that must be overcome to achieve the milestone. Accordingly, such amounts will be recognized as revenue in fullin the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. All salesmilestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone,assuming all other revenue recognition criteria are met. The Company will recognize royalty revenue in the period of sale ofthe related product(s), based on the underlying contract terms, provided that the reported sales are reliably measurable andthe Company has no remaining performance obligations, assuming all other revenue recognition criteria are met. During the year ended December 31, 2017, the Company recognized revenue totaling approximately $8.8 millionwith respect to the Allergan Agreement. As of December 31, 2017, there was $81.2 million of deferred revenue related to theAllergan Agreement, of which $68.3 million is classified as long-term on the consolidated balance sheet. The Company willrecognize revenue on a straight-line basis, as there is no discernible pattern or objective measure of performance of theservices, over the estimated performance period. The estimated performance period is from the commencement of providingservices related to the CDP Services Unit until the end of the Research Term. During the year ended December 31, 2017, the Company paid $14.1 million in sublicense fees that were owed tocertain of the Company’s licensors in connection with the Allergan Upfront, which the Company recorded as research anddevelopment expenses during such period. 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: Massachusetts General Hospital Agreements In August 2014, the Company entered into an agreement to license certain patent rights owned or co‑owned byMGH. 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 right to receive future issuances of shares of common stock to maintain MGH’s ownershipfollowing the third tranche of the Company’s Series A redeemable convertible preferred stock financing (i.e. anti‑dilutionprotection liability), which was settled in June 2015. MGH is entitled to receive nominal annual license fees and futureclinical, regulatory and commercial milestone payments in an aggregate maximum amount of $3.7 million and an aggregateamount of $1.8 million upon the occurrence of certain sales milestones. The Company is also obligated to pay MGH lowsingle digit percentage royalties on net sales of products for the prevention or treatment of human disease, and ranging fromlow single digit to low double digit percentage royalties on net sales of other products and services made by the Company,its affiliates or its sublicenses. The royalty percentage depends on the product and service, and whether such licensed productor licensed service is covered by a valid claim within the certain patent rights that the Company licenses from MGH. In August 2016, the Company entered into a license agreement with MGH (the “2016 MGH Agreement”) to licensecertain patent rights owned or co-owned by MGH (the “Additional MGH Patent Rights”). Consideration for granting thelicense included the payment of an upfront nonrefundable license fee of $0.8 million, which the Company recorded asresearch and development expense in 2016. Under the 2016 MGH Agreement, MGH is entitled to nominal 164 Table of Contentsannual license fees, clinical and regulatory milestone payments totaling less than $1.0 million in the aggregate per licensedproduct up to four licensed products or processes to achieve the specified clinical and regulatory milestones, and commercialsales milestone payments totaling up to $4.9 million in the aggregate, consisting of milestone payments due upon the firstcommercial sales for up to four licensed products or processes and milestone payments due upon annual net sales of productsor processes meeting specified thresholds. The Company is also obligated to pay MGH royalties of less than 1% on net salesof products and processes for the prevention or treatment of human disease, and royalties of a low single-digit percentage onnet sales of products and processes for the prevention or treatment of a non-human animal disease, made by the Company, itsaffiliates, or its sublicensees. The royalty percentages that the Company is obligated to pay are subject to reduction if at thetime of sale the applicable product or process is not covered by a valid claim within the Additional MGH Patent Rights.Under the 2016 MGH Agreement, the Company is obligated to reimburse MGH for all patent costs and future reasonablecosts associated with the prosecution, filing, and maintenance of the licensed patents. MGH is also entitled under the 2016 MGH Agreement to receive payments of up to $6.0 million in the event theCompany’s market capitalization reaches specified thresholds meeting or exceeding $1.0 billion, on or prior to theexpiration or termination of the 2016 MGH Agreement (or if earlier, a Company sale) (“MGH Market Cap SuccessPayments”) or a Company sale for consideration in excess of those thresholds (“MGH Company Sale SuccessPayments”). Additional MGH Market Cap Success Payments become payable, and the amount of potential MGH CompanySale Success Payments would increase further, if the Company’s market capitalization reaches additional higher thresholdsand the Company has at least one product candidate that is covered by a claim of an Additional MGH Patent Right and that(i) is the subject of a Phase 1 clinical trial of which the Company or an affiliate or sublicensee of the Company is the sponsor,(ii) was the subject of a Phase 1 clinical trial of which the Company or an affiliate or sublicensee of the Company was thesponsor with the Company having determined to conduct a subsequent clinical trial with respect to such product candidate,or (iii) has been approved for sale in either the United States or European Union. MGH Market Cap Success Payments arepayable in cash or shares of Company common stock at the Company’s discretion, and MGH Company Sale SuccessPayments are payable solely in cash. The Company triggered the first Success Payment under the MGH license agreementduring the fourth quarter of 2017 when the Company’s market capitalization reached $1.0 billion (see Note 8). The Broad Institute Agreements In October 2014, the Company entered into an agreement (the “Cas9-I License Agreement”) with Broad and Harvardto license certain patent rights owned or co‑owned by, or among, Broad, the Massachusetts Institute of Technology (“MIT”),and Harvard (collectively, the “Institutions”). Consideration for the granting of the license included the payment of anupfront license issuance fee of $0.2 million and the issuance of 561,531 shares of the Company’s common stock. TheInstitutions are collectively entitled to receive clinical and regulatory milestone payments totaling up to $14.8 million in theaggregate per licensed product approved in the United States, European Union, and Japan for the treatment of a humandisease that afflicts at least a specified number of patients in the aggregate in the United States. If the Company undergoes achange of control during the term of the license agreement, the clinical and regulatory milestone payments will be increasedby a certain percentage in the mid‑double digits. The Company is also obligated to make additional payments to theInstitutions, collectively, of up to an aggregate of $54.0 million upon the occurrence of certain sales milestones per licensedproduct for the treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the UnitedStates. The Institutions are collectively entitled to receive clinical and regulatory milestone payments totaling up to$4.1 million in the aggregate per licensed product approved in the U.S. and at least one jurisdiction outside the U.S. for thetreatment of a human disease based on certain criteria. The Company is also obligated to make additional payments to theInstitutions, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones per licensedproduct for the treatment of a rare disease meeting certain criteria. The Institutions are entitled to receive from the Companynominal annual license fees and a mid‑single digit percentage royalties on net sales of products for the prevention ortreatment of human disease, and ranging from low single digit to high single digit percentage royalties on net sales of otherproducts and services, made by the Company, its affiliates, or its sublicensees. The royalty percentage depends on theproduct and service, and whether such licensed product or licensed service is covered by a valid claim within the certainpatent rights that the Company licenses from the Institutions. 165 Table of ContentsIn December 2016, the Company entered into the Cpf1 License Agreement with Broad, for specified patent rights(the “Cpf1 Patent Rights”) related primarily to Cpf1 compositions of matter and their use for gene editing. Concurrently withentering into the Cpf1 License Agreement, the Company, Broad, and Harvard amended and restated the Cas9-I LicenseAgreement as described below. Concurrently, the Company and Broad also entered into the Cas9‑II License Agreement forspecified patent rights (the “Cas9-II Patent Rights”) related primarily to certain Cas9 compositions of matter and their use forgenome editing. The Company paid an upfront fee in aggregate of $16.5 million, which included the Initial Notes, underthese agreements which was recorded in research and development expenses during 2016. Cpf1 License Agreement Pursuant to the Cpf1 License Agreement, Broad, on behalf of itself, Harvard, MIT, Wageningen, and the Universityof Tokyo (“UTokyo” and, together with Broad, Harvard, MIT, and Wageningen, the “Cpf1 Institutions”) granted theCompany an exclusive, worldwide, royalty‑bearing, sublicensable license to the Cpf1 Patent Rights, to make, have made,use, have used, sell, offer for sale, have sold, export and import products in the field of the prevention or treatment of humandisease using gene therapy, editing of genetic material, or targeting of genetic material, subject to certain limitations andretained rights (collectively, the “Cpf1 Exclusive Field”), as well as a non‑exclusive, worldwide, royalty‑bearingsublicensable license to the Cpf1 Patent Rights for all other purposes, subject to certain limitations and retained rights. TheCompany is obligated to use commercially reasonable efforts to research, develop, and commercialize products in the Cpf1Exclusive Field. The Company is also required to achieve certain development milestones within specified time periods forproducts covered by the Cpf1 Patent Rights, with Broad having the right to terminate the Cpf1 License Agreement if theCompany fails to achieve these milestones within the required time periods. Broad and Wageningen are collectively entitled to receive clinical and regulatory milestone payments totaling upto $20.0 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. The Company is also obligated to make additional payments to Broad and Wageningen, collectively, of up to anaggregate of $54.0 million upon the occurrence of certain sales milestones per licensed product for the prevention ortreatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States. Broadand Wageningen are collectively entitled to receive clinical and regulatory milestone payments totaling up to $6.0 millionin the aggregate per licensed product approved in the United States, European Union and Japan for the prevention ortreatment of a human disease that afflicts fewer than a specified number of patients in the aggregate in the United States or aspecified number of patients per year in the United States (an “Ultra‑Orphan Disease”). The Company is also obligated tomake additional payments to Broad and Wageningen, collectively, of up to an aggregate of $36.0 million upon theoccurrence of certain sales milestones per licensed product for the prevention or treatment of an Ultra‑Orphan Disease. Broad and Wageningen, collectively, are entitled to receive, on a product‑by‑product and country‑by‑country basis,mid single‑digit percentage royalty on net sales of licensed products for the prevention or treatment of human disease, androyalties on net sales of other licensed products and licensed services, made by the Company, its affiliates, or itssublicensees. The royalty percentage depends on the product and service, and whether such licensed product or licensedservice is covered by a valid claim within the Cpf1 Patent Rights. If the Company is legally required to pay royalties to athird party on net sales of the Company’s products because such third party holds patent rights that cover such licensedproduct, then the Company can credit up to a specified percentage of the amount paid to such third party against theroyalties due to Broad and Wageningen in the same period. Such credit may not exceed 50% of the applicable royalties paidby the Company to the applicable third party. The Company’s 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 the Cpf1Patent Rights that covers each licensed product or service in each country or the tenth anniversary of the date of the firstcommercial sale of the licensed product or licensed service. If the Company sublicenses any of the Cpf1 Patent Rights to athird party, Broad and Wageningen, collectively, have the right to receive sublicense income, depending on the stage ofdevelopment of the products or services in question at the time of the sublicense. Under the Cpf1 License Agreement, Broad and Wageningen are also entitled, collectively, to receive successpayments in the event the Company’s market capitalization reaches specified thresholds (the “Cpf1 Market Cap SuccessPayments”) or a Company sale for consideration in excess of those thresholds (the “Cpf1 Company Sale Success 166 Table of ContentsPayments” and, collectively with the Cpf1 Market Cap Success Payments, the “Cpf1 Success Payments”). The Cpf1 SuccessPayments payable to Broad and Wageningen are triggered when the Company’s market capitalization reaches certainamounts ranging from $750 million to $10 billion for a specified period of time, and, collectively, the Cpf1 SuccessPayments will not exceed, in aggregate, $125.0 million, which maximum amount would be payable only if the Companyreaches a market capitalization threshold of $10.0 billion and has at least one product candidate covered by a claim of apatent right licensed to the Company under either the Cpf1 License Agreement or the Cas9‑I License Agreement that is orwas the subject of a clinical trial pursuant to development efforts by the Company or any Company affiliate or sublicensee.The Cpf1 Market Cap Success Payments are payable by the Company in cash or in the form of promissory notes onsubstantially the same terms and conditions as the Initial Notes, as described in Note 8, except that the maturity date of suchnotes will, subject to certain exceptions, be 150 days following issuance. Following a change in control of the Company,Cpf1 Market Cap Success Payments are required to be made in cash. Cpf1 Company Sale Success Payments are payablesolely in cash. The Company triggered the first and second Cpf1 Success Payments during 2017 when the Company’s marketcapitalization reached $750 million and $1.0 billion, respectively (see Note 8). Unless terminated earlier, the term of the Cpf1 License Agreement will expire on a country‑by‑country basis, uponthe expiration of the last to expire valid claim of the Cpf1 Patent Rights in such country. The Company has the right toterminate the Cpf1 License Agreement at will upon four months’ written notice to Broad. Either party may terminate the Cpf1License Agreement upon a specified period of notice in the event of the other party’s uncured material breach of a materialobligation, such notice period varying depending on the nature of the breach. Broad may terminate the Cpf1 LicenseAgreement immediately if the Company challenges the enforceability, validity, or scope of any Cpf1 Patent Right or assist athird party to do so, or in the event of the Company’s bankruptcy or insolvency. Amendment and Restatement of Cas9-I License Agreement In December 2016, the Company amended and restated the Cas9‑I License Agreement (such agreement, as amended,the “Amended and Restated Cas9-I License Agreement”) to exclude additional fields from the scope of the exclusive licensepreviously granted to the Company, to make the exclusive license to three targets become non‑exclusive, subject to thelimitation that each of Broad and Harvard would only be permitted to grant a license to only one third party at a time withrespect to each such target within the field of the exclusive license, and to revise certain provisions relating to the rights ofHarvard and Broad to grant further licenses under specified circumstances to third parties that wish to develop andcommercialize products that target a particular gene and that otherwise would fall within the scope of the exclusive licenseunder this agreement, so that Harvard and Broad together would have rights substantially similar to the equivalent rightspossessed by Broad under the Cpf1 License Agreement to designate gene targets for which the designating institution,whether alone or together with an affiliate or third party, has an interest in researching and developing products that wouldotherwise be covered by rights licensed by Harvard and/or Broad to the Company under this agreement, the Cpf1 LicenseAgreement or the Cas9‑II Agreement. In March 2017, the Company and Harvard and Broad further amended the Amendedand Restated Cas9-I License Agreement to (i) grant an exclusive license from Broad to the Company with respect to certainpatent rights that The Rockefeller University (“Rockefeller”) has or may have rights in and to and for which Rockefeller has,under a certain inter-institutional agreement that Broad and Rockefeller entered into in February 2017, appointed Broad assole and exclusive agent for the purposes of licensing and (ii) provide to Rockefeller certain rights, including with respect topatent enforcement, indemnification, insurance, confidentiality, reservation of certain rights, and publicity, that are generallyconsistent with those granted to Broad, Harvard, MIT and the Howard Hughes Medical Institute under the Amended andRestated Cas9-I License Agreement, as amended. Cas9‑II License Agreement Pursuant to the Cas9‑II License Agreement, Broad, on behalf of itself, MIT, Harvard, and the University of IowaResearch Foundation, granted the Company an exclusive, worldwide, royalty bearing sublicensable license to certain of theCas9‑II Patent Rights as well as a non‑exclusive, worldwide, royalty‑bearing sublicensable license to all of the Cas9‑II PatentRights, in each case on terms substantially similar to the licenses granted to the Company under the Cpf1 License Agreementexcept, among other things, for the following commitment amounts. Under the Cas9‑II License Agreement, the Company willpay an upfront license fee in a low seven digit dollar amount and will have to pay an annual license maintenance fee. TheCompany is obligated to pay clinical and regulatory milestone payments per licensed product approved in the United States,European Union and Japan for the prevention or treatment of a human 167 Table of Contentsdisease that afflicts at least a specified number of patients in the aggregate in the United States totaling up to $3.7 million inthe aggregate, and sales milestone payments for any such licensed product totaling up to $13.5 million in the aggregate. Inaddition, the Company is obligated to pay clinical and regulatory milestone payments totaling up to $1.1 million in theaggregate per licensed product approved in the United States and the European Union or Japan for the prevention ortreatment of a human disease that afflicts fewer than a specified number of patients in the United States, plus sales milestonepayments of up to $9.0 million for any such licensed product. Consistent with the Cpf1 License Agreement, the licensors areentitled to royalties on net sales of products for the prevention or treatment of human disease and other products and servicesmade by the Company, its affiliates, or its sublicensees. Royalties due under other license agreements are creditable againstthese royalties up to a specified amount in the same period. Lastly, Broad is entitled to receive success payments if theCompany’s market capitalization reaches specified thresholds ascending from $1.0 billion to $9.0 billion or upon a sale ofthe Company for consideration in excess of those thresholds. The potential success payments range from a low seven digitdollar amount to a low eight digit dollar amount and will not exceed, in aggregate, $30.0 million, which maximum amountwould be owed only if the Company reaches a market capitalization threshold of $9.0 billion and has at least one productcandidate covered by a claim of a patent right licensed to the Company under either the Cas9 II License Agreement or theCas9-I License Agreement that is or was the subject of a clinical trial pursuant to development efforts by the Company or anyCompany affiliate or sublicensee. The Company triggered the first success payment during the fourth quarter of 2017 whenthe Company’s market capitalization reached $1.0 billion, which the Company settled in January 2018 (see Note 8). 10. Preferred Stock On February 8, 2016, the Company filed a restated certificate of incorporation with the Secretary of State of the Stateof Delaware. The restated certificate amended and restated the Company’s certificate of incorporation in its entirety to,among other things increase the authorized number of shares of common stock to 195,000,000 shares, eliminate all referencesto the previously existing series of preferred stock, and authorize 5,000,000 shares of undesignated preferred stock that maybe issued from time to time by the Company’s board of directors in one or more series. As of December 31, 2017, theCompany had no shares of preferred stock issued or outstanding. 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 holders of the preferred stock that may be issued from time to time. The common stock hadthe following characteristics as of December 31, 2017: 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. 168 Table of ContentsShares Reserved for Future Issuance As of December 31, 2017 2016Shares reserved for outstanding stock option awards under the 2013 StockIncentive Plan, as amended 1,220,567 1,595,082Shares reserved for outstanding stock option awards under the 2015 StockIncentive Plan 2,921,987 1,569,746Shares reserved for outstanding inducement stock option award 225,000 —Remaining shares reserved, but unissued, for future awards under the 2015Stock Incentive Plan 2,502,338 2,760,472Remaining shares reserved, but unissued, for future awards under the 2015Employee Stock Purchase Plan 751,242 384,615 7,621,134 6,309,915March 2017 Common Stock Sales Agreement In March 2017, the Company entered into a sales agreement with Cowen and Company LLC (“Cowen), under whichthe Company from time to time can issue and sell shares of its common stock through Cowen in at-the-market offerings(“March 2017 ATM Program”) for aggregate sales proceeds of $50.0 million. The common stock will be distributed at themarket prices prevailing at the time of sale. All sales of shares will be made pursuant to an effective shelf registrationstatement on Form S-3 filed with the SEC. The Company will pay Cowen a commission of 3% of the aggregate grossproceeds the Company receives from all sales of the Company’s common stock under the sales agreement. As of December31, 2017, the Company had not received any proceeds under the March 2017 ATM Program. Subsequent to December 31,2017 and during January 2018, the Company sold an aggregate of 1,429,205 common shares under the March 2017 ATMProgram at an average price of $34.99 per common share for gross proceeds of $50.0 million. 12. Stock‑Based Compensation 2013 Stock Incentive Plan In September 2013, the board of directors adopted the 2013 Stock Incentive Plan, as amended (the “2013 Plan”),which provides for the grant of incentive stock options and nonqualified stock options or other awards including restrictedstock awards, unrestricted stock awards, and restricted stock units to the Company’s employees, officers, directors, advisors,and consultants for the purchase of up to 1,057,692 shares of the Company’s common stock. In June 2014, the 2013 Plan wasamended to increase the number of shares reserved thereunder by 1,365,384 shares. In April 2015, the 2013 Plan wasamended to increase the number of shares reserved thereunder by 153,846 shares. In July 2015, the 2013 Plan was amendedto increase the number of shares 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 2013 Plan. The stock options granted to employees generally vest over a four-year periodand expire ten years from the date of grant. Certain awards contain performance based vesting criteria. There has only beenone such award to date. Certain options provide for accelerated vesting in the event of a change in control, as defined in theapplicable options. Awards granted to non‑employee consultants generally vest monthly over a period of one to four years.In connection with the IPO, the Company’s board of directors determined to grant no further awards under the 2013 Plan. 2015 Stock Incentive Plan The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentiveplan (the “2015 Plan”), which became effective immediately prior to the effectiveness of the registration statement related tothe IPO. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards,restricted stock units, stock appreciation rights and other stock‑based awards. The Company’s employees, officers, directorsand consultants and advisors are eligible to receive awards under the 2015 Plan. 169 Table of ContentsThe number of shares reserved for issuance under the 2015 Plan is subject to further increases for (a) any additionalshares of the Company’s common stock subject to outstanding awards under the 2013 Plan that expire, terminate, or areotherwise surrendered, cancelled, forfeited, or repurchased by the Company at their original issuance price pursuant to acontractual repurchase right and (b) annual increases, to be added as of the first day of each fiscal year, from January 1, 2017until, and including, January 1, 2026, equal to the lowest of 2,923,076 shares of common stock, 4% of the number of sharesof common stock outstanding on such first day of the fiscal year in question and an amount determined by the Company’sboard of directors. On January 1, 2018, the Company increased the shares under the 2015 Plan by 1,801,017 shares. 2015 Employee Stock Purchase Plan The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stockpurchase plan (the “2015 ESPP”), which became effective upon the closing of the IPO. The number of shares reserved forissuance under the 2015 ESPP is subject to annual increases, to be added as of the first day of each fiscal year, from January 1,2017 until, and including, January 1, 2026, in an amount equal to the least of (a) 769,230 shares of common stock, (b) 1% ofthe total number of shares of common stock outstanding on the first day of the applicable year, and (c) an amount determinedby the board of directors. The first offering under the 2015 ESPP opened on December 1, 2017. On January 1, 2018, theCompany increased the shares under the 2015 ESPP Plan by 450,254 shares.Founder Awards In September 2013, the Company issued 2,403,845 shares of restricted stock to its non‑employee founders forservices rendered subject to certain repurchase rights. The shares vested 25% upon the first issuance of shares of Series APreferred Stock and then 1.5625% a month through the fourth anniversary of the vesting commencement date. These sharesof restricted stock were subject to repurchase rights. Accordingly, the Company recorded the proceeds from the issuance ofrestricted stock as a liability in its consolidated balance sheets. The restricted stock liability was reclassified intostockholders’ equity (deficit) as the restricted stock vested. In June 2014, one founder ceased to be in the Company’s serviceand the Company repurchased 285,457 shares of unvested restricted stock from the founder for $74. The remaining founderawards completed vesting in August 2017. Stock‑based compensation expense associated with these awards was recognized as the awards vested. Unvestedawards were remeasured at each reporting period end to reflect the current fair value of such awards on a straight‑line basis. Stock‑Based Compensation Expense Total compensation cost recognized for all stock‑based compensation awards in the consolidated statements ofoperations was as follows (in thousands): Year Ended December 31, 2017 2016 2015Research and development $15,131 $4,234 $3,015General and administrative 8,233 12,647 498Total stock-compensation expense $23,364 $16,881 $3,513 Restricted Stock From time to time, upon approval by the Company’s board of directors, certain employees and advisors have beengranted restricted 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 sheets. Therestricted stock liability is reclassified into stockholders’ equity (deficit) as the 170 Table of Contentsrestricted stock vests. A summary of the status of and changes in unvested restricted stock as of December 31, 2016 and 2017is as follows: Weighted Average Grant Date Fair Value Shares Per ShareUnvested Restricted Common Stock as of December 31, 2016 822,638 $0.02Issued 480,000 $28.05Vested (784,119) $4.95Forfeited (5,294) $0.03Unvested Restricted Common Stock as of December 31, 2017 513,225 $18.70 The expense related to restricted stock awards granted to employees and non‑employees was $0.5 million and $4.1million, respectively, for the year ended December 31, 2017. The expense related to restricted stock awards granted toemployees and non‑employees was $0 and $8.3 million, respectively, for the year ended December 31, 2016. The expenserelated to restricted stock awards granted to employees and non-employees was $0 and $2.3 million, respectively, for the yearended December 31, 2015. As of December 31, 2017, the Company had no unrecognized stock‑based compensation expense related to itsemployee unvested restricted stock awards. As of December 31, 2017, the Company had unrecognized stock‑basedcompensation expense related to its non‑employee unvested restricted stock awards of $10.3 million which is expected to berecognized over a remaining weighted average vesting period of 4.7 years. Stock Options Certain of the Company’s stock option agreements allow for the exercise of unvested awards. During 2014, optionsto purchase 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 cease to provide service to the Company, with or without cause. Assuch, the Company does not treat the exercise of unvested options as a substantive exercise. The Company has recorded theproceeds from the exercise of unvested stock options as a liability in the consolidated balance sheets. The liability forunvested common stock subject to repurchase is reclassified into stockholders’ equity (deficit) as the shares vest. The following is a summary of stock option activity for the year ended December 31, 2017: Weighted Average Remaining Aggregate Intrinsic Shares Exercise Price Contractual Life Value (in thousands)Outstanding at December 31, 2016 3,411,783 $13.71 8.8 $16,190Granted 1,392,689 — — —Exercised (289,583) — — —Cancelled (142,753) — — —Outstanding at December 31, 2017 4,372,136 $17.28 8.5 $60,591Vested and expected to vest at December 31, 2017 4,372,126 $17.28 8.5 $60,591Exercisable at December 31, 2017 1,540,023 $14.95 8.3 $25,099 The table above reflects unvested stock options as exercised on the dates that the shares are no longer subject torepurchase. The Company had 4,572 and 21,955 shares of unvested common stock at December 31, 2017 and 2016 related tothe exercise of unvested stock options. The total intrinsic value of options exercised for the years ended December 31, 2017, 2016, and 2015 was $5.0million, $0.9 million, and $0.1 million, respectively. 171 Table of ContentsUsing the Black‑Scholes option pricing model, the weighted average fair value of options granted to employees anddirectors during the years ended December 31, 2017, 2016, and 2015 was $16.07, $14.10, and $5.91, respectively. Theexpense related to options granted to employees and directors was $12.3 million, $6.0 million, and $0.7 million for the yearsended December 31, 2017, 2016, and 2015, respectively. 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, 2017 2016 2015 Expected volatility 77.8% 78.4% 78.8%Expected term (in years) 6.25 6.25 6.25 Risk free interest rate 2.1% 1.5% 1.7%Expected dividend yield — — — There were no options granted to persons other than employees and directors during the year ended December 31,2017. For the year ended December 31, 2017, 2016 and 2015, the fair value of each option issued to persons other thanemployees and directors was estimated at the date of grant using the Black‑Scholes option pricing model with theweighted‑average assumptions set forth in the table below: Year Ended December 31, 2017 2016 2015 Expected volatility — 76.5% 80.0%Expected term (in years) — 10.0 10.0 Risk free interest rate — 1.6% 2.2%Expected dividend yield — — — As of December 31, 2017, the Company had unrecognized stock‑based compensation expense related to itsemployee stock options of $33.4 million which the Company expects to recognize over a remaining weighted averagevesting period of 2.5 years. 13. 401(k) Savings Plan The Company has a defined‑contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986,as amended (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and servicerequirements, and allows participants to defer a portion of their annual compensation on a pretax basis. Effective in 2017, theCompany will provide a 200% match of employee contributions up to a limit on the Company’s contributions of the lesser of$6,000 and 3% of the employee’s salary. The Company made $0.5 million in contributions to the 401(k) Plan for the yearended December 31, 2017 and did not make any contributions for the years ended December 31, 2016 and 2015,respectively. 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, 2017 2016 2015 Income tax computed at federal statutory tax rate 34.0%34.0%34.0%State taxes, net of federal benefit 5.9%3.5%2.5%General business credit carryovers 2.5%1.5%0.8%Non-deductible expenses (2.1)%(3.6)%(17.9)%Federal tax rate reduction (24.7)% —% —%Change in valuation allowance (15.6)%(35.4)%(19.4)% —% —% —% 172 Table of ContentsOn December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”) was signed intolaw. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 34% to 21%, requires taxpayers topay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates newtaxes on certain foreign sourced earnings. As of December 31, 2017, the Company did not have any foreign subsidiaries andthe international aspects of the Tax Act are not applicable. In connection with the initial analysis on the impact of the Tax Act, the Company remeasured certain deferred taxassets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. Theremeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance.However, the reduction of the U.S. federal corporate tax rate resulted in increases to the amounts reflected in “Federal tax ratereduction” and “Change in valuation allowance” captions for the year ended December 31, 2017 in the Company’s taxreconciliation table compared to those amounts disclosed for the years ended December 31, 2016 and 2015. The change inthe U.S. federal corporate tax rate, which is effective January 1, 2018, is also reflected in the Company’s deferred tax table. The Company is still in the process of analyzing the impact to the Company of the Tax Act. On December 22, 2017,the SEC staff issued SAB 118 to address the application of GAAP in situations when a registrant does not have the necessaryinformation available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting forcertain income tax effects of the Tax Act. The Company has recognized the provisional tax impacts related to the revaluationof the deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the yearended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among other things,additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance thatmay be issued, and actions the Company may take as a result of the Tax Act, which could result in changes to the provisionaltax impacts during 2018. The principal components of the Company’s deferred tax assets and liabilities consist of the following at December31, 2017 and 2016 (in thousands): Year Ended December 31, 2017 2016Deferred tax assets: Net operating loss carryforwards $27,726 $16,490Tax credit carryforwards 5,259 2,014Accrued expenses 2,079 7,353Capitalized patent costs 26,307 16,025Deferred revenue 7,151 9,672Construction financing lease obligation 9,352 13,685Other 4,978 2,979Total deferred tax assets 82,852 68,218Less valuation allowance (73,301) (54,300)Net deferred tax assets 9,551 13,918Deferred tax liabilities—depreciation and amortization (9,551) (13,918)Net deferred taxes $ — $ — The Company has incurred net operating losses (“NOL”) since inception. At December 31, 2017 and 2016, theCompany had federal and state net operating loss carryforwards of $202.7 million and $82.4 million respectively, whichexpire beginning in 2033 and will continue to expire through 2037. As of December 31, 2017 and 2016, the Company hadfederal and state research and development tax credits carryforwards of $5.6 million and $2.3 million, respectively, whichexpire beginning in 2028 and will continue to expire through 2037. 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 changes in theownership interest of significant shareholders over a three year period in excess of 50%, as defined under Sections 382 and383 of the Code, respectively, as well as other similar state provisions. The Company has not performed a full 173 Table of Contentscomprehensive Section 382 study to determine any potential loss limitation in the United States or a Section 383 study todetermine the appropriate amount of NOL and tax credit carryforwards. Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred taxassets, which principally comprise of NOL carryforwards, research and development credit carryforwards and capitalizedlicense and patent costs. Management has determined that it is more likely than not that the Company will not recognize thebenefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $73.3 million and $54.3 millionhas been established at December 31, 2017 and 2016, respectively. The increase in the valuation allowance of $19.0 millionfor the year ended December 31, 2017 was primarily due to current year operating losses offset by the federal rate reductionfrom 34% to 21% as a result of the Tax Act. 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 taken 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, 2017 and 2016, 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, the Massachusetts state jurisdiction andthe California state jurisdiction. Since the Company is in a loss carryforward position, the Company is generally subject toexamination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward isavailable. The Company did not have any international operations as of December 31, 2017. There are no federal or stateaudits in process. 15. 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. Contingently issuable shares are included in the calculation of basic loss pershare as of the beginning of the period in which all the necessary conditions have been satisfied. Contingently issuableshares are included in diluted loss per share based on the number of shares, if any, that would be issuable under the terms ofthe arrangement if the end of the reporting period was the end of the contingency period, if the results are dilutive. For purposes of the diluted net loss per share calculation, stock options are considered to be common stockequivalents, but they were excluded from the Company’s calculation of diluted net loss per share allocable to commonstockholders because their inclusion would have been anti-dilutive. Therefore, basic and diluted net loss per share applicableto common stockholders was the same for all periods presented. Upon the closings of the March Offering and the December Offering, the Company sold 4,600,000 and 2,265,500shares of common stock, respectively. The issuance of these shares resulted in a significant increase in the Company’sweighted-average shares outstanding for the year ended December 31, 2017 when compared to the comparable prior yearperiod and is expected to continue to impact the year-over-year comparability of the Company’s net loss per sharecalculations for the next three and twelve months. The following common stock equivalents were excluded from the calculation of diluted net loss per share allocableto common stockholders because their inclusion would have been anti-dilutive: 174 Table of Contents As of December 31, 2017 2016Unvested restricted common stock 513,225 822,638Outstanding stock options 4,372,126 3,411,783Estimated number of shares issuable for convertible notes 244,896 —Total 5,130,247 4,234,421(1)Represents the number of shares that would have been issued if the Company had elected to pay the December SuccessPayment Notes, as discussed in Note 8, in shares of the Company’s common stock, based on the closing price of thecommon stock on December 31, 2017. The number of shares issued, for purposes of this presentation, is calculated bydividing the principal of the notes payable, including accrued interest, by the stock price per share. The table above reflects restricted stock issued upon exercise of unvested stock options as exercised on the datesthat the shares are no longer subject to repurchase. 16. Related‑Party Transactions During the years ended December 31, 2016 and December 31, 2015, the Company paid a related party $1.4 millionand $1.2 million in rent and facility-related fees, respectively. The Company did not make any payments to this related partyduring the year ended December 31, 2017. The Company received $0.8 million in rent and facility-related fees from a relatedparty during the year ended December 31, 2017 in connection with the Sublease; no rent or facility-related payments werereceived from this related party during the year ended December 31, 2016 or December 31, 2015. In addition, during the yearended December 31, 2015, the Company paid one of its investors $0.1 million in professional fees. 175 (1)Table of Contents17. Selected Quarterly Financial Data (unaudited) – The following table contains selected quarterly financial information from 2017 and 2016. 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 31,2017 June 30, 2017 September 30,2017 December 31,2017 (in thousands, except per share data)Total revenue$682 $3,097 $6,282 $3,667Total operating expenses 31,309 29,212 33,031 40,109Total other income (expense), net (470) (324) 150 253Net loss$(31,097) $(26,439) $(26,599) $(36,189)Net loss applicable to common stockholders$(31,097) $(26,439) $(26,599) $(36,189)Net loss per share applicable to commonstockholders — basic and diluted$(0.85) $(0.65) $(0.64) $(0.84) Three months ended March 31,2016 June 30, 2016 September 30,2016 December 31,2016 (in thousands, except per share data)Total revenue$805 $3,388 $962 $898Total operating expenses 18,644 22,588 22,127 39,882Total other income (expense), net 94 158 145 (392)Net loss$(17,745) $(19,042) $(21,020) $(39,376)Net loss applicable to common stockholders$(17,792) $(19,042) $(21,020) $(39,376)Net loss per share applicable to commonstockholders — basic and diluted$(0.80) $(0.54) $(0.59) $(1.10) 18. Subsequent Events In January 2018, the Company issued an aggregate of 225,909 shares of its common stock to Broad as payment ofall outstanding principal and interest under the December Success Payment Notes (see Note 8). Upon such issuance andpayment, the December Success Payment Notes were cancelled. In January 2018, the Company issued an aggregate of 80,000 shares of its common stock to MGH in connectionwith settling the First MGH Success Payment (see Note 8). In January 2018, the Company paid $1.6 million in cash and issued an aggregate of 56,099 shares of its commonstock, valued at $29.76 per share, to i2 Pharmaceuticals, Inc. in connection with the purchase of certain assets pursuant to anasset purchase agreement. In January 2018, the Company sold an aggregate of 1,429,205 common shares under the March 2017 ATM Programat an average price of $34.99 per common share for gross proceeds of $50.0 million. The March 2017 ATM Program was fullyutilized in January 2018. 176 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures as of December 31, 2017. The term “disclosure controls andprocedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (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, or persons performing similarfunctions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that anycontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving theirobjectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possiblecontrols and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017, ourChief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedureswere effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reportingas defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with general accepted accounting principles. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reportingbased on the 2013 framework in Internal Control–Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded thatour internal control over financial reporting was effective as of December 31, 2017. This Annual Report on Form 10-K does not include an attestation report of our independent registered publicaccounting firm due to a transition period established by rules of the SEC for “emerging growth companies.” Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under theExchange Act) occurred during our fiscal quarter ended December 31, 2017 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 177 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. Except to the extent provided below, the information required by this Item 10 will be included in the sectioncaptioned “Corporate Governance” and the subsections thereof, “Nominees for Election as Class II Directors,” “DirectorsContinuing in Office,” “Executive Officers Who Are Not Directors,” “Section 16(a) Beneficial Ownership ReportingCompliance,” in our definitive proxy statement to be filed with the Securities and Exchange Commission (“SEC”) withrespect to our 2018 Annual Meeting of Stockholders, which information is incorporated herein by reference. 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. We will provide any person, without charge, a copy of such Code of BusinessConduct and Ethics upon written request, which may be mailed to 11 Hurley Street, Cambridge, MA 02141, Attn: CorporateSecretary. Item 11. Executive Compensation. The information required by this Item 11 will be included in the section captioned “Executive and DirectorCompensation” in our definitive proxy statement to be filed with the SEC with respect to our 2018 Annual Meeting ofStockholders, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this Item 12 will be included in the sections captioned “Principal Stockholders” and“Securities Authorized for Issuance under Equity Compensation Plans” in our definitive proxy statement to be filed with theSEC with respect to our 2018 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in the sections captioned “Transactions with RelatedPersons” and “Director Independence” in our definitive proxy statement to be filed with the SEC with respect to our 2018Annual Meeting of Stockholders, which information is incorporated herein by reference. On March 7, 2018, we terminatedour Amended and Restated Investors’ Rights Agreement, dated as of August 4, 2015 (the “Investors’ Rights Agreement”), byand between us and holders of our previously-outstanding preferred stock (the “Holders”). The Investors’ Rights Agreementhad provided the Holders with the right, subject to certain conditions, to register shares of common stock issued uponconversion of such Holders preferred stock upon a demand request or in connection with our registration of shares for ourown account. The termination was effected pursuant to the termination provision of the Investors’ Rights Agreement with theconsent of all the Holders holding shares that remained subject to the Investors’ Rights Agreement, including Katrine S.Bosley, our Chief Executive Officer, and Boris Nikolic, a member of the Board of Directors. Item 14. Principal Accounting Fees and Services. The information required by this Item 14 will be included in the sections captioned “Audit Fees” and “AuditCommittee Pre-Approval Policies and Procedures” in our definitive proxy statement to be filed with the SEC with respect toour 2018 Annual Meeting of Stockholders, which information is incorporated herein by reference. 178 Table of Contents PART 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 following Exhibit Index.EXHIBIT 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 Amended and Restated 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+ 2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.5 10.2+ Form of Incentive Stock Option Agreement under2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.6 10.3+ Form of Nonstatutory Stock Option Agreementunder 2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.7 10.4+ Form of Early Exercise Nonstatutory StockOption Agreement under 2013 Stock IncentivePlan, as amended S-1 333-208856 1/4/2016 10.8 10.5+ Form of Restricted Stock Agreement under 2013Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.9 10.6+ 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.10 10.7+ Form of Incentive Stock Option Agreement under2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.11 10.8+ Form of Nonstatutory Stock Option Agreementunder 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.12 10.9+ Form of Restricted Stock Agreement under 2015Stock Incentive Plan 10-Q 001-37687 11/8/2017 10.1 10.10+ Employment Offer Letter, dated June 12, 2014,between the Registrant and Katrine S. Bosley S-1 333-208856 1/4/2016 10.13 10.11+ Amended and Restated Offer of Employment,dated July 24, 2016, between the Registrant andCharles Albright, Ph.D. 10-K 001-37687 3/3/2017 10.11 10.12+ Employment Offer Letter, dated July 19, 2016,between the Registrant and Gerald Cox, M.D.,Ph.D. 10-K 001-37687 3/3/2017 10.11 10.13+ Inducement Stock Option Agreement, datedOctober 5, 2016, between the Registrant andGerald F. Cox, M.D., Ph.D. S-8 333‑214556 11/10/2016 99.1 179 Table of Contents10.14 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 10.15† 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 10.16 First Amendment to Exclusive Patent LicenseAgreement, dated as of June 29, 2015, by andbetween the Registrant and the General HospitalCorporation, d/b/a Massachusetts GeneralHospital 10-K 001-37687 3/3/2017 10.16 10.17† Second Amendment to Exclusive Patent LicenseAgreement, dated as of November 17, 2016, byand between the Registrant and the GeneralHospital Corporation, d/b/a/ MassachusettsGeneral Hospital 8‑K 001‑37687 1/23/2017 99.4 10.18† Amended and Restated Cas9-I License Agreement,dated December 16, 2016, among the Registrant,the President and Fellows of Harvard College, andthe Broad Institute, Inc. 8‑K 001‑37687 1/23/2017 99.2 10.19 Amendment No.1 to Amended and RestatedCas9‑I License Agreement, by and among EditasMedicine, Inc., President and Fellows of HarvardCollege, and the Broad Institute, Inc., dated March3, 2017 8-K 001-37687 3/7/2017 99.1 10.20† License and Collaboration Agreement, datedMay 26, 2015, between the Registrant and JunoTherapeutics, Inc. S-1 333-208856 1/4/2016 10.23 10.21+ Summary of Director Compensation Program S-1 333-208856 1/4/2016 10.24 10.22+ 2015 Employee Stock Purchase Plan S-1 333-208856 1/4/2016 10.25 10.23+ Severance Benefits Plan S-1 333-208856 1/4/2016 10.27 10.24 Form of Indemnification Agreement between theRegistrant and each of its directors and executiveofficers S-1 333-208856 1/4/2016 10.28 10.25 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 10.26† Exclusive Patent License Agreement, dated as ofAugust 2, 2016, by and between the Registrantand The General Hospital Corporation, d/b/aMassachusetts General Hospital 10-Q 001‑37687 11/9/2016 10.1 10.27† Cpf1 License Agreement, dated as ofDecember 16, 2016, by and between theRegistrant and The Broad Institute, Inc. 8‑K 001‑37687 1/23/2017 99.1 10.28† Cas9‑II License Agreement, dated as ofDecember 16, 2016, by and between theRegistrant and The Broad Institute, Inc. 8‑K 001‑37687 1/23/2017 99.3 10.29† Strategic Alliance and Option Agreement, datedMarch 14, 2017, by and between the Registrantand Allergan Pharmaceuticals InternationalLimited 10-Q 001-37687 5/15/2017 10.1 10.30 Common Stock Sales Agreement, dated March 3,2017, between the Registrant and Cowen andCompany, LLC S-3 333-216444 3/3/2017 1.2 21.1 Subsidiaries of the Registrant 10-K 001-37687 3/30/2016 21.1 180 Table of Contents23.1 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 X101.INS XBRL Instance Document X101.SCH XBRL Taxonomy Extension Schema Document X101.CAL XBRL Taxonomy Extension CalculationLinkbase Document X101.DEF XBRL Taxonomy Extension Definition LinkbaseDocument X101.LAB XBRL Taxonomy Extension Label LinkbaseDocument X101.PRE XBRL Taxonomy Extension PresentationLinkbase Document X † Confidential treatment has been granted as to certain portions, which portions have been omitted and filed separatelywith the Securities and Exchange Commission.+ Management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary.None. 181 Table of Contents SIGNATURES 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 8, 2018By:/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 8, 2018Katrine S. Bosley/s/ Andrew A. F. HackChief Financial Officer (principal financial andaccounting officer)March 8, 2018Andrew A.F. Hack, M.D., Ph.D./s/ Kevin BittermanDirectorMarch 8, 2018Kevin Bitterman, Ph.D./s/ Alexis BorisyDirectorMarch 8, 2018Alexis Borisy/s/ Andrew HirschDirectorMarch 8, 2018Andrew Hirsch /s/ Jessica Hopfield Director March 8, 2018Jessica Hopfield, Ph.D./s/ John D. MendleinDirectorMarch 8, 2018John D. Mendlein, Ph.D., J.D./s/ Boris NikolicDirectorMarch 8, 2018Boris Nikolic, M.D./s/ Akshay K. VaishnawDirectorMarch 8, 2018Akshay K. Vaishnaw, M.D., Ph.D. 182Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements (Form S-3 Nos. 333-216444, 333-216528, 333-222266 and Form S-8 pertaining to the 2013 Stock Incentive Plan, the 2015 Stock IncentivePlan and 2015 Employee Stock Purchase Plan of Editas Medicine, Inc. of our report dated March 8, 2018, with respect tothe consolidated financial statements of Editas Medicine, Inc. included in this Annual Report (Form 10-K) for the yearended December 31, 2017. /s/ Ernst & Young LLP Boston, MassachusettsMarch 8, 2018 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; and 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 8, 2018By:/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; and 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 8, 2018By:/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, 2017, 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 8, 2018 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 

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