Editas Medicine
Annual Report 2018

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, 2018 or ☐☐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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark 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☐ 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, 2018, 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 $1,631,271,034.00 based upon the closing price of the registrant’s Common Stock on June 29, 2018, the last business day of the registrant’s most recently completedsecond fiscal quarter. The number of shares of the registrant’s Common Stock outstanding as of February 8, 2019 was 49,092,251. DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement for its 2019 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, 2018 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 Factors54Item 1B. Unresolved Staff Comments108Item 2. Properties108Item 3. Legal Proceedings108Item 4. Mine Safety Disclosures108 PART II 109 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities109Item 6. Selected Financial Data110Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations112Item 7A. Quantitative and Qualitative Disclosures About Market Risk128Item 8. Financial Statements and Supplementary Data130Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure178Item 9A. Controls and Procedures178Item 9B. Other Information180 PART III 180 Item 10. Directors, Executive Officers and Corporate Governance180Item 11. Executive Compensation180Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters180Item 13. Certain Relationships and Related Transactions, and Director Independence181Item 14. Principal Accounting Fees and Services181 PART IV 181 Item 15. Exhibits, Financial Statement Schedules181Item 16. Form 10-K Summary183 SIGNATURES184 2 Table of ContentsReferences to EditasThroughout 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 DataThis 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, clinical stage genome editing company dedicated to developing potentially transformativegenomic medicines to treat a broad range of serious diseases. The promise of genomic medicines is supported by theadvancing knowledge of the human genome, and harnessing the progress in technologies for cell therapy, gene therapy, and,most recently, genome editing. We believe this progress sets the stage for us to create unprecedented medicines with thepotential to have a durable benefit for patients. At Editas Medicine, our core capability in genome editing uses thetechnology known as CRISPR (clustered, regularly interspaced, short palindromic repeats) with which we can createmolecules that efficiently and specifically edit DNA. Our mission is to translate the promise of genome editing into a broadclass of transformative genomic medicines to benefit the greatest number of patients.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, also known as Cas12a), bound to a guide RNAmolecule designed to recognize a particular DNA sequence. Once the complex binds to the DNA sequence it was designed torecognize, the complex makes a specific cut in the DNA. Our platform consists of four interrelated components: nuclease andguide RNA engineering, delivery, control and specificity, and directed editing. These interrelated components are designedto develop medicines that specifically address a wide variety of diseases.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 over 95% of the human genome. Each of our product candidates derivesfrom our platform, and we plan to continue to use our platform to develop a broad range of genomic medicines to treatserious diseases.Our product development strategy is to target genetically addressable diseases where gene editing can be used toenable or enhance therapeutic outcomes for patients. Genetically addressable diseases include genetically defined diseasesthat may be treated by correcting a disease-causing gene and genetically treatable diseases that do not necessarily have asingle, disease causing gene, but which nonetheless may be treated by editing the genome to ameliorate or eliminate thesigns or symptoms of the disease. We are advancing both in vivo CRISPR medicines, in which the medicine is injected orinfused into the patient to edit the cells inside their body, and engineered cell medicines, in which cells are edited with ourtechnology and then administered to the patient. While our discovery efforts have ranged across several different geneticallyaddressable diseases and therapeutic areas, the two areas where our programs are more mature are ocular diseases andengineered cell medicines to treat blood diseases and cancer.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 other potential treatment in clinicaltrials in the United States and Europe. A mutation in the CEP290 gene causes LCA10. We have demonstrated that our leadproduct candidate, EDIT-101, can achieve high levels of editing of the CEP290 gene in human retinal tissue that has beenexplanted and maintained in vitro and in the retinas of non-human primates in vivo. In October 2018, we filed aninvestigational new drug application (“IND”) for a Phase 1/2 clinical trial for EDIT-101 for treatment of LCA10, which wasaccepted by the United States Food and Drug Administration (the “FDA”) in November 2018. We and our partner AllerganPharmaceuticals International Limited (“Allergan”) plan to initiate patient screening in mid-2019 and begin patient dosingin the second half of 2019, enrolling approximately 10 to 20 patients in the United States and Europe. In addition, weinitiated a clinical natural history study in 2017 to evaluate the clinical course and characteristics of LCA10 moreextensively. We believe preclinical results to date with EDIT-101 validate our platform technology, including its potentialapplication to other ocular diseases, such as Usher syndrome 2A (“USH2A”), retinitis pigmentosa and recurrent ocular herpessimplex virus 1 (“HSV-1”), as well as diseases of other organs and tissues.In March 2017, we entered into a strategic alliance and option agreement with Allergan, which we believe has thepotential to expand and enhance our research and development efforts for ocular diseases. Under this agreement,4 Table of ContentsAllergan received exclusive access and the option to license up to five of our genome editing ocular programs, includingEDIT-101, and will be responsible for development and commercialization of any program with respect to which it exercisesits option. We received an upfront payment of $90.0 million from Allergan and have the potential to receive greater than$1.0 billion in contingent milestone payments, as well as high single-digit royalties on programs for which Allerganexercises its option. Under our alliance with Allergan, we had the right to elect to co-develop and share equally in the profitsand losses in the United States for up to two programs for which Allergan exercise its option, including the LCA10 program.In August 2018, Allergan exercised its option for the LCA10 program and paid us $15.0 million in connection with suchexercise and we subsequently entered into a co-development and commercialization agreement with an affiliate of Allerganunder which we will equally split profits and losses for EDIT-101 in the United States with Allergan (the “LCA10 Co-Development and Commercialization Agreement”). We also retain the option to co-develop and commercialize oneadditional program in the United States pursuant to our alliance with Allergan. We also received a $25.0 million paymentfrom Allergan in connection with the acceptance of the IND for EDIT-101.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 developed. To this end, we haveestablished 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 blood diseases and cancer. More broadly, we believe that our editingcapabilities can be applied to many additional cell types, including natural killer cells.In May 2015, we established a collaboration with Juno Therapeutics, Inc., a Celgene company that is a wholly-owned subsidiary of Celgene Corporation (“Juno Therapeutics”), to develop engineered T cell medicines for cancer. Thesetherapies have the potential to substantially advance the field of cancer immunotherapy and expand the range of cancers thatcan be treated with engineered T cells. Under the collaboration, we received an upfront payment of $25.0 million, fourmilestone payments totaling $10.0 million related to technical progress in research programs under the collaboration and a$5.0 million payment in connection with amending the collaboration agreement in May 2018. We also have the potential toreceive approximately $920 million in aggregate milestone payments, as well as tiered royalties. In addition, we are eligibleto receive research support of up to $22.0 million over the initial five year research term, subject to adjustment in accordancewith the terms of the collaboration, of which we have received $9.5 million as of December 31, 2018.We are also developing a novel gene editing approach to treating sickle cell disease and beta-thalassemia, togetherreferred to as hemoglobinopathies. This program takes advantage of our genome editing capabilities in hematopoietic stemcells (“HSCs”), including a distinct genome editing approach that targets the hemoglobin gene locus directly. We believethis has the potential to effectively and durably treat hemoglobinopathies and may have advantages over other programswhich increase fetal hemoglobin indirectly by altering the expression of other genes.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 as we are pioneering the possible.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 Therapies5 Table of Contents·Science: Impeccable—Rigorous—Meaningful·Passion: Love It—Do It—Own It·Revolution: Discover—Translate—Cure We 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 experimentalmedicines and our company that we are working to achieve by the end of 2022. These goals, which we call “EM22,” includehaving at least three experimental medicines in early stage clinical trials and at least two additional experimental medicinesin or ready for late stage clinical trials. In addition, we aim to have a pipeline characterized by potential best-in-classmedicines and to be a company 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 (“DMD”), 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. Genomic6 Table of Contentsmedicine harnesses the knowledge of genetics to guide the care of patients and create new therapies. There are severaltechnologies that have the potential to create medicines in this field. These technologies can be grouped into two broadcategories: gene therapy and genome editing. Each approach seeks to address genetically defined diseases at the level ofDNA.Gene therapy is an approach whereby a new gene is transferred into cells to augment a defective gene. This caneither be through insertion of the new gene directly into a patient’s DNA without specific regard to the site of insertion ordelivering a piece of DNA to exist alongside the patient’s genome without being integrated into it. Gene therapy transfersnew DNA into cells, however it does not remove or modify the defective DNA and it generally introduces the new geneticmaterial in a location where it is not subject to the cell’s normal control and feedback mechanisms. This approach is suitedfor a finite set of genetically defined diseases.Genome editing is the process of revising, removing, or repairing defective DNA in situ. 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 ability7 Table of Contentsto modify CRISPR technology to allow for different types of cuts will expand the potential of our genomeediting platform.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;·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 genomic8 Table of Contentssites. Thus, while the S. pyogenes Cas9 can target approximately 1 in 10 bases in the human genome, we have the potentialto hit over 95% of all bases due to the wide range of endonucleases at our disposal.Comparison 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, and the use of electroporation. For example, we have taken advantage of the smaller S. aureus Cas9 andexisting 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 90% 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.9 Table of ContentsControl 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 accomplish this, wehave combined multiple orthogonal methods in the design, testing, and optimization process. Our strategy to assessspecificity 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.10 Table of ContentsWe 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 productdevelopment strategy is to target genetically addressable diseases where gene editing can be used to enable or enhancetherapeutic outcomes for patients. While our discovery efforts have ranged across several different genetically addressablediseases and therapeutic areas, the two areas where our programs are more mature are ocular diseases and engineered cellmedicines to treat blood diseases and cancer. We believe the therapeutic programs and delivery technologies we have chosento date will demonstrate the depth and breadth of our ability to deploy our genome editing platform to treat patients in needwith genetically addressable diseases. A summary of our experimental medicines under development is presented in thefollowing 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 EDIT-101. As discussed above, Allergan has exercised its optionwith respect to EDIT-101 and entered into a profit-sharing arrangement with us in the United States for such 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 of11 Table of Contentsmeasurable electroretinogram recordings due to a lack of functional photoreceptor cells. The most common form of thedisease is LCA10, a monogenic disorder that represents approximately 20-30% of all LCA subtypes. LCA10 is caused byautosomal recessive mutations in the CEP290 gene, which encodes a protein required for the survival and proper function ofphotoreceptor cells. The most frequently found mutation within the CEP290 gene, occurring in approximately 85% of northand west European patients with LCA10, is an A to G nucleotide change that disrupts normal splicing, or processing, of thegene message, ultimately resulting in a deficiency of functional CEP290 protein. Decreased CEP290 protein leads to loss ofphotoreceptor cells and function 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 a disease-causing A to G nucleotide change in a non-coding region, or intron, of the CEP290 gene by cutting outthat nucleotide and surrounding DNA. We believe this genome editing approach has the potential to restore normal proteinexpression and function of the remaining photoreceptor cells, which could improve vision or arrest the further loss of visionin LCA patients.In 2017, we initiated a natural history study of LCA10 patients. In this study, we intend to assess the manifestationsand course of the LCA10 disease in approximately 40 patients across a range of ages and disease severity at seven sites in theUnited States and Europe. Patients will be evaluated six times over the course of a year. The purpose of the study is to informthe clinical trial design and enrollment for our Phase 1/2 clinical trial of EDIT-101 through the characterization of patients’baseline status and the rate of change of the disease, as well as to validate endpoints of the Phase 1/2 clinical trial for EDIT-101.In October 2018, we filed an IND for a Phase 1/2 clinical trial for EDIT-101, which was accepted by the FDA inNovember 2018. We and Allergan designed an initial Phase 1/2 clinical trial which is an open-label, single ascending dosetrial of EDIT-101 in adult and pediatric (i.e., ages 3 to 17 years) patients with retinal degeneration caused by a homozygousor compound heterozygous mutation of the CEP290 gene, which is referred to as an IVS26 mutation. Patients will receive asingle dose of EDIT-101 administered via subretinal injection in one eye. Approximately 10 to 20 patients will be enrolled atapproximately eight trial centers in the United States and Europe. Up to five cohorts across three doses will be enrolled inthis clinical trial. The primary endpoint of the trial is an assessment of safety and tolerability, and the secondary endpoint isto evaluate the efficacy of a single dose of EDIT-101 on change from baseline in various parameters. Efficacy will beevaluated at multiple timepoints, including core measures every three months for the first year and then less frequentlythereafter. We and Allergan plan to initiate patient screening in mid-2019 and begin patient dosing in the second half of2019. 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 vision 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 non-human 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 AAV12 Table of Contentsgenomes and Cas9 expression were limited to photoreceptors. In addition, we estimate that 12-22% and 50% of CEP-290alleles were productively edited at six weeks and at 13 weeks, respectively. In these studies, productive editing is defined asthe proportion of photoreceptor cells edited in a manner that we believe will restore CEP290 protein function. All of thesevalues exceed our prespecified therapeutic target of 10% productive editing. Furthermore, these doses were shown insubsequent studies to be well tolerated in non-human primates based on visual and immunohistochemical analysis. Similarstudies in mice showed that editing was rapid, achieving maximum levels by 6 weeks, and stable with changes maintainedfor the 26 weeks of the study.In addition, we developed a retinal explant system to explore the potential effectiveness of EDIT-101 in humantissue. In these studies, retinas from human cadavers were dissected, placed in culture, and exposed to EDIT-101 at a low anda high dose. 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 USH2A, retinitispigmentosa and HSV-1. We believe that our experience with the LCA10 program will support the development of therapiesfor these other eye diseases. For example, the successful construction and testing of the components of the AAV vector we arepursuing for EDIT-101 will continue to inform our approach to treating the most common cause of USH2A.Usher Syndrome 2AUSH2A gene mutations are the most common cause of Usher syndrome, a form of RP that also includes hearing loss.Loss of the usherin protein encoded by the USH2A gene leads to a degeneration of the retina and progressive vision loss.More than 200 mutations have been identified for this gene. Our initial goal in this research program is to address mutationswithin exon 13, which is the location of the highest percentage of USH2A gene mutations. We believe there areapproximately 14,000 USH2A patients including up to approximately 4,000 Usher syndrome patients with the mutation weaim to correct. In preclinical studies, we have shown that both wild-type usherin and usherin-lacking amino acids encoded byexon 13 restore cilia formation to cells lacking usherin. In our research program, we aim to develop a therapeutic that willskip exon 13 which contains the mutation. Retinitis PigmentosaMutations in the human rhodopsin (“RHO”) gene accounts for 25% of all autosomal dominant forms of retinitispigmentosa (“adRP”), a progressive form of retinal degeneration characterized by initial night blindness early in lifefollowed by loss of peripheral vison and eventual complete blindness. More than 150 mutations in the RHO gene have beenidentified, with the most prevalent allele in the United States representing approximately 10 percent of all patients withadRP. We are investigating a novel approach to address all forms of adRP resulting from mutations in the RHO gene.13 Table of ContentsHerpes Simplex Virus 1HSV‑1 causes lifelong infections leading to ocular and oral disease. Infected individuals develop persistent latentinfections in the nerves that innervate the affected part of the body. During latency, the HSV‑1 DNA does not integrate intothe infected individual’s genome, but rather it remains within the individual’s cells as independent viral genomic material.The latent HSV‑1 virus can then be reactivated by illness, emotional or physical stress, and other conditions. Ocular infectionwith HSV‑1 is a major health problem, especially in developed countries. It is the most common infectious cause of blindnessin developed economies with over 25,000 recurrent cases each year. Recurrent activation of HSV-1 virus causes cornealdamage and scarring, which impairs the ability to see. Existing therapies have only partial benefit in preventing the initialHSV‑1 infection or recurrences. As a result, there is a need for an effective therapy that prevents or reduces reactivation oflatent HSV‑1. Our ongoing research program aims to deliver the CRISPR molecular machinery to the eye and specificallycleave and inactivate HSV‑1 DNA with the goal of eliminating or reducing reactivation.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, we have applied our genome editing technology to multiplegene targets in order to improve the efficacy and safety of CAR/ Engineered TCR T cells directed against a range of tumortypes. In addition, we have optimized genome editing components and delivery methods compatible with engineered T cellmanufacturing methods developed by Juno Therapeutics.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 proteins areimportant potential targets for cancer immunotherapy. With Juno Therapeutics, we have demonstrated in preclinical studiesthat disruption of the natural T cell receptor combined with the introduction of an Engineered TCR resulted in significantlyimproved in vitro T cell function. Furthermore, the elimination of the natural T cell receptor (“TCR”) has the potential tomake a safer medicine as the Engineered TCR will not be able to interact with the natural TCR to create new, and potentiallyadverse, functionality. We believe this innovation may broaden the therapeutic opportunity for engineered T cells.14 Table of ContentsNon‑malignant Hematologic DiseasesWe are developing an approach for genome editing in HSCs to support the advancement of research programs totreat non-malignant hematological diseases, such as sickle cell disease and beta thalassemia. We are actively pursuing adistinct gene editing approach to treating these hemoglobinopathies and assessing other opportunities to develop medicinesfor diseases where we believe gene editing of HSCs is likely to produce a therapeutic effect.Our genome editing approach in HSCs focuses on the hemoglobin locus with the aim of developing best-in-classmedicines for sickle cell disease and beta thalassemia. Our primary criteria for a successful product candidate are successfulediting in HSCs, maintenance of normal HSC function, and a durable predicted therapeutic induction of fetal hemoglobin.We have focused these efforts on directly editing a site within the hemoglobin locus that we believe has the potential tocreate superior expression of fetal hemoglobin. Based on the observation that patients with elevated fetal hemoglobin levelshave better clinical outcomes, we believe this approach could significantly benefit people with sickle cell disease. Using thisapproach in preclinical studies, we edited human CD34+ cells at the HBG1/2 promoter site and then infused these editedcells into immuno-compromised mice. Following such infusion, we collected bone marrow from the mice at eight- and 16-weeks post-infusion. Such studies demonstrated that the edited cells were able to repopulate all hematopoietic lineages,including red blood cell precursors, in the mice, resulting in increased production of fetal hemoglobin. In contrast, we foundthat cells edited at the BCL11A erythroid enhancer site were not able to repopulate the erythroid lineage in mice. If theseresults are seen in humans, then editing at such site may not be an effective approach to treat sickle cell disease or beta-thalassemia. For this reason, we believe our approach of editing the hemoglobin locus to increase fetal hemoglobin has thepotential to generate differentiated medicines to benefit patients with sickle cell disease and beta thalassemia.Early Discovery ProgramsDuchenne Muscular DystrophyDMD is a genetic disorder primarily affecting boys and is characterized by progressive muscle weakness andatrophy that presents in early childhood and rapidly results in loss of ambulation and respiratory muscle function.Additionally, DMD often causes cardiomyopathy in adolescence. Death occurs typically in early adulthood. The incidenceof DMD is approximately one in every 3,500 male births with a prevalence of approximately 15,000 cases in the UnitedStates. The FDA has approved only two therapies for the treatment of DMD. The disease is caused by mutations in the genethat encodes dystrophin, a structural protein that is important for normal muscle health. Loss of dystrophin function leads tomuscle degeneration. We believe that restoring dystrophin activity before the onset of severe loss of muscle function couldsignificantly and favorably alter disease progression.The dystrophin gene is one of the largest in the human genome spanning 2.2 million base pairs. Pathogenicmutations can occur throughout the gene. Many disease‑causing mutations in the dystrophin gene consist of deletions thatlead to non‑functional protein. Interestingly, large deletions in the middle of the dystrophin protein have been identified thatcause only mild to moderate disease. For example, deletions of selected exons have been shown to cause the much less severeBecker muscular dystrophy. Our genome editing approach is to introduce targeted deletions of mutation‑containingsegments of the gene in order to create smaller, yet functional versions of the dystrophin gene. Based on the known spectrumof DMD‑causing mutations, an NHEJ‑mediated small deletion of exon 51 would be expected to address approximately 13%of patients whereas an NHEJ‑mediated large deletion encompassing exons 45 through 55 would expand coverage to up to60% of patients. We continue to evaluate whether to pursue developing a treatment to potentially treat patients with DMD.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 epithelial15 Table of Contentscells will require efficient editing of these cells and development of advanced pulmonary delivery modalities. We continueto evaluate whether to pursue developing a treatment to potentially treat patients with CF.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 and we continue to evaluate whether to pursue developing atreatment using this approach to treat patients with A1AT.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. We and Juno Therapeutics amended and restated this agreement in May 2018. Under this agreement, Juno Therapeuticsand we will research and develop CAR and TCR engineered T cell products across four research programs over a five‑yearperiod, ending in May 2020. Juno Therapeutics has the option to extend the research period through May 2022, upon usagreeing to extend the term and the payment of one‑year extension fees in the mid‑single‑digit millions of dollars per 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 agreement, we granted to Juno Therapeutics an exclusive (even as to us), worldwide, milestone androyalty‑bearing, sublicensable license to certain of our owned and in‑licensed patent rights to research, develop, make, havemade, use, offer for sale, sell and import selected CAR and TCR engineered T cell products in the Exclusive Field. Inaddition, we granted to Juno Therapeutics a non‑exclusive, worldwide, milestone and royalty‑bearing, sublicensable licenseto certain of our owned and in‑licensed patent rights to use genome editing reagents that are used in the creation of a CAR orTCR engineered T cell product on which Juno Therapeutics has filed an IND for the treatment or prevention of a cancer inhumans for researching, developing, making, having made, using, offering for sale, selling, and importing that CAR or TCRengineered T cell product in all fields outside of the Exclusive Field, excluding the diagnosis, treatment, or prevention ofmedullary cystic kidney disease 1. We further granted to Juno Therapeutics a non‑exclusive, worldwide, non‑sublicensablelicense to certain of our owned and in‑licensed patent rights to, among other things, conduct the activities assigned to JunoTherapeutics under the mutually agreed research plan and to our genome editing reagents for further research anddevelopment of CAR and TCR engineered T cell products. We also granted Juno Therapeutics a non-exclusive, worldwide,non-sublicensable license to certain of our patent applications related to our proprietary genome editing detection methodfor Juno Therapeutics’ internal research purposes. Juno Therapeutics granted to us a non‑exclusive, worldwide, royalty‑free,and non‑sublicensable license to certain Juno Therapeutics patents solely for the purpose of our conducting the researchactivities assigned to us under the mutually agreed research plan.16 Table of ContentsDuring the research program term and subject to certain exceptions, we may not conduct or participate in, and maynot license, fund or otherwise enable a third party to conduct or participate in, research, development, manufacture, orcommercialization of CAR and TCR engineered T cells in the Exclusive Field. In addition, we may not enter into anycollaboration, license, or other relationship with a third party to use our genome editing technology with respect to CAR andTCR engineered T cells in any other field, excluding the diagnosis, treatment, or prevention of medullary cystic kidneydisease 1, unless we first provide written notice to Juno Therapeutics and provide Juno Therapeutics an opportunity todiscuss 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 agreement and except pursuant to the agreement, we may not conduct or participate in, andmay not license, fund, or otherwise enable a third party to conduct or participate in, research, development, manufacturing, orcommercialization activities involving the use of our genome editing technology, or any genome editing technology similarto ours, with respect to the gene targets selected by Juno Therapeutics during the research program term for further researchand development in the Exclusive Field. During the term of the agreement and except pursuant to the 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 with respect to a certain type of CAR or TCR engineered T cellproduct for use in the Exclusive Field, where such product targets a protein designated by Juno Therapeutics during theresearch program term as a target for Juno Therapeutics’ further research and development of that certain type of CAR or TCRengineered 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 four 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 agreement, we received an upfront payment of $25.0 million, an amendment fee of $5.0million and we have received four milestone payments totaling $10.0 million under the collaboration for technical progressin three research programs. In addition, we have the potential to receive up to $22.0 million in research support over a fiveyear term across the four programs under our collaboration, subject to adjustment in accordance with the terms of theagreement, of which we had recognized $17.7 million as of December 31, 2018. We are eligible to receive future research andregulatory milestones of approximately $160.0 million for each of the first products developed in each of the four researchprograms, of which we have achieved four milestone payments of $2.5 million each. We also are eligible to receive futurecommercial sales milestones of $75.0 million based on certain specified thresholds of aggregate, worldwide net sales of allengineered T cell products within each of the four research programs. Further, we are eligible to receive tiered royalties of lowdouble‑digit percentages of Juno Therapeutics’ net sales of products licensed under our agreement. Juno Therapeutics’obligation to pay royalties on a licensed product will expire on a product‑by‑product and country‑by‑country basis upon thelater of the tenth anniversary of the first commercial sale of17 Table of Contentssuch licensed product and the expiration of the last to expire valid claim within the licensed patents covering such licensedproduct. If Juno Therapeutics is required to pay royalties on net sales of a licensed product to a third party because thelicensed product is covered under the third party’s patent, then Juno Therapeutics can credit a certain percentage of itspayments to the third party against the royalties it owes us, subject to certain maximum deduction limits.We will own any inventions developed by our employees and agents during our collaboration with JunoTherapeutics. Juno Therapeutics and we will jointly own any inventions made jointly by employees or agents of JunoTherapeutics and us during our collaboration with Juno Therapeutics. We retain control, at our own cost, of the prosecutionand maintenance of our solely owned patents. Juno Therapeutics and we will be jointly responsible for the prosecution andmaintenance of any jointly owned patents. We hold the final decision making authority with respect to claims of jointlyowned patents relating to our genome editing technology and Juno Therapeutics holds the final decision making authoritywith respect to claims of jointly owned patents relating to CAR and TCR engineered T cell products.Unless terminated earlier, the term of the agreement will expire on a product‑by‑product and country‑by‑countrybasis until the date no further payments are due to us from Juno Therapeutics. Juno Therapeutics may terminate theagreement for convenience in its entirety upon six months’ written notice to us. Either Juno Therapeutics or we mayterminate the agreement if the other party is in material breach and fails to cure such breach within the specified cure period.Either Juno Therapeutics or we may terminate the agreement in the event of insolvency or bankruptcy of the other party.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.Allergan Strategic Alliance and Option Agreement and Co-Development and Commercialization 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 EDIT-101, for which Allergan has exercised itsoption. We will use commercially reasonably efforts to develop at least five Collaboration Development Programs anddeliver preclinical results and data meeting specified criteria with respect to each Collaboration Development Program (each,an “Option Package”) to Allergan. We will generally have responsibility for the conduct of each Collaboration DevelopmentProgram and sole responsibility for all development costs of each Collaboration Development Program prior to any exerciseby Allergan of its option to acquire an exclusive license to such Collaboration Development Program under the terms of theagreement. If at the end of the seven-year research term we have not delivered five Collaboration Development Programs thatsatisfy the Option Package criteria for each such program, the research term shall automatically extend by one-yearincrements until such obligation is satisfied, up to three additional years (the “Research Term”). In connection with enteringinto this agreement, Allergan paid us a one-time up-front payment of $90.0 million. Allergan has also paid us $15.0 millionin connection with Allergan exercising its option for the LCA10 program and $25.0 million in connection with theacceptance of the IND for 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 develop, commercialize, make,have made, use, offer for sale, sell, and import any gene editing therapy product that results from such CollaborationDevelopment Program during the term of the agreement (a “Licensed Product”) in any category of human diseases andconditions other than the diagnosis, treatment or prevention of any cancer in humans through the use of engineered T-cellsand subject to specified other limitations. Following the exercise of an Option,18 Table of ContentsAllergan will have the right to grant sublicenses subject to specified terms, under Allergan’s exclusive license to ourbackground intellectual property and our interest in the Collaboration Development Program intellectual property, todevelop, 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. 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.We have the right to elect to participate in a profit-sharing arrangement with Allergan in the United States for oneadditional Collaboration Development Program that Allergan exercises its option with respect to, on terms mutually agreedby us and Allergan and subject to a right of Allergan to reject such election under certain circumstances. If we make such anelection, we and Allergan would share equally in net profits and losses on specific terms to be agreed between us andAllergan, in lieu of Allergan paying royalties on net sales of any applicable Licensed Products in the United States and insuch event Allergan’s milestone payment obligations would be reduced, with our being eligible to receiveclinical, regulatory, and launch milestone payments up to a low nine-digit amount in the aggregate and further commercialmilestone payments up to a high-eight digit amount in the aggregate, subject to reduction under certain circumstances. If weelect to participate in a profit-sharing arrangement, we are obligated to reimburse Allergan for half of the development costsincurred by Allergan with respect to the applicable Collaboration Development Program and Allergan will retain control ofall development and commercialization activities for the applicable Licensed Products. Under the agreement, we andAllergan will establish an alliance steering committee (“ASC”) comprised of three members from each of us and Allergan,which will have review, oversight and decision-making responsibility for19 Table of Contentsselecting the targets and indications and certain Option Package criteria for the Collaboration Development Programs anddetermining whether the Option Package criteria for a Collaboration Development Program have been satisfied. With respectto a given Collaboration Development Program, all decisions of the ASC will be made by consensus, subject to specifiedfinal decision-making rights, with each of us and Allergan having one vote.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 (i) on a Collaboration Development Program-by-Collaboration Development Program basis upon written notice to us inthe event of a change of control of us or (ii) 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.In February 2019, we entered into the LCA10 Co-Development and Commercialization Agreement with AllerganSales, LLC (“Allergan Sales”). Under this agreement, we and Allergan Sales have agreed to share in the costs and certaindevelopment responsibilities for products arising under the program to treat LCA10 and the profits and losses resulting fromthe commercialization of any products arising under such program, in each case, in the United States.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 ‑related compositions ofmatter and their use for genome editing. These licenses impose various diligence and financial payment obligations on us.We expect to continue to enter into these types of license agreements in the future. We consider the following licenseagreements 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 products that target a particular gene and thatotherwise would fall within the scope of our exclusive license; and20 Table of Contentsproviding Harvard and Broad with certain rights to designate, and reserve all rights to, gene targets for which the designatinginstitution has an interest in researching and developing products that would otherwise be covered by rights licensed to us.The licenses granted to us under the Cas9‑I License Agreement include rights to certain patents solely owned by Harvard (the“Harvard Cas9‑I Patent Rights”), certain patents co‑owned by the Massachusetts Institute of Technology (“MIT”) and Broad,certain patents co-owned by MIT, The Rockefeller University (“Rockefeller”), and Broad, and certain patents co‑owned byMIT, Broad and Harvard. We refer to all the patents and patent applications licensed to us under the Cas9‑I LicenseAgreement as the 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 compositions of matter andtheir use for genome editing and to certain CRISPR/Cas9 related delivery technologies. Pursuant to the Cas9‑I LicenseAgreement, and as of December 31, 2018, we have certain rights under 43 U.S. patents, 61 pending U.S. patent applications,14 European patents and related validations, 39 pending European patent applications, and other related patent applicationsin 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 technologies covered by theHarvard/Broad Cas9‑I Patent Rights. Harvard and Broad have the right to terminate our license with respect to theHarvard/Broad Cas9‑I Patent Rights covering the technology or technologies with respect to which we fail to achieve thesedevelopment 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,21 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 has been conformed tothe process 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. This22 Table of Contentsannual license maintenance fee is creditable against royalties owed on licensed products and services in the same year as themaintenance fee is paid. We are obligated to reimburse Broad and Harvard for expenses associated with the prosecution andmaintenance of the Harvard/Broad Cas9‑I Patent Rights, including expenses associated with any interference proceedings inthe USPTO, any opposition proceedings in the EPO, or any other inter partes or other post grant proceedings in these or otherjurisdictions where we are seeking patent protection. Therefore, we are obligated to reimburse Broad and/or Harvard forexpenses associated with the interference and opposition proceedings involving patents licensed to us under this agreement(described in more detail under “Risk Factors—Risks Related to Our Intellectual Property—Some of Our In-Licensed Patentsare Subject to Priority and Validity Disputes” in Part I, Item 1A 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, had the right to receive a low to mid double‑digit percentage of the sublicense income, which percentagedecreased to a low double-digit percentage in 2018 and may still decrease to a low of a high single‑digit percentage forlicensed products for the prevention or treatment of human disease under sublicenses executed after we meet a certainclinical milestone.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. We are responsible for the cost of the interference proceeding and appeal with respect to these patents and thispatent application. Broad and Harvard are required to maintain any application or patent within the Harvard/Broad PatentsRights so long as we meet our obligation to reimburse Broad and Harvard for expenses related to prosecution and there is agood faith basis for doing so. If we cease payment for the prosecution of any Harvard/Broad Patent Right, then any licensegranted to us with respect to such Harvard/Broad Patent Right will terminate.23 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, 2018, we have certain rights under one U.S. patent,nine pending U.S. patent applications, one European patent and related validations, seven pending European patentapplications, and other related patent applications in jurisdictions outside of the United 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 License24 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, which we settled in full in 2017. Broad and Wageningen are collectively entitled to receive clinicaland regulatory milestone payments totaling up to $20.0 million in the aggregate per licensed product approved in the UnitedStates, the European 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. If we undergo a change of control during the term of the Cpf1License Agreement, certain of these clinical and regulatory milestone payments will be increased by a certain percentage inthe mid double‑digits. We are also obligated to make additional payments to Broad and Wageningen, collectively, of up toan aggregate of $54.0 million upon the occurrence of certain sales milestones per25 Table of Contentslicensed product for the prevention or treatment of a human disease that afflicts at least a specified number of patients in theaggregate in the United States. Broad and Wageningen are collectively entitled to receive clinical and regulatory milestonepayments totaling up to $6.0 million in the aggregate per licensed product approved in the United States, the EuropeanUnion and Japan for the prevention or treatment of an ultra‑orphan disease. We are also obligated to make additionalpayments to Broad and Wageningen, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain salesmilestones per licensed product for the prevention or treatment of an ultra‑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”). Market CapSuccess Payments are payable by us in cash or in the form of promissory notes (the “Promissory Notes”).The PromissoryNotes bear interest at 4.8% per annum. Principal and interest on the Promissory Notes are payable on, subject to certainexceptions, 150 days following issuance (or if earlier, a specified period of time following a sale of our company). We couldelect to make any payment of amounts outstanding under the Promissory Notes either in the form of cash or, subject tocertain conditions, in shares of our common stock of equal value, with such shares being valued for such purpose at theclosing price of our common stock as reported the Nasdaq Stock Market for the trading day immediately preceding the dateof such payment if our common stock was then listed on the Nasdaq Stock Market. In the event of a change of control of ourcompany or a sale of our company, we are required to pay all remaining principal and accrued interest on the PromissoryNotes in cash within a specified period following such event. Following a change in control of our company, Market CapSuccess Payments are required to be made in cash. Company Sale Success Payments are payable solely in cash. In 2017, twoMarket Cap Success Payments of $5.0 million each became due and payable and we issued Promissory Notes in suchamounts, which we fully settled by issuing shares of our common stock in 2017 and 2018. The remaining Success Paymentsthat may be paid to Broad and Wageningen range from a low-eight digit dollar amount to a mid-eight digit dollar amount,and collectively will not exceed, in aggregate, $115.0 million, which maximum would be payable only if we achieve amarket capitalization threshold of $10.0 billion and have at least one product candidate covered by a claim of a patent rightlicensed to us under either the Cpf1 License Agreement or the Cas9‑I License Agreement that is or was the subject of aclinical trial pursuant to development efforts by us or any of our affiliates or sublicensees.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 in26 Table of Contentscertain countries. We are also obligated to reimburse Broad and Wageningen for all unreimbursed expenses incurred by themin connection with the prosecution and maintenance of the Cpf1 Patent Rights prior to the date of the Cpf1 LicenseAgreement, and to reimburse Broad for expenses associated with the prosecution and maintenance of the Cpf1 Patent Rightsfollowing the 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;·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, and27 Table of Contentsthe royalty rate on net sales of other licensed products and licensed services covered by the Cas9‑II PatentRights subject 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, 2018, we have certain rights under 13 pendingU.S. patent applications, one European patent and related validations, 12 pending European patent applications, and otherrelated patent applications in jurisdictions outside 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, which was settled in January 2018. In January 2018, we issued 75,303shares of our common stock to Broad as payment of all outstanding principal and interest under the December Cas9-IISuccess Payment Note.Broad Sponsored Research AgreementIn June 2018, we entered into a sponsored research agreement (the “Sponsored Research Agreement”) with Broadproviding for Broad to conduct research useful or relevant to genome editing in the field of genomic medicines for theprevention or treatment of human disease with funding from us. Under the Sponsored Research Agreement, Broad granted usan exclusive right of first negotiation for licenses from Broad with respect to patentable inventions developed by Broad inthe course of the sponsored research, subject to certain limitations and retained rights (“Sponsored Invention Licenses”).Under the Sponsored Research Agreement, we are obligated to make payments of research funding to Broad in theevent our market capitalization reaches specified thresholds ranging from a mid nine digit dollar amount to a low elevendigit dollar amount (“Market Cap Research Funding”) or a sale of our company for consideration ranging from a mid ninedigit dollar amount to a low eleven digit dollar amount (“Company Sale Research Funding” and, collectively with theMarket Cap Research Funding, the “Research Funding”). In connection with entering into the Sponsored ResearchAgreement, we stipulated that the first two research payments of $5 million and $7.5 million were due and payable to Broad(the “Initial Research Payments”). Other than the Initial Research Payments, we are not required to make additional ResearchFunding payments if we, whether directly or through our affiliates or sublicensees, are not researching, developing, orcommercializing products based on or incorporating inventions exclusively licensed to us28 Table of Contentsfrom Broad under the Sponsored Invention Licenses or based on or incorporating CRISPR technology owned, co-owned, orcontrolled by Broad and otherwise licensed to us, subject to certain exclusions (an “Applicable Product” and such exemptionfrom payment, the “Funding Exemption”). In the event that we, whether directly or through our affiliates or sublicensees,later resume research, development, or commercialization of an Applicable Product within a specified period of time, anyResearch Funding that was not paid to Broad as a result of the Funding Exemption shall become payable. Under theSponsored Research Agreement, we are obligated to pay up to a maximum of $125 million to Broad in Research Funding,inclusive of the Initial Research Payments, and in no event shall the aggregate amount of all Research Funding exceed suchamount.Company Sale Research Funding is payable solely in cash. Unless we have undergone a change in control, MarketCap Research Funding is payable by us in cash or in the form of promissory notes bearing interest at a rate of 4.8% per year.Principal and interest on such notes will be payable over a term running through the 150 days following issuance, providedthat full payment of any such notes is due within a specified period of time following a sale or change of control event withrespect to our company. Under the terms of the notes, the entire unpaid principal and interest of the notes shall becomeimmediately due and payable upon a payment default or bankruptcy- and insolvency-related defaults. At our option, thenotes are payable in cash or convertible into our common stock of subject to certain conditions. Following a change incontrol of our company, Market Cap Research Funding is required to be made in cash. In connection with the InitialResearch Payment, we issued promissory notes to Broad in the aggregate principal amount of $12.5 million (the “InitialNotes”), of which $5.0 million is due and payable in November 2018 and $7.5 million is due in April 2019. Interest does notcommence accruing on $7.5 million of the principal until November 2018. In June 2018, we settled the outstanding principaland accrued interest on these notes by issuing shares of our common stock to Broad.The Sponsored Research Agreement is terminable by each party upon the occurrence of specified bankruptcy eventsof the other party and otherwise will continue in effect until the later of the expenditure of all Research Funding by Broadand such time as we have no further rights of first negotiation for Sponsored Invention Licenses, unless otherwise mutuallyagreed between the parties.Intellectual 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.29 Table of ContentsNotwithstanding 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.”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, 2018, we owned four U.S. patents, 34 pending U.S. non‑provisional patent applications, twoEuropean patents and related validations, 29 pending European patent applications, nine pending U.S. provisional patentapplications, 19 pending PCT patent applications, and other related patent applications in jurisdictions outside the UnitedStates and Europe that are related to our CRISPR technology and which include claims directed to our genome editingplatform, including our directed editing component, as well as composition of matter and method of use claims for ourtherapeutic programs, including LCA10 and other genetic and infectious eye disorders, and engineered T cells. One of theseU.S. patents, one of these European patents and their U.S., European and foreign counterpart applications are co‑owned withBroad and Iowa and we have obtained an exclusive license to such co‑ownership rights from these third parties in the field ofprevention or treatment of human disease using gene therapy or genome editing. In addition, four of these pending PCTpatent applications, one of these pending U.S. non-provisional patent applications and one of these pending U.S. provisionalpatent applications are co‑owned with certain of our collaborators because they encompass inventions developed under ourcollaborations. Our current issued U.S. patents, if the appropriate maintenance fees are paid, are expected to expire between2034 and 2037, excluding any additional term for patent term adjustments or patent term extensions. If issued as U.S. patents,and if the appropriate maintenance fees are paid, the U.S. patent applications would be expected to expire between 2034 and2039, excluding any additional term for patent term adjustments or patent term extensions.As of December 31, 2018, we in‑licensed 50 U.S. patents, 16 European patents and related validations, and over 550pending patent applications, including approximately 92 pending U.S. non‑provisional patent applications, 64 pendingEuropean patent applications, and other related patents and patent applications in jurisdictions outside the United States andEurope that are related to our CRISPR technology collectively from various universities and institutions. The patents andpatent applications outside of the United States and Europe are held primarily in Canada, Japan, and Australia, althoughsome of our in‑licensed patent families were filed in a larger number of countries. The claims from our in‑licensed portfolioinclude claims to compositions of matter, methods of use, and certain processes. These include claims directed to CRISPRsystems that employ Cas9 including Cas9 nickases, S. aureus Cas9, high‑fidelity Cas9 nucleases, Cas9 PAM variants andself‑inactivating forms of Cas9, CRISPR systems that employ Cpf1 including Cpf1 nickases and other variants and self-inactivating forms of Cpf1, and also CRISPR systems that employ viral vectors for delivery, single guide RNAs, or modifiedguide RNAs. Our current in‑licensed U.S. patents, if the appropriate maintenance fees are paid, are expected to expirebetween 2033 and 2036, excluding any additional term for patent term adjustments or patent term extensions. If issued asU.S. patents, and if the appropriate maintenance fees are paid, the U.S. patent applications would be expected to expirebetween 2033 and 2036, excluding any additional term for patent term adjustments or patent term extensions.30 Table of ContentsOur 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 to us with respect to its interests and toTokyo’s interests in these U.S. patent applications but not to any foreign equivalents thereof. Broad does not and does notpurport to grant any rights in NIH’s interest in these U.S. patent applications under our agreement. As a result, we may nothave exclusive rights under any U.S. patents that issue from these U.S. patent applications and we may not have any rightsunder any foreign patents that issue from any foreign equivalents thereof. For more information regarding these licenseagreements, please see the section of this Annual Report on Form 10-K titled “Business —Intellectual Property Licenses.”LCA10As of December 31, 2018, we owned one U.S. patent, three pending U.S. non‑provisional patent applications, onepending European patent application, one pending Canadian patent application, one pending U.S. provisional patentapplication, and one pending PCT patent application which are directed to compositions of matter, including guide RNAsdirected to CEP290, and methods of use for the treatment of LCA10. Our current issued U.S. patent, if the appropriatemaintenance fees are paid, is expected to expire in 2035, excluding any additional term for patent term extensions. 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 2039, excluding any additional term for patent term adjustments or patent term extensions.TrademarksAs of December 31, 2018, 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, China, the European Union, Japan and Switzerland for the Infinity Logoand a registration in the European Union for UDITAS.CompetitionThe biotechnology and pharmaceutical industries, including in the gene therapy, genome editing and cell therapyfields, are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on intellectualproperty and proprietary products. While we believe that our technology, development experience, and scientific knowledgeprovide us with competitive advantages, we face potential competition from many different sources, including majorpharmaceutical, specialty pharmaceutical, biotechnology companies, governmental agencies, and public and privateresearch institutions. Any product candidates that we successfully develop and commercialize may compete with existingtherapies and new therapies 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 technologyor therapies using CRISPR technology include Arbor Biotechnologies, Caribou Biosciences, Casebia Therapeutics, CRISPRTherapeutics, ERS Genomics, Exonics Therapeutics, Intellia Therapeutics, Locus Biosciences, ToolGen Inc. and TRACRHematology. In addition, there have been and may continue to be discoveries of new CRISPR‑based gene editingtechnologies. There are additional companies developing therapies using other genome editing technologies, including baseediting, transcription activator-like effector nucleases, meganucleases, Mega‑TALs and zinc finger nucleases. The companiesdeveloping these other genome editing technologies include Beam Therapeutics Inc., bluebird bio, Cellectis, PoseidaTherapeutics, Precision Biosciences and Sangamo Therapeutics. Additional companies developing gene therapy productsinclude Abeona Therapeutics, Adverum Biotechnologies, AGTC Therapeutics, Audentes Therapeutics, HomologyMedicines, Nightstar Therapeutics, REGENXBIO, Sarepta Therapeutics, Solid Biosciences, Spark Therapeutics, uniQure andVoyager Therapeutics. In addition to competition from other genome editing therapies, gene therapies or cell medicinetherapies, any products that we may develop may31 Table of Contentsalso face competition from other types of therapies, such as small molecule, antibody, protein, oligonucleotide, orribonucleic acid therapies. For example, ProQR Therapeutics N.V. is conducting a Phase I/II clinical trial for its experimentaltreatment using antisense oligonucleotide technology for LCA10.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.ManufacturingWe currently contract with third parties for the manufacturing of our materials for preclinical studies and ourplanned clinical trials. We have limited manufacturing operations and do not own or operate any substantial manufacturingfacilities for the production of our program materials. We currently have no plans to build our own clinical or commercialscale manufacturing capabilities. The use of contracted manufacturing and reliance on collaboration partners is relativelycost‑efficient and has eliminated the need for our direct investment in manufacturing facilities and additional staff early indevelopment. Although we rely on contract manufacturers, we have personnel with manufacturing experience to oversee ourcontract manufacturers. We expect third‑party manufacturers to be capable of providing sufficient quantities of our programmaterials to meet anticipated needs for preclinical studies and clinical trials. To meet our projected needs for commercialmanufacturing, third parties with whom we currently work might need to increase their scale of production or we will need tosecure alternate suppliers. We believe that there are alternate sources of supply that can satisfy our preclinical, clinical, andcommercial requirements, although we cannot be certain that identifying and establishing relationships with such sources, ifnecessary, would not result in significant 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. Additionally, under the LCA10 Co-Development and Commercialization Agreement, Allergan will be responsiblefor all commercialization efforts with respect to EDIT-101.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 and32 Table of Contentsmanagement resources, some of which will be committed prior to any confirmation that any product candidate we maydevelop 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 Regulation Government authorities in the United States, at the federal, state and local level, and in other countries andjurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing,manufacture, pricing, reimbursement, sales, quality control, approval, packaging, storage, recordkeeping, labeling,advertising, promotion, distribution, marketing, post‑approval monitoring and reporting, and import and export ofpharmaceutical products, including biological products. The processes for obtaining marketing approvals in the UnitedStates and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulationsand other regulatory authorities, 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 process, maysubject an applicant to delays in the conduct of the study, regulatory review and approval, and/or administrative or judicialsanctions. These sanctions may include, but are not limited to, the FDA’s refusal to allow an applicant to proceed withclinical 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 of production or distribution,injunctions, fines, and civil or criminal investigations and penalties brought by the FDA or the Department 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”);33 Table of Contents·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.An 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. Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings,or developments in clinical, nonclinical, and/or chemistry, manufacturing, and controls. This order issued by the FDA woulddelay either a proposed clinical study or cause suspension of an ongoing study, until all outstanding concerns have beenadequately addressed and the FDA has notified the company that investigations may proceed. This could cause significantdelays 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.34 Table of ContentsExpanded Access to an Investigational Drug for Treatment UseExpanded access, sometimes called “compassionate use,” is the use of investigational products outside of clinicaltrials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable orsatisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improveaccess to investigational products for patients who may benefit from investigational therapies. FDA regulations allow accessto investigational products under an IND by the company or the treating physician for treatment purposes on a case-by-casebasis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergencysettings); intermediate-size patient populations; and larger populations for use of the investigational product under atreatment protocol or treatment IND application.When considering an IND application for expanded access to an investigational product with the purpose of treatinga patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of thefollowing criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is nocomparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patientbenefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition tobe treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct,or completion of clinical investigations that could support marketing approval of the product or otherwise compromise thepotential development of the product.On December 13, 2016, the 21st Century Cures Act established (and the 2017 Food and Drug AdministrationReauthorization Act later amended) a requirement that sponsors of one or more investigational products for the treatment of aserious disease(s) or condition(s) make publicly available their policy for evaluating and responding to requests forexpanded access for individual patients. Although these requirements were rolled out over time, they have now come intofull effect. This provision requires drug and biologic companies to make publicly available their policies for expandedaccess for individual patient access to products intended for serious diseases. Sponsors are required to make such policiespublicly available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the investigational drug orbiologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy. In addition, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides afederal framework for certain patients to access certain investigational products that have completed a Phase I clinical trialand that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatmentwithout enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There isno obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right toTry Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.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’s35 Table of Contentsregulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical trials, as well asthe quality and integrity of the resulting data. They further help ensure that non-IND foreign trials are conducted in a mannercomparable to that required for 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 Committee inaccordance 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.Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are adequateto assess the safety and effectiveness of the product for the claimed indications in all relevant 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 an36 Table of Contentsoutline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, anydeferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internalreview committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDAor the applicant may 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.Information about clinical trials must be submitted within specific timeframes to the NIH for public disseminationon its ClinicalTrials.gov website. Similar requirements for posting clinical trial information are present in the EuropeanUnion (EudraCT) website: https://eudract.ema.europa.eu/ and other countries, as well.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, including draft guidance documents released in July 2018relating to gene therapies for human retinal disorders and gene therapies for rare diseases. Although the FDA has indicatedthat these guidance documents are not legally binding, we believe that our compliance with them is likely necessary to gainapproval for any product candidate we may develop. The guidance documents provide additional factors that the FDA willconsider at each of the above stages of development and relate to, among other things, the proper preclinical assessment ofgene therapies; the chemistry, manufacturing, and control information that should be included in an IND application; theproper design 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 Office37 Table of Contentsof Biotechnology 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.Review 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 2019 is $2,588,478 for an application requiring clinical data. Thesponsor of an approved BLA is also subject to an annual program fee, which for fiscal year 2019 is $309,915. 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.38 Table of ContentsThe 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 circumstances, special monitoring, and the use ofpatent registries. The FDA may prevent or limit further marketing of a product based on the results of post‑market studies orsurveillance programs. After approval, many types of changes to the approved product, such as adding new indications,manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review andapproval.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 to39 Table of Contentsas fast track designation, breakthrough therapy designation, priority review designation and regenerative advanced therapydesignation.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.Accelerated 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.40 Table of ContentsFor 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, theFDA will conduct laboratory research related to the safety, purity, potency, and effectiveness of pharmaceutical products.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements andstandards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknownproblems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes,or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safetyinformation; imposition of post‑market studies or clinical trials to assess new safety risks; or41 Table of Contentsimposition of distribution or other restrictions under a REMS program. Other potential consequences include, among otherthings:·restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from themarket or product recalls;·fines, warning letters or holds on post‑approval clinical trials;·refusal of the FDA to approve pending applications or supplements to approved applications, or suspension orrevocation of product license approvals;·product seizure or detention, or refusal to permit the import or export of products; or·injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of theapproved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑labeluses, and a company that is found to have improperly promoted off‑label uses may be subject to significant liability.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 States and forwhich there is no reasonable expectation that the cost of developing and making available the biologic for the disease orcondition will be recovered from sales of the product in the United States.Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following thedate of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can bemade any time prior to the filing of an application for approval to market the product. A product becomes an orphan when itreceives orphan drug designation from the Office of Orphan Products Development at the FDA based on42 Table of Contentsacceptable confidential requests made under the regulatory provisions. The product must then go through the review andapproval process like any other product.A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for analready marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approvedorphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or conditionif it can present a plausible hypothesis that its product may be clinically superior to the first drug. More than one sponsormay receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seekingorphan drug designation must file a complete request for designation.The period of exclusivity begins on the date that the marketing application is approved by the FDA and appliesonly to the indication for which the product has been designated. The FDA may approve a second application for the sameproduct for a different use or a second application for a clinically superior version of the product for the same use. The FDAcannot, however, approve the same product made by another manufacturer for the same indication during the marketexclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities.Pediatric ExclusivityPediatric exclusivity is another type of non‑patent marketing exclusivity in the United States and, if granted,provides for the attachment of an additional six months of marketing protection to the term of any existing regulatoryexclusivity, including the non‑patent and orphan exclusivity. This six‑month exclusivity may be granted if a BLA sponsorsubmits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show theproduct to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’srequest, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by theFDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover theproduct are extended by six months. This is not a patent term extension, but it effectively extends the regulatory periodduring which the FDA cannot approve another application.Biosimilars and 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, 2019, the FDA has approved17 biosimilar products for use in the United States. No interchangeable biosimilars, however, have been approved. The FDAhas issued several guidance documents outlining an approach to review and approval of biosimilars. Additional guidancesare expected to be finalized by the FDA in the near term.Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilarto” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA toapprove a biosimilar product, it must find that there are no clinically meaningful differences between the reference productand proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar product asinterchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce thesame clinical results as the reference product, and (for products administered multiple times) that the biologic and thereference biologic may be switched after one has been previously administered without increasing safety risks or risks ofdiminished efficacy relative to exclusive use of the reference biologic.Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four yearsfollowing the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years fromthe date on which the reference product was approved. Even if a product is considered to be a reference product eligible forexclusivity, another company could market a competing version of that product if the FDA approves a full BLA for suchproduct containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials todemonstrate the safety, purity, and potency of their product. The BPCIA also created certain exclusivity periods forbiosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed43 Table of Contents“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. Under 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 2019, the standard fee for review of a PMA is$322,147 and the small business fee is $80,537.A clinical trial is typically required for a PMA application and, in a small percentage of cases, the FDA may require aclinical study in support of a 510(k) submission. A manufacturer that wishes to conduct a clinical study involving the deviceis subject to the FDA’s IDE regulation. The IDE regulation distinguishes between significant and non-significant risk devicestudies and the procedures for obtaining approval to begin the study differ accordingly. Also, some types of studies areexempt from the IDE regulations. A significant risk device presents a potential for serious risk to the health, safety, or welfareof a subject. Significant risk devices are devices that are substantially important in diagnosing, curing, mitigating, or treatingdisease or in preventing impairment to human health. Studies of devices that pose a significant risk require both FDA and anIRB approval prior to initiation of a clinical study. Non-significant risk devices are devices that do not pose a significant riskto the human subjects. A non-significant risk device study requires only IRB approval prior to initiation of a clinical study.44 Table of ContentsAfter 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.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 well‑controlled clinicaltrials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to therelevant competent authorities of a marketing authorization application (“MAA”) and granting of a marketing authorizationby 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 is expectedto become applicable later in 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”) or45 Table of ContentsCommittee for Advanced Therapies are appointed early in the PRIME scheme facilitating increased understanding of theproduct at the EMA’s Committee level. A kick-off meeting initiates these relationships and includes a team ofmultidisciplinary experts at the EMA 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 for the treatment ofcertain diseases, including products for the treatment of cancer. For products with a new active substance indicated for thetreatment of other diseases and products that are highly innovative or for which a centralized process is in the interest ofpatients, the centralized procedure may be optional.Specifically, the grant of marketing authorization in the European Union for products containing viable humantissues or cells such as gene therapy medicinal products is governed by Regulation 1394/2007/EC on advanced therapymedicinal products, read in combination with Directive 2001/83/EC of the European Parliament and of the Council,commonly known as the Community code on medicinal products. Regulation 1394/2007/EC lays down specific rulesconcerning the authorization, supervision, and pharmacovigilance of gene therapy medicinal products, somatic cell therapymedicinal products, and tissue engineered products. Manufacturers of advanced therapy medicinal products mustdemonstrate the quality, safety, and efficacy of their products to EMA which provides an opinion regarding the applicationfor marketing authorization. The European Commission grants or refuses marketing authorization in light of the opiniondelivered by EMA.Under the centralized procedure, the 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.46 Table of ContentsEven if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of dataexclusivity, another company may market another version of the product if such company obtained marketing authorizationbased on an MAA with a complete independent data package of 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.Regulatory 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.47 Table of ContentsBrexit 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.The United Kingdom has a period of a maximum of two years from the date of its formal notification to negotiate theterms of its withdrawal from, and future relationship with, the European Union. If no formal withdrawal agreement is reachedbetween the United Kingdom and the European Union, then it is expected the United Kingdom's membership of theEuropean Union will automatically terminate two years after the submission of the notification of the United Kingdom'sintention to withdraw from the European Union. Discussions between the United Kingdom and the European Union focusedon finalizing withdrawal issues and transition agreements are ongoing. However, limited progress to date in thesenegotiations and ongoing uncertainty within the UK Government and Parliament sustains the possibility of the UnitedKingdom leaving the European Union on March 29, 2019 without a withdrawal agreement and associated transition periodin place, which is likely to cause significant market and economic disruption.General Data Protection RegulationThe collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU,including personal health data, is subject to the EU General Data Protection Regulation (“GDPR”), which became effectiveon May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that processpersonal data, including requirements relating to processing health and other sensitive data, obtaining consent of theindividuals to whom the personal data relates, providing information to individuals regarding data processing activities,implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches,and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer ofpersonal data to countries outside the EU, including the U.S., and permits data protection authorities to impose largepenalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues,whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodgecomplaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting fromviolations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase the costof doing business or require companies to change their business practices to ensure full compliance.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 significantportion of the cost of such product candidates. Even if any product candidates we may develop are approved, sales of suchproduct candidates will depend, in part, on the extent to which third‑party payors, including government health programs inthe United States such as Medicare and Medicaid, commercial health insurers, and managed care organizations, providecoverage, and establish adequate reimbursement levels for, such product candidates. The process for determining whether apayor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that thepayor will pay for the product once coverage is approved. Third‑party payors are increasingly challenging the prices charged,examining the medical necessity, and reviewing the cost‑effectiveness of48 Table of Contentsmedical products and services and imposing controls to manage costs. Third‑party payors may limit coverage to specificproducts on an approved list, also known as a formulary, which might not include all of the approved products for aparticular 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 has been obtained. Reference pricing used by various European Unionmember states, and parallel trade (arbitrage between low‑priced and high‑priced member states), can further reduce prices.There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical productswill allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries.49 Table of ContentsHealthcare 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 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 forhealth care benefits, items or services;·the Foreign Corrupt Practices Act, which prohibits companies and their intermediaries from making, or offeringor promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining businessor otherwise seeking favorable treatment;·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 to50 Table of Contentsrequiring pharmaceutical manufacturers to report information related to payments to physicians and other health careproviders or marketing expenditures. State and foreign laws also govern the privacy and security of health information insome circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thuscomplicating compliance efforts.Healthcare 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 prescription51 Table of Contentsproduct spending. Funding has been allocated to support the mission of the Center for Medicare and MedicaidInnovation from 2011 to 2019.Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. Forexample, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions byCongress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least$1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’sautomatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providersof up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additionalCongressional action is taken. The American Taxpayer Relief Act of 2012, which was enacted in January 2013, among otherthings, further reduced Medicare payments to several providers, including hospitals, imaging centers, and cancer treatmentcenters, and increased the statute of limitations period for the government to recover overpayments to providers from three tofive years.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.Further, the Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January 1, 2019, to increase from50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate inMedicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. TheCongress will likely consider other legislation to replace elements of the ACA during the next Congressional session. TheCongress 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 theACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation ofcertain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grantexemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burdenon states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Thesecond Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. Several state AttorneysGeneral filed suit to stop the administration from terminating the subsidies, but their request for a restraining order wasdenied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that wouldgive states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which mayhave the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.Further, on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required topay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects ofthis gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially ourbusiness, are not yet known.Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enactedstate legislation designed to, among other things, bring more transparency to drug pricing, review the relationship betweenpricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government programreimbursement methodologies for drug products. For example, there have been several recent U.S. congressional inquiriesand proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency todrug pricing, 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 seek52 Table of Contentsnew legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administrationissued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that the Department of Healthand Human Services will take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protectmonopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharinginformation between insurers and drug makers; avoid excessive pricing by relying more on value-based pricing byexpanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation powerwith drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, andimproving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increasetransparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when theycould pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annualstatement of plan payments, out-of-pocket spending, and drug price increases.At the state level, individual states are increasingly aggressive in passing legislation and implementing regulationsdesigned to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authoritiesand individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and whichsuppliers will be included in their prescription drug and other health care programs. These measures could reduce theultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state andfederal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and stategovernments will pay for healthcare products and services, which could result in reduced demand for our product candidatesor additional pricing pressures.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.Additional 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, 2018, 2017 and 2016.EmployeesAs of February 1, 2019, we had 133 full‑time employees, including 41 employees with M.D. or Ph.D. degrees. Ofthese full‑time employees, 81 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.53 Table of ContentsOur 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 InformationWe 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 review our electronically filed reportsand other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. We also make available, free ofcharge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant toSection 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by thosepersons. In addition, we regularly use our website to post information regarding our business, product development programsand governance, and we encourage investors to use our website, particularly the information in 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. Item 1A. Risk FactorsOur 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 (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 $110.0 million, $120.3 million,$97.2 million, and $72.9 million for the years ended December 31, 2018, 2017, 2016 and 2015, respectively. As of December31, 2018, we had an accumulated deficit of $416.3 million. We have financed our operations primarily through publicofferings of our common stock, private placements of our preferred stock, our collaboration with Juno Therapeutics, Inc., aCelgene company that is a wholly-owned subsidiary of Celgene Corporation (“Juno Therapeutics”), and payments under ourstrategic alliance with Allergan Pharmaceuticals International Limited (“Allergan”). We have devoted substantially all of ourefforts to research and development. We expect to continue to incur significant expenses and increasing operating losses forthe foreseeable 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;54 Table of Contents·initiate preclinical testing and clinical trials for any product candidates we identify and develop;·prepare for and initiate clinical development of EDIT-101 to treat Leber congenital amaurosis (“LCA”) 10(“LCA10”);·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 only recently begun preparing for the initiation of clinical development of EDIT-101 and expect that itwill be many years, if ever, before we have a product candidate ready for commercialization. To become and remainprofitable, we must develop and eventually commercialize a medicine or medicines with significant market potential. Thiswill require us to be successful in a range of challenging activities, including identifying product candidates, completingpreclinical testing and clinical trials of product candidates, obtaining marketing approval for these product candidates,manufacturing, marketing, and selling those medicines for which we may obtain marketing approval, and satisfying anypost‑marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenues thatare significant or large enough to achieve profitability. Other than EDIT-101, we are currently only in the preclinical testingstages for our most advanced research programs. If we do achieve profitability, we may not be able to sustain or increaseprofitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of ourcompany and could impair our ability to raise capital, maintain our research and development efforts, expand our business, orcontinue our operations. A decline in the value of our company could cause our stockholders to lose all or part of theirinvestments 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. Accordingly, we will need to obtainsubstantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed oron attractive terms, we would be forced to delay, reduce, or eliminate our research and product development programs orfuture commercialization efforts.55 Table of ContentsWe expect that our existing cash, cash equivalents, and marketable securities at December 31, 2018 and anticipatedinterest income will enable us to fund our operating expenses and capital expenditure requirements for at least the next 24months following the date of this Annual Report on Form 10-K. 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 for and initiating the clinical development of EDIT-101 to treat LCA10;·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 additional 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 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, which is limited in scope and duration. To the extent that we raiseadditional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders maybe materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect therights of our stockholders. Debt financing, if available, may involve agreements that include56 Table of Contentscovenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capitalexpenditures, 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, undertaking preclinical studies and preparing toundertake clinical trials. Except for EDIT-101 to treat LCA10, all of our research programs are still in the preclinical orresearch stage of development, and their risk of failure of all of our research programs is high. We have not yet demonstratedan ability to successfully initiate or complete any clinical trials, including large‑scale, pivotal clinical trials, obtainmarketing approvals, manufacture a commercial‑scale medicine, or arrange for a third party to do so on our behalf, or conductsales and marketing activities necessary for successful commercialization. Typically, it takes about 10 to 15 years to developa new medicine from the time it is discovered to when it is available for treating patients. Consequently, any predictionsabout our future success or viability may not be as accurate as they could be if we had a longer operating history.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.We have never generated revenue from product sales and may never be profitable.Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or withcollaboration 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;·qualify for adequate coverage and reimbursement by government and third‑party payors for any our productcandidates for which we obtain regulatory and marketing approval;57 Table of Contents·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.Risks 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. Because we have not initiated a clinical trial for any program and most of ourprograms are all in the research or preclinical stage, we have not yet been able to assess safety in humans, and there may belong‑term effects from treatment with any of our future product candidates that we cannot predict at this time. Any productcandidates we may develop will act at the level of DNA, and, because animal DNA differs from human DNA, it will bedifficult for us to test our future product candidates in animal models for either safety or efficacy. Also, animal models do notexist for some of the diseases we expect to pursue in our programs. As a result of these factors, it is more difficult for us topredict the time and cost of product candidate development, and we cannot predict whether the application of our genomeediting platform, or any similar or competitive genome editing platforms, will result in the identification, development, andregulatory approval of any medicines. There can be no assurance that any development problems we experience in the futurerelated to our genome editing platform or any of our research programs will not cause significant delays or unanticipatedcosts, or that such development problems can be solved. We may also experience delays in developing a sustainable,reproducible, and scalable manufacturing process or transferring58 Table of Contentsthat process to commercial partners. Any of these factors may prevent us from completing our preclinical studies or anyclinical trials that we 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. Although the FDA decides whetherindividual gene therapy protocols may proceed, the review process and determinations of other reviewing bodies can impedeor delay the initiation of a clinical trial, even if the FDA has reviewed the trial and approved its initiation. The same appliesin the European Union. The EMA’s Committee for Advanced Therapies (“CAT”) is responsible for assessing the quality,safety, and efficacy of advanced‑therapy medicinal products. The role of the CAT is to prepare a draft opinion on anapplication for marketing authorization for a gene therapy medicinal candidate that is submitted to the EMA. In theEuropean Union, the development and evaluation of a gene therapy medicinal product must be considered in the context ofthe relevant European Union guidelines. The EMA may issue new guidelines concerning the development and marketingauthorization for gene therapy medicinal products and require that we comply with these new guidelines. As a result, theprocedures and standards applied to gene therapy products and cell therapy products may be applied to any CRISPR productcandidates we may develop, but that remains uncertain at this point.Adverse developments in clinical trials conducted by others of gene therapy products, cell therapy products, orproducts developed through the application of a CRISPR 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.59 Table of ContentsAdverse 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 understanding and acceptance of the use of genome editing therapy for theprevention or treatment of human diseases. Public attitudes may be influenced by claims that genome editing is unsafe,unethical, or immoral, and, consequently, our products may not gain the acceptance of the public or the medical community.Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend uponphysicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates wemay develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which greaterclinical data may be 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, academic scientists in several countries, including the United States, have reported on their attempts to edit thegenome of human embryos as part of basic research. In addition, in November 2018, it was reported that Dr. Jiankui He, aChinese biophysics researcher who was an associate professor in the Department of Biology of the Southern University ofScience and Technology in Shenzhen, China, claimed he had created the first human genetically edited babies, twin girls.This claim, and another that Dr. He had helped create a second gene-edited pregnancy, was subsequently confirmed byChinese authorities and was negatively received by the public, in particular those in the scientific community. In the UnitedStates, germline editing for clinical application has been expressly prohibited since enactment of a December 2015 U.S. Foodand Drug Administration ban on such activity. Prohibitions are also in place in the United Kingdom, across most of Europe,in China, and many other countries around the world. In the United States, the NIH has announced that it would not fund anyuse of genome editing technologies in human embryos, noting that there are multiple existing legislative and regulatoryprohibitions against such work, including the Dickey‑Wicker Amendment, which prohibits the use of appropriated funds forthe creation of human embryos for research purposes or for research in which human embryos are destroyed. Laws in theUnited Kingdom prohibit genetically modified embryos from being implanted into women, but embryos can be altered inresearch labs under license from the Human Fertilisation and Embryology Authority. Basic research on embryos is moretightly controlled in many other European countries.Moreover, 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. Other than EDIT-101 to treat LCA10, all of our product development60 Table of Contentsprograms are still in the preclinical or research stage of development. Our research programs, including those subject to ourcollaboration with Juno Therapeutics and our strategic alliance with Allergan, may fail to identify potential productcandidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifyingpotential product candidates, or our potential product candidates may be shown to have harmful side effects or may haveother characteristics that may make the products impractical to manufacture, unmarketable, or unlikely to receive marketingapproval.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 nucleases, but to date none has obtainedmarketing approval for a product candidate. There can be no certainty that the CRISPR/Cas9 or CRISPR/Cpf1 technologywill lead to the development of genomic medicines, that other genome editing technologies will not be considered better ormore attractive for the development of medicines or that either Cas9 or Cpf1, the two CRISPR associated proteins that weuse, may be useful or successful in developing therapeutics. For example, Cas9 or Cpf1 may be determined to be lessattractive than other CRISPR enzymes, including CRISPR enzymes that have yet to be discovered. Similarly, a new genomeediting technology that has not been discovered yet may be determined to be more attractive than CRISPR. Moreover, if wedecide to develop genome technologies other than CRISPR technology using a Cas9 or Cpf1 enzyme, we cannot be certainwe will be able to obtain rights to such technologies. Although all of our founders who currently provide consulting andadvisory services to us in the areas of certain genome editing technologies have assignment of inventions obligations to uswith respect to the services they perform for us, these assignment of inventions obligations are subject to limitations and donot extend to their work in other fields or to the intellectual property arising from their employment with their respectiveacademic and research institutions. To obtain intellectual property rights assigned by these founders to such institutions, wewould need to enter into license agreements with such institutions. Any of these factors could reduce or eliminate ourcommercial opportunity, and could have a material adverse effect on our business, financial condition, results of operations,and prospects.We depend heavily on the success of EDIT-101. Except for EDIT-101, 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 and developmentof EDIT-101 to treat LCA10. Our ability to generate product revenues, which we do not expect will occur for many years, ifever, will depend heavily on the successful development and eventual commercialization of EDIT-101 for the treatment ofLCA10 and other product candidates that we may identify in the future. The success of product candidates we may identifyand develop will depend on many factors, including the following:·sufficiency of our financial and other resources to complete the necessary clinical trials for EDIT-101;·successful completion of preclinical studies and investigational new drug (“IND”)‑enabling studies;·successful enrollment in, and completion of, clinical trials;61 Table of Contents·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.The foregoing also applies to our collaborators to the extent we have partnered, sold or licensed any of our researchprograms to them. For instance, Allergan has exercised its option to license EDIT-101 and, although we have entered into aprofit-sharing arrangement to equally split the profits and costs of such program in the United States and we will continue towork with Allergan on the development and commercialization of such program, in the event a dispute arises, Allergan willhave final decision making authority. If we or our collaborators do not achieve one or more of these factors in a timelymanner or at all, we could experience significant delays or an inability to successfully commercialize any product candidateswe may develop, which would materially harm our business.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 which we may market theproduct. Accordingly, even if we are able to obtain the requisite financing to continue to fund our research programs, wecannot assure you that we or our collaborators will successfully develop or commercialize EDIT-101, or any of our otherresearch programs. If we or any of our collaborators and 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 history, if any, 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 a62 Table of Contentssegment of DNA to serve as a repair template, it is possible that following off‑target cut events, DNA from such repairtemplate could be integrated into the genome at an unintended site, potentially disrupting another important gene orgenomic element. We cannot be certain that off‑target editing will not occur in any of our planned or future clinical studies.There is also the potential risk of delayed adverse events following exposure to genome editing therapy due to the potentialfor persistent biological 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 EMA or other regulatory authorities could order us to cease further development of, or deny approvalof, any product candidates we are able to develop for any or all targeted indications. Even if we are able to demonstrate thatall future serious adverse events are not product‑related, such occurrences could affect patient recruitment or the ability ofenrolled patients to complete the trial. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trialof any product candidate we may develop, the commercial prospects of such product candidates may be harmed and ourability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of theseoccurrences may harm our ability to identify and develop product candidates, and may harm our business, financialcondition, result of operations, and prospects significantly.Additionally, if we successfully develop a product candidate and it receives marketing approval, the FDA couldrequire us to adopt a Risk Evaluation and Mitigation Strategy (“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; and63 Table of Contents·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 history, if any, 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 power is more difficult thanwith diseases that have larger patient populations. Further, even if we do achieve the pre‑specified criteria, we may produceresults that are unpredictable or inconsistent with the results of the non‑primary endpoints or other relevant data. The FDAalso weighs the benefits of a product against its risks, and the FDA may view the efficacy results in the context of safety asnot being supportive of regulatory approval. Other regulatory authorities in the European Union and other countries, such asthe CAT, may make similar comments with respect to these endpoints and data. Any product candidates we may develop willbe based on a novel technology that makes it difficult to predict the time and cost of development and of subsequentlyobtaining regulatory approval. No genome editing therapeutic product has been approved 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 to64 Table of Contentsdesign and implement, can take many years to complete, and is uncertain as to outcome. A failure of one or more clinicaltrials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive ofthe success of later clinical 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 (“IECs”) may not authorize usor our investigators 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 patients may drop out of these clinical trials at a higher rate than weanticipate;·our third‑party contractors may fail to comply with regulatory requirements or meet their contractualobligations to us in a timely manner, or at all;·regulators, IRBs, or IECs may require that we or our investigators suspend or terminate clinical research orclinical trials of any product candidates we may develop for various reasons, including noncompliance withregulatory requirements, a finding of undesirable side effects or other unexpected characteristics, or that theparticipants are being exposed to unacceptable health risks or after an inspection of our clinical trial operationsor 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;65 Table of Contents·delays in having patients 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·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 these66 Table of Contentstrials as required by the FDA or analogous regulatory authorities outside the United States, or as needed to provideappropriate statistical power for a given trial. Enrollment may be challenging for the rare genetically defined diseases we aretargeting. In addition, if patients are unwilling to participate in our genome editing trials because of negative publicity fromadverse events related to the biotechnology, gene therapy, or genome editing fields, competitive clinical trials for similarpatient populations, clinical trials in competing products, or for other reasons, the timeline for recruiting patients, conductingstudies, and obtaining regulatory approval of any product candidates we may develop may be delayed. Moreover, some ofour competitors may have ongoing clinical trials for product candidates that would treat the same indications as any productcandidates we may develop, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinicaltrials of our competitors’ product candidates. For example, ProQR Therapeutics N.V. has already enrolled LCA10 patients inits clinical trial, which may limit the number of potential patients available to enroll in the planned Phase 1/2 clinical studyfor EDIT-101.Patient enrollment is also affected by other factors, including:·severity of the disease under investigation;·size of the patient population and process for identifying patients;·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 patient informed consent;·risk that enrolled patients 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·proximity and availability of clinical trial sites for prospective patients.In particular, EDIT-101 for the treatment of LCA10 has a limited patient pool from which to draw for enrollment in aclinical trial, as the global incidence of LCA10 is estimated to be two to three per 100,000 live births worldwide. Theeligibility criteria of our clinical trials will further limit the pool of available trial participants. Additionally, the process offinding 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;67 Table of Contents·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 LCA can be diagnosed based on a patient’s symptoms and retinal scans, DNAsamples are taken from LCA patients in order to test for the presence of the known gene mutations that cause LCA and, wherepossible, to identify the specific genetically defined disease, such as LCA10. If we, or any third parties that we engage toassist us, are unable to successfully identify such patients, or experience delays in doing so, then:·our ability to develop any product candidates may be adversely affected if we are unable to appropriately selectpatients for enrollment in our clinical trials;·any product candidates we develop may not receive marketing approval if safe and effective use of such productcandidates depends on an in vitro diagnostic; and·we may not realize the full commercial potential of any product candidates we develop that receive marketingapproval if, among other reasons, we are unable to appropriately select patients who are likely to benefit fromtherapy with our medicines.68 Table of ContentsAs 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;·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;69 Table of Contents·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:·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;70 Table of Contents·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, genome editing and cell therapy fields, are characterized byrapidly advancing technologies, intense competition, and a strong emphasis on intellectual property and proprietaryproducts. We will face competition with respect to any product candidates that we may seek to develop or commercialize inthe future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companiesworldwide. Potential competitors also include academic institutions, government agencies, and other public and privateresearch organizations that conduct research, seek patent protection, and establish collaborative arrangements for research,development, manufacturing, and commercialization.There are a number of large pharmaceutical and biotechnology companies that currently market and sell products orare pursuing the development of products for the treatment of the disease indications for which we have research programs. 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. Other companiesdeveloping CRISPR technology or therapies using CRISPR technology include Arbor Biotechnologies, CaribouBiosciences, Casebia Therapeutics, CRISPR Therapeutics, ERS Genomics, Exonics Therapeutics, Intellia Therapeutics,Locus Biosciences, ToolGen Inc. (“ToolGen”) and TRACR Hematology. In addition, there have been and may continue to bediscoveries of new CRISPR-based gene editing technologies. There are additional companies developing therapies usingother genome editing technologies, including base editing, transcription activator-like effector nucleases, meganucleases,Mega‑TALs, and zinc finger nucleases. These companies include Beam Therapeutics Inc., bluebird bio, Cellectis, PoseidaTherapeutics, Precision Biosciences and Sangamo Therapeutics. Additional companies developing gene therapy productsinclude Abeona Therapeutics, Adverum Biotechnologies, AGTC Therapeutics, Audentes Therapeutics, HomologyMedicines, Nightstar Therapeutics, REGENXBIO, Sarepta Therapeutics, Solid Biosciences, Spark Therapeutics, uniQure andVoyager Therapeutics. In addition to competition from other genome editing therapies, gene therapies or cell medicinetherapies, any products that we may develop may also face competition from other types of therapies, such as small molecule,antibody, protein, oligonucleotide, or ribonucleic acid therapies. For example, ProQR Therapeutics N.V. is conducting aPhase I/II clinical trial for its experimental treatment using antisense oligonucleotide technology for LCA10.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,71 Table of Contentsconducting 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.There may be significant delays in obtaining reimbursement for newly approved medicines, and coverage may bemore limited than the purposes for which the medicine is approved by the FDA or similar regulatory authorities outside theUnited States. Moreover, eligibility for reimbursement does not imply that any medicine will be paid for in all cases or at arate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levelsfor new medicines, if applicable, may also not be sufficient to cover our costs and may not be72 Table of Contentsmade permanent. Reimbursement rates may vary according to the use of the medicine and the clinical setting in which it isused, may be based on reimbursement levels already set for lower cost medicines and may be incorporated into existingpayments for other services. Net prices for medicines may be reduced by mandatory discounts or rebates required bygovernment healthcare programs or private payors and by any future relaxation of laws that presently restrict imports ofmedicines from countries where they may be sold at lower prices than in the United States. Third‑party payors often rely uponMedicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptlyobtain coverage and profitable payment rates from both government‑funded and private payors for any approved medicineswe may develop could have a material adverse effect on our operating results, our ability to raise capital needed tocommercialize 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 commercialize any product candidateswe may develop. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize asufficient return on our investment.73 Table of ContentsMoreover, 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.Some of our most advanced programs, including EDIT-101, focus on treatments for rare genetically defined diseases.Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases whohave the potential to benefit from treatment with product candidates we may develop, are based on estimates. These estimatesmay prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. The numberof patients 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 laboratoryprocedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and74 Table of Contentswastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety.Our operations 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, including the planned Phase 1/2 clinical trial for EDIT-75 Table of Contents101, or product launches, which could be costly to us and otherwise harm our business, financial condition, results ofoperations, and prospects.We also may encounter problems hiring and retaining the experienced scientific, quality control, and manufacturingpersonnel needed to manage our manufacturing process, which could result in delays in our production or difficulties inmaintaining compliance with applicable regulatory requirements.Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Anycontamination could materially harm our ability to produce product candidates on schedule and could harm our results ofoperations and cause reputational damage. Some of the raw materials that we anticipate will be required in our manufacturingprocess are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination orrecall. A material shortage, contamination, recall, or restriction on the use of biologically derived substances in themanufacture of any product candidates we may develop could adversely impact or disrupt the commercial manufacturing orthe production of clinical material, which could materially harm our development timelines and our business, financialcondition, results of operations, and prospects.Any problems in our manufacturing process or the facilities with which we contract could make us a less attractivecollaborator for potential partners, including larger pharmaceutical companies and academic research institutions, whichcould limit our access to additional attractive development programs. Problems in third‑party manufacturing process orfacilities also could restrict our ability to ensure sufficient clinical material for any clinical trials we may be conducting or areplanning to conduct and meet market demand for any products we develop and commercialize. For example, if the contractmanufacturing organizations that we have engaged to manufacture EDIT-101 fail to deliver sufficient amounts or fail totimely deliver EDIT-101 due to any of the risks discussed herein, then we and Allergan may not be able to begin patientdosing in the planned Phase 1/2 clinical trial for EDIT-101 in the second half of 2019.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 any additional options to commercialize aproduct. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfullyperform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that weenter into.Collaborations involving our research programs or any product candidates we may develop, including ourcollaboration with Juno Therapeutics, 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.76 Table of Contents·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.·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 proposed77 Table of Contentscollaborator’s evaluation of several factors. If we license rights to any product candidates we or our collaborators maydevelop, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them withour 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.We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for acollaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the termsand conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Thosefactors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatoryauthorities outside the United States, the potential market for the subject product candidate, the costs and complexities ofmanufacturing and delivering such product candidate to patients, the potential of competing products, the existence ofuncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership withoutregard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consideralternative product candidates or technologies for similar indications that may be available to collaborate on and whethersuch a collaboration could be more attractive than the one with us.We may also be restricted under existing collaboration agreements from entering into future agreements on certainterms with potential collaborators 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.78 Table of ContentsOur reliance on these third parties for research and development activities will reduce our control over theseactivities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of ourclinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDArequires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, andreporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights,integrity, and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials andpost the results of completed clinical trials on a government‑sponsored database, ClinicalTrials.gov, within certaintimeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.Furthermore, these third parties may also have relationships with other entities, some of which may be ourcompetitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conductour clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may bedelayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may bedelayed in our efforts to, successfully commercialize our medicines.We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Anyperformance failure on the part of our distributors could delay clinical development or marketing approval of any productcandidates we may develop or commercialization of our medicines, producing additional losses and depriving us of potentialproduct revenue.We contract with third parties for the manufacture of materials for our research programs and preclinical studies andexpect to continue to do so for clinical trials and for commercialization of any product candidates that we may develop.This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, productcandidates, or any medicines that we may develop and commercialize, or that such supply will not be available to us at anacceptable cost, which could delay, prevent, or impair our development or commercialization efforts.We have a limited ability to manufacture materials for our research programs and preclinical studies and we do notoperate any significant manufacturing facilities. We primarily rely on third‑party manufacturers for the manufacture of ourmaterials for preclinical studies and expect to continue to do so for clinical testing and for commercial supply of any productcandidates that we may develop and for which we or our collaborators obtain marketing approval. We do not have a longterm supply agreement with any of the third‑party manufacturers, and we purchase our required supply on a purchase orderbasis.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.79 Table of ContentsAny medicines that we may develop may compete with other product candidates and products for access tomanufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might becapable of manufacturing for us.Any performance failure on the part of our existing or future manufacturers could delay clinical development ormarketing approval. We do not currently have arrangements in place for redundant supply for bulk drug substances. If anyone of our current contract manufacturer cannot perform as agreed, we may be required to replace that manufacturer.Although we believe that there are several potential alternative manufacturers who could manufacture any productcandidates we may develop, we may incur added costs and delays in identifying and qualifying any such replacement.Our current and anticipated future dependence upon others for the manufacture of any product candidates we maydevelop or medicines may adversely affect our future profit margins and our ability to commercialize any medicines thatreceive marketing approval on a timely and competitive basis.Risks Related to Our Intellectual Property If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if thescope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercializeproducts and technology similar or identical to ours, and our ability to successfully commercialize any product candidateswe may develop, and our technology may be adversely affected.Our success depends in large part on our ability to obtain and maintain patent protection in the United States andother countries with respect to our CRISPR 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 future80 Table of Contentspatent applications may not result in patents being issued which protect our technology or product candidates or whicheffectively prevent 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.The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patentsmay be challenged in the courts or patent offices in the United States and abroad. 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, including81 Table of Contentscertain aspects of our in‑licensed CRISPR technology. If the government decides to exercise these rights, it is not required toengage us as its contractor in connection with doing so. These rights may permit the U.S. government to disclose ourconfidential information to third parties and to exercise march‑in rights to use or allow third parties to use our licensedtechnology. The U.S. government can exercise its march‑in rights if it determines that action is necessary because we fail toachieve practical application of the government‑funded technology, because action is necessary to alleviate health or safetyneeds, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in suchinventions may be subject to certain requirements to manufacture products embodying such inventions in the United States.Any exercise by the government of any of the foregoing rights could harm our competitive position, business, financialcondition, results of operations, and prospects.Our rights to develop and commercialize our technology and product candidates are subject, in part, to the terms andconditions of licenses granted to us by others.We are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that areimportant or necessary to the development of our genome editing technology, including our CRISPR technology, andproduct candidates. These and other licenses may not provide exclusive rights to use such intellectual property andtechnology in all relevant fields of use and in all territories in which we may wish to develop or commercialize ourtechnology and products in the future. As a result, we may not be able to prevent competitors from developing andcommercializing competitive products in territories included in all of our licenses. For example, pursuant to our 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 opposition and re‑examination proceedings involving the patents licensed to us under our license agreement withHarvard and Broad and our obligation to make such reimbursements are not subject to any limitations, we anticipate that ourobligation to reimburse our licensors for expenses related to these matters will continue to be substantial. In connection withthese reimbursement obligations, we incurred expenses in aggregate of $14.2 million, $18.7 million, $23.6 million, and $9.4million during the years ended December 31, 2018, 2017, 2016, and 2015, respectively.82 Table of ContentsOur 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.Some 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 Caribou83 Table of ContentsBiosciences in certain fields. CRISPR Therapeutics, ERS Genomics, and TRACR Hematology, also our competitors, havereported that they have exclusively licensed such patent rights from Emmanuelle Charpentier. Further, Dr. Doudna was afounder of our company and entered into a consulting agreement with us at the time of our founding. However, Dr. Doudnagave notice of termination of that agreement in May 2014 after less than seven months of service, and she has had no furtherengagement in our business since that time. Dr. Doudna is also a founder of Caribou Biosciences and has been publiclyidentified as an advisor to Intellia Therapeutics, each of which is one of our competitors.As a result of the declaration of interference, an adversarial proceeding in the USPTO before the PTAB 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. The interference proceedinghas therefore ended without reaching the second priority phase. Therefore, the 12 U.S. patents and one U.S. patentapplication that we have in‑licensed from Broad, acting on behalf of itself, MIT, and Harvard, as well as the U.S. patentapplication 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.On April 12, 2017, the University of California, the University of Vienna, and Emmanuelle Charpentier appealed tothe U.S. Court of Appeals for the Federal Circuit for review of the no interference-in-fact holding made by the PTAB in theinterference proceeding. On September 10, 2018, the Court of Appeals for the Federal Circuit (the “CAFC”) affirmed thePTAB’s holding of no interference-in-fact. The University of California, the University of Vienna, and EmmanuelleCharpentier did not appeal to the U.S. Supreme Court for review of this decision. The judgment of no interference‑in‑fact istherefore final and bars any further interference between the same parties for claims to the same invention as the count of theinterference. However, as discussed below, certain of these 12 U.S. patents and one U.S. patent application are, or may in thefuture be, subject to further intellectual property proceedings and disputes, including interference 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 filed Suggestions of Interference in the USPTO onApril 13, 2015 suggesting that they believe some of the claims in pending U.S. applications owned by ToolGen (U.S. SerialNo. 14/685,568 and U.S. Serial No. 14/685,510) interfere with certain claims in five U.S. patents, which we have in‑licensedfrom Broad, acting on behalf of itself, MIT, and Harvard. These five U.S. patents are among the 12 U.S. patents with respect towhich the PTAB had declared an interference with the pending U.S. patent application (U.S. Serial No. 13/842,859) that isowned by the University of California, the University of Vienna, and Emmanuelle Charpentier. The Suggestions ofInterference that were filed by ToolGen are still pending and it is uncertain when and in what manner the USPTO will act onthem.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. For example, a request for ex parte re‑examination was filed with theUSPTO on February 16, 2016 against one patent that we have in‑licensed from Broad, acting on behalf of itself and MIT (U.S.Patent No. 8,771,945), which was subject to the interference proceeding involving the University of California, theUniversity of Vienna, and Emmanuelle Charpentier and referenced in the Suggestions of Interference filed by ToolGen. Exparte re‑examination is a procedure through which a third party can anonymously request the USPTO to re‑examine agranted patent because the third party believes the granted patent may not be patentable over84 Table of Contentsprior art in the form of a printed publication or another patent. Before the USPTO will re‑examine a granted patent, the thirdparty requestor must establish that the submitted prior art establishes a substantial and new question of patentability. If theUSPTO determines there is a substantial and new question of patentability, it grants the re‑examination request andre‑examines the patent after giving the patent owner the option of filing an initial statement. The request for ex partere‑examination of U.S. Patent No. 8,771,945 was granted on May 9, 2016 thereby initiating a re‑examination procedurebetween the USPTO and Broad, acting on behalf of itself and MIT. The third party requestor does not participate in there‑examination procedure after filing the request except that it has the option of responding if the patent owner chooses tofile an initial statement. On May 12, 2016, the PTAB suspended the re‑examination of U.S. Patent No. 8,771,945 noting thatit has jurisdiction over any file that involves a patent involved in the interference. On January 3, 2019, the PTAB lifted thesuspension in light of the CAFC’s affirmance of the PTAB’s no interference‑in‑fact holding. If Broad is unsuccessful duringthe re‑examination, U.S. Patent No. 8,771,945 may be revoked or narrowed, which could have a material adverse effect on thescope of our rights under such patent.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 scope of one or more of thesein‑licensed patents could have a material adverse effect on the conduct of our business, financial condition, results ofoperations, and prospects.In addition, a petition for post-grant review was filed by Benson Hill Biosystems, Inc. (“Benson Hill”) with thePTAB on July 17, 2018 against one patent that we have in‑licensed from Broad, acting on behalf of itself, MIT and Harvard(U.S. Patent No. 9,790,490). This patent relates generally to the CRISPR/Cpf1 system and its use in eukaryotic cells. Post-grant review is a procedure through which a third party can request the PTAB to review the patentability of one or moreclaims of a granted patent on any ground that could be raised in an invalidity defense. The post-grant review process beginswith a third party filing a petition on or prior to the date that is nine months after the grant of the patent. The patent ownermay file a preliminary response to the petition. A post-grant review may then be instituted by the PTAB but only upon ashowing that, it is more likely than not that at least one claim challenged is unpatentable. If the proceeding is instituted andnot dismissed, a final determination by the PTAB will be issued within one year (extendable for good cause by six months).Broad, acting on behalf of itself, MIT and Harvard, filed a preliminary response to the petition on October 24, 2018. OnJanuary 22, 2019, the PTAB notified the parties that it would not be instituting post-grant review of U.S. PatentNo. 9,790,490 based on Benson Hill’s petition.We or our licensors may also be subject to claims that former employees, collaborators, or other third parties have aninterest 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. OnFebruary 18, 2019, one additional European patent (European Patent No. EP 2,784,162 B1) that we have in-licensed fromBroad, acting on behalf of itself, MIT and Harvard was revoked in its85 Table of Contentsentirety and another European patent (European Patent No. EP 2,896,697 B1) that we in-license from such parties wasmaintained with amended patent claims. The Opposition Division has also initiated opposition proceedings against sevenother European patents that we have in‑licensed from Broad, acting on behalf of itself, MIT and Harvard (European PatentNos. EP 2,898,075 B1, EP 2,921,557 B1, EP 2,931,897 B1, EP 2,931,898 B1, and EP 3,009,511 B1), one European patentthat we have in‑licensed from Broad, acting on behalf of itself and MIT (European Patent No. EP 2,764,103 B1), twoEuropean patents that we have in-licensed from Broad, acting on behalf of itself, MIT, Harvard and The RockefellerUniversity (“Rockefeller”) (European Patent Nos. EP 2,825,654 B1 and EP 2,840,140 B1), and one European patent that weco-own and in-license from Broad, acting on behalf of itself, MIT and The University of Iowa Research Foundation(European Patent No. EP 3,066,201 B1). The EPO opposition proceedings may involve issues including, but not limited to,procedural formalities related to filing the European patent application, priority, and the patentability of the involved claims.The loss of priority for, or the loss of, these European patents could have a material adverse effect on the conduct of ourbusiness. One or more of the third parties that have filed oppositions against these European patents or other third partiesmay file future oppositions against other European patents that we in‑license or own.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 successful in any interferenceproceeding or other priority, inventorship, or validity disputes, it could result in substantial costs and be a distraction to ourmanagement 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 interpreted86 Table of Contentsnarrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not becommercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around theworld may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop orlicense.Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses tothird parties. In addition, many countries limit the enforceability of patents against government agencies or governmentcontractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value ofsuch patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to ourbusiness, our competitive position may be impaired, and our business, financial condition, results of operations, andprospects may be adversely affected.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission,fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reducedor eliminated for non‑compliance with these requirements.Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents andapplications will be due to be paid to the USPTO and various government patent agencies outside of the United States overthe lifetime of our owned or licensed patents and applications. In certain circumstances, we rely on our licensing partners topay these fees due to U.S. and non‑U.S. patent agencies. The USPTO and various non‑U.S. government agencies requirecompliance with several procedural, documentary, fee payment, and other similar provisions during the patent applicationprocess. We are also dependent on our licensors to take the necessary action to comply with these requirements with respectto our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by othermeans in accordance with the applicable rules. There are situations, however, in which non‑compliance can result inabandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in therelevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identicalproducts or technology, which could have a material adverse effect on our business, financial condition, results of operations,and prospects.If we fail to comply with our obligations in the agreements under which we license intellectual property rights from thirdparties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rightsthat are important to our business.We have entered into license agreements with third parties and may need to obtain additional licenses from ourexisting licensors and others to advance our research or allow commercialization of product candidates we may develop. It ispossible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. In thatevent, we may be required to expend significant time and resources to redesign our technology, product candidates, or themethods for manufacturing them or to develop or license replacement technology, all of which 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;87 Table of Contents·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 business. Forexample, we are aware of third party patents and patent applications that may be construed to cover our CRISPR technologyand product candidates. In order to avoid infringing these third party patents, or patents that issue from these third partypatent applications, we may find it necessary or prudent to obtain licenses from such third party intellectual property holders.We may also require licenses from third parties for certain non‑CRISPR technologies including certain delivery methods thatwe are evaluating for use with product candidates we may develop. In addition, with respect to any patents we co‑own withthird parties, we may require licenses to such co‑owners’ interest in such patents. However, we may be unable to secure suchlicenses or otherwise acquire or in‑license any compositions, methods of use, processes, or other intellectual property rightsfrom third parties that we identify as necessary for our CRISPR technology and product candidates we may develop. Thelicensing or acquisition of third party intellectual property rights is a competitive area, and several more establishedcompanies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractiveor necessary. These established companies may have a competitive advantage over us due to their size, capital resources andgreater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitormay be unwilling to assign or license rights to us. We also may be unable to license or acquire third party intellectualproperty rights on terms that would allow us to make an appropriate return on our investment or at all. For example, certaindelivery modes, including certain adeno‑associated virus vectors and lipid nanoparticle technologies, we are evaluating foruse are covered by patents held by third parties. If we are unable to successfully obtain rights to required third partyintellectual property rights or maintain the existing intellectual property rights we have, we may have to abandondevelopment of the relevant program or product candidate, which could have a material adverse effect on our business,financial condition, results of operations, and prospects.88 Table of ContentsChanges 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 aproduct candidate 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 alleged failure tomeet any of several statutory requirements, including lack of novelty, obviousness, or non‑enablement. Grounds for anunenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevantinformation from the USPTO, or made a misleading statement, during prosecution. Third parties have raised challenges to thevalidity of certain of our in‑licensed patent claims and may in the future raise similar claims before administrative bodies inthe United States or abroad, even outside the context of litigation. Such mechanisms include re‑examination, post‑grantreview, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreignjurisdictions (e.g., opposition proceedings). For example, as discussed above, an interference was declared, and multipleSuggestions of Interference have been filed against certain of our in‑licensed U.S. patents and patent applications, one ofthese U.S. patents is subject to a re‑examination proceeding, opposition proceedings have been initiated against several ofour in‑licensed European patents and additional interference, re‑examination, post-grant review, inter partes review,opposition, and other intellectual property proceedings may be initiated in the future. The opposition proceedings have sofar resulted in the revocation of two of our in-licensed European patents while maintaining a third European patent withamended claims. In view of certain arguments made by the third parties against this revoked patent and similar argumentsmade by the third parties against additional other in-licensed European patents under opposition, the opposition proceedingscould potentially lead to the revocation of additional in-licensed European patents. These and other proceedings could resultin the revocation or cancellation of, or amendment to our patents in such a way that they no longer cover our technology orplatform, or any product candidates that we may develop. The outcome following legal assertions of invalidity andunenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is noinvalidating prior art, of which we or our licensing partners and the patent examiner were unaware during prosecution. If athird party were to prevail on a89 Table of Contentslegal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on ourtechnology or platform, or any product candidates that we may develop. Such a loss of patent protection would have amaterial 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 No. 10,000,772 and 10,113,167 and other related U.S. patentapplications and foreign counterparts including European Patent Nos. EP 2,800,811 B1 and EP 3,241,902 B1 which arebeing opposed by several parties) filed by the University of California, the University of Vienna (both of which are reportedto have exclusively licensed their rights to Caribou Biosciences, which is reported to have exclusively licensed certain rightsto Intellia 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 including European Patent No. EP 2,912,175 B1 which is being opposed by several parties) filed byToolGen, and WO 2014/089290 (and its related U.S. patent applications and foreign counterparts including European PatentNos. EP 3,138,910 B1, EP 3,138,911 B1, and EP 3,138,912 B1 which are being opposed by several parties) filed by Sigma-Aldrich Co. LLC. 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 a90 Table of Contentscourt of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe a third party’sintellectual property rights, and we are unsuccessful in demonstrating that such patents are invalid or unenforceable, wecould be required to obtain a license from such third party to continue developing, manufacturing, and marketing anyproduct candidates we may develop and our technology. However, we may not be able to obtain any required license oncommercially reasonable terms or at all. Even if we were able to obtain a license, it could be non‑exclusive, thereby givingour competitors and other third parties access to the same technologies licensed to us, and it could require us to makesubstantial licensing and royalty payments. We also could be forced, including by court order, to cease developing,manufacturing, and commercializing the infringing technology or product candidates. In addition, we could be found liablefor significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed apatent or other intellectual property right. Claims that we have misappropriated the confidential information or trade secretsof third parties could have a similar material adverse effect on our business, financial condition, results of operations, andprospects.We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged tradesecrets of their current or former employers or claims asserting ownership of what we regard as our own intellectualproperty.Many of our employees, consultants, and advisors are currently or were previously employed at universities or otherbiotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensurethat our employees, consultants, and advisors do not use the proprietary information or know‑how of others in their work forus, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including tradesecrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary todefend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation couldresult in substantial costs and be a distraction to management.In addition, while it is our policy to require our employees and contractors who may be involved in the conceptionor development of intellectual property to execute agreements assigning such intellectual property to us, we may beunsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property thatwe regard as our own. The assignment of intellectual property rights may not be self‑executing, or the assignment agreementsmay be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us,to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effecton our business, financial condition, results of operations, and prospects.We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which couldbe expensive, time consuming, and unsuccessful.Competitors may infringe our patents or the patents of our licensing partners, or we may be required to defendagainst claims of infringement. In addition, our patents or the patents of our licensing partners also are, and may in the futurebecome, involved in inventorship, 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. We91 Table of Contentsmay not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of ourcompetitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of theirgreater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from theinitiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability tocompete in the marketplace.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets andconfidentiality agreements to protect our unpatented know‑how, technology, and other proprietary information and tomaintain our competitive position. With respect to our technology platform, we consider trade secrets and know‑how to beone of our primary sources of intellectual property. Trade secrets and know‑how can be difficult to protect. In particular, weanticipate that with respect to our technology platform, these trade secrets and know‑how will over time be disseminatedwithin the industry through independent development, the publication of journal articles describing the methodology, andthe movement of personnel from academic to industry scientific positions.We seek to protect these trade secrets and other proprietary technology, in part, by entering into non‑disclosure andconfidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outsidescientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter intoconfidentiality and invention or patent assignment agreements with our employees and consultants. We cannot guaranteethat we have entered into such agreements with each party that may have or have had access to our trade secrets orproprietary technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose ourproprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, andtime‑consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are lesswilling or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independentlydeveloped by a competitor or other third party, we would have no right to prevent them from using that technology orinformation to compete with us. If any of our trade secrets were to be disclosed to or independently developed by acompetitor or other third party, our competitive position would be materially and adversely harmed.If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our businessmay be materially harmed.Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates wemay develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug PriceCompetition and Patent Term Restoration Action of 1984 (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.92 Table of ContentsIntellectual property rights do not necessarily address all potential threats.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual propertyrights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. Forexample:·others may be able to make gene therapy products that are similar to any product candidates we may develop orutilize similar gene therapy technology but that are not covered by the claims of the patents that we license ormay own in the future;·we, or our license partners or current or future collaborators, might not have been the first to make theinventions covered by the issued patent or pending patent application that we license or may own in the future;·we, or our license partners or current or future collaborators, might not have been the first to file patentapplications covering certain of our or their inventions;·others may independently develop similar or alternative technologies or duplicate any of our technologieswithout infringing our owned or licensed intellectual property rights;·it is possible that our pending licensed patent applications or those that we may own in the future will not leadto issued patents;·issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legalchallenges by our competitors;·our competitors might conduct research and development activities in countries where we do not have patentrights and then use the information learned from such activities to develop competitive products for sale in ourmajor commercial markets;·we may not develop additional proprietary technologies that are patentable;·the patents of others may harm our business; and·we may choose not to file a patent in order to maintain certain trade secrets or know‑how, and a third party maysubsequently file a patent covering such intellectual property.Should any of these events occur, they could have a material adverse effect on our business, financial condition,results of operations, and prospects.Risks Related to Regulatory Approval and Other Legal Compliance 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. We93 Table of Contentshave not received approval to market any product candidates from regulatory authorities in any jurisdiction. We have onlylimited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely onthird‑party CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinicaland clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establishthe biologic product candidate’s safety, purity, and potency. Securing regulatory approval also requires the submission ofinformation about the product manufacturing process to, and inspection of manufacturing facilities by, the relevantregulatory authority. Any product candidates we develop may not be effective, may be only moderately effective, or mayprove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtainingmarketing approval or prevent or limit commercial use.The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take manyyears if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety offactors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approvalpolicies during the development period, changes in or the enactment of additional statutes or regulations, or changes inregulatory review for each submitted product application, may cause delays in the approval or rejection of an application.The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse toaccept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, orother studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit,or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited orsubject to restrictions or post‑approval commitments that render the approved medicine not commercially viable.If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we maydevelop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will bematerially impaired.Failure to obtain marketing approval in foreign jurisdictions would prevent any product candidates we may develop frombeing marketed in such jurisdictions, which, in turn, would materially impair our ability to generate revenue.In order to market and sell any product candidates we may develop in the European Union and many other foreignjurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varyingregulatory requirements. The approval procedure varies among countries and can involve additional testing. The timerequired to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approvalprocess outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, inmany countries outside the United States, it is required that the product be approved for reimbursement before the productcan be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authoritiesoutside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authoritiesin other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensureapproval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketingapprovals and may not receive necessary approvals to commercialize our medicines in any jurisdiction, which wouldmaterially impair our ability to generate revenue.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.94 Table of ContentsThe United Kingdom has a period of a maximum of two years from the date of its formal notification to negotiate theterms of its withdrawal from, and future relationship with, the European Union. If no formal withdrawal agreement is reachedbetween the United Kingdom and the European Union, then it is expected the United Kingdom's membership of theEuropean Union will automatically terminate two years after the submission of the notification of the United Kingdom'sintention to withdraw from the European Union. Discussions between the United Kingdom and the European Union focusedon finalizing withdrawal issues and transition agreements are ongoing. However, limited progress to date in thesenegotiations and ongoing uncertainty within the UK Government and Parliament sustains the possibility of the UnitedKingdom leaving the European Union on March 29, 2019 without a withdrawal agreement and associated transition periodin place, which is likely to cause significant market and economic disruption.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:·restrictions on such medicines, manufacturers, or manufacturing processes;·restrictions on the labeling or marketing of a medicine;95 Table of Contents·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 thefederal government, with potential liability including mandatory treble damages and significant per‑claimpenalties, currently set at $5,500 to $11,000 per false claim;96 Table of Contents·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 administrative sanctions,including exclusions from government funded healthcare programs. Liabilities they incur97 Table of Contentspursuant to these laws could result in significant costs or an interruption in operations, which could have a material adverseeffect on our 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 prescription drugsand 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-KickbackStatute, 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 pricing programnew requirements to report financial arrangements with physicians and teaching hospitals;·a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;and·a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparativeclinical effectiveness research, along with funding for such research.In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. 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.Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal andreplace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by thePresident on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requiresmost Americans to carry a minimal level of health insurance, will become effective in 2019. According to the CongressionalBudget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 andpremiums in insurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed to repealor repeal and replace portions of the ACA. Although none of these measures has been enacted by Congress to date, Congressmay consider other legislation to repeal and replace elements of the ACA. The Congress will likely consider other legislationto replace elements of the ACA, during the next Congressional session. It is possible that repeal and replacement initiatives,if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals havinginsurance coverage with less generous benefits. While the timing and scope of any potential future legislation to repeal andreplace ACA provisions is highly uncertain in many respects, it is also possible that some of the ACA provisions thatgenerally are not favorable for the research-based pharmaceutical industry could also be repealed along with ACA coverageexpansion provision.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 product99 Table of Contentsand/or the level of reimbursement physicians receive for administering any approved product we might bring to market.Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our potentialproducts are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs mayresult in a similar reduction in payments from private payors.The Trump Administration has also taken executive actions to undermine or delay implementation of theACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation ofcertain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grantexemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burdenon states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Thesecond Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. Several state AttorneysGeneral filed suit to stop the administration from terminating the subsidies, but their request for a restraining order wasdenied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that wouldgive states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which mayhave the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.Further, on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required topay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects ofthis gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially ourbusiness, are not yet known.The costs of prescription pharmaceuticals has also been the subject of considerable discussion in the United States,and members of Congress and the Administration have stated that they will address such costs through new legislative andadministrative measures. To date, there have been several recent U.S. congressional inquiries and proposed and enacted stateand federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationshipbetween pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform governmentprogram reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposalfor fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or inother future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certaindrugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing forgeneric drugs for low-income patients. While any proposed measures will require authorization through additionallegislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek newlegislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passinglegislation and implementing regulations designed to control pharmaceutical and biological product pricing, including priceor patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure andtransparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.At the state level, individual states are increasingly aggressive in passing legislation and implementing regulationsdesigned to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authoritiesand individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and whichsuppliers will be included in their prescription drug and other health care programs. These measures could reduce theultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state andfederal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and stategovernments will pay for healthcare products and services, which could result in reduced demand for our product candidatesor additional pricing pressures.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 FDA100 Table of Contentsfast track 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 EMA in theEuropean Union. Generally, if a product candidate with an orphan drug designation subsequently receives the first marketingapproval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity,which precludes the FDA or the EMA from approving another marketing application for the same product for the sametherapeutic 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.101 Table of ContentsOur 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.Laws 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 the102 Table of ContentsFCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved.Conviction of a violation of the FCPA can result in long‑term disqualification as a government contractor. The terminationof a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governinginternational business practices would have a negative impact on our operations and harm our reputation and ability toprocure government contracts. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges forviolations of the FCPA’s accounting provisions.Risks Related to Employee Matters, Managing Growth and Information TechnologyOur future success depends on our ability to attract and retain key executives and to attract, retain, and motivate qualifiedpersonnel.We are highly dependent on the principal members of our management and scientific teams. Each of theseindividuals is employed “at will,” meaning we or the individual may terminate the employment relationship at any time. Wedo not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of thesepersons could impede the achievement of our research, development, and commercialization objectives. Additionally,although we have an interim Chief Executive Officer and will have an interim Chief Financial Officer following theimpending departure of our Chief Financial Officer, we are actively trying to recruit candidates to fill these positions, as wellas a Chief Medical Officer, permanently and any inability to fill these position in an expedient manner may have a materialadverse effect on our business.Recruiting and retaining qualified scientific, clinical, manufacturing, and sales and marketing personnel will also becritical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competitionamong numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition forthe hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultantsand advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors may be employed by employers other than us and may havecommitments under consulting or advisory contracts with other entities that may limit their availability to us. The inabilityto recruit, or loss of services of certain executives, including a permanent Chief Executive Officer and Chief Financial Officerand a Chief Medical Officer, key employees, consultants, or advisors, may impede the progress of our research, development,and commercialization objectives and have a material adverse effect on our business, financial condition, results ofoperations, and prospects.We have expanded and expect to further expand our development, regulatory, clinical, manufacturing and future sales andmarketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt ouroperations.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 132 as of December 31,2018. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational,and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to ourlimited financial resources and the limited experience of our management team in managing a company with suchanticipated growth, we may not be able to effectively manage the expected expansion of our operations or recruit and trainadditional qualified personnel. Moreover, the expected physical expansion of our operations may lead to significant costsand may divert our management and business development resources. Any inability to manage growth could delay theexecution of our 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 maycollect personally identifiable information of clinical trial participants when we begin clinical trials. We also103 Table of Contentsrely to a large extent on information technology systems to operate our business, including our financial systems. We haveoutsourced elements of our confidential information processing and information technology structure, and as a result, we aremanaging independent vendor relationships with third parties who may or could have access to our confidential information.Similarly, our business partners and other third-party providers possess certain of our sensitive data. The secure maintenanceof this information is important to our operations and business strategy. Despite our security measures, our informationtechnology infrastructure (and those of our partners, vendors and third-party providers) may be vulnerable to attacks byhackers or breached due to employee error, malfeasance or other disruptions. We, our partners, vendors, and other third-partyproviders could be susceptible to third party attacks on our, and their, information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise,including organized criminal groups, hacktivists, nation states and others. While we have invested in informationtechnology security measures and the protection of confidential information, there can be no assurance that our efforts willprevent service interruptions or security breaches. Any such interruptions or breach may substantially impair our ability tooperate our business and would compromise our, and their, networks and the information stored could be accessed, publiclydisclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings,liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, anyof which could adversely affect 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.The 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 clinical trials for EDIT-101 and any preclinical studies and clinical trials of any otherproduct candidates that we may develop;·commencement or termination of collaborations for our product development and research programs;·failure or discontinuation of any of our product development and research programs;·results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, 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;104 Table of Contents·the recruitment, including our Chief Executive Officer, Chief Financial Officer and Chief Medical Officer, ordeparture of key personnel, including the recent departures of our former Chief Executive Officer and formerChief Medical Officer, and the impending departure of our Chief Financial Officer;·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.Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actualoperating performance. Following periods of such volatility in the market price of a company’s securities, securities classaction litigation has often been brought against that company. Because of the potential volatility of our stock price, we maybecome the target of securities litigation in the future. Securities litigation could result in substantial costs and divertmanagement’s attention and resources from our business.If securities analysts do not publish research or reports about our business or if they publish negative evaluations of ourstock, the price of our stock and trading volume could decline.The trading market for our common stock depends, in part, on the research and reports that industry or financialanalysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations ofour stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock 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.105 Table of ContentsWe have registered substantially all shares of common stock that we may issue under our equity compensationplans. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitationsapplicable to affiliates. In addition, under the terms of certain of our license agreements and certain promissory notes that wemay issue in the future in connection with these license agreements, we may elect to issue shares of our common stock insatisfaction of specified payment obligations of ours, which shares may be subject to rights requiring us to register suchshares under the Securities Act of 1933, as amended (the “Securities Act”). Such an election by us could result in the issuanceof a substantial number of shares and upon registration under the Securities Act these shares would be able to be freely soldin the public market, subject to volume limitations applicable to affiliates. If any of the additional shares described above aresold, or if it is perceived that they will be sold, in the public market, the market price 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 participant establishing the plan when entering into theplan, without further direction from such participant. A Rule 10b5‑1 plan may be amended or terminated in somecircumstances. Our employees, executive officers, directors, and affiliated stockholders also may buy or sell additional sharesoutside of a Rule 10b5‑1 plan when they are not in possession of material, nonpublic information.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 we have incurred, and will continue to incur, significant legal, accounting, and other expensesthat we did not incur as a private company. The Sarbanes‑Oxley Act of 2002, the Dodd‑Frank Wall Street Reform andConsumer Protection Act, the listing requirements of The Nasdaq Global Select Market, and other applicable securities rulesand regulations impose various requirements on public companies, including establishment and maintenance of effectivedisclosure 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 to comply with the requirements of being, a publiccompany, and our management and other personnel devote a substantial amount of time towards maintaining compliancewith these requirements. These requirements increase our legal and financial compliance costs and make some activities moretime‑consuming and costly. These rules and regulations are often subject to varying interpretations, in many cases due totheir lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided byregulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costsnecessitated by ongoing revisions to disclosure and governance practices.Pursuant to SOX Section 404, we are required to furnish a report by our management on our internal control overfinancial reporting and are required to include an attestation report on internal control over financial reporting issued by ourindependent registered public accounting firm. To maintain compliance with SOX Section 404, we will continue todocument and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, wewill need to dedicate internal resources, engage outside consultants, adopt a detailed work plan to assess and document theadequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validatethrough testing that controls are functioning as documented, and implement a continuous reporting and improvementprocess for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independentregistered public accounting firm will be able to conclude, within the prescribed timeframe or at all, that our internal controlover financial reporting is effective as required by SOX Section 404. If we identify one or more material weaknesses, it couldresult in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidatedfinancial statements.We have broad discretion in the use of our cash reserves and may not use them effectively.Our management has broad discretion to use our cash reserves and could use our cash reserves in ways that do notimprove our results of operations or enhance the value of our common stock. The failure by our management to apply thesefunds effectively could result in financial losses that could have a material adverse effect on our business,106 Table of Contentscause the price of our common stock to decline, and delay the development of our product candidates. Pending their use, wemay invest 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 CommentsNot 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. We believe that our facilities are sufficient to meet our current needs and that suitable additional space willbe 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. Certain of ourintellectual property rights, including ones licensed to us under our licensing agreements, are subject to, and from time totime may be subject to, priority and validity disputes. For additional information regarding these matters, see “Item 1A. RiskFactors—Risks Related to Our Intellectual Property.” Regardless of outcome, litigation or other legal proceedings can havean adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures.Not applicable.108 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.Market InformationOur 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. HoldersAs of February 15, 2019, we had approximately 19 holders of record of our common stock. This number does notinclude beneficial owners whose shares were held in street name.Dividend PolicyWe 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 GraphThe 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, 2018. The comparison assumes $100 was invested after the market closed on109 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 SecuritiesNone.Purchases of Equity Securities by the Issuer and Affiliates PurchasersNeither we nor any affiliated purchaser or anyone acting on behalf of us or an affiliated purchaser made anypurchases of shares of our common stock during the fourth quarter of 2018. 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, 2018, 2017 and 2016 and theconsolidated balance sheet data as of December 31, 2018 and 2017 from our audited consolidated financial statementsincluded elsewhere in this Annual Report on Form 10-K. We have derived the consolidated statements of110 Table of Contentsoperations data from the years ended December 31, 2015 and 2014 and consolidated balance sheet data as of December 31,2016, 2015 and 2014 from our audited consolidated financial statements not included in this Annual Report on Form 10-K.Our historical results for any prior period are not necessarily indicative of the results that may be expected in any futureperiod. Our consolidated statements of operations are summarized as follows (in thousands, except share and per shareamounts): Year Ended December 31, 2018 2017 2016 2015 2014Consolidated Statements of Operations Data: Collaboration and other research and developmentrevenues$31,937 $13,728 $6,053 $1,629 $ —Operating expenses: Research and development 90,654 83,159 56,979 18,846 5,073General and administrative 55,010 50,502 46,262 18,095 7,650Total operating expenses 145,664 133,661 103,241 36,941 12,723Operating loss (113,727) (119,933) (97,188) (35,312) (12,723)Other income (expense), net 328 587 (57) (37,445) (928)Interest income (expense), net 3,445 (978) 62 (143) (34)Total other income (expense), net 3,773 (391) 5 (37,588) (962)Net loss$(109,954) $(120,324) $(97,183) $(72,900) $(13,685)Reconciliation of net loss to net loss attributable tocommon stockholders: Net loss$(109,954) $(120,324) $(97,183) $(72,900) $(13,685)Accretion of redeemable convertible preferredstock to redemption value — — (47) (394) (309)Net loss attributable to common stockholders $(109,954) $(120,324) $(97,230) $(73,294) $(13,994)Net loss per share attributable to commonstockholders, basic and diluted $(2.33) $(2.98) $(3.02) $(28.55) $(12.46)Weighted-average common shares outstanding,basic and diluted 47,097,735 40,323,631 32,219,717 2,566,916 1,123,098(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. December 31, 2018 2017 2016 2015 2014Consolidated Balance Sheet Data: Cash, cash equivalents, and marketable securities $368,955 $329,139 $185,323 $143,180 $10,623Working capital 338,876 295,492 154,100 138,060 4,555Total assets 420,386 373,260 229,182 149,363 12,188Deferred revenue, net of current portion 115,614 94,725 26,000 25,321 —Construction financing lease obligation, net of currentportion 32,417 33,431 35,096 — —Equipment loan, net of current portion and discounts — — — — 344Redeemable convertible preferred stock — — — 199,915 20,772Total stockholders’ equity (deficit) 236,162 208,080 134,607 (83,114) (15,292) 111 (1)(1)(1)(1)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.OverviewWe are a leading, clinical stage genome editing company dedicated to developing potentially transformativegenomic medicines to treat a broad range of serious diseases. We have developed a proprietary genome editing platformbased on CRISPR technology and we continue to expand its capabilities. Our product development strategy is to targetgenetically addressable diseases where gene editing can be used to enable or enhance therapeutic outcomes for patients.Genetically addressable diseases include genetically defined diseases that may be treated by correcting a disease-causinggene and genetically treatable diseases that do not necessarily have a single, disease causing gene, but which nonethelessmay be treated by editing the genome to ameliorate or eliminate the signs or symptoms of the disease. We are advancing bothin vivo CRISPR medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body,and engineered cell medicines, in which cells are edited with our technology and then administered to the patient. While ourdiscovery efforts have ranged across several different genetically addressable diseases and therapeutic areas, the two areaswhere our programs are more mature are ocular diseases and engineered cell medicines to treat blood diseases and cancer.In ocular diseases, our most advanced program is designed to address a specific genetic form of retinal degenerationcalled Leber congenital amaurosis 10 (“LCA10”), a disease for which we are not aware of any available therapies and onlyone other potential treatment in clinical trials in the United States and Europe. In October 2018, we filed an investigationalnew drug (“IND”) application for a Phase 1/2 clinical trial for EDIT-101, our experimental medicine to treat LCA10, whichwas accepted by the United States Food and Drug Administration (“FDA”) in November 2018. We and our partner AllerganPharmaceuticals International Limited (“Allergan”) plan to initiate patient screening in mid-2019 and begin patient dosingin the second half of 2019, enrolling approximately 10 to 20 patients in the United States and Europe.As part of our long term strategy, we have developed and articulated goals for our pipeline of experimentalmedicines and our company that we are working to achieve by the end of 2022. These goals, which we call “EM22,” includehaving at least three experimental medicines in early stage clinical trials and at least two additional experimental112 Table of Contentsmedicines in or ready for late stage clinical trials. In addition, we aim to have a pipeline characterized by potential best-in-class medicines and to be a company with the leading genome editing platform and organizational culture. In May 2015, we entered into a collaboration with Juno Therapeutics, Inc., a Celgene company that is a wholly-owned subsidiary of Celgene Corporation (“Juno Therapeutics”), a leader in the emerging field of immuno-oncology, todevelop novel engineered T cell therapies for cancer, which Juno Therapeutics and we amended and restated in May 2018. InMarch 2017, we entered into a strategic alliance and option agreement with Allergan, a wholly-owned subsidiary of Allerganplc, a leading global pharmaceutical company, to discover, develop, and commercialize new gene editing medicines for arange of ocular disorders. In July 2018, Allergan exercised its option to develop and commercialize EDIT-101 and paid us$15.0 million in connection with such exercise (the “EDIT-101 Option Exercise Payment”). We and an affiliate of Allergansubsequently entered into a co-development and commercialization agreement under which we will co-develop and equallysplit profits and losses for EDIT-101 in the United States. In December 2018, we also received a $25.0 million payment fromAllergan in connection with the acceptance of the IND for EDIT-101 (the “EDIT-101 Milestone Payment”).Since our inception in September 2013, our operations have focused on organizing and staffing our company,business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities ingenome editing, seeking to identify potential product candidates, and undertaking preclinical studies. Except for EDIT-101,all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of ourresearch programs is high. We have not generated any revenue from product sales. We have funded our operations primarilythrough the initial public offering of our common stock (the “IPO”), follow-on public offerings of our common stockincluding through at-the-market offerings, private placements of our preferred stock, payments received under ourcollaboration with Juno Therapeutics and payments received under our strategic alliance with Allergan. From inceptionthrough December 31, 2018, we raised an aggregate of $674.2 million to fund our operations.Since inception, we have incurred significant operating losses. Our net losses were $110.0 million, $120.3 millionand $97.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had anaccumulated deficit of $416.3 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; prepare for and initiate clinical development of EDIT-101 to treat LCA10; seek to identify additional researchprograms and additional product candidates; initiate preclinical testing and clinical trials for any product candidates weidentify and develop; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensorsfor such expenses related to the intellectual property that we in-license from such licensors; further develop our genomeediting platform; hire additional clinical, quality control, and scientific personnel; and incur additional costs associated withoperating as a public company. We do not expect to be profitable for the year ending December 31, 2019 or the foreseeablefuture.Financial Operations OverviewRevenueTo 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 May 2018, in connection with the amendment and restatement of our collaboration agreementwith Juno Therapeutics to expand our collaboration to add an additional research program, we received $5.0 million foramending the agreement and two $2.5 million milestone payments for technical progress in a research program (the “JunoTherapeutics Amendment Payments”). In addition, we will receive up to $22.0 million in research support over the five yearsof the collaboration and across the four programs under the collaboration, subject to adjustment in accordance with the termsof the agreement. Through December 31, 2018, we had recognized an aggregate of $17.7 million of research support fromJuno Therapeutics since entering into the collaboration. During the year ended December 31, 2018, we recognized $6.4million of research support from Juno Therapeutics. As of December 31, 2018, we recorded $32.0 million of deferred revenue,$29.2 million of which is classified as long-term on our consolidated113 Table of Contentsbalance sheet, related to the collaboration. In connection with entering into our strategic alliance with Allergan in March2017, we received an upfront payment of $90.0 million from Allergan (such payment, the “Allergan Upfront”). In addition,we received $15.0 million related to the EDIT-101 Option Exercise Payment in July 2018 and $25.0 million related to theEDIT-101 Milestone Payment in December 2018. Through December 31, 2018, we had recognized an aggregate of $30.8million in revenue related to our strategic alliance with Allergan, which includes all of the EDIT-101 Option ExercisePayment and a portion of the EDIT-101 Milestone Payment. For the year ended December 31, 2018, we recognized $21.5million in revenue in connection with the Allergan Upfront, which includes all of the EDIT-101 Option Exercise Paymentand a portion of the EDIT-101 Milestone Payment. As of December 31, 2018, we recorded $99.2 million of deferred revenue,of which $86.4 million is classified as long-term on the consolidated balance sheet. For additional information about ourrevenue recognition policy related to the Juno Therapeutics collaboration or the Allergan agreement, see “—CriticalAccounting 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 alliance with Allergan, any other collaborations or agreements we may enter into andanticipated interest income.ExpensesResearch and Development ExpensesResearch and development expenses consist primarily of costs incurred for our research and development activities,including our drug 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;114 Table of Contents·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. As a result of Allergan’s exercise of its option to license EDIT-101 and our election to enter into a profit-sharingarrangement with Allergan in the United States for EDIT-101, our obligations to fund such program in the United States willrepresent 50% of the total costs related to developing and commercializing the program in the United States.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 to preparefor and initiate the clinical development for EDIT-101, as well as supporting preclinical studies for our other researchprograms.General and Administrative ExpensesGeneral 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 intellectual property and corporate matters,and fees for accounting and consulting services.We anticipate that our general and administrative expenses will increase in the future to support continued researchand development activities and potential commercialization of any product candidates we identify and develop. Theseincreases will include increased costs related to the hiring of additional personnel and fees to outside consultants. We alsoanticipate increased expenses related to reimbursement of third‑party patent‑related expenses and expenses associated withoperating as a public company, including costs for audit, legal, regulatory, and tax‑related services, director and officerinsurance premiums, and investor relations costs. With respect to reimbursement of third-party intellectual property-relatedexpenses specifically, given the ongoing nature of the opposition proceedings involving the patents licensed to us under ourlicense agreement with The Broad Institute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”), weanticipate general and administrative expenses will continue to be significant. Some of our in‑licensed patents and patentapplications under our license agreement with Broad and Harvard are subject to priority disputes, and we anticipate that ourobligation to reimburse Broad and Harvard for expenses related to these disputes during future periods will be substantialuntil such proceedings are resolved.Other Income (Expense), NetFor the year ended December 31, 2018, other income, net consisted primarily of interest income, accretion ofdiscounts associated with marketable securities, and rental income from our former subtenant, partially offset by interestexpense on our construction financing lease obligation.115 Table of ContentsFor the year ended December 31, 2017, other expense, net consisted primarily of interest expense on ourconstruction financing lease obligation and promissory notes, and amortization of premiums associated with marketablesecurities, partially offset by rental income from our former subtenant, interest income, and accretion of discounts associatedwith marketable securities.For the year ended December 31, 2016, other income, net consisted primarily of interest income earned on our cashequivalents and government grant income, partially offset by interest expense on our construction financing lease obligationand loss on disposal of equipment.Critical Accounting Policies and EstimatesOur 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.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 RecognitionWe recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification (“ASC”), Topic 606, Revenue Recognition (“ASC 606”). Accordingly, we recognize revenue following the fivestep model prescribed under Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers: (i)identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transactionprice; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (oras) we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that we willcollect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contractinception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promisedwithin each contract and determine those that are performance obligations, and whether each promised good or service isdistinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performanceobligation when (or as) the performance obligation is satisfied. We evaluate the measure of progress each reporting periodand, if necessary, adjust the measure of performance and related revenue recognition.Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in ourconsolidated balance sheets.Accrued Research and Development ExpensesAs 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 development116 Table of Contentsexpenses include the costs incurred for services performed by our vendors in connection with research and developmentactivities 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.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.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.117 Table of ContentsThe 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, 2018 2017 2016 Expected volatility 77.5% 77.8% 78.4% Expected term (in years) 6.25 6.25 6.25 Risk-free interest rate 2.9% 2.1% 1.5% 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 were as follows. There were no stock optionsgranted to non-employees during 2017 or 2018: Year Ended December 31, 2018 2017 2016 Expected volatility — — 76.5% Expected term (in years) — — 10.0 Risk-free interest rate — — 1.6% Expected dividend yield — — — Stock-based compensation totaled approximately $26.6 million, $23.4 million and $16.9 million for the yearsended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had $6.0 million and $47.4 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 3.7 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.Corporate Equity SecuritiesWe record investments in privately issued corporate equity securities that do not have readily determinable fairvalues at cost and adjust for changes in observable prices minus impairment. Each reporting period we adjust the carryingvalue of these investments if we observe that additional shares have been issued in an orderly transaction between marketparticipants resulting in a price increase or decrease per share. Additionally, each reporting period we review theseinvestments for impairment considering all available information to conclude whether an impairment exists. Changes inmeasurement for all corporate equity investments are recognized in “Other income (expense), net.”118 Table of ContentsResults of OperationsComparison of Years ended December 31, 2018 and 2017The following table summarizes our results of operations for the years ended December 31, 2018 and 2017, togetherwith the changes in those items in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2018 2017 Dollar Change PercentageChangeCollaboration and other research and development revenues $31,937 $13,728 $18,209 n/m Operating expenses: Research and development 90,654 83,159 7,495 9%General and administrative 55,010 50,502 4,508 9%Total operating expenses 145,664 133,661 12,003 9%Other income (expense), net Other income, net 328 587 (259) (44)%Interest income (expense), net 3,445 (978) 4,423 n/m Total other income (expense), net 3,773 (391) 4,164 n/m Net loss $(109,954) $(120,324) $10,370 9% For our results of operations, we have included the respective percentage of changes, unless greater than 100% orless than (100)%, in which case we have denoted such changes as not meaningful (n/m).Collaboration and Other Research and Development RevenuesCollaboration and other research and development revenues increased by $18.2 million, to $31.9 million for theyear ended December 31, 2018 from $13.7 million for the year ended December 31, 2017. This increase was primarilyattributable to a $12.7 million increase in revenue recognized pursuant to our strategic alliance with Allergan, $4.0 millionin revenue recognized in connection with entering into a license agreement with Beam Therapeutics Inc. (“Beam”) and a$1.5 million increase in revenue recognized pursuant to our collaboration agreement with Juno Therapeutics.Research and Development ExpensesResearch and development expenses increased by $7.5 million, to $90.7 million for the year ended December 31,2018 from $83.2 million for the year ended December 31, 2017. The following table summarizes our research anddevelopment expenses for the years ended December 31, 2018 and December 31, 2017, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2018 2017 Dollar Change PercentageChangeProcess and platform development expenses $25,466 $17,117 $8,349 49%Employee related expenses 19,771 14,406 5,365 37%Stock-based compensation expenses 14,734 15,131 (397) (3)%Success payment expenses 12,500 14,500 (2,000) (14)%Licensing and sublicensing payment expenses 8,707 14,610 (5,903) (40)%Facility expenses 6,058 4,416 1,642 37%Other expenses 3,418 2,979 439 15%Total research and development expenses $90,654 $83,159 $7,495 9% 119 Table of ContentsThe increase in research and development expenses for the year ended December 31, 2018 compared to the yearended December 31, 2017 was primarily attributable to:·approximately $8.3 million in increased process and platform development expenses due to increased researchactivity, mostly relating to external research and development costs that we expect will increase further as wecontinue to prepare for and initiate clinical development for EDIT-101, which was partially offset by $1.7million in reimbursable research and development expenses associated with our profit-sharing arrangement withAllergan related to EDIT-101;·approximately $5.4 million in increased employee related expenses due to an increase in the size of ourworkforce; and·approximately $2.0 million in increased facility and other related expenses due to increased professionalservice and office expenses.These increases were partially offset by the following decreases in research and development expenses:·approximately $5.9 million in decreased licensing and sublicensing payment expenses resulting primarily from$14.5 million in sublicense fees that were owed to certain of our licensors in connection with receiving theAllergan Upfront and a milestone received under our collaboration with Juno Therapeutics in 2017, partiallyoffset by $8.2 million in sublicense fees owed to certain of our licensors in connection with the EDIT-101Option Exercise Payment, EDIT-101 Milestone Payment, certain amendment and milestone payments receivedfrom Juno Therapeutics under our collaboration and the consideration received from Beam in connection withentering into a license agreement in 2018;·approximately $2.0 million in decreased success payment expenses resulting primarily from $14.5 million insuccess payments due to the triggering of multiple success payment obligations under licensing agreementswith Broad and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) in 2017,partially offset by the $12.5 million notes payable that were issued to Broad and settled during the secondquarter of 2018 in connection with us entering into a sponsored research agreement with Broad; and·approximately $0.4 million in decreased stock-based compensation expenses.General and Administrative ExpensesGeneral and administrative expenses increased by $4.5 million, to $55.0 million for the year ended December 31,2018 from $50.5 million for the year ended December 31, 2017. The following table summarizes our general andadministrative expenses for the years ended December 31, 2018 and December 31, 2017, together with the changes in thoseitems in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2018 2017 Dollar Change PercentageChangeIntellectual property and patent related fees $20,442 $23,921 $(3,479) (15)%Stock-based compensation expenses 11,864 8,233 3,631 44%Employee related expenses 11,502 8,915 2,587 29%Professional service expenses 6,875 6,010 865 14%Other expenses 4,327 3,423 904 26%Total general and administrative expenses $55,010 $50,502 $4,508 9% 120 Table of ContentsThe increase in general and administrative expenses for the year ended December 31, 2018 compared to the yearended December 31, 2017 was primarily attributable to:·approximately $3.6 million in increased stock-based compensation expenses due to an increase in employeestock option expense;·approximately $2.6 million in increased employee related expenses due to an increase in the size of ourworkforce;·approximately $0.9 million in increased other expenses including facility-related expenses; and·approximately $0.9 million in increased professional services expenses.These increases were partially offset by an approximate $3.5 million in decreased intellectual property and patentrelated fees, including expenses associated with the prosecution and maintenance of patents and patent applications.Other Income (Expense), NetFor the year ended December 31, 2018, other income, net was $3.8 million, which was primarily attributable tointerest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant,partially offset by interest expense on our construction financing lease obligation.For the year ended December 31, 2017, other expense, net was $0.4 million, which was primarily attributable tointerest expense on our construction financing lease obligation and certain promissory notes, and amortization of premiumsassociated with marketable securities, partially offset by rental income from our former subtenant, interest income andaccretion of discounts associated with marketable securities.Comparison of Years Ended December 31, 2017 and 2016The 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: 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 (expense) income, net: Other income (expense), net 587 (57) 644 n/m Interest income (expense), net (978) 62 (1,040) n/m Total other income (expense), net (391) 5 (396) n/m Net loss $(120,324) $(97,183) $(23,141) 24% Collaboration and Other Research and Development RevenuesCollaboration and other research and development revenues increased by $7.7 million, to $13.7 million for the yearended December 31, 2017 from $6.1 million for year ended December 31, 2016. This increase was primarily attributable to$8.8 million in revenue recognized pursuant to our strategic alliance with Allergan, partially offset by a $0.8 milliondecrease in revenue recognized pursuant to our collaboration agreement with Juno Therapeutics. 121 Table of ContentsResearch and Development ExpensesResearch 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 n/m 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% The 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 MGH;·approximately $7.5 million in increased process and platform development expenses due to increased researchactivity;·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 bysublicensing 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 ExpensesGeneral 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 and122 Table of Contentsadministrative 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 Percentage ChangeIntellectual property and patent related fees $23,921 $26,963 $(3,042) (11)%Employee related expenses 8,915 6,881 2,034 30%Stock-based compensation expenses 8,233 4,234 3,999 94%Professional service expenses 6,010 5,483 527 10%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.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), NetFor the year ended December 31, 2017, other expense, net was $0.4 million, which was primarily attributable tointerest expense on our construction financing lease obligation and certain promissory notes, and amortization of premiumsassociated with marketable securities, partially offset by rental income from our former subtenant, interest income andaccretion of discounts associated with marketable securities.For the year ended December 31, 2016, other income, net was $5 thousand, which was primarily attributable tointerest income earned on our cash equivalents and government grant income, partially offset by interest expense on ourconstruction financing lease obligation and loss on disposal of equipment. Liquidity and Capital ResourcesSources of LiquidityFrom inception through December 31, 2018, we funded our operations primarily through proceeds from privateplacements of our preferred stock of $163.3 million, net proceeds of $328.3 million from public offerings of our commonstock, the Allergan Upfront and other milestones paid by Allergan, and payments from Juno Therapeutics under ourcollaboration with them. As of December 31, 2018, we had cash, cash equivalents and marketable securities of $369.0million.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.123 Table of ContentsAdditionally, under our strategic alliance with Allergan, we are eligible to earn milestone payments, certain costreimbursement for EDIT-101 costs in the United States and certain option exercise or extension payments. Our ability to earnthe milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of ourdevelopment, regulatory and commercial activities and, as such, are uncertain at this time. As of December 31, 2018, ourright to contingent payments under our collaboration agreement with Juno Therapeutics and our strategic alliance withAllergan are our only significant committed potential external sources of funds.At-the-Market OfferingsIn 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 our receiving net proceeds from the offering of approximately $48.5million. Following these sales, no shares of common stock remained available for sale under the sales agreement. Shares soldpursuant to the sales agreement were sold pursuant to a shelf registration statement, which became effective on March 15,2017. In March 2018, we entered into a sales agreement with Cowen, under which we are able from time to time to issue andsell shares of our common stock through Cowen for aggregate gross sales proceeds of $150.0 million. In November 2018, wesold 1,107,000 shares of our common stock to Cowen at a weighted-average price of $26.95 per share (the “NovemberOffering”). We paid a 3% cash commission on the gross sales price per share of common stock sold resulting in our receivingnet proceeds of $28.4 million.IndebtednessIn 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. In June 2018, in connection with entering into a sponsored research agreementwith Broad, we issued promissory notes to Broad in the aggregate original principal amount of $12.5 million and issued330,617 shares of our common stock to the Broad as payment of all outstanding principal and interest under such notes.Upon such issuance, such notes were cancelled.Under the terms of the Cpf1 License Agreement, Cas9-II License Agreement and our sponsored research agreementwith Broad, we may be required to issue additional promissory notes in connection with the achievement of success paymentcriteria. See Note 8 to our consolidated financial statements for more information regarding such success payment criteria.124 Table of ContentsCash FlowsThe following table provides information regarding our cash flows for the years ended December 31, 2018, 2017and 2016, respectively (in thousands): Year Ended December 31, 2018 2017 2016 Net cash (used in) provided by: Operating activities $(45,707) $(9,417) $(50,246)Investing activities (53,087) (183,810) (3,473)Financing activities 86,940 154,534 97,161Net increase (decrease) in cash and cash equivalents $(11,854) $(38,693) $43,442 Net Cash Used in Operating ActivitiesNet cash used in operating activities was approximately $45.7 million for the year ended December 31, 2018, andconsisted primarily of a net loss of $110.0 million adjusted for non-cash items, including non-cash research and developmentexpenses of $14.4 million, stock-based compensation expenses of $26.6 million, non-cash investment income from corporateequity securities of $3.7 million, depreciation expense of $3.3 million, other non-cash items income of $3.3 million and a netchange in operating assets and liabilities of $26.9 million. The change in operating assets and liabilities was related to anincrease in deferred revenue of $22.9 million, an increase in accrued expenses of $4.0 million, an increase in accountspayable of $1.8 million, an increase in other current liabilities of $1.0 million and a decrease in accounts receivable of $0.6million, partially offset by an increase in prepaid expenses and other current assets of $3.4 million and an increase in othernon-current assets of $0.1 million.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 millionNet 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 Investing ActivitiesNet cash used in investing activities was approximately $53.1 million for the year ended December 31, 2018 andconsisted primarily of costs to acquire marketable securities of $459.4 million and costs to acquire property plant andequipment of $4.8 million, partially offset by proceeds from maturities of marketable securities of $411.0 million.Net cash used in investing activities was approximately $183.8 million for the year ended December 31, 2017, andconsisted primarily of costs to acquire marketable securities of $375.3 million and costs to acquire property plant andequipment of $2.1 million, partially offset by proceeds from maturities of marketable securities of $193.5 million.125 Table of ContentsNet cash used in investing activities was $3.5 million for the year ended December 31, 2016 and consisted primarilyof costs to acquire property plant and equipment.Net Cash Provided by Financing ActivitiesNet cash provided by financing activities was approximately $86.9 million for the year ended December 31, 2018,primarily related to $76.8 million in proceeds received from at-the-market offerings of our common stock, net of issuancecosts that were paid as of December 31, 2018, $10.3 million in proceeds from exercises of options for our common stock and$0.7 million from issuances of our common stock under benefit plans, partially offset by payments on our constructionfinancing lease obligation of $0.9 million.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 lease obligation of $0.8 million and payments on our promissory notes of$0.6 million.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 exercisesof options for our common stock of $0.2 million, partially offset by payments on our construction financing lease obligationof $0.6 million.Funding RequirementsWe expect our expenses to increase substantially in connection with our ongoing activities, particularly as wecontinue to advance our current research programs and our preclinical development activities; prepare for and initiate theclinical development of EDIT-101 to treat LCA10; seek to identify additional research programs and additional productcandidates; initiate preclinical testing and clinical trials for any product candidates we identify and develop; maintain,expand, and protect our intellectual property portfolio, including reimbursing our licensors for expenses related to theintellectual property that we in-license from such licensors; further develop our genome editing platform; hire additionalclinical, quality control, and scientific personnel; and incur additional costs associated with operating as a public company.In addition, if we obtain marketing approval for any product candidate that we identify and develop, we expect to incursignificant commercialization expenses related to product sales, marketing, manufacturing, and distribution to the extent thatsuch sales, marketing, and distribution are not the responsibility of a collaborator. We do not expect to generate significantrecurring revenue unless and until we obtain regulatory approval for and commercialize a product candidate. Furthermore,since 2016 we have incurred, and in future years we expect to continue to incur, significant costs associated with operating asa public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuingoperations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, oreliminate our research and development programs or future commercialization efforts.We expect that our existing cash, cash equivalents and marketable securities at December 31, 2018 and anticipatedinterest income will enable us to fund our operating expenses and capital expenditure requirements for at least the next 24months following the date of this Annual Report on Form 10-K. We have based our estimates on assumptions that may proveto be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirementswill 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 for and initiating the clinical development of EDIT-101 to treat LCA10;·the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectualproperty and proprietary rights, and defending intellectual property‑related claims;126 Table of Contents·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 additional 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.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.127 Table of ContentsContractual ObligationsThe following table summarizes our significant contractual obligations as of payment due date by period atDecember 31, 2018 (in thousands): Less Than More than Total 1 Year 1 to 3 Years 3 to 5Years 5 YearsSublicensing expenses $3,750 $3,750 $ — $ — $ —Operating lease obligations 24,129 5,477 14,850 3,802 —Total $27,879 $9,227 $14,850 $3,802 $ —(1)In January 2019, we settled the contractual obligation in cash related to $3.8 million in sublicense fees owed tocertain of our licensors in connection with the EDIT-101 Milestone Payment.(2)Represents future minimum lease payments under our non-cancelable operating leases. The minimum leasepayments above exclude our share of the facility operating expenses and other costs that are reimbursable to thelandlord under the leases.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.”We enter into contracts in the normal course of business with contract research organizations and other vendors toassist in the performance of our research and development activities and other services and products for operating purposes.These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in thetable of contractual obligations and commitments.Off‑Balance Sheet ArrangementsWe 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 InflationInflation 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, 2018, 2017 and 2016. 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, 2018, we had cash and cashequivalents of $134.8 million, primarily held in money market mutual funds consisting of U.S. government-backedsecurities, and marketable securities of $234.2 million, primarily consisting of U.S. government-backed securities. Ourprimary 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.128 (1)(2)Table of ContentsWhile we contract with certain vendors and institutions internationally, substantially all of our total liabilities as ofDecember 31, 2018 were denominated in the United States dollar and we believe that we do not have any material exposureto foreign currency exchange rate risk.129 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 131Consolidated Balance Sheets 132Consolidated Statements of Operations 133Consolidated Statements of Comprehensive Loss 134Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) 135Consolidated Statements of Cash Flows 136Notes to Consolidated Financial Statements 137 130 Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Editas Medicine, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Editas Medicine, Inc. (the “Company”) as ofDecember 31, 2018 and 2017, the related consolidated statements of operations, comprehensive loss, redeemable convertiblepreferred stock and stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 31,2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company at December31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2018, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based oncriteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework) and our report dated February 28, 2019 expressed an unqualified opinion thereon.Adoption of ASU No. 2014-09As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting forrevenue in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts withCustomers (Topic 606), and the related amendments.Basis for OpinionThese 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 thePCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities lawsand the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of thefinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such proceduresincluded examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditsalso included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion. /s/ Ernst & Young LLP We have served as the Company‘s auditor since 2015.Boston, MassachusettsFebruary 28, 2019 131 Table of ContentsEditas Medicine, Inc.Consolidated Balance Sheets(amounts in thousands, except share and per share data) December 31, 2018 2017 ASSETS Current assets: Cash and cash equivalents $134,776 $146,630 Marketable securities 234,179 182,509 Accounts receivable 30 679 Prepaid expenses and other current assets 5,791 2,381 Total current assets 374,776 332,199 Property and equipment, net 40,232 39,442 Restricted cash and other non-current assets 5,378 1,619 Total assets $420,386 $373,260 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $5,327 $4,020 Accrued expenses 12,813 11,049 Notes payable — 7,500 Deferred revenue, current 15,712 13,238 Other current liabilities 2,048 900 Total current liabilities 35,900 36,707 Deferred revenue, net of current portion 115,614 94,725 Construction financing lease obligation, net of current portion 32,417 33,431 Other non-current liabilities 293 317 Total liabilities 184,224 165,180 Commitments 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; 49,028,907 and 45,025,448shares issued, and 48,758,951 and 44,507,960 shares outstanding at December 31, 2018 and December31, 2017, respectively 5 4 Additional paid-in capital 652,464 514,002 Accumulated other comprehensive loss (29) (76) Accumulated deficit (416,278) (305,850) Total stockholders’ equity 236,162 208,080 Total liabilities and stockholders’ equity $420,386 $373,260 The accompanying notes are an integral part of the consolidated financial statements.132 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Operations(amounts in thousands, except per share and share data) Year Ended December 31, 2018 2017 2016Collaboration and other research and development revenues$31,937 $13,728 $6,053Operating expenses: Research and development 90,654 83,159 56,979General and administrative 55,010 50,502 46,262Total operating expenses 145,664 133,661 103,241Operating loss (113,727) (119,933) (97,188)Other income (expense), net Other income (expense), net 328 587 (57)Interest income (expense), net 3,445 (978) 62Total other income (expense), net 3,773 (391) 5Net loss$(109,954) $(120,324) $(97,183)Reconciliation of net loss to net loss attributable to common stockholders: Net loss$(109,954) $(120,324) $(97,183)Accretion of redeemable convertible preferred stock to redemption value — — (47)Net loss attributable to common stockholders$(109,954) $(120,324) $(97,230)Net loss per share attributable to common stockholders, basic and diluted$(2.33) $(2.98) $(3.02)Weighted-average common shares outstanding, basic and diluted 47,097,735 40,323,631 32,219,717 The accompanying notes are an integral part of the consolidated financial statements. 133 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Comprehensive Loss(amounts in thousands) Year Ended December 31, 2018 2017 2016Net Loss$(109,954) $(120,324) $(97,183)Other comprehensive loss: Unrealized loss on marketable securities 47 (76) —Comprehensive loss$(109,907) $(120,400) $(97,183) The accompanying notes are an integral part of the consolidated financial statements. 134 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity(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, 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 of initialpublic offering — — — — 376 — — 376Issuance of common stock from initial publicoffering, net of issuance costs of $11.1million — — 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 $0.6 million — — 4,600,000 — 96,685 — — 96,685Issuance of common stock for repayment ofnotes payable — — 750,617 — 14,823 — — 14,823Issuance of common stock from publicoffering, net of issuance costs of $1.7 million — — 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) $208,080Cumulative effect adjustment for adoption ofnew accounting guidance — — — — — (474) — (474)Issuance of common stock for repayment ofnotes payable — — 636,526 — 22,030 — — 22,030Issuance of common stock from publicoffering, net of issuance costs of $0.1 million — — 1,429,205 1 48,493 — — 48,494Issuance of common stock from publicoffering, net of issuance costs of $0.6 million — — 1,107,000 — 28,387 — — 28,387Issuance of common stock for asset purchaseagreement — — 56,099 — 1,942 — — 1,942Exercise of stock options — — 749,294 — 10,328 — — 10,328Stock-based compensation expense — — — — 24,180 — — 24,180Purchase of common stock under benefitsplans — — 26,272 — 680 — — 680Vesting of founder shares — — 72,000 — 2,418 — — 2,418Vesting of employee restricted common stockand common stock subject to repurchase — — 174,595 — 4 — — 4Unrealized losses on marketable securities — — — — — — 47 47Net loss — — — — — (109,954) — (109,954)Balance at December 31, 2018 — $ — 48,758,951 $ 5 $652,464 $(416,278) $(29) $236,162 The accompanying notes are an integral part of the consolidated financial statements. 135 Table of ContentsEditas Medicine, Inc.Consolidated Statements of Cash Flows(amounts in thousands) Year Ended December 31, 2018 2017 2016Cash flow from operating activities Net loss$(109,954) $(120,324) $(97,183)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 26,598 23,364 16,881Depreciation 3,254 2,683 1,202Non-cash research and development expenses 14,442 14,500 10,000Re-measurement of warrant to purchase redeemable securities — — 87Non-cash investment in equity securities (3,667) — —Other non-cash items, net (3,268) (300) 869Changes in operating assets and liabilities: Accounts receivable 649 (591) 931Prepaid expenses and other current assets (3,410) (596) (1,306)Other non-current assets (92) 2 2,246Accounts payable 1,780 (1,515) 3,251Accrued expenses 4,042 (8,334) 11,841Deferred revenue 22,889 81,707 935Other current and non-current liabilities 1,030 (13) —Net cash used in operating activities (45,707) (9,417) (50,246)Cash flow from investing activities Purchases of property and equipment (4,754) (2,059) (3,493)Proceeds from the sale of equipment 37 15 20Purchases of marketable securities (459,370) (375,266) —Proceeds from maturities of marketable securities 411,000 193,500 —Net cash used in investing activities (53,087) (183,810) (3,473)Cash flow from financing activities Proceeds from offering of common stock, net of issuance costs 76,789 154,143 97,488Proceeds from exercise of stock options 10,328 1,755 233Payments on construction financing lease obligation (857) (764) (560)Issuances of common stock under benefit plans 680 — —Payments of notes payable — (600) —Net cash provided by financing activities 86,940 154,534 97,161Net increase (decrease) in cash, cash equivalents, and restricted cash (11,854) (38,693) 43,442Cash, cash equivalents, and restricted cash, beginning of period 148,249 186,942 143,500Cash, cash equivalents, and restricted cash, end of period$136,395 $148,249 $186,942Supplemental disclosure of cash and non-cash activities: Accretion of redeemable convertible preferred stock to redemption value$ — $ — $47Fixed asset additions included in accounts payable and accrued expenses 659 623 130Reclassification of warrants to additional paid in capital — — 376Conversion of preferred stock to common stock upon closing of the initialpublic offering — — 199,962Reclassification of liability for common stock subject to repurchase 4 11 11Offering expenses included in accounts payable and accrued expenses 92 235 —Issuance of common stock for repayment of notes payable 22,030 14,823 —Issuance of common stock for asset acquisition 1,942 — — The accompanying notes are an integral part of the consolidated financial statements. 136 Table of ContentsEditas Medicine, Inc.Notes to Consolidated Financial Statements1. Nature of BusinessEditas Medicine, Inc. (the “Company”) is a clinical stage company dedicated to treating patients with geneticallyaddressable diseases. The Company was incorporated in the state of Delaware in September 2013. Its principal offices are inCambridge, 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, its at-the-market offerings of itscommon stock in January 2018 and November 2018, and private placements of preferred stock, payments received under aresearch collaboration with Juno Therapeutics, Inc., a Celgene company that is a wholly-owned subsidiary of CelgeneCorporation (“Juno Therapeutics”), and from payments received under a strategic alliance and option agreement withAllergan 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 to large-scale production of products.LiquidityIn February 2016, the Company completed its IPO and received aggregate net proceeds of approximately $97.5million. In March 2017, the Company completed a follow-on offering and received net proceeds of approximately $96.7million (the “2017 March Offering”). In December 2017, the Company completed another follow-on offering and receivednet proceeds of approximately $57.2 million (the “2017 December Offering”). The Company completed at-the-marketofferings in January 2018, receiving net proceeds of approximately $48.5 million (the “January 2018 ATM Offering”), andan at-the-market offering November 2018, receiving net proceeds of approximately $28.4 million (the “November 2018ATM Offering”).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, 2018 and anticipated interest income willenable it to fund its operating expenses and capital expenditure requirements for at least the next 24 months following thedate of this Annual Report on Form 10-K. The Company had an accumulated deficit of $416.3 million at December 31, 2018,and will require substantial additional capital to fund its operations. The Company has never generated any product revenue.There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate productrevenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failureof the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on theCompany’s business, results of operations, and financial condition. 2. Summary of significant accounting policiesPrinciples of ConsolidationThe 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.137 Table of ContentsBasis of PresentationThe 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”).ReclassificationCertain 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 EstimatesThe 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 and deferred tax valuation allowances.The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believesto be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.Fair Value of Financial InstrumentsASC 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.To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market,the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company indetermining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair valuehierarchy is based on the lowest level of any input that is significant to the fair value measurement.The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, 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 Company138 Table of Contentsbelieves that the carrying value of the notes payable approximates their fair value based on Level 3 inputs including aquoted rate.Cash, Cash Equivalents, and Restricted CashThe 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 held in the form of money market accounts as collateral for theCompany’s construction financing lease obligation as of December 31, 2018, 2017 and 2016.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, 2018 2017 2016Cash and cash equivalents $134,776 $146,630 $185,323Restricted cash included in "Restricted cash and other non-currentassets" 1,619 1,619 1,619Total $136,395 $148,249 $186,942 Marketable SecuritiesThe 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 ReceivableThe 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 not had any write-offsof bad debt, and the Company did not have an allowance for doubtful accounts as of December 31, 2018 and 2017.Property and EquipmentProperty 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 additions139 Table of Contentsand betterments are capitalized. Depreciation is calculated over the estimated useful lives of the assets using the straight‑linemethod. The Company capitalizes laboratory equipment used for research and development if it has alternative future use inresearch and development 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 AssetsThe 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 31,2018.Revenue RecognitionTo date, the Company has primarily earned revenue under the collaboration and license agreement with JunoTherapeutics and the strategic alliance with Allergan.The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers(“ASC 606”), effective January 1, 2018. The Company enters into collaboration agreements and certain other agreements thatare within the scope of ASC 606, under which the Company licenses, may license or grants an option to license rights tocertain of the Company’s product candidates and performs research and development services in connection with sucharrangements. The terms of these arrangements typically include payment of one or more of the following: non-refundable,up-front fees; reimbursement of research and development costs; development, clinical, regulatory and commercial salesmilestone payments, and royalties on net sales of licensed products.Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in anamount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Todetermine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii)determination of whether the promised goods or services are performance obligations including whether they are distinct inthe context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv)allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Companysatisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable thatthe entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.The promised goods or services in the Company’s arrangements typically consist of a license, or option to license,rights to the Company’s intellectual property or research and development services. The Company provides options toadditional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercisesuch options, unless the option provides a material right to the customer. Performance obligations are promised goods orservices in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customercan benefit from the good or service on its own or together with other readily available resources140 Table of Contentsand (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whetherpromised good or services are distinct, the Company considers factors such as the stage of development of the underlyingintellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the requiredexpertise is readily available and whether the goods or services are integral or dependent to other goods or services in thecontract.The Company estimates the transaction price based on the amount expected to be received for transferring thepromised goods or services in the contract. The consideration may include fixed consideration or variable consideration. Atthe inception of each arrangement that includes variable consideration, the Company evaluates the amount of potentialpayment and the likelihood that the payments will be received. The Company utilizes either the most likely amount methodor expected value method to estimate the amount expected to be received based on which method best predicts the amountexpected to be received. The amount of variable consideration that is included in the transaction price may be constrainedand is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of thecumulative revenue recognized will not occur in a future period.The Company’s contracts often include development and regulatory milestone payments that are as assessed underthe most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestonepayments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are notconsidered probable of being achieved until those approvals are received. At the end of each reporting period, the Companyre-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and ifnecessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-upbasis, which would affect collaboration and other research and development revenues in the period of adjustment.For arrangements that include sales-based royalties, including milestone payments based on the level of sales, andthe license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the laterof (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has beenallocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resultingfrom any of the Company’s collaboration or strategic alliance arrangements.The Company allocates the transaction price based on the estimated standalone selling price. The Company mustdevelop assumptions that require judgment to determine the stand-alone selling price for each performance obligationidentified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which mayinclude other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variableconsideration is allocated specifically to one or more performance obligations in a contract when the terms of the variableconsideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent withthe amounts the Company would expect to receive for the satisfaction of each performance obligation.The consideration allocated to each performance obligation is recognized as revenue when control is transferred forthe related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizesjudgment to assess the nature of the combined performance obligation to determine whether the combined performanceobligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. TheCompany evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance andrelated revenue recognition.The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs itsobligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right toconsideration is unconditional.141 Table of ContentsPrior to ASC 606 AdoptionRevenue for the years ended December 31, 2017 and 2016 were recognized in accordance with ASC Topic 605,Revenue Recognition (“ASC 605”). Accordingly, revenue was recognized for each unit of accounting when all of thefollowing 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 were 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 evaluated 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 Companyevaluated multiple‑element arrangements to determine (1) the deliverables included in the arrangement and (2) whether theindividual deliverables represented separate units of accounting or whether they must be accounted for as a combined unit ofaccounting. This evaluation involved subjective determinations and required the Company to make judgments about theindividual deliverables and whether such deliverables were separable from the other aspects of the contractual relationship.Deliverables were considered separate units of accounting provided that the delivered item had value to the customer on astandalone basis and, if the arrangement included 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 had standalone value, the Company considered 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 considered 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 were considered substantive if, at the inception of the arrangement, the Company was at risk as to whetherthe collaboration partner will choose to exercise the option. Factors that the Company considered in evaluating whether anoption is substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit thecollaborator might obtain from the arrangement without exercising the option and the likelihood the option will beexercised. When an option was considered substantive, the Company does not consider the option or item underlying theoption to be a deliverable at the inception of the arrangement and the associated option fees are not included in allocableconsideration, assuming the option is not priced at a significant and incremental discount. Conversely, when an option is notconsidered substantive, the Company would consider the option, including other deliverables contingent upon the exerciseof the option, to be a deliverable at the inception of the arrangement and a corresponding amount would be included inallocable arrangement consideration. In addition, if the price of the option includes a significant incremental discount, thediscount would be included as a deliverable at the inception of the arrangement.The consideration received under the arrangement that is fixed or determinable was then allocated among theseparate units of accounting using the relative selling price method. The Company determined the estimated selling price forunits of accounting within each arrangement using vendor‑specific objective evidence (“VSOE”) of selling price, ifavailable, third‑party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price (“BESP”) ifneither VSOE nor TPE is available. Determining the BESP for a unit of accounting required significant judgment. Indeveloping the BESP for a unit of accounting, the Company considered applicable market conditions and relevantentity‑specific factors, including factors that were contemplated in negotiating the agreement with the customer142 Table of Contentsand estimated costs. The Company validated the BESP for units of accounting by evaluating whether changes in the keyassumptions used to determine the BESP had a significant effect on the allocation of arrangement consideration betweenmultiple units of accounting.The Company recognized 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 recognized 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 recognized revenue under the arrangement on a straight‑line basisover the period the Company is expected to complete its performance obligations. Conversely, if the pattern of performancein which the service is provided to the customer can be determined and objectively measurable performance measures exist,then the Company recognized 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 evaluated whether eachmilestone was 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 evaluated factors suchas the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestoneand the level of effort and investment required to achieve the particular milestone in making this assessment. There wasconsiderable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that amilestone is substantive. Milestones that are not considered substantive were recognized as earned if there are no remainingperformance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met.Research and Development ExpensesResearch and development expenses 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 and clinicalactivities on the Company’s behalf, the cost of purchasing lab supplies and non‑capital equipment used in preclinical andclinical activities and in manufacturing preclinical and clinical study materials, consultant fees, facility costs including rent,depreciation, and maintenance expenses, and fees for acquiring and maintaining licenses under third party licensingagreements, including any sublicensing or success payments made to the Company’s licensors. In accruing service fees, theCompany estimates the time period over which services will be performed and the level of effort to be expended in eachperiod. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, theaccrual or prepaid is adjusted accordingly. The Company defers and capitalizes non-refundable advance payments made bythe Company for research and development activities until the related goods are received or the related services areperformed. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaidexpense.Patent CostsThe 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 in-licenses, asincurred and classifies such costs as general and administrative expenses in the accompanying consolidated statements ofoperations.143 Table of ContentsConstruction Financing Lease ObligationBeginning 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 the Company was deemed to be the owner of the building during the constructionperiod for accounting purposes. In each reporting period, the landlord estimated and reported to the Company the costsincurred to date and provided supporting invoices for the Company to review. The Company periodically met with thelandlord and its construction manager to review the estimates and observe construction progress prior to recording suchamounts. Construction 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 lease property. The Company determined that the arrangement did notqualify for sale lease-back accounting treatment, the building asset will remain on the Company’s consolidated balance sheetat its historical cost, and such asset would be depreciated over its estimated useful life of thirty years.Operating Lease ObligationsOperating lease obligations represent future minimum lease payments under the Company’s non-cancelableoperating leases. The minimum lease payments exclude the Company’s share of the facility operating expenses and othercosts that are reimbursable to the landlord under the leases. The Company enters into contracts in the normal course ofbusiness with contract research organizations and other vendors to assist in the performance of its research and developmentactivities and other services and products for operating purposes. These contracts generally provide for termination onnotice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.Stock‑based Compensation ExpenseThe 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 recognizes stock-based compensationexpense equal to the grant date fair value of stock options on a straight-line basis over the 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 never144 Table of Contentspaid dividends and does not have current plans to pay any dividends on common stock. If factors change or differentassumptions are used, the Company’s stock-based compensation expense could be materially different in the future.Income taxesIncome taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides fordeferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determinedbased on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measuredusing the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. TheCompany provides a valuation allowance against net deferred tax assets unless, based upon the weight of available evidence,it is more likely than not that the deferred tax assets will be realized.The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertaintax positions exist, the Company recognized the tax benefit of tax positions to the extent that the benefit will more likelythan not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon thetechnical merits of the tax position as well as consideration of the available facts and circumstances.Other Income (Expense), NetFor the years ended December 31, 2018 and 2017, other income (expense), net consists primarily of interest incomeearned on cash equivalents and marketable securities, interest expense on the construction financing lease obligation andpromissory notes, rental income from the Company’s former subtenant, interest income, accretion of discounts, andamortization of premiums 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 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 LossComprehensive 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.Corporate Equity SecuritiesThe Company records investments in privately issued corporate equity securities that do not have readilydeterminable fair values at cost and adjusts for changes in observable prices minus impairment. Each reporting period theCompany adjusts the carrying value of these investments if it observes that additional shares have been issued in an orderlytransaction between market participants resulting in a price increase or decrease per share. Additionally, each reportingperiod the Company reviews these investments for impairment considering all available information to conclude whether animpairment exists. Changes in measurement for all corporate equity investments are recognized in “Other income (expense),net.”Concentrations of Credit Risk and Off‑Balance Sheet RiskThe 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 federally145 Table of Contentsinsured limits. 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 for which the Company does not obtain collateral. As of December 31, 2018, substantiallyall of the Company’s revenue to date has been generated from the strategic alliance with Allergan and the collaboration withJuno Therapeutics.Segment InformationOperating 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 - AdoptedIn 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. The guidance is effective on a retrospective basis. The Company adopted this guidance as ofOctober 1, 2017. The Company reclassified restricted cash in the statements of cash flows to be included in the cash and cashequivalents balance. The reclassification was not material to the periods presented. The following table presents cash, cashequivalents and restricted cash as reported on the consolidated balance sheets that equal the total amounts on theconsolidated statements of cash flows (in thousands): Year Ended As of December 31, 2018 2017 2016Cash and cash equivalents $134,776 $146,630 $185,323Restricted cash included in "Restricted cash and other non-currentassets" 1,619 1,619 1,619Total $136,395 $148,249 $186,942 In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes therevenue recognition requirements in FASB ASC Topic 605, Revenue Recognition, and most industry-specific guidance. TheCompany adopted the new standard effective January 1, 2018 using the modified retrospective approach. As part of theadoption, the Company reviewed all contracts that were not yet completed as of the date of initial application in determiningthe cumulative-effect impact related to the adoption of ASC 606. The adoption of ASC 606 resulted in the changes to (i) theallocation of arrangement consideration, including the determination of estimated selling price and the allocation of variableconsideration to specific performance obligations for the Company’s collaboration agreement with Juno Therapeutics, and(ii) the application of proportional performance as a measure of progress on service related deliverables for the Company’sstrategic alliance with Allergan.Effective January 1, 2018, the Company’s adoption of ASC 606 resulted in increases of $0.5 million in deferredrevenue and accumulated deficit, which was primarily due to an adjustment for two milestone payments previously earnedthat will now be recognized over time, partially offset by acceleration of proportional performance revenue.146 Table of ContentsThe following table presents changes in the Company’s deferred revenue balance as of January 1, 2018 resultingfrom adoption of ASC 606 (in thousands): Balance atDecember 31, 2017 Adjustments Balance at January 1, 2018Contract liabilities: Deferred revenue$(107,963) $(474) $(108,437) As of December 31, 2018, the Company’s accounts receivable and contract liabilities were primarily related to theCompany’s collaboration with Juno Therapeutics and strategic alliance Allergan. The following table presents changes in theCompany’s accounts receivable and contract liabilities for the year ended December 31, 2018 (in thousands): For the year ended December 31, 2018Balance atDecember 31,2017 Additions Deductions Balance at December 31,2018Accounts receivable$679 $1,189 $(1,838) $30Contract liabilities: Deferred revenue$(107,963) $(31,497) $8,134 $(131,326) During the three months and year ended December 31, 2018, the Company recognized revenue as a result of thefollowing (in thousands): Three MonthsEnded Year EndedRevenue recognized in the period from:December 31, 2018Amounts included in deferred revenue at the beginning of the period$1,417 $5,874Performance obligations satisfied in previous periods$4,645 $5,956 For additional information regarding revenue recognition from contracts with customers, refer to Note 9.The Company has included the following financial statement line items for comparability purposes as of and for thethree months and year ended December 31, 2018 (in thousands, except per share data): Three Months Ended December 31, 2018 As reported underTopic 606 Balances withoutadoption of ASC606 Effect of ChangeCollaboration and other research and development revenues$6,119 $5,060 $1,059Operating loss$(26,253) $(27,312) $1,059Net loss attributable to common stockholders$(25,054) $(26,113) $1,059Net loss per share attributable to common stockholders, basic anddiluted$(0.52) $(0.54) $0.02 Year Ended December 31, 2018 As reported underTopic 606 Balances withoutadoption of ASC606 Effect of ChangeCollaboration and other research and development revenues$31,937 $33,993 $(2,056)Operating loss$(113,727) $(111,671) $(2,056)Net loss attributable to common stockholders$(109,954) $(107,898) $(2,056)Net loss per share attributable to common stockholders, basic anddiluted$(2.33) $(2.29) $(0.04) 147 Table of Contents As of December 31, 2018 As reported underTopic 606 Balances withoutadoption of ASC606 Effect of ChangeDeferred revenue, current$(15,712) $(17,552) $1,840Deferred revenue, net of current portion$(115,614) $(111,466) $(4,148)Accumulated deficit$(416,278) $(414,222) $(2,056) In 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and FinancialLiabilities (“ASU 2016-01”). ASU 2016-01 amended guidance related to the recording of financial assets and liabilities.Under the amended guidance, equity investments that are not accounted for under the equity method or those that result inthe consolidation of an investee, are to be measured at fair value with changes in fair value recognized in net income (loss).An entity has the option to measure equity investments without readily determinable fair values at cost minus impairment, ifany, plus or minus changes resulting from observable price changes in orderly transaction for the identical or similarinvestments. The amended guidance became effective January 1, 2018. As of December 31, 2018, the Company held anequity investment in Beam Therapeutics Inc. (“Beam”), a privately held company, that it accounted for under the costmethod. The equity investment does not have a readily determinable fair value. The Company measured the investment atcost adjusted for impairment or observable price changes. During the year ended December 31, 2018, the Company did notadjust the value of the Company’s investment in Beam as a result of impairment or based on observable price changes. Recent Accounting Pronouncements – Issued But Not Yet AdoptedIn February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”), which applies to all leases and will requirelessees to record most leases on the balance sheet, but recognize expense in a manner similar to the current standard, wascodified as ASC 842, Leases, and amended through subsequent ASUs. ASC 842 is effective for fiscal years beginning afterDecember 15, 2018 and interim periods within those years. Entities are required to use a modified retrospective approach ofadoption. The Company will recognize a cumulative-effect adjustment to the opening balance of retained earnings in theperiod of adoption, for which comparative periods will be presented in accordance with the previous guidance in ASC 840,Leases. The Company has elected, in transition, to apply the package of practical expedients which allows the Company notto reassess whether existing contracts are or contain leases, the classification of existing leases, and whether initial directcosts qualify for capitalization. Additionally, the Company expects to elect the package of practical expedients to: i) notrecognize lease assets and lease liabilities for leases with a term of 12 months of less; and ii) not separate the non-leasecomponents from the associated lease components for leases of real estate and, instead, account for each non-leasecomponent and associated lease component as a single component. The Company is evaluating the effect of this guidance onthe Company’s consolidated financial statements and disclosures, which includes, but is not limited to, the impact on thelease of its corporate headquarters in Cambridge, Massachusetts, and its laboratory space in Boulder, Colorado. TheCompany currently expects to derecognize the existing asset and liabilities on the consolidated balance sheet resulting fromthe build-to-suit lease arrangement at the Company’s corporate headquarters in Cambridge, Massachusetts, which did notmeet the criteria for “sale-leaseback” treatment at the time construction was completed. Also, the Company is in the processof updating its systems, policies and internal controls over financial reporting in anticipation of adopting these standards.In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements toNonemployee Share-Based Payment Accounting (“ASU 2018-07”) to simplify the accounting for share-based payments tonon-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The newguidance expands the scope of ASC 718, Compensation – Stock Compensation, to include share-based payments granted tonon-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes theguidance in ASC Topic 505-50, Equity-Based Payments to Non-Employees. The guidance is effective for public businessentities in annual periods beginning after December 15, 2018 and interim periods within those years. Early adoption ispermitted. The Company is currently evaluating the effect of this guidance on the Company’s consolidated financialstatements and disclosures.148 Table of ContentsIn August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the DisclosureRequirements for Fair Value Measurement (“ASU 2018-13”), which modifies certain disclosure requirements on fair valuemeasurements. The amendments regarding changes in unrealized gains and losses, the range and weighted average ofsignificant unobservable inputs used to develop Level 3 fair value measurements and the narrative description ofmeasurement uncertainty are required to be applied prospectively for only the most recent interim or annual period presentedin the initial fiscal year of adoption. All other amendments are required to be applied retrospectively to all periods presentedupon their effective date. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periodswithin those years. The Company does not anticipate a material impact to disclosures as a result of the adoption of ASU2018-13. 3. Cash Equivalents, Marketable Securities and Corporate Equity SecuritiesCash equivalents, marketable securities and corporate equity securities consisted of the following at December 31,2018 (in thousands): Gross Gross Amortized Unrealized Unrealized FairDecember 31, 2018 Cost Gains Losses ValueCash equivalents and marketable securities: Money market funds $130,049 $ — $ — $130,049U.S. Treasuries 208,754 — (24) 208,730Government agency securities 29,940 — (5) 29,935Equity securities included in other non-current assets: Corporate equity securities 3,667 — — 3,667Total $372,410 $ — $(29) $372,381 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 and marketable securities: Money market funds $134,635 $ — $ — $134,635U.S. Treasuries 135,601 — (47) 135,554Government agency securities 58,979 — (29) 58,950Total cash equivalents and marketable securities $329,215 $ — $(76) $329,139 At December 31, 2018, the Company held 38 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, 2018 was$210.7 million, and there were no securities held by the Company in an unrealized loss position for more than 12 months. Asof December 31, 2018, 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, 2018.There were no realized gains or losses on available-for-sale securities during the years ended December 31, 2018 or2017.149 Table of Contents4. Fair Value MeasurementsAssets measured at fair value on a recurring basis as of December 31, 2018 are as follows (in thousands): Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs InputsFinancial Assets 2018 (Level 1) (Level 2) (Level 3)Cash equivalents: Money market funds $130,049 $130,049 $ — $ —U.S. Treasuries 4,487 4,487 — —Marketable securities: U.S. Treasuries 204,243 204,243 — —Government agency securities 29,935 29,935 — —Restricted cash and other non-current assets: Corporate equity securities 3,667 — 3,667 —Money market funds 1,619 1,619 — —Total financial assets $374,000 $370,333 $3,667 $— Assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 are as follows (inthousands): 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 $ — $— There were no transfers between fair value measurement levels during the years ended December 31, 2018 or 2017. 5. Prepaid Expenses and Other Current AssetsPrepaid expense and other current assets consisted of the following (in thousands): As of December 31, 2018 2017Prepaid expenses $2,918 $1,864Other 2,873 517Total $5,791 $2,381 150 Table of Contents6. Property and Equipment, NetProperty and equipment, net consisted of the following (in thousands): As of December 31, 2018 2017Building $35,167 $35,167Laboratory equipment 10,892 7,415Computer equipment 733 550Leasehold improvements 289 177Furniture and office equipment 166 96Software 118 95Total property and equipment 47,365 43,500Less: accumulated depreciation (7,133) (4,058)Property and equipment, net $40,232 $39,442 The Company recorded $3.3 million, $2.7 million and $1.2 million in depreciation expense during the years endedDecember 31, 2018, 2017 and 2016, respectively. 7. Accrued ExpensesAccrued expenses consisted of the following (in thousands): As of December 31, 2018 2017Employee related expenses $5,201 $3,708Sublicensing and success payment expenses 3,750 2,000Intellectual property and patent related fees 1,939 2,370Process and platform development expenses 1,044 2,301Professional service expenses 475 487Other expenses 404 183Total $12,813 $11,049 8. Commitments and ContingenciesHurley Street LeaseIn 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 balance sheetsas of December 31, 2018 and December 31, 2017.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 corresponding151 Table of Contentsconstruction financing lease obligation, on its balance sheet for the total amount of the project costs incurred whether fundedby the Company or the landlord.Construction 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 Lease2019 4,1552020 4,2572021 4,3622022 4,4702023 (partial year) 3,8022024 and thereafter -Total minimum lease payments$21,046 Rent expense of approximately $1.8 million, $1.2 million and $2.5 million was incurred during the years endedDecember 31, 2018, 2017 and 2016, respectively.The Company subleased approximately 10,000 square feet of the Hurley Street premises pursuant to a sublease,which commenced in February 2017 and terminated in June 2018.Licensor Expense ReimbursementThe 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, and other license agreements between the Company and Broad. As such, the Company anticipates that it has asubstantial commitment in connection with these proceedings until such time as these proceedings have been resolved, butthe amount of such commitment is not determinable. The Company incurred an aggregate of $14.2 million, $18.2 millionand $23.1 million in expense during the years ended December 31, 2018, 2017 and 2016, respectively, for suchreimbursement.Success PaymentsIn 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, Broad152 Table of Contentsand Wageningen University (“Wageningen” and such payments, collectively, the “Success Payments”), payable in cash or, atthe Company’s election, common stock in the case of MGH or, in the case of Broad and Wageningen, promissory notespayable in cash or, at the Company’s election subject to certain conditions, common stock of the Company. The SuccessPayments are payable, if and when, the Company’s market capitalization reaches specified thresholds for a specific period oftime or upon a sale of the Company for consideration in excess of those thresholds, as discussed more fully in Note 9(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 Company records this expense as aresearch and development expense in its consolidated 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 $750.0 million. In March 2017, the Company issued promissorynotes for an aggregate principal amount of $5.0 million to Broad and Wageningen and the Company settled such notes inAugust 2017.The Company triggered another Success Payment under one of the 2016 License Agreements during the fourthquarter of 2017 when the Company’s market capitalization reached $1.0 billion. In December 2017, the Company issuedpromissory notes for an aggregate principal amount of $7.5 million to Broad and settled such notes in January 2018.The Company triggered a Success Payment under the MGH license agreement during the fourth quarter of 2017when the Company’s market capitalization reached $1.0 billion. The Company accrued $2.0 million relating to the suchSuccess Payment owed to MGH which is included in accrued expense on the consolidated balance sheet for the year endedDecember 31, 2017. In January 2018, the Company settled this liability through the issuance of 80,000 shares of its commonstock to MGH.The Success Payments issued to Broad and Wageningen are discussed more fully within the Notes Payable sectionbelow.Research Funding PaymentsIn June 2018, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”)with Broad, which is described more fully in Note 9. Pursuant to the terms of the Sponsored Research Agreement, theCompany is required to make certain research funding payments to Broad, payable by promissory note, cash or commonstock. Under the Sponsored Research Agreement, the Company is obligated to make payments of research funding to Broadin the event the Company’s market capitalization reaches specified thresholds ranging from a mid-nine digit dollar amountto a low-eleven digit dollar amount (“Market Cap Research Funding”) or a Company sale for consideration ranging from amid-nine digit dollar amount to a low-eleven digit dollar amount (“Company Sale Research Funding” and, collectively withthe Market Cap Research Funding, the “Research Funding Payments”). In connection with entering into the SponsoredResearch Agreement, the Company confirmed that the first two Research Funding Payments of $5.0 million and $7.5 millionwere due and payable to Broad (the “Initial Research Payments”). In June 2018, the Company issued promissory notes for anaggregate principal balance of $12.5 million to Broad, which were settled by the issuance of shares of common stock, and aredescribed more fully in the Notes Payable section.The Research Funding Payments were accounted for under the provisions of FASB ASC, Topic 505-50, Equity-Based Payments to Non-Employees. Other than the Initial Research Payments, the Company is not required to makeadditional Research Funding Payments if the Company, whether directly or through its affiliates or sublicensees, is notresearching, developing, or commercializing products based on or incorporating inventions developed under the SponsoredResearch Agreement and exclusively licensed to the Company from Broad or based on or incorporating CRISPR technologyowned, co-owned, or controlled by Broad and otherwise licensed to the Company, subject to certain exclusions. As such, theCompany will recognize the expenses and liability associated with each Research Funding153 Table of ContentsPayment upon achievement of the associated Research Funding Payment conditions, if ever. The Company records thisexpense as a research and development expense in its consolidated statements of operations.Notes PayableIn 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, the Company issued promissory notes in an aggregate principalamount of $10.0 million to Broad and Wageningen (the “Initial Notes”). Outstanding principal and accrued interest on theInitial Notes were due and payable on the earlier of December 2017 or a specified period of time following a Company sale orchange of control event. The Initial Notes accrued interest at a rate of 4.8% per annum. The Company fully settled theoutstanding principal and accrued interest on the Initial Notes by paying $0.2 million in cash to Wageningen in August2017 and issuing 108,104 shares and 371,166 shares of common stock to Broad in August 2017 and September 2017,respectively.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 Success PaymentNotes”). Outstanding principal and accrued interest on the March Success Payment Notes were due and payable in August2017. The March Success Payment Notes were subject to the same interest and terms as the Initial Notes, other than thematurity date. The Company settled the outstanding principal and accrued interest on the March Success Payment Notes inAugust 2017 by paying $0.4 million in cash to Wageningen and issuing 271,347 shares of common stock to Broad in August2017. In September 2017, Wageningen designated Broad as the recipient of any future promissory notes that are owed toWageningen pursuant to the Cpf1 License Agreement.In December 2017, $7.5 million in Success Payments under the Cpf1 License Agreement and the Cas9-II licenseagreement with Broad (the “Cas9-II License Agreement”), one of the 2016 License Agreements, became due upon theCompany’s market capitalization reaching $1.0 billion. The Company issued promissory notes to Broad in an aggregateoriginal principal amount of $7.5 million (collectively, the “December Success Payment Notes”). Outstanding principal andaccrued interest on the December Success Payment Notes were due and payable in May 2018. The December SuccessPayment Notes were subject to the same interest and terms as the Initial Notes, other than the maturity date. The Companyfully settled the outstanding principal and accrued interest on the December Success Payment Notes by issuing 225,909shares of common stock to Broad in January 2018. In June 2018, in connection with the Company’s entry into the Sponsored Research Agreement and the trigger ofthe Initial Research Payments, the Company issued promissory notes in an aggregate principal amount of $12.5 million toBroad (the “Initial Research Notes”) bearing interest at a rate of 4.8% annum, except with respect to $7.5 million of theprincipal, which would not start accruing interest until November 2018. The Company fully settled the outstanding principaland accrued interest on the Initial Research Notes by issuing 330,617 shares of common stock to Broad in June 2018.LitigationThe Company is not a party to any litigation and did not have contingency reserves established for any litigationliabilities as of December 31, 2018 or 2017. 9. Significant AgreementsJuno Therapeutics Collaboration AgreementSummary of AgreementIn May 2015, the Company entered into a collaboration and license agreement (the “Collaboration Agreement”)with Juno Therapeutics and in May 2018 the Company and Juno Therapeutics entered into an amended and restatedcollaboration and license agreement (the Collaboration Agreement, as amended and restated, the “Amended154 Table of ContentsCollaboration Agreement”). The collaboration is focused on the research and development of engineered T cells withchimeric antigen receptors (“CARs”) and T cell receptors (“TCRs”) that have been genetically modified to recognize and killother cells. Pursuant to the Collaboration Agreement, the parties were pursuing the research and development of CAR andTCR engineered T cell products utilizing the Company’s genome editing technologies with Juno Therapeutics’ CAR andTCR technologies across three research areas, which was increased to four research areas under the Amended CollaborationAgreement.The collaborative program of research to be undertaken by the parties pursuant to the Amended CollaborationAgreement will be conducted in accordance with a mutually agreed upon research plan which outlines each party’s researchand development responsibilities across the four research areas. The Company’s research and development responsibilitiesunder the research plan are related to generating genome editing reagents that modify gene targets selected by JunoTherapeutics. Juno Therapeutics is responsible for evaluating and selecting for further research and development CAR andTCR engineered T cell products modified with the Company’s genome editing reagents. Except with respect to theCompany’s obligations under the mutually agreed upon research plan, Juno Therapeutics has sole responsibility, at its owncost, for the worldwide research, development, manufacturing and commercialization of products within each of the fourresearch areas for the diagnosis, 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 on May26, 2020 (the “Initial Research Program Term”). Juno Therapeutics may extend the Initial Research Program Term for up totwo 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”). The Research Program Term and the optional extensions were not changed by the AmendedCollaboration Agreement.Under the terms of the Collaboration Agreement, the Company granted to Juno Therapeutics during the ResearchProgram Term a nonexclusive, worldwide, royalty free, non-sublicensable license under certain of the intellectual propertycontrolled by the Company solely for the purpose of conducting the following activities required under the specifiedresearch under the Collaboration Agreement: (i) conduct activities assigned to Juno Therapeutics under the research plan, (ii)conduct activities assigned to the Company under the research plan that the Company fails or refuses to conduct in a timelymanner, (iii) research, evaluate and conduct preclinical testing and development of certain engineered T cells relating to thethree research areas that were originally the subject of the arrangement and (iv) evaluate the data developed in the conduct ofactivities under the research plan. Pursuant to the terms of the Amended Collaboration Agreement, the license rights grantedto Juno Therapeutics were expanded to include, during the Research Program Term, a nonexclusive, worldwide, royalty free,non-sublicensable license under certain of the intellectual property controlled by the Company to: (i) research, evaluate andconduct preclinical testing and development of certain engineered T cells relating to the fourth research area and (ii)research, develop and use certain research tools (together, the initial research license granted per the terms of theCollaboration Agreement and the incremental research license granted per the terms of the Amended CollaborationAgreement, the “Research License”).As it relates to two of the three research areas that were originally the subject of the arrangement, under the terms ofthe Collaboration Agreement, the Company granted to Juno Therapeutics an exclusive, milestone and royalty bearing,sublicensable license under certain of the intellectual property controlled by the Company to research, develop, make andhave made, use, offer for sale, sell, import and export selected CAR and TCR engineered T cell products in the ExclusiveField on a worldwide basis, specifically as it relates to certain targets selected by Juno Therapeutics pursuant to the researchprogram. Furthermore, as it relates to the same two research areas, under the terms of the Collaboration Agreement, theCompany granted to Juno Therapeutics a non-exclusive, milestone and royalty bearing, sublicensable license under certainof the intellectual property controlled by the Company to use genome editing reagents generated under the research programthat are used in the creation of certain CAR or TCR engineered T cell products on which Juno Therapeutics has filed aninvestigational new drug (“IND”) application in the Exclusive Field for the treatment or prevention of a cancer in humans toresearch, develop, make and have made, use, offer for sale, sell, import and export those CAR or TCR engineered T cellproducts in all fields outside of the Exclusive Field (the “Non Exclusive Field”) on a worldwide basis, specifically as itrelates to certain targets selected by Juno Therapeutics pursuant to the research155 Table of Contentsprogram (together, the license in the Exclusive Field and the license in the Non Exclusive Field are referred to as the“Development and Commercialization License” for each particular research area). Additionally, as it relates to the thirdresearch area that was originally the subject of the arrangement, under the terms of the Collaboration Agreement, theCompany granted to Juno Therapeutics a milestone and royalty bearing, sublicensable license under certain of theintellectual property controlled by the Company to research, develop, make and have made, use, offer for sale, sell, import orexport selected CAR and TCR engineered T cell products that utilize the genome editing reagents generated under theresearch program associated with those CAR and TCR engineered T cell products in the Exclusive Field on a worldwidebasis, specifically as it relates to certain products selected by Juno Therapeutics pursuant to the research program. The licenseassociated with the third research area is exclusive as it relates to CAR or TCR engineered T cell products directed to certaintargets as selected by Juno Therapeutics, but is otherwise non-exclusive (referred to as the “Development andCommercialization License” for the third research area). Pursuant to the terms of the Amended Collaboration Agreement, as itrelates to the fourth area of research that was added to the collaboration, the Company granted to Juno Therapeutics amilestone and royalty bearing, sublicensable license under certain of the intellectual property controlled by the Company toresearch, develop, make and have made, use, offer for sale, sell, import or export selected CAR and TCR engineered T cellproducts that utilize the genome editing reagents generated under the research program associated with those CAR and 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 fourth 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 fourth research area).The Amended Collaboration Agreement is being managed on an overall basis by a project leader from each of theCompany and Juno Therapeutics. The project leaders serve as the contact point between the parties with respect to theresearch program and are primarily responsible for facilitating the flow of information, interaction, and collaboration betweenthe parties. In addition, the research and development activities under the Amended Collaboration Agreement during theResearch Program Term are governed by a joint research committee (“JRC”) formed by an equal number of representativesfrom the Company and Juno Therapeutics. The JRC oversees, reviews and recommends the direction of the research program.Among other responsibilities, the JRC monitors and reports research progress and ensures open and frequent exchangebetween the parties regarding research program activities. The Amended Collaboration Agreement did not alter thegovernance provisions in the Collaboration Agreement.Under the terms of the Collaboration Agreement, the Company received a $25.0 million up front, non-refundable,non-creditable cash payment. In connection with the entry into the Amended Collaboration Agreement, the Companyreceived an additional $5.0 million up-front, non-refundable, non-creditable cash payment. Moreover, the Company becameentitled to receive two $2.5 million milestones related to technical progress in one of the research areas upon the executionof the Amended Collaboration Agreement. In addition, Juno Therapeutics is obligated to pay to the Company an aggregateof up to $22.0 million in research and development funding over the Initial Research Program Term across the four researchareas consisting primarily of funding for up to a specified maximum number of full time equivalents personnel each year overthe Initial Research Program Term across four research areas. Consistent with the terms of the Collaboration Agreement,under the terms of the Amended Collaboration Agreement, there is no incremental compensation due to the Company withrespect to the Development and Commercialization License granted to Juno Therapeutics associated with the first target orproduct, as applicable, designated by Juno Therapeutics within each of the four research areas. However, for two of the threeresearch areas that were originally the subject of the arrangement, Juno Therapeutics continues to have the option topurchase up to three additional Development and Commercialization Licenses associated with other gene targets for anadditional fee of approximately $2.5 million per target. In addition, Juno Therapeutics is required to make certain milestonepayments to the Company upon the achievement of specified development, regulatory and commercial events. Morespecifically, for the first product to achieve the associated event in each of the three research areas that were originally thesubject of the arrangement, the Company is eligible to receive up to $77.5 million in development milestone payments andup to $80.0 million in regulatory milestone payments, while the Company is eligible to receive up to $80.0 million indevelopment milestone payments and up to $80.0 million in regulatory milestone payments for the first product to achievethe associated event in the fourth area of research that was added to the collaboration. In addition, the Company is eligible toreceive additional development and regulatory milestone payments for subsequent products developed within each of thefour research areas. Moreover, the Company is eligible for up to $75.0 million in commercial milestone payments associated156 Table of Contentswith aggregate sales of all products within each of the four research areas. Development milestone payments are generallytriggered upon the achievement of certain specified development criteria or upon initiation of a defined phase of clinicalresearch for a product candidate. Regulatory milestone payments are triggered upon approval to market a product candidateby the United States Food and Drug Administration (“FDA”) or other global regulatory authorities. Commercial milestonepayments are triggered when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee.The milestone payments and related triggering events associated with the three research areas that were originally the subjectof the Collaboration Agreement were not modified in the Amended Collaboration Agreement.In addition, to the extent any of the product candidates covered by the licenses conveyed to Juno Therapeuticsunder the Amended Collaboration Agreement are commercialized, the Company would be entitled to receive tiered royaltypayments of low double digits based on a percentage of net sales. Similar to the milestones, pursuant to the AmendedCollaboration Agreement, the Company is eligible to receive an independent royalty stream associated with the fourth areaof research that was added to the collaboration. Royalty payments are subject to certain reductions, including for any royaltypayments required to be made by Juno Therapeutics related to a third party’s intellectual property rights, subject to anaggregate minimum floor. Royalties are due on a licensed product by licensed product and country by country basis from thedate of the first commercial sale of each product in a country until the later of: (i) the tenth anniversary of the first commercialsale of such licensed product in such country and (ii) the expiration date in such country of the last to expire valid claimwithin the licensed intellectual property covering the manufacture, use or sale of such licensed product in such country. TheCompany achieved $2.5 million development milestones under the Collaboration Agreement resulting from technicalprogress in a research program in each of May 2016 and July 2017 (the “July 2017 Juno Milestone Payment”). The Companyachieved two additional $2.5 million development milestones under the Amended Collaboration Agreement resulting fromtechnical progress in a research program in May 2018. Due to the uncertainty of pharmaceutical development and the highhistorical failure rates generally associated with drug development, no additional milestone or royalty payments may ever bereceived from Juno Therapeutics. As of December 31, 2018, the next potential milestone payment that the Company may beentitled to receive under the Amended Collaboration Agreement is a milestone payment of $2.5 million for the achievementof certain development criteria. There are no cancellation, termination or refund provisions in the Amended CollaborationAgreement that contain material financial consequences to the Company.Unless earlier terminated, the Amended Collaboration Agreement will continue in full force and effect, on a licensedproduct by licensed product and country by country basis until the date no further payments are due to the Company fromJuno Therapeutics. Either party may terminate the Amended Collaboration Agreement if the other party has materiallybreached or defaulted in the performance of any of its material obligations and such breach or default continues after thespecified cure period. Either party may terminate the Amended Collaboration Agreement in the event of the commencementof any proceeding in or for bankruptcy, insolvency, dissolution or winding up by or against the other party that is notdismissed or otherwise disposed of within a specified time period. Juno Therapeutics may terminate the AmendedCollaboration Agreement for convenience upon not less than six months prior written notice to the Company. The Companymay terminate the Amended Collaboration Agreement in the event that Juno Therapeutics brings, assumes, or participates in,or knowingly, willfully or recklessly assists in bringing a dispute or challenge against the Company related to its intellectualproperty.Termination of the Amended Collaboration Agreement for any reason does not release either party from any liabilitywhich, 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 Amended Collaboration Agreement. If Juno Therapeutics terminates the AmendedCollaboration Agreement as a result of the Company’s uncured material breach or default, then: (i) the licenses and rightsconveyed to Juno Therapeutics will continue as set forth in the agreement, (ii) Juno Therapeutics’ obligations related tomilestones and royalties will continue as set forth in the agreement and (iii) Juno Therapeutics’ rights to prosecute, maintainand enforce certain intellectual property rights will continue as set forth in the agreement. If Juno Therapeutics terminates theAmended Collaboration Agreement for convenience or if the Company terminates the Amended Collaboration Agreement asa result of Juno Therapeutics’ uncured material breach or default, then the licenses conveyed to Juno Therapeutics willterminate. The Amended Collaboration Agreement did not modify the termination provisions in the CollaborationAgreement.157 Table of ContentsAccounting AnalysisThe Company evaluated the Amended Collaboration Agreement in accordance with the provisions of ASC 606. TheCompany has accounted for the amendment resulting from the Amended Collaboration Agreement as a modification to theoriginal contract and not as a separate contract. The Company combined the Amended Collaboration Agreement with theCollaboration Agreement because the scope of the arrangement did not solely increase due to the addition of distinctpromised goods or services with pricing that reflects the associated standalone selling prices. For the remaining goods andservices that are distinct from the goods and services that were transferred on or before the date of the effectiveness of theAmended Collaboration Agreement, the Company has accounted for the modification on a prospective basis as if it were atermination of the existing contract and the creation of a new contract. Conversely, the remaining goods and services that arenot distinct from the goods and services that were transferred on or before the date of the effectiveness of the AmendedCollaboration Agreement were deemed to form part of a single performance obligation that is partially satisfied so they havebeen accounted for as part of the existing contract for which an adjustment was recorded on a cumulative catch-up basis atthe date of the modification.The Company has identified the following performance obligations under the combined arrangement: (i) ResearchLicense and the related research and development services during the Initial Research Program Term (the “Research Licenseand Related Services”), (ii) four material rights related to the first Development and Commercialization Licenses related toeach of the four research areas (each, a “First Development and Commercialization License Material Right”) and (iii) sixmaterial rights related to the option to purchase up to three additional Development and Commercialization Licenses for twoof the research areas (each, an “Additional Development and Commercialization License Material Right”). Upon exercise ofthe option to obtain a Development and Commercialization License under any of the four research areas, the Company willprovide Juno Therapeutics with a license covering the further development and potential commercialization of theunderlying target or product, as applicable. The Company has determined that the ability to obtain Development andCommercialization Licenses under the arrangement represents a material right because Juno Therapeutics is entitled toincremental licenses for additional consideration that represents a significant discount from amounts that would otherwise beoffered for the related goods to comparable customers outside of the contract.The Company has concluded that the Research License is not distinct from the research and development servicesduring the Initial Research Program Term as Juno Therapeutics cannot obtain the benefit of the Research License without theCompany performing the research and development services. The services incorporate proprietary technology, unique skillsand specialized expertise, particularly as it relates to genome editing technology that is not available in the marketplace. Asa result, the Research License, inclusive of the incremental license granted in connection with the Amended CollaborationAgreement, has been combined with the research and development services into a bundled performance obligation. TheCompany has concluded that the First Development and Commercialization License Material Rights for each respectiveresearch area and the Additional Development and Commercialization License Material Rights for the two research areas towhich they relate are each a separate performance obligation. These material rights, of which there are ten in total, are distinctfrom the other performance obligations in the arrangement as they are options in the contract that are not required for JunoTherapeutics to obtain the benefit of the other promised goods and services in the arrangement. Accordingly, in accountingfor the modification resulting from the Amended Collaboration Agreement, the Research License and Related Servicesperformance obligation was treated as part of the existing contract, whereas the material right performance obligations weretreated as a termination of the existing contract and the creation of a new contract.As of December 31, 2018, the total transaction price associated with the remaining consideration based on theAmended Collaboration Agreement was determined to be $40.7 million, consisting of: (i) $25.0 million upfront non-refundable, non-creditable cash payment associated with the Collaboration Agreement, (ii) $5.0 million upfront non-refundable, non-creditable cash payment associated with the Amended Collaboration Agreement, (iii) $2.9 million ofremaining research and development funding, (iv) $2.7 million of milestone payments received by the Company under theCollaboration Agreement that were not yet recognized as revenue and (v) $5.0 million of milestone payments associated withthe execution of the Amended Collaboration Agreement. The research and development funding is being paid by JunoTherapeutics to the Company based on the number of the Company’s full time equivalents of its personnel conducting theresearch under the Amended Collaboration Agreement. The Company utilizes the most likely amount158 Table of Contentsmethod to determine the amount of research and development funding to be received. The Company also utilizes the mostlikely amount method to estimate any development and regulatory milestone payments to be received. As of December 31,2018, the only milestones that were included in the transaction price were milestones that had been contractually earned andreceived. The remaining milestones were fully constrained due to the significant uncertainties surrounding such payments.The Company considers the stage of development and the risks associated with the remaining development required toachieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or JunoTherapeutics. The outstanding milestone payments were fully constrained as of December 31, 2018, as a result of theuncertainty whether any of the milestones will be achieved. The Company has determined that any commercial milestonesand sales-based royalties will be recognized when the related sales occur as they were determined to relate predominantly tothe license(s) to be granted and therefore have also been excluded from the transaction price. The Company reevaluates thetransaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstancesoccur. Through the date of the Amended Collaboration Agreement, the Company had recognized approximately $12.3million of revenue associated with the Research License and Related Services which was excluded from the modificationdate transaction price.The transaction price was allocated to the performance obligations based on the relative estimated standaloneselling prices of each performance obligation or, in the case of certain variable consideration, to one or more performanceobligations. The estimated standalone selling price for the Research License and Related Services is primarily based on thenature of the services to be performed and estimates of the associated effort and costs of the services, adjusted for a reasonableprofit margin that would be expected to be realized under similar contracts. The Company developed the estimatedstandalone selling price for the material rights based on the difference between the value of the license granted and anyadditional consideration to be received upon exercise of the underlying option, adjusted for the probability of exercise. Thevalue of the license granted was determined based on the probability-weighted present value of expected future cash flowsassociated with each license related to each specific research area. In developing such estimate, the Company also consideredapplicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating theagreement, probability of success and the time needed to commercialize a product candidate pursuant to the associatedlicense.The transaction price allocated to each performance obligation as of December 31, 2018 was as follows: (i) ResearchLicense and Related Services: $10.7 million, (ii) First Development and Commercialization License Material Right related tothe first research area: $3.6 million, (iii) First Development and Commercialization License Material Right related to thesecond research area: $6.0 million, (iv) First Development and Commercialization License Material Right related to the thirdresearch area: $0.1 million, (v) First Development and Commercialization License Material Right related to the fourthresearch area: $18.3 million, (vi) the first Additional Development and Commercialization License Material Right for thefirst research area: $0.3 million, (vii) the second Additional Development and Commercialization License Material Right forthe first research area: $0.2 million, (viii) the third Additional Development and Commercialization License Material Rightfor the first research area: $0.1 million, (ix) the first Additional Development and Commercialization License Material Rightfor the second research area: $0.8 million, (x) the second Additional Development and Commercialization License MaterialRight for the second research area: $0.5 million, and (xi) the third Additional Development and Commercialization LicenseMaterial Right for the second research area: $0.3 million.The Company recognizes revenue related to amounts allocated to the Research License and Related Services as theunderlying services are performed using a proportional performance model. The Company measures proportionalperformance based on full time employee hours relative to projected full time employee hours to complete the researchservices which best reflects the progress towards satisfaction of the performance obligation. Revenue related to each of thematerial rights will be recognized upon the earlier of when the respective options are exercised and the Company transferscontrol of the related license or when the respective options lapse. The rights to be conveyed to Juno Therapeutics pursuantto each of the Development and Commercialization Licenses extend exclusively to an individual target or product, asapplicable; therefore, control is deemed to be transferred upon the designation by Juno Therapeutics of the specific target orproduct, as applicable, whereupon the license becomes effective upon Juno Therapeutics exercising their option. None of theoptions associated with the material rights had been exercised or had lapsed as of December 31, 2018.159 Table of ContentsDuring the years ended December 31, 2018 and 2017, the Company recognized revenue under the CollaborationAgreement and the Amended Collaboration Agreement totaling approximately $6.4 million and $4.9 million, respectively.Included in the revenue recognized during the year ended December 31, 2018 is approximately $3.0 million of additionalrevenue related to a cumulative catch-up adjustment associated with the Amended Collaboration Agreement. Included in therevenue recognized during the year ended December 31, 2017 is $2.5 million related to the July 2017 Juno MilestonePayment. No revenue had been recognized through the date of the Amended Collaboration Agreement for the material rightsperformance obligations and there were no cumulative catch-up adjustments recorded for such performance obligations as aresult of the Amended Collaboration Agreement. Amounts allocated to each of the material rights will be recognized asrevenue prospectively when the material right has been exercised or when the respective option has lapsed.The revenue is classified as collaboration and other research and development revenues in the accompanyingconsolidated statements of operations. As of December 31, 2018 and 2017, there was approximately $32.0 million and $26.4million of deferred revenue, respectively, related to the Amended Collaboration Agreement and the CollaborationAgreement, respectively, of which $29.2 million and $26.4 million were classified as long-term, respectively, in theaccompanying consolidated balance sheets. In addition, as of December 31, 2017, the Company had recorded accountsreceivable of $0.5 million related to reimbursable research and development costs under the Collaboration Agreement foractivities performed during the fourth quarter of 2017. There was no receivable balance as of December 31, 2018.During the year ended December 31, 2018, the Company paid $1.7 million in sublicense fees that were owed tocertain of the Company’s licensors in connection with the Amended Collaboration Agreement, which the Company recordedas research and development expenses during such period. During the year ended December 31, 2017, the Company paid$0.5 million in sublicense fees that were owed to certain of the Company’s licensors in connection with the July 2017 JunoMilestone Payment, which the Company recorded as research and development expenses during such period.Allergan Pharmaceuticals Strategic Alliance and Option AgreementSummary 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 Lebercongenital amaurosis 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. Allergan will have the ability fora defined period of time (“Initial Option Period”) to exercise an option (each, an “Option”) to obtain a worldwide right andlicense to the Company’s background intellectual property and the Company’s interest in the CDP intellectual property todevelop, commercialize, make, have made, use, offer for sale, sell, and import any gene editing therapy product that resultsfrom such CDP during the term of the Allergan Agreement (a “Licensed Product”) in any category of human diseases andconditions other than the diagnosis, treatment or prevention of any cancer in humans through the use of engineered T-cellsand subject to specified other limitations. Allergan has the option to extend the Initial Option Period and require theCompany to perform additional research and development services, subject to the payment of additional consideration. Afterexercise of an Option with respect to a CDP, with the exception of any CDP’s where the Company has exercised its profit-sharing option, Allergan will be160 Table of Contentsresponsible for all development, manufacturing, and commercialization activities in connection with licensed productsarising from such CDP, other than with respect to the LCA10 Program, if LCA10 is designated as a CDP. In July 2018,Allergan exercised its Option with respect to the LCA10 Program. In connection with such exercise, Allergan paid theCompany $15.0 million (the “LCA10 Option Exercise Payment”). Following such exercise, the Company exercised its Profit-Share Election with respect to the LCA10 Program. Following such election, the LCA10 Program became subject to a Profit-Sharing Arrangement and, as of December 31, 2018, the parties have not yet entered into a separate profit-sharing agreementwith respect to the Profit-Sharing Arrangement.The initial term of the Allergan Agreement commenced on March 14, 2017 and continues for seven years ending onMarch 14, 2024 (the “Research Term”). If the Company has not delivered an Option Package, which includes the results anddata from the CDP, for five CDPs that satisfy the Option Package Criteria, then the Research Term will automatically extendby one-year increments until such obligation is satisfied, up to a maximum of ten years from March 2017.The activities under the Allergan Agreement during the Research Term will be governed by the Steering Committee.The Steering Committee will review and monitor the direction of the development plan, evaluate and determine whichtargets are selected to become CDP, establish the Option Package Criteria for each CDP and evaluate the achievement of suchcriteria 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 Period, Allergan isrequired to pay an additional fee of $5.0 million to extend the option, at which point the Company is required to performadditional research services. If Allergan elects to exercise its option to a development and commercialization license afterextending the Initial Option Period, Allergan must pay the Company the option exercise fee of $22.5 million, plus specifiedcosts 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 December 2018, the Company received a $25.0million payment from Allergan in connection with the acceptance of the IND for EDIT-101, the Company’s experimentaltherapeutic generated under the LCA10 Program (the “EDIT-101 Milestone Payment”).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 circumstances161 Table of Contents(such right, the “Profit-Share Election,” and such arrangement, a “Profit-Sharing Arrangement”). If the Company elects toparticipate in a Profit-Sharing Arrangement, which it has for the LCA10 Program, the Company is obligated to reimburseAllergan for half of the United States development costs incurred by Allergan with respect to the applicable CDP, andAllergan will retain control of all development 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 Arrangement the royalties will only be paid on ex-U.S. 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 control of the Company or for all CDPs,provided that Allergan will not have any right to exercise an Option for any CDPs following such termination. After theexercise of an Option, Allergan will have the right, at its sole discretion, to terminate the Allergan Agreement, on a CDP byCDP basis, upon 90 days’ written notice. The Company may terminate the Allergan Agreement in the event that Allerganbrings, assumes, or participates in, or knowingly, willfully or recklessly assists in bringing a dispute or challenge against theCompany related to its intellectual property. Lastly, Allergan may terminate the Allergan Agreement with respect to a CDP ifa 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 AnalysisUnder the Allergan Agreement, the Company has identified a single performance obligation that includes (i) theresearch and development services during the Research Term (the “Allergan R&D Services”), and (ii) Steering Committeeservices during the Research Term (the “ASC Services”). The Company has concluded that the Allergan R&D Services is notdistinct from the ASC Services during the Research Term. The Steering Committee provides oversight and management ofthe overall Allergan Agreement, and the members of the Steering Committee from the Company have specialized industryknowledge, particularly as it relates to genome editing technology. The Steering Committee is meant to facilitate the earlystage research being performed and coordinate the activities of both the Company and Allergan. Further, the SteeringCommittee services are critical to the selection of a CDP, the ongoing162 Table of Contentsevaluation of a CDP and the development and evaluation of the Option Package Criteria. Accordingly, the Company’sparticipation on the Steering Committee is essential to Allergan receiving value from the Allergan R&D Services and as such,the ASC Services along with the Allergan R&D Services are considered one performance obligation (the “CDP Services”). Inaddition, the Company has concluded that the option to purchase five development and commercialization licenses isconsidered a marketing offer as the options did not provide any discounts or other rights that would be considered a materialright in the arrangement.As of January 1, 2018, the date of the initial application of ASC 606 by the Company, the total transaction price wasdetermined to be $90.0 million, consisting solely of the upfront non-refundable, non-creditable cash payment. The Companyalso utilized the most likely amount method to estimate any development and regulatory milestone payments to be received.As of January 1, 2018, there were no milestones included in the transaction price. The milestones were fully constrained dueto the significant uncertainties surrounding such payments. The Company considered the stage of development and the risksassociated with the remaining development required to achieve the milestone, as well as whether the achievement of themilestone is outside the control of the Company or Allergan. Upon achievement of the EDIT-101 Milestone Payment, $25.0million was added to the transaction price in November 2018. As of December 31, 2018, the total transaction price is $115.0million. The remaining milestone payments were fully constrained, as a result of the uncertainty whether any of themilestones would be achieved, as of December 31, 2018. The Company has determined that any commercial milestones andsales-based royalties will be recognized when the related sales occur and therefore have also been excluded from thetransaction price. The Company will re-evaluate the transaction price at the end of each reporting period and as uncertainevents are resolved or other changes in circumstances occur.The Company will recognize revenue related to the CDP Services as the underlying services are performed using aproportional performance model. The Company measures proportional performance based on full time employee hoursrelative to projected full time employee hours to complete the research service.During the year ended December 31, 2018, the Company recognized revenue under the Allergan Agreement ofapproximately $21.5 million, which includes $15.0 million related to the LCA10 Option Exercise Payment. During the yearended December 31, 2017, the Company recognized revenue under the Allergan Agreement of approximately $8.8 million.The LCA10 Option Exercise Payment was recognized upon the grant to Allergan of the right to use intellectual propertyassociated with the development and commercialization license for LCA10 and final decision making authority with respectto the LCA10 Program. As of December 31, 2018 and 2017, there was $99.2 million and $81.2 million of deferred revenuerelated to the Allergan Agreement, respectively, of which $86.4 million and $68.3 million is classified as long-term on theconsolidated balance sheet, respectively.As part of the Profit-Sharing Arrangement, the Company and Allergan will equally split U.S. profits and losses forthe LCA10 Program in the United States and will co-develop the LCA10 Program in the United States. The Companyaccounts for the Profit-Sharing Arrangement with respect to the LCA10 Program within the scope of ASC Topic 808,Collaborative Arrangements, given that both the Company and Allergan are active participants in future research anddevelopment activities and both parties are exposed to significant risks and rewards dependent on the commercial success ofsuch activities. During the year ended December 31, 2018, the Company and Allergan incurred $5.9 million in expenseassociated with the LCA10 Program after the option exercise, of which the Company recognized $1.7 million in contraresearch and development expenses during such period. The reimbursement of $2.3 million is classified as prepaid expensesand other current assets and the liability of $0.6 million in expenses owed to Allergan is classified as other current liabilitiesin the consolidated balance sheet as of December 31, 2018.During the year ended December 31, 2018, the Company incurred $6.0 million in sublicense fees owed to certain ofthe Company’s licensors in connection with the LCA10 Option Exercise Payment and EDIT-101 Milestone Payment, whichthe Company recorded as research and development expenses during such period, of which $3.8 million were accrued in theconsolidated balance sheet as of December 31, 2018. During the year ended December 31, 2017, the Company paid $14.1million in sublicense fees that were owed to certain of the Company’s licensors in connection with the Allergan Upfront,which the Company recorded as research and development expenses during such period.163 Table of ContentsBroad Sponsored Research AgreementSummary of AgreementThe Sponsored Research Agreement provides for Broad to conduct research useful or relevant to genome editing inthe field of genomic medicines for the prevention or treatment of human disease with funding from the Company. Under theSponsored Research Agreement, Broad granted to the Company an exclusive right of first negotiation for licenses from Broadwith respect to patentable inventions developed by Broad in the course of the sponsored research, subject to certainlimitations and retained rights (“Sponsored Invention Licenses”).Under the Sponsored Research Agreement, the Company is obligated to make Market Cap Research Fundingpayments in the event the Company’s market capitalization reaches specified thresholds ranging from a mid-nine digit dollaramount to a low-eleven digit dollar amount or Company Sale Research Funding payments in the event of a Company sale forconsideration ranging from a mid-nine digit dollar amount to a low-eleven digit dollar amount. In connection with enteringinto the Sponsored Research Agreement, the Company confirmed that the first two research payments of $5.0 million and$7.5 million, respectively, were due and payable to Broad. In connection with the Initial Research Payments, the Companyissued promissory notes to Broad that it settled in common stock in June 2018 as discussed more fully in Note 8. The $12.5million in research funding expense was recorded to research and development expenses during the year ended December 31,2018. Other than the Initial Research Payments, the Company is not required to make additional Research Funding Paymentsif the Company, whether directly or through its affiliates or sublicensees, is not researching, developing, or commercializingproducts based on or incorporating inventions exclusively licensed to the Company from Broad under Sponsored InventionLicenses or based on or incorporating CRISPR technology owned, co-owned, or controlled by Broad and otherwise licensedto the Company, subject to certain exclusions (an “Applicable Product” and such exemption from payment, the “FundingExemption”). In the event that the Company, whether directly or through its affiliates or sublicensees, later resumes research,development, or commercialization of an Applicable Product within a specified period of time, any Research FundingPayment that was not paid to Broad as a result of the Funding Exemption shall become payable. Under the SponsoredResearch Agreement, the Company is obligated to pay up to $125.0 million to Broad in Research Funding, inclusive of theInitial Research Payments, and in no event shall the aggregate amount of all Research Funding Payments exceed suchamount.Unless the Company has undergone a change in control, Market Cap Research Funding is payable by the Companyin cash, common stock, or in the form of promissory notes, which may be settled in shares of common stock at the election ofthe Company, as discussed more fully in Note 8. Following a change in control of the Company, Company Sale ResearchFunding is required to be made in cash. The Sponsored Research Agreement is terminable by each party upon the occurrenceof specified bankruptcy events of the other party and otherwise will continue in effect until the later of the expenditure of allResearch Funding Payments by Broad and such time as the Company has no further rights of first negotiation for SponsoredInvention Licenses, unless otherwise mutually agreed between the parties.Beam Therapeutics License AgreementSummary of AgreementIn May 2018, the Company entered into a license agreement with Beam (the “Beam License Agreement”). Beam is abiotechnology company focused on developing precision genetic medicines using technology that converts a singlenucleobase into a different nucleobase (“Base Editing”). Pursuant to the Beam License Agreement, the Company granted toBeam licenses and options to acquire licenses to certain intellectual property rights owned or controlled by the Company, forspecified uses. More specifically, the Company granted to Beam a worldwide, exclusive (subject to certain exceptions),sublicensable (subject to certain conditions), license under certain intellectual property controlled by the Company for theuse of Base Editing therapies for the treatment of any field of human diseases and conditions, subject to certain exceptions(the “Beam Field,” and the licenses granted or to be granted under the Beam License Agreement, the “Beam Developmentand Commercialization License”). Additionally, the Company granted to Beam a royalty-free, non-exclusive license undercertain intellectual property owned or controlled by the Company to perform research activities in the Beam Field (the164 Table of Contents“Beam Research License”). The Company provided Beam with an exclusive option to obtain a Beam Development andCommercialization License to three additional groups of intellectual property owned or controlled by the Company, on agroup by group basis, during the specified option period, subject to certain exceptions. Pursuant to the Beam LicenseAgreement, Beam will use commercially reasonable efforts to develop a product that includes the rights licensed to Beamwithin a specified period of time and to commercialize any such product that have received regulatory approval in certainspecified countries.As consideration for the license and option rights granted to Beam, the Company received a nominal one-time, non-refundable, non-creditable upfront cash payment. The Company also received non-cash consideration, consisting of a low tomid-single digit million number of shares of Beam Series A-1 and A-2 preferred stock, having an aggregate fair value ofapproximately $3.6 million. The Company is eligible to receive additional consideration if Beam elects to exercise its optionto obtain a Beam Development and Commercialization License to the three categories of intellectual property underlying theResearch License, for a fee ranging from a mid-teen million dollar amount to a low to mid-eight digit dollar amount pergroup, depending on the timing of the option exercise. Additionally, Beam is required to reimburse the Company for certainpayments the Company may be obligated to make under the Company’s existing license agreements related to theintellectual property being licensed to Beam, including (i) development, regulatory and commercial milestone payments andcertain sublicense income payments due as a result of the Beam License Agreement and (ii) a percentage of the annualmaintenance fees and patent fees due to certain of the Company’s licensors. In addition, to the extent any products arecommercialized under a Beam Development and Commercialization License, the Company would be entitled to receiveroyalty payments equivalent to the royalties that would be due from the Company to any applicable licensors of theCompany related to the sales of such licensed products, plus an additional low single-digit percentage royalty. Additionally,if Beam exercises its right to obtain a Beam Development and Commercialization License to one of the categories ofoptioned intellectual property comprising Company-owned intellectual property and any related licensed products that arecommercialized, the Company would be entitled to tiered low single-digit royalty payments related to sales of such licensedproducts.The license rights and option rights granted to Beam are subject to the terms and conditions of the underlyinglicense agreements that the Company is a party to and under which the Company licensed rights or option rights to Beamand the termination of such in-licenses, as applicable. Unless earlier terminated by either party pursuant to the terms of theagreement, the Beam License Agreement will continue in full force and effect and will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to such licensed productin such country. Beam has the right, at its sole discretion, at any time to terminate the Beam License Agreement in its entiretyor on a group-by-group of intellectual property basis, upon ninety days written notice to the Company. Upon termination ofthe Beam License Agreement, all rights and licenses granted by the Company to Beam (including the rights to exerciseoptions and obtain such licenses) will immediately terminate and patents within a group of patents will no longer be deemedlicensed patents. Expiration or termination of the Beam License Agreement for any reason does not release either party of anyobligation or liability which had accrued or which is attributable to a period prior to such expiration or termination.Accounting AnalysisThe Company has identified the following performance obligations (i) the Beam Development andCommercialization License and (ii) the Beam Research License. In addition, the Company has concluded the option toobtain additional Beam Development and Commercialization Licenses to up to three additional groups of patents in thefuture is considered a marketing offer as the options did not provide any discounts or other rights that would be considered amaterial right in the arrangement.As of December 31, 2018, the total transaction price at the inception of the arrangement was determined to beapproximately $3.8 million, consisting of the upfront cash payment and non-cash consideration related to the shares of Beampreferred stock. The Company determined the fair value based on the price paid by other unrelated investors for such shares.The consideration associated with the exercise of the option(s) will be accounted for if and when Beam elects to purchase theadditional licenses. The other forms of consideration, including the development and regulatory milestone reimbursement,the sublicense income reimbursement, the maintenance fee reimbursement and the patent costs reimbursement were estimatedbased on the most-likely amount and were excluded from the initial transaction price as the165 Table of Contentsmost-likely amount was estimated to be zero or the amount was otherwise fully constrained due to the significantuncertainties surrounding such payments. The commercial-based milestone reimbursement and the sales-based royaltypayments will be recognized when the related sales occur as they were determined to relate predominantly to the licensesgranted and therefore have also been excluded from the transaction price.The total transaction price at the inception of the arrangement was allocated to the performance obligations in theaggregate, as the Beam Development and Commercialization License and the Beam Research License were deliveredsimultaneously with one another, at inception of the arrangement, when the licenses were made available for Beam’s use andbenefit. Accordingly, the satisfaction of each performance obligation occurs at inception of the arrangement and thetransaction price at the inception of the arrangement is recognized in its entirety at such time. The Company will re-evaluatethe transaction price at the end of each reporting period and as uncertain events are resolved or other changes incircumstances occur. There were no changes to the transaction price during the year ended December 31, 2018.During the year ended December 31, 2018, the Company recognized revenue under the Beam License Agreement ofapproximately $4.0 million. The revenue is classified as collaboration and other research and development revenues in theaccompanying consolidated statement of operations and the Beam preferred stock is classified in restricted cash and othernon-current assets.Other AgreementsLicensing AgreementsThe 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 following is a summary of such in-license agreements thatare significant to the Company’s business.Cas9-I License AgreementIn 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.In 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 restated166 Table of Contentsthe Cas9-I License Agreement as described below and the Company and Broad entered into the Cas9‑II License Agreementfor specified patent rights (the “Cas9-II Patent Rights”) related primarily to certain Cas9 compositions of matter and their usefor genome 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 AgreementPursuant 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 Payments”and, collectively with the Cpf1 Market Cap Success Payments, the “Cpf1 Success Payments”). The Cpf1 Success Paymentspayable to Broad and Wageningen are triggered when the Company’s market capitalization reaches certain amounts rangingfrom $750.0 million to $10.0 billion for a specified period of time, and collectively the Cpf1167 Table of ContentsSuccess Payments will not exceed, in aggregate, $125.0 million, which maximum amount would be payable only if theCompany reaches a market capitalization threshold of $10.0 billion and has at least one product candidate covered by aclaim of a patent right licensed to the Company under either the Cpf1 License Agreement or the Cas9‑I License Agreementthat is or was the subject of a clinical trial pursuant to development efforts by the Company or any Company affiliate orsublicensee. The Cpf1 Market Cap Success Payments are payable by the Company in cash or in the form of promissory noteson substantially the same terms and conditions as the Initial Notes, as described more fully in Note 8, except that the maturitydate of such notes will, subject to certain exceptions, be 150 days following issuance. Following a change in control of theCompany, Cpf1 Market Cap Success Payments are required to be made in cash. Cpf1 Company Sale Success Payments arepayable solely in cash. The Company triggered the first and second Cpf1 Success Payments during 2017 when theCompany’s market capitalization reached $750 million and $1.0 billion, respectively, as described more fully in 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 AgreementIn 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 License Agreement. In March 2017, the Company and Harvard and Broad further amended theAmended and Restated Cas9-I License Agreement to (i) grant an exclusive license from Broad to the Company with respectto certain patent rights that The Rockefeller University (“Rockefeller”) has or may have rights in and to and for whichRockefeller has, under a certain inter-institutional agreement that Broad and Rockefeller entered into in February 2017,appointed Broad as sole and exclusive agent for the purposes of licensing and (ii) provide to Rockefeller certain rights,including with respect to patent enforcement, indemnification, insurance, confidentiality, reservation of certain rights, andpublicity, that are generally consistent with those granted to Broad, Harvard, MIT and the Howard Hughes Medical Instituteunder the Amended and Restated Cas9-I License Agreement.Cas9‑II License AgreementPursuant 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 disease that afflicts at least a specified number ofpatients in the aggregate in the United States totaling up to $3.7 million168 Table of Contentsin the 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-I License Agreement or theCas9-II License Agreement that is or was the subject of a clinical trial pursuant to development efforts by the Company orany Company affiliate or sublicensee. The Company triggered the first Success Payment under the Cas9-II LicenseAgreement during the fourth quarter of 2017 when the Company’s market capitalization reached $1.0 billion, which theCompany settled in January 2018, as more fully described in Note 8.10. Preferred StockOn 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, 2018, theCompany had no shares of preferred stock issued or outstanding. 11. Common StockThe 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, 2018:VotingThe 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.DividendsThe 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.169 Table of ContentsShares Reserved for Future Issuance As of December 31, 2018 2017Shares reserved for outstanding stock option awards under the 2013 StockIncentive Plan, as amended 873,373 1,220,567Shares reserved for outstanding stock option awards under the 2015 StockIncentive Plan 3,709,225 2,921,987Shares reserved for outstanding inducement stock option award 107,188 225,000Remaining shares reserved, but unissued, for future awards under the 2015Stock Incentive Plan 3,233,031 2,502,338Remaining shares reserved, but unissued, for future awards under the 2015Employee Stock Purchase Plan 1,175,224 751,242 9,098,041 7,621,134 March 2018 Common Stock Sales AgreementIn March 2018, the Company entered into a sales agreement with Cowen and Company LLC (“Cowen”), underwhich the Company from time to time can issue and sell shares of its common stock through Cowen in at-the-marketofferings (“2018 ATM Program”) for aggregate sales proceeds of $150.0 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 Securities and Exchange Commission (“SEC”). The Company will pay Cowen acommission of 3% of the aggregate gross proceeds the Company receives from all sales of the Company’s common stockunder the sales agreement. In November 2018, the Company sold an aggregate of 1,107,000 shares of its common stockunder the 2018 ATM Program at an average price of $26.95 per share for net proceeds of $28.4 million. 12. Stock‑Based Compensation2013 Stock Incentive PlanIn September 2013, the board of directors adopted the 2013 Stock Incentive Plan, which was subsequently amended(as amended, the “2013 Plan”), which provides for the grant of incentive stock options and nonqualified stock options orother awards including restricted stock awards, unrestricted stock awards, and restricted stock units to the Company’semployees, officers, directors, advisors, and consultants for the purchase of up to 1,057,692 shares of the Company’s commonstock. In June 2014, the 2013 Plan was amended to increase the number of shares reserved thereunder by 1,365,384 shares. InApril 2015, the 2013 Plan was amended to increase the number of shares reserved thereunder by 153,846 shares. In July2015, the 2013 Plan was amended to 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 PlanThe 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.170 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. In January 2019, the shares under the 2015 Plan were increased by 1,961,156 shares pursuant to the annualincrease described in the prior sentence.2015 Employee Stock Purchase PlanThe 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. In January 2019, the sharesunder the 2015 ESPP Plan were increased by 490,289 shares pursuant to the annual increase described in the prior sentence.Founder AwardsIn 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 ExpenseTotal compensation cost recognized for all stock‑based compensation awards in the consolidated statements ofoperations was as follows (in thousands): Year Ended December 31, 2018 2017 2016Research and development $14,734 $15,131 $12,647General and administrative 11,864 8,233 4,234Total stock-compensation expense $26,598 $23,364 $16,881 Restricted StockFrom 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 as the restricted stock171 Table of Contentsvests. A summary of the status of and changes in unvested restricted stock as of December 31, 2017 and 2018 is as follows: Weighted Average Grant Date Fair Value Shares Per ShareUnvested Restricted Common Stock as of December 31, 2017 513,225 $18.70Issued — —Vested (243,225) $8.32Forfeited — —Unvested Restricted Common Stock as of December 31, 2018 270,000 $28.05 The expense related to restricted stock awards granted to employees and non-employees was $0 million and $2.4million, respectively, for the year ended December 31, 2018. The expense related to restricted stock awards granted toemployees and non‑employees was $0.5 million and $4.1 million, respectively, for the year ended December 31, 2017. Theexpense related to restricted stock awards granted to employees and non‑employees was $0 and $8.3 million, respectively,for the year ended December 31, 2016.As of December 31, 2018, the Company had no unrecognized stock‑based compensation expense related to itsemployee unvested restricted stock awards and $6.0 million in unrecognized stock-based compensation expense related toits non-employee unvested restricted stock awards which is expected to be recognized over a remaining weighted averagevesting period of 3.7 years.Stock OptionsCertain of the Company’s stock option agreements allowed for the exercise of unvested awards. During 2014,options to purchase 75,304 shares of common stock for $0.03 per share were exercised prior to their vesting. The unvestedshares were subject to repurchase by the Company if the employees ceased to provide service to the Company, with orwithout cause. As such, the Company did not treat the exercise of unvested options as a substantive exercise. The Companyrecorded the proceeds from the exercise of unvested stock options as a liability in the consolidated balance sheets. Theliability for unvested common stock subject to repurchase was reclassified into stockholders’ equity as the shares vested. Asof June 30, 2018, the early exercise stock options were fully vested.The following is a summary of stock option activity for the year ended December 31, 2018: Weighted Average Remaining Aggregate Intrinsic Shares Exercise Price Contractual Life Value (in thousands)Outstanding at December 31, 2017 4,372,136 $17.28 8.5 $60,591Granted 1,884,411 $35.29 — —Exercised (752,674) $13.78 — —Cancelled (814,087) $24.88 — —Outstanding at December 31, 2018 4,689,786 $23.80 7.9 $20,686Exercisable at December 31, 2018 2,061,769 $18.34 7.0 $15,222 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. The Company had no unvested restricted common stock outstanding atDecember 31, 2018 and had 4,572 shares of unvested restricted common stock outstanding at December 31, 2017, resultingfrom the exercise of unvested stock options.The total intrinsic value of options exercised for the years ended December 31, 2018, 2017 and 2016 was $15.9million, $5.0 million and $0.9 million, respectively.172 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, 2018, 2017, and 2016 was $24.91, $16.07 and $14.10, respectively. Theexpense related to options granted to employees and directors was $19.9 million, $12.3 million and $6.0 million for the yearsended December 31, 2018, 2017, and 2016, 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, 2018 2017 2016 Expected volatility 77.5% 77.8% 78.4%Expected term (in years) 6.25 6.25 6.25 Risk free interest rate 2.9% 2.1% 1.5%Expected dividend yield — — — There were no options granted to persons other than employees and directors during the year ended December 31,2018. For the years ended December 31, 2018, 2017 and 2016, 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, 2018 2017 2016 Expected volatility — — 76.5%Expected term (in years) — — 10.0 Risk free interest rate — — 1.6%Expected dividend yield — — — As of December 31, 2018, the Company had unrecognized stock‑based compensation expense related to itsemployee stock options of $47.4 million which the Company expects to recognize over a remaining weighted averagevesting period of 2.45 years. 13. 401(k) Savings PlanThe 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 $0.7 million and $0.5 million in contributions to the 401(k)Plan for the years ended December 31, 2018 and 2017, respectively. 173 Table of Contents14. Income Taxes The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2018,2017 and 2016.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, 2018 2017 2016 Income tax computed at federal statutory tax rate 21.0%34.0%34.0%State taxes, net of federal benefit 6.4%5.9%3.5%General business credit carryovers 4.4%2.5%1.5%Non-deductible expenses 0.6%(2.1)%(3.6)%Federal tax rate reduction —%(24.7)% —%Change in valuation allowance (32.4)%(15.6)%(35.4)% —% —% —% On 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. The Company does not currently have any foreign subsidiaries and theinternational aspects of the Tax Act are not applicable.In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of GAAP insituations when a registrant does not have the necessary information available, prepared, or analyzed (includingcomputations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of December31, 2018, the Company had completed its accounting for all of the tax effects of the enactment of the Tax Act; including theeffects on its existing deferred tax balances. The Company has not recognized any material adjustment to the provisionalestimate that was previously recorded related to the Tax Act.The principal components of the Company’s deferred tax assets and liabilities consist of the following at December31, 2018 and 2017 (in thousands): Year Ended December 31, 2018 2017Deferred tax assets: Net operating loss carryforwards $20,302 $27,726Tax credit carryforwards 10,059 5,259Accrued expenses 3,099 2,079Capitalized patent costs 33,101 26,307Deferred revenue 34,039 7,151Construction financing lease obligation 9,100 9,352Other 8,347 4,978Total deferred tax assets 118,047 82,852Less valuation allowance (109,091) (73,301)Net deferred tax assets 8,956 9,551Deferred tax liabilities—depreciation and amortization (8,956) (9,551)Net deferred taxes $ — $ — The Company has incurred net operating losses (“NOL”) since inception. At December 31, 2018 and 2017, theCompany had federal and state net operating loss carryforwards of $147.8 million and $202.7 million, respectively, whichexpire beginning in 2035 and will continue to expire through 2037. As of December 31, 2018 and 2017, the174 Table of ContentsCompany had federal and state research and development tax credits carryforwards of $10.8 million and $5.6 million,respectively, which expire beginning in 2028 and will continue to expire through 2038.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 conducted an analysis under Section382 to determine if historical changes in ownership through December 31, 2017 would limit or otherwise restrict its ability toutilize its NOL and research and development credit carryforwards. As a result of this analysis, the Company does not believethere are any significant limitations on its ability to utilize these carryforwards. However, future changes in ownershipoccurring after December 31, 2017 could affect the limitation in future years, and any limitation may result in expiration of aportion of the NOL or research and development credit carryforwards before utilization.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. The Company’s management has determined that it is more likely than not that the Company willnot recognize the benefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $109.1 millionand $73.3 million has been established at December 31, 2018 and 2017, respectively. The increase in the valuationallowance of $35.8 million for the year ended December 31, 2018 was primarily due to current period pre-tax losses incurredand research tax credits generated.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, 2018 and 2017, 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. The Company will file an initial Colorado tax return for 2018. Since the Company is in aloss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income taxauthorities for all tax years in which a loss carryforward is available. The Company did not have any international operationsas of December 31, 2018. There are no federal or state audits in process. 15. Net Loss per ShareBasic net loss per common share is calculated by dividing the net loss attributable to common stockholders by theweighted average number of shares of common stock outstanding during the period, without consideration for potentiallydilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders bythe weighted average number of shares of common stock and potentially dilutive securities outstanding for the perioddetermined using the treasury stock and if converted methods. Contingently issuable shares are included in the calculation ofbasic loss per share as of the beginning of the period in which all the necessary conditions have been satisfied. Contingentlyissuable shares are included in diluted loss per share based on the number of shares, if any, that would be issuable under theterms of the arrangement if the end of the reporting period was the end of the contingency period, if the results are dilutive.175 Table of ContentsFor 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 closing of the November 2018 ATM Offering, the January 2018 ATM Offering, the 2017 DecemberOffering and the 2017 March Offering, the Company sold 1,107,000 shares, 1,429,205 shares, 2,265,500 shares and4,600,000 shares of common stock, respectively. The issuance of these shares resulted in a significant increase in theCompany’s weighted-average shares outstanding for the years ended December 31, 2018 and 2017 and is expected tocontinue to impact the year-over-year comparability of the Company’s net loss per share calculations for the next twelvemonths.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: As of December 31, 2018 2017Unvested restricted common stock 270,000 513,225Outstanding stock options 4,689,786 4,372,126Estimated number of shares issuable for convertible notes — 244,896Total 4,959,786 5,130,247(1)Represents the number of shares of common stock that would have been issued if the Company had elected to paythe December Success Payment Notes, as discussed in Note 8, in shares of the Company’s common stock, based onthe closing price of the common stock on December 31, 2017. The number of shares issued, for purposes of thispresentation, is calculated by dividing the principal of the notes payable, including accrued interest, by thecommon 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 TransactionsDuring the year ended December 31, 2016, the Company paid a related party $1.4 million in rent and facility-relatedfees. The Company did not make any payments to this related party during the years ended December 31, 2018 or 2017. TheCompany received $0.4 million and $0.8 million in rent and facility-related fees from a related party during the years endedDecember 31, 2018 and 2017, respectively, in connection with subleasing a portion of its headquarters; no rent or facility-related payments were received from this related party during the year ended December 31, 2016. During the years endedDecember 31, 2018 and 2017, the Company paid a related party $0.8 million and $0.3 million, respectively, in connectionwith certain research and development expenses. The Company did not make any payments to this related party during theyear ended December 31, 2016. 17. Selected Quarterly Financial Data (unaudited) –The following table contains selected quarterly financial information from 2018 and 2017. The Company believesthat the following information reflects all normal recurring adjustments necessary for a fair statement of the176 (1)Table of Contentsinformation for the periods presented. The operating results for any quarter are not necessarily indicative of results for anyfuture period. Three Months Ended March 31,2018 June 30,2018 September 30,2018 December 31,2018 (in thousands, except per share data)Total collaboration and other research anddevelopment revenues$3,927 $7,372 $14,519 $6,119Total operating expenses 35,486 47,029 30,777 32,372Total other income (expense), net 620 934 1,020 1,199Net loss$(30,939) $(38,723) $(15,238) $(25,054)Net loss applicable to common stockholders$(30,939) $(38,723) $(15,238) $(25,054)Net loss per share applicable to commonstockholders — basic and diluted$(0.67) $(0.82) $(0.32) $(0.52) Three Months Ended March 31,2017 June 30,2017 September 30,2017 December 31,2017 (in thousands, except per share data)Total collaboration and other research anddevelopment revenues$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) 18. Subsequent EventsIn February 2019, the Company entered into a co-development and commercialization agreement with an affiliate ofAllergan to memorialize the Profit-Sharing Arrangement with respect to the LCA10 Program.177 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 ProceduresOur management, with the participation of our principal executive officer and our principal financial officer,evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. The term “disclosure controlsand procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “ExchangeAct”) means controls and other procedures of a company that are designed to ensure that information required to be disclosedby a company 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, 2018, ourprincipal executive officer and principal financial officer concluded that, as of such date, our disclosure controls andprocedures were effective at the reasonable assurance level.Management’s Report on Internal Control over Financial ReportingOur 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, 2018.The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by Ernst& Young LLP, an independent registered public accounting firm, and has issued an attestation report on such audit, which isincluded herein.178 Table of ContentsChanges in Internal Control over Financial ReportingNo 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, 2018 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Editas Medicine, Inc.Opinion on Internal Control over Financial ReportingWe have audited Editas Medicine, Inc.’s internal control over financial reporting as of December 31, 2018, based oncriteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework) (the COSO criteria). In our opinion, Editas Medicine, Inc. (the “Company”)maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on theCOSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the consolidated balance sheets of Editas Medicine, Inc. as of December 31, 2018 and 2017, therelated consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’(deficit) equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes andour report dated February 28, 2019 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting andfor its assessment of the effectiveness of internal control over financial reporting included in the accompanyingManagement’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion onthe Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered withthe PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission of the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control based on theassessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding179 Table of Contentsprevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. /s/ Ernst & Young LLP Boston, MassachusettsFebruary 28, 2019 Item 9B. Other Information.None. 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 III Directors,” “DirectorsContinuing in Office,” “Executive Officers Who Are Not Directors,” and “Section 16(a) Beneficial Ownership ReportingCompliance,” in our definitive proxy statement to be filed with the Securities and Exchange Commission (“SEC”) withrespect to our 2019 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 2019 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 2019 Annual Meeting of Stockholders, which information is incorporated herein by reference. 180 Table of Contents 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 2019Annual Meeting of Stockholders, which information is incorporated herein by reference. 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 2019 Annual Meeting of Stockholders, which information is incorporated herein by reference. 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 FiledHerewith 3.1 Restated Certificate of Incorporation of theRegistrant 8-K 001-37687 2/8/2016 3.1 3.2 Amended and Restated By‑laws of theRegistrant 8-K 001-37687 2/8/2016 3.2 4.1 Specimen Stock Certificate evidencing theshares of 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 Agreementunder 2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.6 10.3+ Form of Nonstatutory Stock OptionAgreement under 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 StockIncentive Plan, as amended S-1 333-208856 1/4/2016 10.8 10.5+ Form of Restricted Stock Agreement under2013 Stock Incentive Plan, as amended S-1 333-208856 1/4/2016 10.9 181 Table of Contents Incorporated by Reference ExhibitNumber Description of Exhibit Form File No. Date ofFiling ExhibitNumber FiledHerewith 10.6+ 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.10 10.7+ Form of Incentive Stock Option Agreementunder 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.11 10.8+ Form of Nonstatutory Stock OptionAgreement under 2015 Stock Incentive Plan S-1 333-208856 1/4/2016 10.12 10.9+ Form of Restricted Stock Agreement under2015 Stock 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 Registrantand Charles 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 10.12 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 10.14† Amended and Restated Cas9-I LicenseAgreement, dated December 16, 2016, amongthe Registrant, the President and Fellows ofHarvard College, and the Broad Institute, Inc.(the “Broad”) 8‑K 001‑37687 1/23/2017 99.2 10.15 Amendment No.1 to Amended and RestatedCas9‑I License Agreement, by and amongEditas Medicine, Inc., President and Fellowsof Harvard College, and Broad, dated March3, 2017 8-K 001-37687 3/7/2017 99.1 10.16† Amended and Restated License andCollaboration Agreement, dated May 3, 2018,between the Registrant and JunoTherapeutics, Inc. 10-Q/A 001‑37687 10/23/2018 10.1 10.17† Sponsored Research Agreement, dated June 7,2018, between the Registrant and Broad 10-Q/A 001‑37687 10/23/2018 10.2 10.18+ Summary of Director Compensation Program S-1 333-208856 1/4/2016 10.24 10.19+ 2015 Employee Stock Purchase Plan S-1 333-208856 1/4/2016 10.25 10.20+ Severance Benefits Plan S-1 333-208856 1/4/2016 10.27 10.21 Form of Indemnification Agreement betweenthe Registrant and each of its directors andexecutive officers S-1 333-208856 1/4/2016 10.28 10.22 Lease Agreement, dated February 12, 2016,between Registrant and ARE-MA RegionNo. 55 Exchange Holding LLC 8-K 001-37687 2/19/2016 99.1 10.23† 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 10.24† 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 99.3 182 Table of Contents Incorporated by Reference ExhibitNumber Description of Exhibit Form File No. Date ofFiling ExhibitNumber FiledHerewith 10.25† Strategic Alliance and Option Agreement,dated March 14, 2017, by and between theRegistrant and Allergan PharmaceuticalsInternational Limited 10-Q 001-37687 5/15/2017 10.1 10.26 Common Stock Sales Agreement, datedMarch 3, 2017, by and between the Registrantand Cowen and Company, LLC (“Cowen”) S-3 333-216444 3/3/2017 1.2 10.27 Common Stock Sales Agreement, datedMarch 12, 2018, by and between theRegistrant and Cowen S-3 333-223596 3/12/2019 1.2 10.28+ Separation Agreement, by and between theRegistrant and Gerald Cox, M.D., Ph.D. X21.1 Subsidiaries of the Registrant 10-K 001-37687 3/30/2016 21.1 23.1 Consent of Ernst & Young X31.1 Rule 13a-14(a) Certification of PrincipalExecutive Officer X31.2 Rule 13a-14(a) Certification of PrincipalFinancial Officer X32.1 Certification of Principal Executive Officerand Principal Financial Officer pursuant to 18U.S.C. §1350 X101.INS XBRL Instance Document X101.SCH XBRL Taxonomy Extension SchemaDocument X101.CAL XBRL Taxonomy Extension CalculationLinkbase Document X101.DEF XBRL Taxonomy Extension DefinitionLinkbase Document 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. 183 Table of Contents SIGNATURESPursuant 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: February 28, 2019By:/s/ Cynthia Collins Cynthia Collins Principal Executive Officer SIGNATURESPursuant 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/ Cynthia CollinsDirector (principal executive officer)February 28, 2019Cynthia Collins/s/ Andrew A. F. HackChief Financial Officer (principal financial andaccounting officer)February 28, 2019Andrew A.F. Hack, M.D., Ph.D./s/ James MullenChairman of the BoardFebruary 28, 2019James Mullen /s/ Andrew Hirsch Director February 28, 2019Andrew Hirsch/s/ Jessica HopfieldDirectorFebruary 28, 2019Jessica Hopfield, Ph.D./s/ David ScaddenDirectorFebruary 28, 2019David Scadden, M.D./s/ Akshay K. VaishnawDirectorFebruary 28, 2019Akshay K. Vaishnaw, M.D., Ph.D. 184Exhibit 10.28 August 24, 2018Gerald Cox48 Avon CircleNeedham, MA 02494 Dear Gerry, The purpose of this letter (the “Separation Agreement”) is to set forth the terms regarding yourseparation of employment as Chief Medical Officer from Editas Medicine, Inc. (“Editas” or the“Company”), including certain severance payments and benefits you may elect in exchange for certainother commitments and the general release provided herein: 1. Employment with the Company. You are being removed from the position of ChiefMedical Officer with the Company effective November 9, 2018, unless terminated at anearlier date by you or the Company (any such date, the “Termination Date”). Youacknowledge that from and after November 9, 2018, you shall not have any authority, andshall not represent yourself, as an employee or agent of the Company. 2. Payments. You will receive on the Termination Date: a. Payment reflecting pay for any time worked through the Termination Date that hasnot already been paid through the Company’s regular payroll process. 3. Retention Benefit. If your employment with the Company is not terminated by you or theCompany prior to November 9, 2018, and so long as you make yourself available to answerquestions and provide advice from November 12, 2018 through December 14, 2018, youwill be eligible for the following Retention Benefit: a. You will be eligible to receive a bonus for 2018. Any such bonus will be based onyour current target bonus (40%) subject to modification based only on CorporateAchievement and will be paid to you at the same time that 2018 bonuses are paid outto existing employees of the Company (the “Retention Payment”). For theavoidance of doubt, such bonus will not be determined or modified based onachievement of your individual goals. 4. Severance Benefits. In accordance with and subject to the Company’s SeveranceBenefits Plan (the “Severance Plan”), subject to your execution of this SeparationAgreement on or before August 27, 2018 and execution and non-revocation of the Release,attached as Exhibit A, within twenty-one (21) days of your last day of employment with theCompany, the Company agrees to provide you with the following Gerald CoxAugust 24, 2018Page 2 of 8 severance benefits (collectively, the “Severance Benefits”): a. Cash Severance: The Company will continue to pay you your monthly Base Salary(as defined in the Severance Plan), less all applicable taxes and withholdings, asseverance pay for a period of twelve (12) months from the TerminationDate. Subject to the Severance Plan, this severance pay will be paid in installmentsin accordance with the Company’s regular payroll practices, but in no event shallpayments begin earlier than the Company’s first payroll date following the ReleaseEffective Date (as defined in the Severance Plan). b. COBRA Contributions: You will be entitled to the COBRA contributions inaccordance with Section 8(a) of the Severance Plan. Also, regardless of your signing this Separation Agreement, upon the termination ofyour employment with the Company you may elect to continue your medical and dentalinsurance, subject to the requirements of COBRA. You will be sent a COBRA qualifyingnotice under separate cover and subsequent notices as required by applicable law orregulation. Your costs to continue the coverage will be set forth in these notices. The“qualifying event” under COBRA shall be deemed to have occurred on the TerminationDate. “COBRA” is the Consolidated Omnibus Budget Reconciliation Act of 1985, asamended. 5. Extension of Stock Option Exercise Period. Subject to the approval of the CompensationCommittee of the Company’s Board of Directors, the Company shall extend to May 9, 2019the exercise period for all options previously awarded by the Company to you as part ofyour employment (the “Employee Option Agreements”) and that have vested up to andincluding November 9, 2018, your last day as a Company employee. Following May 9,2019, your ability to exercise any vested options under your Employee Option Agreements,to the extent not previously exercised, shall terminate. For the avoidance of doubt, vestingunder all Employee Option Agreements shall cease effective as of November 9, 2018 andno additional vesting shall occur under such Employee Option Agreements as a result ofyou being available to answer questions and provide advice between November 12 andDecember 14, 2018. 6. Unemployment Compensation. You may seek unemployment benefits as a result of thetermination of your employment with the Company. Decisions regarding eligibility for andamounts of unemployment benefits are made by the applicable state unemploymentagency, not by Editas. Editas agrees to provide any and all requested or necessarydocuments to enable you to seek unemployment benefits, and further agrees that it will notcontest your eligibility for unemployment benefits. 7. Other Benefits. You acknowledge that, except as provided in Section 4(b) above, allemployee benefits provided to you by the Company will terminate on the Termination Datesubject to any conversion or other rights, including rights to vested benefits, that you mayhave under any such benefit plans, including, without limitation, the Severance Plan, 2015Stock Incentive Plan and related Awards and your Inducement Gerald CoxAugust 24, 2018Page 3 of 8 Stock Option Agreement. 8. No Amounts Owing. You acknowledge and agree that the Severance Benefits provided inSection 4 of this Separation Agreement are in accordance with the Severance Plan andshall confer no benefit on anyone other than you. You further acknowledge and agree thatyou have been paid and provided all wages, bonuses, and any other form of compensationthat may be currently due to you as of the date you sign this Separation Agreement exceptfor wages due on the next regular payroll date, the Retention Payment and SeveranceBenefits. 9. Release of Claims. In exchange for the Retention Payment and Severance Benefitsdescribed in Sections 3 and 4 above, respectively, as well as other good and valuableconsideration described herein, you agree to execute a general release and waiver of claims(the “Release”) against the Company and each of its present, former, and future parents,affiliates, predecessors in interest, successors in interest, subsidiaries, trustees, officers,directors, employees, agents, representatives, attorneys, insurers, and assigns in the formattached as Exhibit A. This Release includes claims of discrimination, including agediscrimination, and all other claims relating to your hiring, employment, and termination ofemployment by the Company. 10. Scope of Disclosure Restrictions. Nothing in this Separation Agreement prohibits eitheryou or the Company communicating with government agencies about possible violations offederal, state, or local laws or otherwise providing information to government agencies, filinga complaint with government agencies, or participating in government agency investigationsor proceedings. Neither you nor the Company are required to notify the other of any suchcommunications; provided, however, that nothing herein authorizes the disclosure ofinformation either party obtained through a communication that was subject to the attorney-client privilege. Further, notwithstanding your confidentiality and nondisclosure obligations,you are hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individualshall not be held criminally or civilly liable under any Federal or State trade secret law for thedisclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or localgovernment official, either directly or indirectly, or to an attorney; and (ii) solely for thepurpose of reporting or investigating a suspected violation of law; or (B) is made in acomplaint or other document filed in a lawsuit or other proceeding, if such filing is madeunder seal. An individual who files a lawsuit for retaliation by an employer for reporting asuspected violation of law may disclose the trade secret to the attorney of the individual anduse the trade secret information in the court proceeding, if the individual (A) files anydocument containing the trade secret under seal; and (B) does not disclose the trade secret,except pursuant to court order.” 11. Return of Company Property. You agree to return all Company property, including but notlimited to keys, access cards, computer and electronic equipment, mobile phone,documents, and files to the Company on or before December 14, 2018. 12. Non-Assignment. You warrant and represent to the Company that you have not assignedor transferred or attempted to assign or transfer to any person any claim or Gerald CoxAugust 24, 2018Page 4 of 8 matter recited in the Release or any part or portion thereof, and agree to indemnify and holdharmless the Company from and against any claim. 13. Confidentiality. You hereby acknowledge and agree that all information relating in any wayto the negotiation of this Separation Agreement, including the terms and amount of financialconsideration provided for in this Separation Agreement, shall be held confidential and shallnot be disclosed to any other persons, business entity or government agency except thatyou may disclose the terms of this Separation Agreement to immediate family members,tax authorities, attorney, tax/financial advisor, and/or any state unemployment agency, ifnecessary in connection with any effort by you to collect unemployment benefits, (providedthat any individual to whom disclosure is made agrees to be bound by these confidentialityobligations) or as otherwise may be required by law or subpoena. Nothing in the SeparationAgreement is intended to interfere with or should be interpreted as interfering with the rightsof employees or former employees under Section 7 of the National Labor Relations Act(NLRA). 14. Non-Disparagement. You hereby acknowledge and agree that you will not make anystatements, whether verbally or in writing, that are professionally or personally disparagingof the Company, or those persons known by you to be or to have been Company officers,directors, employees, agents, or representatives and you further agree not to engage in anyconduct that is intended to harm the reputation of the Company or those persons known byyou to be or have been Company officers, directors, employees, agents, orrepresentatives. In turn, the Company agrees that we will not make professionally orpersonally disparaging comments regarding you and will limit reference checks to dates ofemployment and last position title and level. 15. Your Continuing Obligations. You acknowledge that while an employee of Editas youexecuted an Employee Non-Competition, Non-Solicitation, Confidentiality and AssignmentAgreement, a copy of which is attached as Exhibit B (the “Restrictive CovenantAgreement”), and that notwithstanding your termination you continue to remain bound bythat agreement. 16. Successors and Assigns. This Separation Agreement shall be binding upon therespective legal representatives, heirs, and successors of the parties, to the extentpermitted by law. 17. Notices. Any notices required to be given in connection with this Separation Agreementor Exhibit A shall be given by either by overnight delivery (FED-EX, UPS, or similar over-night carrier) or mailed by certified mail, return receipt requested, postage prepaid, to you atthe address above or to the Company as follows: Semi Trotto, Head of HumanResources, Editas Medicine, 11 Hurley Street, Cambridge, MA 02142. The address fornotices may be changed by providing you or the Company with notice pursuant to thisSection 17. 18. Voluntary Agreement. By executing this Separation Agreement, you are acknowledgingthat you have been afforded sufficient time to understand the terms Gerald CoxAugust 24, 2018Page 5 of 8 and effects of this Separation Agreement, that your agreements are made voluntarily,knowingly and without duress, and that neither the Company, nor its agents orrepresentatives, have made any representations inconsistent with the provisions of thisSeparation Agreement. 19. Entire Agreement. You acknowledge that this Separation Agreement, the Severance Plan,2015 Stock Incentive Plan and related Awards, your Inducement Stock Option Agreementand the Restrictive Covenant Agreement set forth the entire agreement between you andthe Company concerning your termination and fully supersedes any and all prioragreements or understandings between you and the Company pertaining to the subjectmatter hereof. This Separation Agreement may only be modified in a written documentsigned by you and an authorized representative of the Company. In the event any provisionof this Separation Agreement is held invalid, all remaining provisions of the SeparationAgreement shall remain in full force and effect. 20. Severability. Should any provision of this Separation Agreement be declared or bedetermined by any court of competent jurisdiction to be illegal or invalid, the validity of theremaining parts, terms or provisions shall not be affected thereby and said illegal or invalidpart, term or provision shall be deemed not to be a part of this Separation Agreement. 21. Governing Law. This Separation Agreement shall be governed by and interpreted inaccordance with the substantive laws of the Commonwealth of Massachusetts, withoutregard to its conflict of law principles. You agree that any action, demand, claim orcounterclaim relating to the terms and provisions of this Separation Agreement, or itsformation or breach, shall be commenced in the Commonwealth of Massachusetts in acourt of competent jurisdiction, and you further acknowledge that venue for such actionsshall lie exclusively in Massachusetts. 22. Representations. The Company has advised you to consult with an attorney of yourchoosing, concerning this Separation Agreement and Release. You affirm that you havecarefully read and fully understand this Separation Agreement and attached Exhibit A andare voluntarily entering this Separation Agreement. 23. Execution. This Separation Agreement may be executed in one or more counterparts,each of which when so executed shall be deemed to be an original, and all suchcounterparts together shall constitute but one and the same instrument. Your signaturebelow reflects your understanding of, and agreement to, the terms and conditions set forthabove. Sincerely, /s/ Katrine Bosley By: Katrine Bosley Title: Chief Executive Officer Editas Medicine Attachments Gerald CoxAugust 24, 2018Page 6 of 8 Agreed and accepted this 27day of August, 2018: /s/ Gerald Cox Gerald Cox th Gerald CoxAugust 24, 2018Page 7 of 8 EXHIBIT A GENERAL RELEASE AND WAIVER OF CLAIMS(INCLUDING AGE DISCRIMINATION IN EMPLOYMENT CLAIMS) In consideration of the Retention Payment and Severance Benefits set forth in the August 24,2018 letter of agreement (the “Separation Agreement”) (to which this General Release and Waiver ofClaims is attached), I, Gerald Cox, on behalf of my heirs, administrators, executors, representatives,attorneys, agents, insurers, and assigns (collectively, the “Releasors”) except as provided below,hereby fully, finally, irrevocably, unconditionally, and voluntarily release and forever discharge EditasMedicine, Inc. (“the Company”) and each of its present, former, and future parents, affiliates,predecessors in interest, successors in interest, subsidiaries, trustees, officers, directors, employees,agents, representatives, attorneys, insurers, and assigns (collectively, the “Releasees”), jointly andindividually, from any and all claims, suits, charges, complaints, contracts, covenants, promises, debts,losses, sums of money, obligations, demands, judgments, or causes of action of any kind whatsoever,which the Releasors ever had, or now have, or hereafter can, shall or may have, from the beginning ofthe world to the date of the execution of this Release, whether known or unknown, in law or equity, intort, contract, by statute, at common law, or on any other basis, whether federal, state, local, orotherwise, including but not limited to claims arising out of or in any way related to my employment bythe Company including my hiring, or the termination of that employment, or any related matters,including but not limited to: (i.) Claims under any federal, state or local laws, regulations, public policy or otherrequirements relating to the claims or rights of employees, including but not limited to,the Massachusetts Fair Employment Practices Act (Massachusetts General Laws,Chapter 151B), the Massachusetts Payment of Wages Act (Massachusetts GeneralLaws, Chapter 149, Section 148 et seq.), Title VII of the Civil Rights Act of 1964, the AgeDiscrimination in Employment Act, the Older Workers Benefit Protection Act, theEmployee Retirement Income Security Act of 1974, the Equal Pay Act of 1963, theAmericans with Disabilities Act, the Family and Medical Leave Act, and theOccupational Health and Safety Act of 1970, all as they may have been amended;(ii.) Any and all Claims and suits in tort, contract, or wrongful discharge, discrimination,retaliation, or harassment;(iii.) Any and all Claims arising under common law, including but not limited to any claim fornegligent or intentional infliction of emotional distress, promissory estoppel,whistleblower retaliation, fraud, misrepresentation, defamation, negligence, retaliation orviolation of public policy;(iv.) Any and all claims for breach of express or implied contract; and(v.) Any other Claim that I now have, may have, or have ever had against Releasees basedon any conduct up to and including the date of his execution of this Release. The recitation of specific claims herein is without prejudice to the general release containedherein and is not intended to limit the scope of the general release. This release will remain in effectnotwithstanding the discovery or existence of any additional fact or facts different from those which younow know or believe to be true relating to the foregoing released Claims. Gerald CoxAugust 24, 2018Page 8 of 8 Notwithstanding anything to the contrary contained herein, nothing contained in this GeneralRelease and Waiver of Claims shall be construed to bar any (a) non-termination related claims underthe Massachusetts Workers Compensation Act (M.G.L. c. 152) or any disability insurance policy/plan;(b) rights to vested benefits under any applicable retirement and/or pension and/or deferredcompensation plans, including, without limitation the Severance Plan, 2015 Stock Incentive Plan andrelated Awards, and my Inducement Stock Option Agreement; (c) non-termination related claims underthe Employee Retirement Income Security Act (29 U.S.C. § 1001 et seq.); (d) rights under theConsolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”); (e) claims for unemploymentcompensation; (f) rights to defense, indemnification and contribution from the Company or its insurersfor actions taken by me in the course and scope of my employment with the Company and its parents,subsidiaries and/or affiliates, pursuant to any Company policy and/or governing documents such as itsby-laws or any applicable insurance policy, or at common law; (g) claims, actions, or rights arisingunder or to enforce the terms of the Separation Agreement; (h) any claims arising solely after theexecution of this Release; (i) claims for reimbursement of approved business expenses incurred prior tothe Termination Date (as defined in the Separation Agreement); or (j) any rights or claims I may have asa shareholder of the Company or holder of options to purchase stock of the Company. I acknowledge that I have been advised to consult with an attorney, and affirm that I have doneso, before signing this Release, particularly the release of ADEA claims. I acknowledge that theCompany has given me twenty-one days to consider signing this Release. I also acknowledge that, insigning this Release, I am not relying on any other statements or explanations made by the Company. This Release will become effective seven (7) days after it is signed. I understand that I mayrevoke this Release within seven (7) days after it is signed by giving written notice by overnight delivery(FED-EX, UPS, or similar over-night carrier) or mailed by certified mail, return receipt requested,postage prepaid to the Company as follows: Semi Trotto, Head of Human Resources, Editas Medicine,11 Hurley Street, Cambridge, MA 02142, and that it shall not become effective until the expiration of theseven-day revocation period. If I choose to revoke the Release, I understand that the SeparationAgreement, of which this Release is an essential part, will become null and void and that the Companywill not owe me the Retention Payment or Severance Benefits set forth in the Separation Agreement. In witness whereof, I, Gerald Cox, have caused this General Release and Waiver of Claims tobe executed and sealed this day of , 2018. Gerald Cox Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements:(1)Registration Statements (Form S-3 No. 333-216528, 333-222266, and 333-223596) of Editas Medicine,Inc., (2)Registration Statement (Form S-8 No. 333-209351) pertaining to the Editas Medicine, Inc. 2013 StockIncentive Plan, 2015 Stock Incentive Plan and 2015 Employee Stock Purchase Plan, (3)Registration Statement (Form S-8 No. 333-214556) pertaining to the Editas Medicine, Inc. InducementStock Option Award, and(4)Registration Statements (Form S-8 Nos. 333-216445 and 333-223529) pertaining to the 2015 StockIncentive Plan and 2015 Employee Stock Purchase Plan; of our reports dated February 28, 2019, with respect to the consolidated financial statements of Editas Medicine, Inc.and the effectiveness of internal control over financial reporting of Editas Medicine, Inc., included in this AnnualReport (Form 10-K) of Editas Medicine, Inc. for the year ended December 31, 2018. /s/ Ernst & Young LLP Boston, MassachusettsFebruary 28, 2019Exhibit 31.1CERTIFICATIONS I, Cynthia Collins, 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: February 28, 2019By:/s/ Cynthia Collins Cynthia Collins 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: February 28, 2019By:/s/ Andrew A. F. Hack Andrew A. F. Hack, M.D., Ph.D. Chief Financial Officer (Principal Financial Officer) Exhibit 32.1 CERTIFICATIONS OF PEO 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, 2018, 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: February 28, 2019 By:/s/ Cynthia Collins Cynthia Collins Principal Executive Officer By:/s/ Andrew A.F. Hack Andrew A.F. Hack, M.D., Ph.D. Chief Financial Officer 

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