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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________
Commission File Number 001-37687
EDITAS MEDICINE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
11 Hurley Street
Cambridge, Massachusetts
(Address of principal executive offices)
46-4097528
(I.R.S. Employer
Identification No.)
02141
(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
Common Stock, $0.0001 par value per share
Trading Symbol(s)
EDIT
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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, 2021, the last business 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 the registrant was approximately $1,147,336,173 based upon the closing price of the registrant’s Common Stock on June 30, 2021.
The number of shares of the registrant’s Common Stock outstanding as of February 14, 2022 was 68,518,971.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days of the end of the registrant’s fiscal
year ended December 31, 2021 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Editas Medicine, Inc.
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Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
SIGNATURES
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References to Editas
Throughout this Annual Report on Form 10-K, the “Company,” “Editas,” “Editas Medicine,” “we,” “us,” and
“our,” except where the context requires otherwise, refer to Editas Medicine, Inc. and its consolidated subsidiary, and “our
board of directors” refers to the board of directors of Editas Medicine, Inc.
Special Note Regarding Forward-Looking Statements and Industry Data
This Annual Report on Form 10-K contains forward-looking statements regarding, among other things, our future
discovery and development efforts, our future operating results and financial position, our business strategy, and other
objectives 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
cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually
achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue
reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary
statements included in this Annual Report on Form 10-K, particularly in the section entitled “Risk Factors” in Part I that
could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-
looking statements do not reflect the potential 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 Annual
Report on Form 10-K completely and with the understanding that our actual future results may be materially different from
what we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of
this Annual Report on Form 10-K, and we do not assume any obligation to update any forward-looking statements,
whether as 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
from our own internal estimates and research, as well as from industry and general publications and research, surveys, and
studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained
from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
While we believe that each of these studies and publications is reliable, we have not independently verified market and
industry data from third-party sources. While we believe our internal company research is reliable and the market
definitions are appropriate, neither such research nor these definitions have been verified by any independent source.
Risk Factor Summary:
● We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may
never achieve or maintain profitability.
● We will need substantial additional funding, which may cause dilution to our stockholders, restrict our operations
or require us to relinquish rights to our technologies or product candidates.
● We have never generated revenue from product sales and may never be profitable.
● We intend to identify and develop product candidates based on a novel genome editing technology, which makes it
difficult to predict the time and cost of product candidate development.
● Regulatory requirements governing genetic medicines, and in particular any novel genetic medicines we may
develop, have changed frequently and may continue to change in the future.
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● Adverse public perception of genomic medicines, and genome editing in particular, may negatively impact
regulatory approval of, or demand for, our potential products.
● The genome editing field is relatively new and is evolving rapidly. We are focusing our research and development
efforts on CRISPR gene editing technology using Cas9 and Cas12a enzymes, but other genome editing
technologies may be discovered that provide significant advantages over CRISPR/Cas9 or CRISPR/Cas12a.
● Except for EDIT-101 and EDIT-301, all of our product development programs are at the preclinical or research
stage. Preclinical testing and clinical trials of product candidates may not be successful.
● If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the
development of any product candidates we develop, we may need to abandon or limit our further clinical
development of those product candidates, and it may delay or prevent their regulatory approval, limit the
commercial potential, or result in significant negative consequences following any potential marketing approval.
● We have not extensively tested any of our proposed delivery modes and product candidates in clinical trials.
● If we are unable to successfully identify patients who are likely to benefit from therapy with any medicines we
develop, or experience significant delays in doing so, we may not realize the full commercial potential of any
medicines we may develop.
● We face significant competition in an environment of rapid technological change, and our competitors may
achieve regulatory approval before us or develop therapies that are safer or more advanced or effective than
ours.
● Due to the novel nature of our technology and the potential for some of our product candidates to offer
therapeutic benefit in a single administration or limited number of administrations, we face uncertainty related to
pricing and reimbursement for these product candidates.
● Genomic medicines are novel, and our product candidates may be complex and difficult to manufacture. We could
experience production problems that result in delays in our development or commercialization programs, limit the
supply of our products, or otherwise harm our business.
● We expect to depend on collaborations with third parties for the research, development, and commercialization of
certain of the product candidates we develop, for development of certain of our research programs, and to
conduct our clinical trials and some aspects of our research and preclinical testing.
● If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or
if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and
commercialize products and technology similar or identical to ours.
● Our rights to develop and commercialize our technology and product candidates are subject, in part, to the terms
and conditions of licenses granted to us by others.
● Some of our in-licensed patents are subject to priority and validity disputes. Our owned and in-licensed patents,
patent applications and other intellectual property may be subject to further priority and validity disputes, and
other similar intellectual property 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 or at all, or to cease the development, manufacture, and
commercialization of one or more of the product candidates we develop.
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● Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is
expensive, time-consuming, and uncertain and may prevent us from obtaining approvals for the
commercialization of any of our product candidates.
● Our future success depends on our ability to attract and retain key executives and to attract, retain, and motivate
qualified personnel.
● The market price of our common stock may be volatile, which could result in substantial losses for our
stockholders.
● We do not expect to pay any dividends for the foreseeable future. Accordingly, stockholders must rely on capital
appreciation, if any, for any return on their investments.
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Item 1. Business
PART I
We are a leading, clinical stage gene editing company dedicated to developing potentially transformative gene
editing medicines to treat a broad range of serious diseases. The promise of genomic medicines is supported by the
advancing knowledge of the human genome and by harnessing the progress in technologies for cell therapy, gene therapy,
and, most recently, gene editing. We believe this progress sets the stage for us to create medicines with the potential to have
a durable benefit for patients. Our core capability in gene editing uses the technology known as CRISPR (clustered,
regularly interspaced, short palindromic repeats) to allow us to create molecules that efficiently and specifically edit DNA.
Our mission is to translate the promise of gene editing into a broad class of differentiated, transformational medicines for
diseases with high unmet need.
We have developed a proprietary gene editing platform based on CRISPR technology and we continue to expand
its capabilities. CRISPR uses a protein-RNA complex composed of an enzyme, including either Cas9 (CRISPR associated
protein 9) or Cas12a (CRISPR from Prevotella and Francisella 1, also known as Cpf1), bound to a guide RNA molecule
designed to recognize a particular DNA sequence. Once the complex binds to the DNA sequence it was designed to
recognize, the complex makes a specific cut in the DNA. We believe we are the only human genome editing company with
a platform that includes CRISPR/Cas9, CRISPR/Cas12a, and engineered forms of both of these CRISPR systems. Because
of the broad nature of this platform, we believe we can create gene editing molecules for over 95% of the human genome.
Our Strategy
Our product development strategy is to target diseases of high unmet need where we aim to make differentiated,
transformational medicines using our gene editing platform. We are advancing in vivo gene editing medicines, in which the
medicine is injected or infused into the patient to edit the cells inside their body, ex vivo gene-edited cell medicines, in
which cells collected from a patient are edited with our technology and then administered back to that same patient, and
cellular therapy medicines, in which we use our technology to edit induced human pluripotent stem cells that are
subsequently differentiated into effector cells, such as natural killer (“NK”) cells, to develop medicines that can be
administered to a patient. While our discovery efforts have ranged across several diseases and therapeutic areas, the areas
where our programs are more mature are our in vivo medicines to treat ocular diseases, our ex vivo gene-edited cell
medicines to treat hemoglobinopathies and our cellular therapy medicines to treat cancer.
For our in vivo gene editing medicines, we are leveraging an adeno-associated virus (“AAV”)-mediated editing
platform with our proprietary Staphylococcus aureus Cas9 (“SaCas9”) and Acidaminococcus sp. Cas12a (“AsCas12a”) to
develop medicines. In ocular diseases, our most advanced program is designed to address a specific genetic form of retinal
degeneration called Leber congenital amaurosis 10 (“LCA10”), a CEP290-related retinal degenerative disorder that leads
to blindness and for which we are not aware of any available therapies. In mid-2019, we initiated our Phase 1/2
BRILLIANCE clinical trial of EDIT-101, an experimental gene editing medicine to treat LCA10. EDIT-101 has been
granted Rare Pediatric Disease and Orphan Drug designations from the U.S. Food and Drug Administration (“FDA”) and
Orphan Designation from the European Medicines Agency (“EMA”). The BRILLIANCE trial is designed to assess the
safety, tolerability, and efficacy of EDIT-101. We initially planned to enroll up to 18 patients in the United States and
Europe in up to five cohorts, and in 2021 completed dosing of the first three cohorts, the adult low-, mid- and high-dose
cohorts. We are expanding enrollment in one or more of the previously completed adult cohorts to explore dose response
and support establishment of registrational trial endpoints. We anticipate establishing these registrational trial endpoints by
the end of 2022. We remain on track to complete dosing of the pediatric mid-dose cohort in the first half of 2022, and
expect to initiate dosing of the pediatric high-dose cohort in 2022.
In the third quarter of 2021, we released preliminary clinical data from the first six patients with LCA10 treated
with EDIT-101 demonstrating a favorable safety profile and encouraging signals of clinical benefit. For additional
information regarding these clinical data, please see “Business—Our Gene Editing Medicine Programs—In Vivo Gene
Editing Medicines - Ocular—Leber Congenital Amaurosis 10.” We expect to provide a clinical update on the
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BRILLIANCE trial in the second half of 2022, including safety and efficacy assessments on all patients who have had at
least six months of follow-up evaluations.
We believe that our achievement of proof-of-concept with EDIT-101 validates our foundational in vivo
technology, including its potential application to other ocular diseases, such as autosomal dominant retinitis pigmentosa
(“adRP”), a progressive form of retinal degeneration characterized by initial night blindness early in life followed by loss
of peripheral vision and eventual complete blindness, and Usher syndrome 2A (“USH2A”), a form of retinitis pigmentosa
that also includes hearing loss, as well as diseases of other organs and tissues. In December 2021, we declared a
development candidate, referred to as EDIT-103, which we are progressing towards investigational new drug (“IND”)-
enabling studies, for treatment of rhodopsin-associated adRP (“RHO-adRP”). We also continue to optimize our previously
declared development candidate for USH2A, referred to as EDIT-102. We expect to declare an additional development
candidate for an in vivo ocular indication in 2022.
We are leveraging our AAV-mediated editing platform and expertise in ocular therapies to pursue additional
therapeutic areas to treat other organ and tissues that are accessible by AAV. For example, in 2019, we entered into a
research collaboration with Asklepios BioPharmaceutical, Inc., a fully integrated AAV gene therapy company (“AskBio”)
that was acquired by Bayer AG in December 2020, to explore the use of our AAV-mediated editing platform to treat
neurological diseases.
In addition to developing in vivo gene editing medicines, the development of ex vivo gene-edited cell medicines is
a core part of our research effort and product pipeline. We believe that advances in genome editing will both improve the
characteristics of current cellular medicines and also expand the universe of cellular medicines that can be developed. To
this end, we have established capabilities to efficiently and specifically edit hematopoietic stem cells, which we believe can
lead to best-in-class medicines for hemoglobinopathies.
For our ex vivo gene-edited cell medicines, our lead program is EDIT-301, an experimental medicine to treat
sickle cell disease, a severe inherited blood disease that causes premature death, and transfusion-dependent beta-
thalassemia (“TDT”), the most severe form of beta-thalassemia, another inherited blood disorder characterized by severe
anemia. In January 2021, the FDA cleared the start of enrollment and dosing of patients in the first phase of our Phase 1/2
clinical trial of EDIT-301, which we refer to as our RUBY trial, for the treatment of sickle cell disease. This study is
designed to validate the safety and beneficial effects of the cell editing process. The RUBY trial is currently enrolling study
participants and is on track to begin dosing in the first half of 2022 with initial clinical results expected by the end of 2022.
Prior to initiating a registrational trial, we will be required to develop a potency assay to ensure that the characteristics of
the product released are as expected and confirmed by clinical data collected in the first patients treated, in response to an
FDA partial clinical hold. In November 2021, we filed an IND application for a Phase 1/2 clinical trial of EDIT-301 for the
treatment of TDT, which was cleared by the FDA in December 2021. We expect to initiate dosing in this trial during 2022.
The CRISPR nuclease used in our EDIT-301 program is a proprietary engineered AsCas12a enzyme for which we have
exclusively licensed the foundational intellectual property to develop and commercialize human therapeutics. We believe
our editing approach, including targeting the HBG1 and HBG2 promoters to mimic naturally occurring human mutations,
analogous to patients with naturally occurring hereditary persistence of fetal hemoglobin, and the use of AsCas12a, which
has demonstrated high efficiency editing of multipotent long-term hematopoietic stem cells for sustained efficacy and
durability, is potentially a more effective approach with better long-term safety than other editing targets and mechanisms
and positions us to develop a potentially best-in-class medicine to treat sickle cell disease and TDT.
In cellular therapy medicines, we continue to develop our capabilities to generate cells from induced human
pluripotent stem cells (“iPSCs”) to develop engineered cell medicines to treat cancer. We are able to edit cells from iPSCs
that are subsequently differentiated into effector cells, such as NK cells or T cells. These engineered cells are then
administered to the patient. We believe these approaches and expertise will allow us to develop allogeneic, off-the-shelf
engineered cell medicines, as opposed to relying on obtaining cells directly from a patient. These allogeneic cell medicines
have the potential to greatly reduce the costs and complexity of engineered cells and increase the number and type of
cancers that we have the potential to address.
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We have advanced development of engineered iPSC-derived NK (“iNK”) cell medicines for solid tumors and
generated edited NK cells from iPSCs with significantly increased anti-cancer activity. In December 2021, we declared a
development candidate, referred to as EDIT-202, a highly differentiated iNK investigational medicine with double knock-in
and double knock-out gene edits that are intended to enhance adaptive immune response and improve cell proliferation,
cytolytic activity and persistence, as well as overcome suppressive tumor microenvironments. We expect to advance EDIT-
202 in preclinical development during 2022.
We are also advancing alpha-beta T cell experimental medicines for the treatment of solid and liquid tumors in
collaboration with Bristol Myers Squibb Company (“BMS”) through its wholly owned subsidiary, Juno Therapeutics, Inc.
(“Juno Therapeutics”). This collaboration, which leverages our Cas9 and AsCas12a platform technologies, has resulted in
six ongoing programs, including one development candidate. We also continue to evaluate the application of our iPSC
platform to additional cell types beyond iNK and alpha-beta T cells.
Our Core Capability — Gene Editing
Gene editing is the process of revising, removing, or repairing defective DNA in situ. In general, gene editing
corrects the defective DNA in its native genomic location, and consequently the repaired genetic region retains the cell’s
normal control and feedback mechanisms. Gene 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 therapeutic outcome. Edits that are repaired by NHEJ typically disrupt a gene or eliminate a disease-causing
mutation. Edits that are repaired by HDR, including targeted insertion, aim to correct or replace aberrant DNA sequences.
The diversity of genetic drivers of disease demands a variety of solutions. Gene editing has the potential to deliver a variety
of types of genome modification to address a broad range of diseases.
CRISPR technology uses a protein-RNA complex composed of a type of enzyme, referred to as a DNA
endonuclease, bound to an RNA molecule, referred to as a guide RNA, that has been designed to recognize a particular
DNA sequence. A DNA endonuclease is an enzyme that cleaves DNA. This combination of a DNA endonuclease and a
guide RNA only bind and cut DNA when two criteria are met: first, the protein recognizes a short DNA specific to the
enzyme called the protospacer adjacent motif (“PAM”), and second, the appropriate portion of the guide RNA matches the
adjacent DNA sequence. The PAM sequence that is recognized by the DNA endonuclease creates a second layer of
recognition in addition to 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 for
the endonuclease, whether it is Cas9 or Cas12a, is a guide RNA, which can be rapidly replaced with a
different guide 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 to find those that cut the DNA target with the optimal efficiency and specificity. In contrast, other
commonly used DNA nucleases for gene editing have inherently limited flexibility. For example, zinc finger
nucleases, engineered meganucleases, and transcription activator-like effector nucleases use proteins for
DNA sequence recognition to bring the endonuclease to the site of the genome where cleavage is desired,
requiring the creation of an entirely new protein for each target site.
● Simultaneous and efficient targeting of multiple sites. In CRISPR technology, multiple guide RNAs can be
provided 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 creates the potential for self-regulating systems that control exposure to the editing machinery. To
address more than one target, other gene editing technologies require the engineering, characterization,
manufacture, and delivery of distinct nuclease proteins for each target.
● Ability to achieve a range of different types of edits. The inherent differences in Cas9 and Cas12a and the
availability of different engineered variants of both enzymes allow for different types of cuts for gene editing.
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
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cut can influence the type of repair mechanism used by a cell in response to that cut. We believe the ability to
modify CRISPR technology to allow for different types of cuts will expand the potential of our gene editing
platform.
Our Gene Editing Platform
We have developed a proprietary gene editing platform that includes different natural and engineered variants of
Cas9 and Cas12a. We have characterized different Cas9 and Cas12a enzymes for several reasons. Firstly, a lower molecular
weight enzyme will have advantages for delivering the endonuclease using a viral vector due to the inherent size
limitations of most such delivery systems. For example, the Cas9 enzyme from SaCas9 is significantly smaller than that
from Streptococcus pyogenes (“S. pyogenes” or “SpCas9”) (3,159 vs. 4,104 base pairs), and this decreased size is
important when working with AAV as a delivery vector, which has an effective packaging limit of approximately 4,700
base pairs. Secondly, we have gained access to modified versions of Cas12a and Cas12a guide RNAs that increase Cas12a
activity. This increased activity may allow us to use Cas12a editing in more indications where editing at a Cas12a
susceptible site is desirable from a biological perspective but technically difficult with the wild-type Cas12a editing system.
EDIT-301 for sickle cell disease and beta-thalassemia is one such example. Thirdly, identifying Cas9 and Cas12a enzymes
with different editing properties will expand the number of potential editing sites in the human genome. The range of
natural and engineered variants of Cas9 and Cas12a have significantly expanded the number of sites in the human genome
that we can potentially target. As compared to the most commonly used, naturally occurring version of Cas9, from the
bacterial species S. pyogenes, the range of endonucleases in our platform can target approximately ten times as many
genomic sites. Thus, while the S. pyogenes Cas9 can target approximately 1 in 10 bases in the human genome, we have the
potential to hit over 95% of all bases due to the wide range of endonucleases at our disposal.
The guide RNA molecule is another component of our gene editing platform. We have made substantial advances
in the design, synthesis, modification, analysis, and characterization of guide RNAs. For example, in order to accelerate
and standardize the selection of guide RNAs, we have created proprietary analytical software that supports guide RNA
design through single nucleotide polymorphism analysis, specificity prediction, and assessment of relative importance of
potential off target sites. Of critical importance in determining the activity and specificity of an endonuclease-guide RNA
complex is understanding the quality and composition of the guide RNA. The ability to understand the quality and
composition of the guide RNA is an essential component to developing product candidates that have the potential to be
safe and efficacious medicines. In order to understand the absolute composition of our guide RNAs, we utilize state-of-the-
art mass spectrometry and sequencing methodologies.
Our gene editing platform includes multiple modular delivery modes that can be efficiently adapted to deliver
different CRISPR gene editing components to address the specific needs of each disease targeted. Our strategy is to
leverage existing delivery technologies to target cell types of interest while developing next generation capabilities as
warranted. We are currently using, and will continue to use, a variety of delivery approaches, including AAVs,
electroporation and lipid nanoparticles. For example, we have taken advantage of the smaller S. aureus Cas9 and existing
AAV technology to construct an “all-in-one” viral vector that is able to deliver the DNA coding for the nuclease protein
and one or two guide RNAs directly to cells. We believe our ability to configure all the components for gene editing in an
“all-in-one” AAV vector has substantial advantages for manufacturing and delivery compared to approaches that rely on
multiple vectors. In addition, we have also made substantial advances in the ex vivo delivery of CRISPR systems to a
number of cell types. We have been able to demonstrate greater than 90% ex vivo editing on multiple genetic targets
simultaneously in human T cells and greater than 90% ex vivo editing in hematopoietic stem cells using ribonucleoprotein
complexes, which consist of the Cas9 or Cas12a endonuclease complexed with its guide RNA. These results are consistent
across multiple cell donors and multiple target genes.
We also have developed a new gene editing technology referred to as SLEEK (SeLection by Essential-gene Exon
Knock-in) to enable high knock-in efficiencies with different transgenes, while also ensuring robust, transgene
expression. Preclinical data demonstrated that SLEEK results in the knock-in of multiple clinically relevant transgenes
through a proprietary process that selects for cells containing the knock-in cargo. In addition, high percentage knock-in
efficiencies were enabled by our proprietary engineered AsCas12a nuclease. More than 95% knock-in efficiencies were
observed in various clinically relevant target cells using the AsCas12a nuclease, including iPSCs, T cells, and NK cells.
Additionally, we believe SLEEK may be used to fine-tune the expression levels of transgene cargos, an important
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attribute of next-generation cell therapy medicines. We believe SLEEK is an optimal approach to achieve highly efficient
multi-transgene knock-in for the next generation of cell therapy medicines, and we are leveraging this technology across
our oncology programs, including for treatment of a variety of solid tumors.
To optimize the specificity of our product candidates, there are a number of different aspects of the product
configuration that we customize in addition to the sequence and quality of the guide RNA, including the length of the guide
RNA, the type of Cas9 or Cas12a enzyme, including engineered forms, the delivery vector, the use of tissue-selective
promoters, and the duration of exposure all contribute to overall specificity. For example, to reduce the potential
persistence of gene editing activity, we are developing self-regulating gene 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 completed studies of these systems that demonstrate the ability to both maintain on-target
editing and also reduce levels of editing components once the on-target edit is expected to have been completed.
Our Gene Editing Medicine Programs
We have initiated a diversified range of research programs across multiple therapeutic and disease areas. Our
product development strategy is to target diseases where gene editing can be used to enable or enhance therapeutic
outcomes for patients. We believe the therapeutic programs and delivery technologies we have chosen to date will
demonstrate the depth and breadth of our ability to deploy our genome editing platform to develop differentiated,
transformational medicines for patients with high unmet need. The following summarizes our product candidates, research
programs and disease areas:
In Vivo Gene Editing Medicines - Ocular
Our initial focus for our in vivo gene-edited medicines is ocular diseases. We estimate that over 5 million people
worldwide suffer from autosomal recessive inherited retinal diseases. In ocular diseases, our most advanced in vivo gene-
edited medicine, EDIT-101, is designed to treat LCA10. We are leveraging our experience with the LCA10 program to
support the development of therapies for other eye diseases, including RHO-adRP and USH2A.
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Leber Congenital Amaurosis 10
Leber congenital amaurosis (“LCA”) is a heterogeneous group of inherited retinal dystrophies caused by
mutations in at least 18 different genes and is a leading common cause of inherited childhood blindness, with an incidence
of two to three per 100,000 live births worldwide. Symptoms of LCA appear within the first year of life with significant
vision loss, rapid involuntary movements of the eyes, painful eye response to bright light, and absence of measurable
electroretinogram recordings due to a lack of functional photoreceptor cells. The most common form of the disease is
LCA10, a monogenic disorder that represents approximately 20% to 30% of all LCA subtypes. LCA10 is caused by
autosomal recessive mutations in the CEP290 gene, which encodes a protein required for the survival and proper function
of photoreceptor cells. The most frequently found mutation within the CEP290 gene, occurring in approximately 85% of
north and west European patients with LCA10, is an A to G nucleotide change, referred to as an IVS26 mutation, that
disrupts normal splicing, or processing, of the gene message, ultimately resulting in a deficiency of functional CEP290
protein. Decreased CEP290 protein leads to loss of the outer segments of photoreceptor cells and function over time, which
leads to blindness. We believe there are approximately 4,000 LCA10 patients in the United States and Europe and over
30,000 in the rest of the world.
EDIT-101 uses an AAV5 vector to deliver the DNA encoding SaCas9 and two guide RNAs to photoreceptor cells
in the eye. EDIT-101 is designed to eliminate a disease-causing A to G nucleotide change in a non-coding region, or intron,
of the CEP290 gene by cutting out that nucleotide and surrounding DNA. We believe this genome editing approach has the
potential to restore normal protein expression and function of the remaining photoreceptor cells, which could improve
vision or arrest the further loss of vision in LCA patients. Certain clinical research studies estimated that retention of 10%
of photoreceptors can impart meaningful vision in humans. Based on these studies, we have prespecified a therapeutic
target of 10% productive editing of photoreceptors with the assumption that each productively edited photoreceptor will be
fully functional.
Preclinical studies
We tested EDIT-101 in preclinical studies by delivering several dose quantities of EDIT-101 subretinally in mice
that had a humanized CEP290 gene. Subretinal delivery of EDIT-101 in humanized CEP290 mice showed rapid and
sustained CEP290 gene editing. These studies demonstrated that EDIT-101 edited the relevant cells at therapeutically
relevant levels as early as a week following dosing and greater than 10% editing at AAV dose levels that have been safely
administered to humans based on prior clinical studies.
To investigate genome editing in vivo, we conducted studies in non-human primates using subretinal injection of
an AAV5 expressing SaCas9 and nonhuman primate specific guide RNAs. After either six or 13 weeks, animals were
euthanized and retinal tissue from the injected region was removed for analysis. These studies showed that AAV genomes
and Cas9 expression were limited to photoreceptors. In addition, we estimate that 12-22% and 50% of CEP-290 alleles
were productively edited at six weeks and at 13 weeks, respectively. In these studies, productive editing is defined as the
proportion of photoreceptor cells edited in a manner that we believe will restore CEP290 protein function. All of these
values exceed our prespecified therapeutic target of 10% productive editing. Furthermore, these doses were shown in
subsequent studies to be well tolerated in non-human primates based on visual and immunohistochemical analysis. Similar
studies in mice showed that editing was rapid, achieving maximum levels by six weeks, and stable with changes
maintained for the 26 weeks of the study at an AAV dose that has been safely administered to humans.
Clinical trial
In mid-2019, we and our then-partner Allergan Pharmaceuticals International Limited (together with its affiliates,
“Allergan”) initiated an initial Phase 1/2 clinical trial referred to as the BRILLIANCE trial, which is an open-label, single
ascending dose trial of EDIT-101 in adult and pediatric (i.e., ages 3 to 17 years) patients with retinal degeneration caused
by a homozygous or compound heterozygous IVS26 mutation of the CEP290 gene. Patients receive a single dose of EDIT-
101 administered via subretinal injection in one eye. The primary endpoint of the trial is an assessment of safety and
tolerability, and the secondary endpoint is to evaluate and identify endpoints of efficacy of a single dose of EDIT-101 on
change from baseline in various parameters. Efficacy will be evaluated at multiple timepoints, including core measures
every three months for the first year and then less frequently thereafter. The trial
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was initially planned to enroll up to 18 patients in up to five cohorts at approximately eight trial centers in the United States
and Europe. In 2021, we completed dosing of the first three cohorts, the adult low-, mid- and high-dose cohorts. There
have been no reported severe adverse events or dose limited toxicities observed in these first three cohorts. We are
expanding enrollment in one or more of the previously completed adult cohorts to explore dose response and support
establishment of registrational trial endpoints. We anticipate establishing these registrational trial endpoints by the end of
2022. We remain on track to complete dosing of the pediatric mid-dose cohort in the first half of 2022, and expect to
initiate dosing of the pediatric high-dose cohort in 2022.
In September 2021, we announced preliminary clinical data, consisting of patient safety and efficacy assessments,
from the ongoing BRILLIANCE trial. The data related to the first six patients dosed in the trial: two in the adult low-dose
cohort and four in the adult mid-dose cohort. Patients received a single administration of EDIT-101 via subretinal injection
in one eye and are monitored every three months for the first year after dosing, and less frequently in the following two
years. No dose-limiting toxicities, which are defined as vision-threatening toxicities or severe non-ocular adverse events
that occur before or at the week four visit and assessed by the investigator as being related to EDIT-101 and not the
administration procedure, or serious adverse events were reported in the first six adult patients treated. Efficacy was
assessed based on available data from five subjects treated in the low-dose and mid-dose cohorts who had at least three
months of post-treatment follow-up, focusing on those measures demonstrated to be consistent and reproducible in subjects
with CEP290-related retinal degeneration, including best corrected visual acuity (“BCVA”), full-field light sensitivity
threshold (“FST”) testing and ability to navigate standardized navigation courses, or Visual Function Navigation (“VNC”).
Two of three subjects in the mid-dose cohort followed for up to six months showed early efficacy signals providing clinical
evidence of gene editing and suggesting potential clinical benefits, including improvements in BCVA, FST, and/or mobility
navigation. We expect to provide a clinical update on the BRILLIANCE trial in the second half of 2022, including safety
and efficacy assessments on all patients who have had at least six months of follow-up evaluations.
Retinitis Pigmentosa
adRP is an inherited autosomal dominant disease in which a single copy of the human rhodopsin mutation is
sufficient to cause the retinal disorder. The disease results in initial night blindness early in life followed by loss of
peripheral vision and eventual complete blindness. More than 150 addressable mutations in the RHO gene have been
identified, and there are currently no approved treatments. We believe there are approximately 7,500 RHO-adRP patients in
the United States and over 12,000 in Europe.
Leveraging our EDIT-101 learnings, in 2021, we declared a new development candidate, EDIT-103, for treatment
of RHO-adRP. EDIT-103 uses two AAV vectors to simultaneously remove the disease-causing mutant gene and replace it
with a functioning rhodopsin gene in order to preserve photoreceptor function. Preclinical studies of EDIT-103 in non-
human primates demonstrated productive editing levels of more than 95% and that these edits resulted in production of
approximately 37% of normal RHO protein levels, which we believe to be a therapeutically effective level. This program
continues to advance towards IND-enabling studies.
We believe that our dual-AAV approach in EDIT-103, simultaneously knocking out and replacing a gene in the
same cell in vivo, is a significant technical breakthrough, potentially leading to findings that could address other autosomal
dominant diseases, where gain of negative function requires correction.
Usher Syndrome 2A
USH2A gene mutations are the most common cause of Usher syndrome, a form of retinitis pigmentosa 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 mutations within exon 13, which contains the highest percentage of USH2A gene mutations. We
believe there are approximately 5,300 USH2A patients with the mutation we aim to correct in the United States and over
8,000 in Europe.
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An optimized version of our development candidate, EDIT-102, for treatment of USH2A-associated retinitis
pigmentosa is in lead optimization. Using a dual-vector approach with an AsCas12a nuclease, we have enhanced
productive editing by approximately 350% compared to the initial construct of this therapy.
Other Ocular Indications
We are also working on other undisclosed indications in the eye taking advantage of our experience in ocular
diseases, including our proof-of-concept with EDIT-101 for LCA10, and our range of delivery solutions. We expect to
declare an additional development candidate for an in vivo ocular indication in 2022.
In Vivo Gene Editing Medicines – Early Discovery Programs
We believe the curative potential for gene editing is significant in light of the over 6,000 human genetic disorders.
In addition to our ocular programs, we hope to leverage our expertise in developing gene editing medicines utilizing AAV
delivery to expand our in vivo programs to treat additional diseases and therapeutic areas, including a neurological disease
under our research collaboration with AskBio.
Ex Vivo Gene Editing Cell Medicines
In ex vivo-gene edited cell medicines, we are developing an approach for gene editing in hematopoietic stem cells
to support the advancement of research programs to treat non-malignant hematological diseases. Our most advanced ex
vivo gene-edited cell medicine, EDIT-301, is designed to treat sickle cell disease and transfusion-dependent beta-
thalassemia.
We estimate that there are over 165,000 sickle cell disease patients, and over 45,000 TDT patients, in the United
States and Europe. Patients suffering from sickle cell disease have a median life expectancy of 42-47 years, while those
with TDT typically suffer from chronic anemia, often requiring lifelong blood transfusions that can result in iron overload
that requires separate treatment. We are actively pursuing a distinct gene editing approach to treating these
hemoglobinopathies. Our primary criteria for a successful product candidate include high and pancellular fetal hemoglobin
(“HbF”) with a best-in-class safety profile. To this end, we have developed EDIT-301, an experimental, autologous cell
therapy that targets the HBG1/2 promoter and disrupts the binding site of the BCL11A, consistent with observed naturally
occurring human mutations. These mutations mimic the asymptomatic condition of hereditary persistence of fetal
hemoglobin (“HPFH”). By editing the HBG1/2 promoter in the beta-globin gene, we seek to generate protective changes
that increase HbF production similar to HPFH, thereby ameliorating sickle cell disease and TDT symptoms. We believe
that mimicking a combination of HPFH mutations that elevate HbF could be more effective than recreating a single point
mutation. EDIT-301 is the first experimental medicine in development generated using CRISPR/Cas12a (also known as
Cpf1) gene editing.
We have focused our efforts on editing a site within the beta-globin locus that we believe has the potential to
create superior expression of fetal hemoglobin since patients with elevated fetal hemoglobin levels have better clinical
outcomes. We believe that EDIT-301 has the potential to impact beta-globin expression by increasing HbF and decreasing
sickle globin. In particular, our preclinical data shows that EDIT-301 induces more HbF than the approach of targeting
the BCL11A erythroid enhancer (“BC11Ae”). Likewise, we believe our approach will reduce the sickle globin and,
therefore, not have to compete for alpha globin in the same cell unlike lentiviral gene therapy approaches. Our preclinical
studies identified the potential that BC11Ae might result in deleterious lineage skewing when editing the BCL11Ae locus.
Finally, gene editing is more specific than lentiviral expression. To get the high levels of beta-globin required for an
efficacious therapy, there will be cells in the CD34+ population, which are cells that contain the long-term stem cells that
repopulate the hematopoietic lineages, that carry more than twenty copies of the viral genome. These random integration
events have the potential to inadvertently activate or inactivate genes involved in cell function and tumorigenesis. As such,
we believe our approach to editing the beta-globin locus provides the highest likelihood of providing clinical benefit in
patients while minimizing potential safety risks.
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Preclinical studies
Using our approach in preclinical studies, we tested the ability of CD34+ cells obtained from healthy donors and
edited at the beta-globin locus to induce fetal hemoglobin. As predicted from our preclinical in vitro studies, editing at the
beta-globin site with Cas12a caused a robust, pancellular induction of HbF of approximately 45% above the background
levels.
We also tested CD34+ cells obtained from sickle cell patients, which we edited at the beta-globin locus. These
studies showed that editing was highly efficient and reproducible, with approximately 90% editing in multiple sickle
patient donors. We found that EDIT-301 derived red blood cells had more than 50% HbF expression. Further, EDIT-301
derived red blood cells had a significant improvement in deformability, which could aid red blood cell transit without
sickling, and a four-fold decrease in sickling, when subjected to reduced oxygen levels compared to unedited control cells.
These data suggest EDIT-301 can provide potential clinical benefit for sickle patients. In vivo studies revealed editing was
highly efficient with greater than 90% editing in bone marrow cells from mice infused with edited CD34+ cells 16 weeks
post-infusion. In these mice, HbF expression was increased by approximately 50% in the red blood cells derived from these
edited cells. We also observed that approximately 90% of these cells were HbF positive, demonstrating that HbF
expression was pan-cellular, which we believe is likely a critical property for potential clinical benefit. For these reasons,
we believe our approach of editing the hemoglobin locus to increase fetal hemoglobin has the potential to generate
differentiated medicines to benefit patients with sickle cell disease and TDT.
Clinical trial
In January 2021, the FDA cleared the initiation of the safety phase of our Phase 1/2 RUBY clinical trial for EDIT-
301 for sickle cell disease and permitted us to begin dosing patients. This trial is a single-arm, open-label, multi-center
Phase 1/2 study designed to assess the safety and efficacy of EDIT-301 in patients with severe sickle cell disease. Enrolled
patients will receive a single administration of EDIT-301. We have begun clinical manufacturing operations for the trial,
including successfully editing patient cells ex vivo. We are on track to dose the first patient in the trial in the first half of
2022 and expect initial clinical results by the end of 2022. Prior to initiating a registrational trial, we will be required to
develop a potency assay to ensure that the characteristics of the product released are as expected and confirmed by clinical
data collected in the first patients treated, in response to an FDA partial clinical hold. We do not expect that the overall
timing for clinical development of EDIT-301 will be affected by the partial clinical hold. Further, the partial clinical hold
does not impact our ability to conduct our clinical development activities of EDIT-301 for the safety portion of the trial. If
the partial clinical hold is not lifted on the Phase 1/2 RUBY clinical trial, we will not be able to collect the efficacy data of
EDIT-301 necessary to support an application for approval.
In November 2021, we filed an IND application for a Phase 1/2 clinical trial of EDIT-301 for the treatment of
TDT, which was cleared by the FDA in December 2021. Preparations to initiate a Phase 1/2 clinical trial designed to
assess the safety, tolerability, and preliminary efficacy of EDIT-301 for the treatment of TDT are underway. We expect
to dose the first TDT patient during 2022.
Cellular Therapy Medicines
We are also developing multiple cellular therapy medicines for the treatment of different cancers. In our wholly
owned oncology programs, we are developing our capabilities to generate certain engineered NK cells from iPSCs that we
edit to treat solid tumors. In our collaboration with BMS, we are researching and developing engineered alpha-beta T cell
therapies to treat solid and liquid tumors leveraging our platform technologies, including Cas9 and AsCas12a. We also
continue to evaluate the application of our iPSC platform to additional cell types beyond iNK and alpha-beta T cells.
Natural Killer Cells
The American Cancer Society estimates that there are over 1.6 million new cases of solid tumor cancers, linked to
over 500,000 deaths, annually in the United States. NK cells are innate immune cells that can recognize tumor cells by a
variety of mechanisms, including multiple innate receptors that recognize cells that do not express T cell antigens and
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cells that express stress ligands. NK cells are also part of a process known as antibody-directed cellular cytotoxicity
(“ADCC”) by which therapeutic antibodies are directed to and kill tumor cells. Further, NK cells have a lower risk of
causing graft versus host disease. If we are successful, genome-edited NK cells have the potential to increase the signaling
power of ADCC pathways, improve the persistence of NK cells and/or increase tumor microenvironment resistance.
Genome-edited NK cells may be further engineered with one or more chimeric antigen receptors (“CARs”) or innate
receptors to further improve one or more of these properties. For example, gene-edited engineered NK cells could be used
to improve recognition of tumor cells lacking T cell antigens, including PD-1 non-responding tumors.
We obtain NK cells by differentiating iPSCs into such cells. Once we have obtained the cells, we then edit them to
increase certain of the natural properties of the cell to better enable them to treat solid tumors, such as the cells persistence
in vivo, its ability to withstand the tumor micro-environment, improved ability to cause ADCC and improved recognition
of tumor cells. In preclinical studies, we achieved 70% to 100% editing in five genes in iPSCs.
In December 2021, we declared a development candidate for the treatment of solid tumors, referred to as EDIT-
202, an iPSC-derived iNK investigational medicine with double knock-in and double knock-out gene edits. For EDIT-202,
we edit iPSCs using an engineered AsCas12a nuclease to knock-in both CD16 and membrane-bound Interleukin-15 (“IL-
15”). These edits are designed to increase ADCC, when combined with tumor-targeting antibodies, and prolong iNK cell
persistence. We also edit the iPSCs to knock-out both the CISH and TGFβ-receptor 2 genes, edits that are designed to
improve iNK cell effector function and provide resistance to TGFβ-mediated NK suppression in the tumor micro-
environment. From these edited iPSCs, we obtain an engineered iPSC clone for evaluation to ensure optimal characteristics
and from which to create a master cell bank. Using this master cell bank, we have the ability to expand and differentiate the
edited iPSC into iNK cells for EDIT-202. We believe this approach has the potential to create an allogeneic “off-the-shelf”
NK cell therapy medicine with enhanced activity against solid tumors.
In preclinical studies, evaluation of EDIT-202 in an in vivo mouse ovarian cancer model showed that a single dose
of EDIT-202, combined with three doses of the cancer drug trastuzumab, resulted in enhanced anti-tumor activity
compared with wild type iNKs with the same trastuzumab dosage, and also significant tumor reduction after six days and
complete tumor clearance in 40% of the mice tested by day 31. In vitro studies demonstrated that EDIT-202 was also able
to persist for a significantly longer period of time without exogenous cytokines relative to unedited iNK cells. We expect to
advance this therapy in preclinical development during 2022.
Alpha-Beta T Cells
Engineered T cells, including alpha-beta T cells, have shown encouraging clinical activity against multiple
cancers, culminating in recent approvals of such therapies in the United States. Because of these promising results, there is
significant interest in the medical community in expanding the application of this technology across a broader range of
cancers and patients. We believe that our genome editing technology has the potential to improve multiple properties of
these alpha-beta T cell therapies. Alpha-beta cells are part of the adaptive immune system and recognize tumors with
endogenous alpha-beta T cell receptors or CARs or engineered T cell receptors (“eTCRs”). If we are successful, genome-
edited engineered alpha-beta T cells have the potential to significantly expand the types of cancers treatable by CAR/
eTCR alpha-beta T cells and to improve the outcomes of these therapies.
Through our collaboration with BMS, we have applied our Cas9 and AsCas12a platform technologies to multiple
gene targets in order to improve the efficacy and safety of CAR/eTCR alpha-beta T cells directed against a range of tumor
types. In addition, we have optimized genome editing components and delivery methods compatible with engineered
alpha-beta T cell manufacturing methods developed by BMS. To date, this collaboration has resulted in six ongoing
programs, including one development candidate. For example, BMS recently announced its strategy for its gene editing
cell therapy to treat certain human papilloma virus-associated solid tumors. This investigational medicine uses our Cas9a
editing technology to make three edits in donor-derived T cells, which resulted in improved tumor killing and anti-tumor
efficacy compared to wild type cells in in vitro and in vivo studies conducted by BMS.
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Our Collaborations and Licensing Strategy
Juno Therapeutics Collaboration and License Agreement
In May 2015, we entered into a collaboration and license agreement with Juno Therapeutics, now a subsidiary of
BMS, for the research and development of engineered T cells with CARs and eTCRs that have been genetically modified
to recognize and kill other cells. We and Juno Therapeutics amended and restated this agreement in May 2018 and
November 2019 (the “Juno Collaboration Agreement”) and, in connection with the amendment and restatement in
November 2019, we entered into a license agreement with Juno Therapeutics (such agreement, the “Juno License
Agreement,” and together with the Juno Collaboration Agreement, the “Juno Agreements”). Under the terms of the Juno
Collaboration Agreement, we received an upfront payment of $25.0 million, amendment fees totaling $75.0 million and
have received milestone payments totaling $15.0 million, in addition to certain opt-in fees.
The Juno Agreements relate to technology used to edit or modify the genome of a cell in connection with the
research, development, manufacture, commercialization or other exploitation of T cells that express or have ever expressed
T cell receptor dimers consisting of an alpha (α) chain and a beta (β) chain (such cells, “Alpha-beta T Cells”), and T cells
derived from pluripotent stem cells or any other precursor cell (such cells, “Other Derived T Cells”), subject to certain
exclusions for certain of our existing obligations. The exploitation of Alpha-beta T Cells and Other Derived T Cells
specifically excludes the exploitation of T Cells that express a T cell receptor dimer consisting of a gamma (γ) chain and a
delta (δ) chain, which we refer to as gamma-delta T Cells. As such, we may develop such gamma delta T Cells.
During the research term under the Juno Collaboration Agreement, we may research ribonucleoprotein complexes
comprising an RNA-guided engineered nuclease paired with an oligonucleotide (“RNP Complexes”) that recognize or
modulate the expression of up to twenty gene targets selected by Juno Therapeutics (each, a “Research Program”) for the
purpose of identifying the RNP Complexes that may be used in the creation of potential drug development candidates. The
initial research term is five years from the November 2019 effective date of the Juno Collaboration Agreement. Juno
Therapeutics may extend the research term for up to two one-year periods upon written notice to us and payment to us of a
mid to high single digit million-dollar payment upon each extension. Juno Therapeutics’ right to extend the research term
for the second one-year period is subject to our consent.
Under the Juno Collaboration Agreement, if Juno Therapeutics elects to opt-in with respect to a Research
Program, it shall make a mid-six digit dollar payment to us and we shall amend the Juno License Agreement to include
such Research Program by executing a licensed program addendum for such Research Program. Following Juno
Therapeutic’s opt-in for each program we shall grant to Juno Therapeutics an exclusive (even as to us), royalty-bearing
worldwide right and license under specified intellectual property rights to research, develop, manufacture commercialize or
otherwise exploit the RNP Complexes in such Research Program to create products containing, incorporating, comprising
or containing Alpha-beta T Cells and/or Other Derived T Cells, in each case modified using the RNP Complexes in such
Research Program (each, a “Juno Licensed Product”).
We are entitled to receive high single-digit to low double-digit percentage royalties on net sales made by Juno
Therapeutics, its affiliates and sublicensees of any Juno Licensed Products, subject to reductions in certain circumstances.
We are also entitled to receive development milestones totaling up to $135.0 million in the aggregate upon achievement of
certain clinical milestones and specified regulatory approvals and commercial milestone payments totaling up to $60.0
million in the aggregate for each of the first two Juno Licensed Products to achieve specified net sales milestones.
We have agreed during the term of the Juno Collaboration Agreement not to use (directly or indirectly), or license
others to use, genome editing technology in connection with any research, development, manufacture, commercialization
or other exploitation of any Alpha-beta T Cells or Other Derived T Cells. Our exclusivity obligation will not apply to
activities related to (i) any identified RNP Complexes in a program for which Juno Therapeutics elects not to exercise its
opt-in right, (ii) certain of our existing obligations to third parties, and (iii) certain existing programs of an acquiror of our
company in a change of control.
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We have agreed during the term of any licensed program addendum under the Juno License Agreement not to use
(directly or indirectly), or license others to use, any genome editing technology that modulates or recognizes a gene target
covered by such licensed program addendum for the conduct of any research, development, manufacture,
commercialization or other exploitation with respect to any product that constitutes, incorporates, comprises or contains
any Alpha-beta T Cell or Other Derived T Cells.
The Juno Collaboration Agreement continues in effect until the later of expiration of the research term or
expiration of the last to expire of Juno Therapeutics’ right to opt-in with respect to any Research Program. Juno
Therapeutics may terminate the Juno Collaboration Agreement in its discretion upon six months’ prior written notice to us.
Either party may terminate the Juno Collaboration Agreement for uncured material breach of the other party, provided that
the breaching party has had sixty days to cure such breach, or in the event of insolvency or bankruptcy of the other party.
The Juno License Agreement continues in effect on a Juno Licensed Product-by-Juno Licensed Product and
country-by-country basis until the expiration of the royalty term with respect to such licensed product in such country and
in its entirety upon the expiration of all royalty terms with respect to all Juno Licensed Products in all countries. Juno
Therapeutics may terminate the Juno License Agreement in its entirety or on a Juno Licensed Product-by-Juno Licensed
Product basis in its discretion upon ninety days’ prior written notice to us. Either party may terminate the Juno License
Agreement on a Juno Licensed Product-by-Juno Licensed Product basis in the event of an uncured material breach of the
other party, provided that the breaching party has had sixty days to cure such breach, or in the event of insolvency or
bankruptcy of the other party. We have the right to terminate the Juno License Agreement on a program-by-program basis
in the event that Juno Therapeutics fails to make any undisputed payment to us and has not cured such payment breach
within the cure period. Other than Juno Therapeutics’ right to wind-down its operations with respect to Juno Licensed
Products during the twelve months following the date of effectiveness of termination, all licenses and other exclusive rights
granted under the Juno License Agreement shall terminate.
Allergan Agreement
In March 2017, we 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. Pursuant to this agreement, we granted Allergan
an exclusive option to exclusively license from us up to five collaboration development programs for the treatment of
ocular disorders, including EDIT-101. In July 2018, Allergan exercised its option to develop and commercialize EDIT-101
and we subsequently entered into a co-development and commercialization agreement with Allergan under which we
agreed to co-develop and equally split profits and losses for EDIT-101 in the United States.
Allergan was acquired by AbbVie Inc. in May 2020. On August 5, 2020, we entered into a termination agreement
with Allergan pursuant to which, among other things, we and Allergan terminated the strategic alliance and option
agreement and the co-development and commercialization agreement. As a result of the termination of our collaboration
with Allergan, we regained full global rights to research, develop, manufacture, and commercialize our ocular product
candidates, including EDIT-101 for the treatment of LCA10. Under the termination agreement, Allergan granted us a non-
exclusive, royalty-bearing right and license, including the right to grant sublicenses (through multiple tiers), to certain
Allergan know-how that is necessary to develop, manufacture and commercialize EDIT-101. In addition, we are obligated
to use commercially reasonable efforts to develop and commercialize a product directed to each of four collaboration
targets, one of which is LCA10. Under this agreement, we will make certain payments on achievements of clinical and
regulatory milestones up to $20.0 million for each target program and aggregated sales milestones for all products covered
by the termination agreement up to $90.0 million. We are also obligated to pay royalties in a low-single digit percentage,
subject to reduction under specified circumstances, on net sales of specified products. Our obligation to pay royalties will
expire on a country-by-country and product-by-product basis upon the later of the expiration of regulatory-based
exclusivity with respect to such product in such country and the tenth anniversary of the first commercial sale of such
product.
Intellectual Property Licenses
We are a party to a number of license agreements under which we license patents, patent applications, and other
intellectual property from third parties. The licensed intellectual property covers, in part, CRISPR-related compositions
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of matter 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 license
agreements to be material to our business.
The Broad Institute and President and Fellows of Harvard College License Agreement
In October 2014, we entered into a license agreement with The Broad Institute, Inc. (“Broad”) and the President
and Fellows of Harvard College (“Harvard”), for specified patent rights. In December 2016, we amended and restated this
license agreement and further amended the agreement in March 2017 (as amended, the “Cas9-I License Agreement”).
Among other things, the Cas9-I License Agreement amended the original license agreement by excluding additional fields
from the scope of the exclusive license granted to us; converting the exclusive license to three specified targets to a non-
exclusive license, subject to specified limitations; revising certain provisions relating to the rights of Harvard and Broad to
grant further licenses under specified circumstances to third parties that wish to develop and commercialize products that
target a particular gene and that otherwise would fall within the scope of our exclusive license; and providing Harvard and
Broad with certain rights to designate, and reserve all rights to, gene targets for which the designating institution 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 by MIT,
Broad and Harvard. We refer to all the patents and patent applications licensed to us under the Cas9-I License Agreement
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
February 2017, Broad and Rockefeller entered into an inter-institutional agreement pursuant to which Rockefeller
authorized Broad to act as its sole and exclusive agent for the purposes of licensing Rockefeller’s rights in such
Harvard/Broad Cas9-I Patent Rights and any additional related patents or patent applications that Rockefeller may jointly
own with Broad. The March 2017 amendment to the Cas9-I License Agreement included a license to Rockefeller’s rights
in such patents and patent applications.
The Harvard/Broad Cas9-I Patent Rights are directed, in part, to certain CRISPR/Cas9 compositions of matter and
their use for genome editing and to certain CRISPR/Cas9 related delivery technologies. Pursuant to the Cas9-I License
Agreement, and as of December 31, 2021, we have certain rights under 61 U.S. patents, 54 pending U.S. patent
applications, 30 European patents and related validations, 24 pending European patent applications, and other related
patent applications in jurisdictions outside of the United States and Europe.
Pursuant to the Cas9-I License Agreement, Harvard and Broad granted us an exclusive, worldwide, royalty-
bearing, sublicensable license to the Harvard/Broad Cas9-I Patent Rights to make, have made, use, sell, offer for sale, have
sold, import, and export products and services in the field of the prevention and treatment of human disease, subject to
certain limitations and retained rights. The exclusive license granted by Broad and Harvard excludes certain fields,
including the modification of animals or animal cells for the creation and sale of organs suitable for xenotransplantation
into humans; the research, development and commercialization of products or services in the field of livestock
applications; plant-based agricultural products; and, subject to certain limitations, products providing nutritional benefits.
Moreover, the license granted by Broad is non-exclusive with respect to the treatment of medullary cystic kidney disease 1
and three other specified targets, subject to the limitation that for such three targets, each of Broad and Harvard is only
permitted to grant a non-exclusive license to one third party at a time with respect to each such target within the field of
exclusive license granted to us. Harvard and Broad also granted us a non-exclusive, worldwide, royalty-bearing,
sublicensable license to the Harvard/Broad Cas9-I Patent Rights for all purposes, with the exception that the non-exclusive
license to certain Harvard Cas9-I Patent Rights excludes the modification of animals or animal cells for the creation and
sale of organs suitable for xenotransplantation into humans and the development and commercialization of products or
services in the field of livestock applications. In addition to the exclusions described above, the following are excluded
from the scope of both the exclusive and non-exclusive licenses granted to us under the Cas9-I License Agreement: human
germline modification; the stimulation 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 specified exceptions.
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We are obligated to use commercially reasonable efforts to research, develop, and commercialize products for the
prevention or treatment of human disease under the Cas9-I License Agreement. Also, we are required to achieve certain
development milestones within specified time periods for products incorporating the technologies covered by the
Harvard/Broad Cas9-I Patent Rights. Harvard and Broad have the right to terminate our license with respect to the
Harvard/Broad Cas9-I Patent Rights covering the technology or technologies with respect to which we fail to achieve these
development milestones.
The licenses granted by Broad and Harvard to us under the Cas9-I License Agreement are subject to retained
rights of the U.S. government in the Harvard/Broad Cas9-I Patent Rights and the rights retained by Broad, Harvard, MIT,
and Rockefeller on behalf of themselves and other academic, government and non-profit entities, to practice the
Harvard/Broad Cas9-I Patent Rights for research, educational, or teaching purposes. In addition, certain rights granted to us
under the Cas9-I License Agreement are further subject to a non-exclusive license to the Howard Hughes Medical Institute
for research purposes. Our exclusive license rights also are subject to rights retained by Broad, Harvard, MIT, and
Rockefeller any third party to research, develop, make, have made, use, offer for sale, sell, have sold, import or otherwise
exploit the Harvard/Broad Cas9-I Patent Rights and licensed products as research products or research tools, or for research
purposes.
We have the right to sublicense our licensed rights provided that the sublicense agreement must be in compliance
and consistent with the terms of the Cas9-I License Agreement. Any sublicense agreement cannot include the right to grant
further sublicenses without the written consent of Broad and Harvard. In addition, any sublicense agreements must contain
certain terms, including a provision requiring the sublicensee to indemnify Harvard, Broad, MIT, and Howard Hughes
Medical 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 for
certain purposes.
Under the agreement, Harvard and Broad also retained rights to grant further licenses under specified
circumstances to third parties, other than specified entities, that wish to develop and commercialize products that target a
particular gene and that otherwise would fall within the scope of our exclusive license from Harvard and Broad. If a third
party requests a license under the Harvard/Broad Cas9-I Patent Rights for the development and commercialization of a
product that would be subject to our exclusive license grant from Harvard and Broad under the Cas9-I License Agreement,
Harvard and Broad may notify us of the request (the “Cas9-I Third Party Proposed Product Requests”). Our process to
address Cas9-I Third Party Proposed Product Requests has been conformed to the same 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 to
certain limitations, to designate gene targets for which Broad, whether alone or together with an affiliate or third party, has
an interest in researching and developing products that would otherwise be covered by rights licensed to us under the Cas9-
I License 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
to Broad’s reasonable satisfaction that we are interested in researching, developing, and commercializing a 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 our affiliates, sublicensees, or
collaborators, are not researching, developing, or commercializing a product directed toward the gene target designated by
Broad and are not able to develop and implement a plan reasonably satisfactory to Broad, Broad is entitled to reserve all
rights 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 target
will terminate, and we will not be entitled under the Cas9-I License Agreement to develop and commercialize products
directed to that gene target.
Under the Cas9-I License Agreement, we paid Broad and Harvard an upfront license fee in the low six figures and
issued a single-digit percentage of shares of our common stock to Broad (with Broad holding a right to request re-issuance
to its designees, including MIT or MIT’s designee) and Harvard. We also must pay an annual license maintenance fee
ranging from the low- to mid-five figures to the low-six figures, depending on the calendar year. This
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annual license maintenance fee is creditable against royalties owed on licensed products and services in the same year as
the maintenance fee is paid. We are obligated to reimburse Broad and Harvard for expenses associated with the prosecution
and maintenance of the Harvard/Broad Cas9-I Patent Rights, including expenses associated with any interference
proceedings in the USPTO, any opposition proceedings in the EPO, or any other inter partes or other post grant
proceedings in these or other jurisdictions where we are seeking patent protection. Therefore, we are obligated to reimburse
Broad and/or Harvard for expenses 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 Patents are 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 the
prevention or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United
States. If we undergo a change of control during the term of the Cas9-I License Agreement, these clinical and regulatory
milestone payments will be increased by a certain percentage in the mid double-digits. We are also obligated to make
additional payments to Broad and Harvard, collectively, of up to an aggregate of $54.0 million upon the occurrence of
certain sales milestones per licensed product for the prevention or treatment of a human disease that afflicts at least a
specified number of patients in the aggregate in the United States. Broad and Harvard 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
United States and at least one jurisdiction outside the United States for the prevention or treatment of a human disease that
afflicts fewer than a specified number of patients in the aggregate in the United States or a specified number of patients per
year in the United States, which we refer to as an ultra-orphan disease. We are also obligated to make additional payments
to Broad and Harvard, collectively, of up to an aggregate of $36.0 million upon the occurrence of certain sales milestones
per licensed product for the prevention or treatment of an ultra-orphan disease.
Broad and Harvard, collectively, are entitled to receive mid single-digit percentage royalties on net sales of
licensed products for the prevention or treatment of human disease, and ranging from low single-digit to high single-digit
percentage royalties on net sales of other licensed products and services, made by us, our affiliates, or our sublicensees.
The royalty percentage depends on the licensed product and licensed service, and whether such licensed product or
licensed service is covered by a valid claim within the Harvard/Broad Cas9-I Patent Rights. If we are legally required to
pay royalties to a third party on net sales of our licensed products because such third party holds patent rights that cover
such licensed product, then we can credit up to a mid double-digit percentage of the amount paid to such third party against
the royalties due to Harvard and Broad in the same period. Our obligation to pay royalties will expire on a product-by-
product and country-by-country basis upon the later of the expiration of the last to expire valid claim of the Harvard/Broad
Cas9-I Patent Rights that cover the composition, manufacture, or use of each covered product or service in each country or
the tenth anniversary of the date of the first commercial sale of the licensed product or licensed service. If we sublicense
any of the Harvard/Broad Cas9-I Patent 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 percentage decreased to a low double-digit percentage in 2018 and may still decrease to a low of a high
single-digit percentage for licensed products for the prevention or treatment of human disease under sublicenses executed
after we meet a certain clinical milestone.
Broad and Harvard retain control of the prosecution of their respective patent rights. If an interference is declared
or a derivation proceeding is initiated, with respect to any Harvard/Broad Cas9-I Patent Rights, then our prosecution
related rights, including our right to receive correspondence from a patent office, will be suspended with respect to the
patent rights involved in the interference or derivation proceeding until, under some circumstances, we enter into a
common interest agreement with that institution. Nevertheless, we remain responsible for the cost of such interference or
derivation proceeding. We are responsible for the cost of the interference proceeding and appeal with respect to these
patents and this patent application. Broad and Harvard are required to maintain any application or patent within the
Harvard/Broad Patents Rights so long as we meet our obligation to reimburse Broad and Harvard for expenses related to
prosecution and there is a good faith basis for doing so. If we cease payment for the prosecution of any Harvard/Broad
Patent Right, then any license granted to us with respect to such Harvard/Broad Patent Right will terminate.
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We have the first right, but not the obligation, to enforce the Harvard/Broad Cas9-I Patent Rights with respect to
our licensed products so long as certain conditions are met, such as providing Broad and Harvard with evidence
demonstrating a good faith basis for bringing suit against a third party. We are solely responsible for the costs of any
lawsuits we elect to initiate 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,
upon the expiration of the last to expire valid claim of the Harvard/Broad Cas9-I Patent Rights in such country. However,
our royalty obligations, discussed above, may survive expiration or termination. We have the right to terminate the
agreement at will upon four months’ written notice to Broad and Harvard. Broad and Harvard may terminate the agreement
upon a specified period of notice in the event of our uncured material breach, such notice period varying depending on the
nature of the breach. Both Broad and Harvard may terminate the Cas9-I License Agreement immediately if we challenge
the enforceability, validity, or scope of any Harvard/Broad Patent Right or assist a third party to do so, or in the event of
our bankruptcy 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 rights upon the occurrence of the same events that would give rise to the right of both institutions acting
collectively to terminate the Cas9-I License Agreement.
The Broad Institute—Cpf1 License Agreement
In December 2016, we entered into a license agreement with Broad, for specified patent rights (“Cpf1 Patent
Rights”) related primarily to Cas12a compositions of matter and their use for gene editing (as amended, 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 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 solely in the field of the prevention or treatment of
human disease using gene therapy, editing of genetic material, or targeting of genetic material, subject to certain limitations
and retained rights (collectively, the “Exclusive Cpf1 Field”), as well as a non-exclusive, worldwide, royalty-bearing,
sublicensable license to the Cpf1 Patent Rights for all other purposes, subject to certain limitations and retained rights. The
licenses granted to us under the Cpf1 License Agreement exclude certain fields, including human germline modification;
the stimulation 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
specified exceptions.
Tokyo and the National Institute of Health (“NIH”) are joint owners on certain Cpf1 Patent Rights. 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. Broad does not, and does not purport to, grant any rights in NIH’s interest in these U.S. patent
applications under our agreement. As a result, we may not have exclusive rights under any U.S. patents that issue from
these U.S. patent applications and we may not have any rights under any foreign patents that issue from any foreign
equivalents thereof.
Pursuant to the Cpf1 License Agreement, and as of December 31, 2021, we have certain rights under five U.S.
patents, 13 pending U.S. patent applications, five European patents and related validations, six pending European patent
applications, 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
products in the Exclusive Cpf1 Field. We are also required to achieve certain development milestones within specified time
periods for products covered by the Cpf1 Patent Rights, with Broad having the right to terminate the Cpf1 License
Agreement if we fail to achieve these milestones within the required time periods. We have the right to sublicense our
licensed rights provided that the sublicense agreement must be in compliance and consistent with the terms of the Cpf1
License Agreement. Any sublicense 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 Cpf1 Institutions according to the same terms as are provided in the Cpf1 License
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Agreement and a statement that the Cpf1 Institutions are intended third party beneficiaries of the sublicense agreement for
certain purposes.
The licenses granted to us under the Cpf1 License Agreement are subject to retained rights of the U.S. government
in the Cpf1 Patent Rights and rights retained by the Cpf1 Institutions on behalf of themselves and other academic,
government and non-profit entities, to practice the Cpf1 Patent Rights for research, teaching, or educational purposes. Our
exclusive license 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 licensed products as research products or research tools, or for research purposes.
Under the Cpf1 License Agreement, Broad also retained rights to grant further licenses under specified
circumstances to third parties that wish to develop and commercialize products that target a particular gene and that
otherwise would fall within the scope of our exclusive license from Broad. If a third party requests a license under the Cpf1
Patent Rights for the development and commercialization of a product that would be subject to our exclusive license grant
from Broad (a “Cpf1 Third Party Proposed Product Request”), Broad may notify us of such request. A Cpf1 Third Party
Proposed Product Request must be accompanied by a research, development and commercialization plan reasonably
satisfactory to Broad, including evidence that the third party has, or reasonably expects to have, access to any necessary
intellectual property and funding. Broad may not grant a Cpf1 Third Party Proposed Product Request (i) if we, directly or
through any of our affiliates, sublicensees, or collaborators are researching, developing, or commercializing a product
directed to the same gene target that is the subject of the Cpf1Third Party Proposed Product Request (“Cpf1 Licensee
Product”) and we can demonstrate such ongoing efforts to Broad’s reasonable satisfaction, or (ii) if we, directly or through
any of our affiliates or sublicensees, wish to do so either alone or with a collaboration partner, and we can demonstrate to
Broad’s reasonable satisfaction that we are interested in researching, developing, and commercializing a Cpf1 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 our affiliates,
sublicensees, or collaborators, are not researching, developing, or commercializing a Cpf1 Licensee Product nor able to
develop and implement a plan reasonably satisfactory to Broad, Broad may grant an exclusive or non-exclusive license to
the third party on a gene target-by-gene target basis.
The Cpf1 License Agreement also provides Broad with the right, subject to certain limitations, to designate gene
targets for which Broad, whether alone or together with a Cpf1 Institution, affiliate or third party, has an interest in
researching and developing products that would otherwise be covered by rights licensed to us under the Cpf1 License
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
to Broad’s reasonable satisfaction that we are interested in researching, developing, and commercializing a 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 our affiliates, sublicensees, or
collaborators, are not researching, developing, or commercializing a product directed toward the gene target designated by
Broad and are not able to develop and implement a plan reasonably satisfactory to Broad, Broad is entitled to reserve all
rights under the Cpf1 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, our license with respect to such gene target will
terminate, and we will not be entitled under the Cpf1 License Agreement to develop and commercialize products directed
to such gene target.
Under the Cpf1 License Agreement, we paid Broad and Wageningen an aggregate upfront license fee in the mid
seven digits and issued to Broad and Wageningen promissory notes (the “Initial Promissory Notes”) in an aggregate
principal amount of $10.0 million, which we settled in full in 2017. Broad and Wageningen are collectively entitled to
receive clinical and regulatory milestone payments totaling up to $20.0 million in the aggregate per licensed product
approved in the United States, the European Union and Japan for the prevention or treatment of a human disease that
afflicts at least a specified number of patients in the aggregate in the United States. If we undergo a change of control
during the term of the Cpf1 License Agreement, certain of these clinical and regulatory milestone payments will be
increased by a certain percentage in the mid double-digits. We are also obligated to make additional payments to Broad and
Wageningen, collectively, of up to an aggregate of $54.0 million upon the occurrence of certain sales milestones per
licensed product for the prevention or treatment of a human disease that afflicts at least a specified number of patients in
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the aggregate in the United States. Broad and Wageningen are collectively entitled to receive clinical and regulatory
milestone payments totaling up to $6.0 million in the aggregate per licensed product approved in the United States, the
European Union and Japan for the prevention or treatment of an ultra-orphan disease. We are also obligated to make
additional payments to Broad and Wageningen, collectively, of up to an aggregate of $36.0 million upon the occurrence of
certain sales milestones per licensed product for the prevention or treatment of an ultra-orphan disease.
Broad and Wageningen, collectively, are entitled to receive mid single-digit percentage royalties on net sales of
products for the prevention or treatment of human disease, and ranging from sub single-digit to high single-digit percentage
royalties on net sales of other products and services, made by us, our affiliates, or our sublicensees. The royalty percentage
depends on the product and service, and whether such licensed product or licensed service is covered by a valid claim
within the Cpf1 Patent Rights. If we are legally required to pay royalties to a third party on net sales of our products
because such third party holds patent rights that cover such licensed product, then we can credit up to a mid double-digit
percentage of the amount paid to such third party against the royalties due to Broad and Wageningen in the same period.
Our obligation to pay royalties will expire on a product-by-product and country-by-country basis upon the later of the
expiration of the last to expire valid claim of the Cpf1 Patent Rights that covers each licensed product or licensed service in
each country or the tenth anniversary of the date of the first commercial sale of the product or service. If we sublicense any
of the Cpf1 Patent Rights to a third party, Broad and Wageningen, collectively, have the right to receive high single-digit to
low double-digit percentages of the sublicense income, depending on the stage of development 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 success
payments in the event our market capitalization reaches specified thresholds ascending from a high nine digit dollar
amount to $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 Cap Success Payments are payable by us in cash, in shares of our common stock, with such shares being valued for
such purpose at the closing price of our common stock as reported the Nasdaq Stock Market for the trading day
immediately preceding the date of such payment if our common stock was then listed on the Nasdaq Stock Market, or in
the form of promissory notes (the “Promissory Notes”). The Promissory Notes bear interest at 4.8% per annum. Principal
and interest on the Promissory Notes are payable on, subject to certain exceptions, 150 days following issuance (or if
earlier, a specified period of time following a sale of our company). We could elect to make any payment of amounts
outstanding under the Promissory Notes either in the form of cash or, subject to certain conditions, in shares of our
common stock of equal value, with such shares being valued for such purpose at the closing price of our common stock as
reported the Nasdaq Stock Market for the trading day immediately preceding the date of such payment if our common
stock was then listed on the Nasdaq Stock Market. In the event of a change of control of our company or a sale of our
company, we are required to pay all remaining principal and accrued interest on the Promissory Notes in cash within a
specified period following such event. Following a change in control of our company, Market Cap Success Payments are
required to be made in cash. Company Sale Success Payments are payable solely in cash. In 2017, two Market Cap Success
Payments of $5.0 million each became due and payable and we issued Promissory Notes in such amounts, which we fully
settled by issuing shares of our common stock in 2017 and 2018. In December 2020, an additional Market Cap Success
Payment of $15.0 million became due and payable, which we settled through the issuance of shares of our common stock
in January 2021. The remaining Success Payments that 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, $100.0 million, which
maximum would be payable only if we achieve a market capitalization threshold of $10.0 billion and have at least one
product candidate covered by a claim of a patent right licensed to us under either the Cpf1 License Agreement or the Cas9-
I License Agreement that is or was the subject of a clinical 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 of
potential Success Payments under the Cpf1 License Agreement has not been paid to Broad and Wageningen, Broad and
Wageningen are entitled to receive, upon the subsequent achievement of specified regulatory milestones, percentages
ranging 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 Payments upon the subsequent achievement of specified sales milestones. All such post-sale or post-change of
control milestone payments are required to be made in cash.
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Broad retains control of the prosecution and maintenance of the Cpf1 Patent Rights. We have the right to provide
input in the prosecution of the Cpf1 Patent Rights, including to direct Broad to file and prosecute patents in certain
countries. We are also obligated to reimburse Broad and Wageningen for all unreimbursed expenses incurred by them in
connection with the prosecution and maintenance of the Cpf1 Patent Rights prior to the date of the Cpf1 License
Agreement, and to reimburse Broad for expenses associated with the prosecution and maintenance of the Cpf1 Patent
Rights following 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 licensed
products in the Exclusive Cpf1 Field so long as certain conditions are met, such as providing Broad and the applicable
Cpf1 Institutions with evidence demonstrating a good faith basis for bringing suit against a third party. We are solely
responsible for 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,
upon the 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 will upon four months’ written notice to Broad. Either party may terminate the Cpf1 License Agreement
upon a specified period of notice in the event of the other party’s uncured material breach of a material obligation, such
notice period varying depending on the nature of the breach. Broad may terminate the Cpf1 License Agreement
immediately if we challenge the enforceability, validity, or scope of any Cpf1 Patent Right or assist a third party to do so,
or in the event of our bankruptcy or insolvency.
Other Broad Agreements
In addition to the Cas9-I License Agreement and the Cpf1 License Agreement, in December 2016, we entered into
a license agreement with Broad for certain Cas9 compositions of matter and their use for gene editing (the “Cas9-II
Agreement”), and, in December 2018, we entered into a Sponsored Research Agreement with Broad providing for Broad to
conduct research useful or relevant to genome editing in the field of genomic medicines for the prevention of treatment of
human diseases with funding from us (the “Sponsored Research Agreement”). Under the Cas9-II Agreement and the
Sponsored Research Agreement, we have potential obligations with respect to success payments, which are described in
Note 8 to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our platform
technology, programs, and know-how related to our business, defend and enforce our intellectual property rights, in
particular, our patent rights, preserve the confidentiality of our trade secrets, and operate without infringing valid and
enforceable 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 and
planned programs, and improvements that are important to the development of our business, where patent protection is
available. We also rely on trade secrets, know-how, continuing technological innovation, and confidential information to
develop and maintain our proprietary position and protect aspects of our business that are not amenable to, or that we do
not consider appropriate for, patent protection. We seek to protect our proprietary technology and processes, in part, by
confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve
the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical
and electronic security of our information technology systems.
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 Cas12a including Cas12a nickases
and other variants and self-inactivating forms of Cas12a, and also CRISPR systems that employ viral vectors for delivery,
single guide RNAs, or modified guide RNAs, including guide nucleic acids containing both DNA
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and RNA components. We also have filed patent applications and have in-licensed rights to filed patent applications
directed to each of the four components of our genome editing platform technology. We intend to pursue, when possible,
additional patent protection, including composition of matter, method of use, and process claims, directed to each
component of our platform technology. We also intend to obtain rights to existing delivery technologies through one or
more licenses from third parties.
Notwithstanding these efforts, we cannot be sure that patents will be granted with respect to any patent
applications we have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have
licensed or patents that may be licensed or granted to us in the future will not be challenged, invalidated, or circumvented
or that such patents will be commercially useful in protecting our technology. Moreover, trade secrets can be difficult to
protect. While we have confidence in the measures we take to protect and preserve our trade secrets, such measures can be
breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise
become known or be independently 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.
In most countries, including the United States, the patent term is 20 years from the earliest claimed filing date of a non-
provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be
lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining
and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent
naming a common inventor and having an earlier expiration date. The Drug Price Competition and Patent Term Restoration
Act of 1984 extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the
approved drug or a method for using it may be extended.
CRISPR
As of December 31, 2021, we owned 16 U.S. patents, 67 pending U.S. non-provisional patent applications, 13
European patents and related validations, 59 pending European patent applications, 21 pending U.S. provisional patent
applications, four pending PCT patent applications, and other related patent applications in jurisdictions outside the United
States and Europe that are related to our CRISPR technology and which include claims directed to our genome editing
platform, including our directed editing component, as well as composition of matter and method of use claims for our
therapeutic programs, including LCA10 and other genetic and infectious eye disorders, and engineered T cells. Three of
these U.S. patents, one of these European patents and their U.S., European and foreign counterpart applications are co-
owned with Broad and Iowa and we have obtained an exclusive license to such co-ownership rights from these third parties
in the field of prevention or treatment of human disease using gene therapy or genome editing. In addition, one of these
pending PCT patent applications and 12 of these pending U.S. non-provisional patent applications are co-owned with
certain of our collaborators because they encompass inventions developed under our collaborations. Our current issued
U.S. patents, if the appropriate maintenance fees are paid, are expected to expire between 2034 and 2038, 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 2035 and 2041, excluding any
additional term for patent term adjustments or patent term extensions.
As of December 31, 2021, we in-licensed 101 U.S. patents, 49 European patents and related validations, and
approximately 465 pending patent applications, including 91 pending U.S. non-provisional patent applications, 53 pending
European patent applications, and other related patents and patent applications in jurisdictions outside the United States
and Europe that are related to our CRISPR technology collectively from various universities and institutions. The patents
and patent applications outside of the United States and Europe are held primarily in Canada, Japan, and Australia,
although some of our in-licensed patent families were filed in a larger number of countries. The claims from our in-
licensed portfolio include claims to compositions of matter, methods of use, and certain processes. These include claims
directed to CRISPR systems that employ Cas9 including Cas9 nickases, S. aureus Cas9, high-fidelity Cas9 nucleases, Cas9
PAM variants and self-inactivating forms of Cas9, CRISPR systems that employ Cas12a including Cas12a nickases and
other variants and self-inactivating forms of Cas12a, and also CRISPR systems that employ viral vectors for delivery,
single guide RNAs, or modified guide RNAs. Our current in-licensed U.S.
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patents, if the appropriate maintenance fees are paid, are expected to expire between 2033 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 and 2037, excluding any
additional term for patent term adjustments or patent term extensions.
Our in-licensed patents and patent applications claim the inventions of investigators at various universities and
institutions and the majority of these licensed patents and patent applications are licensed on an exclusive basis. The
exclusive licenses are, in some cases, limited to certain technical fields. Certain U.S. patent applications licensed to us by
Broad include Tokyo and NIH as joint 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. Broad does not and does not
purport to grant any rights in NIH’s interest in these U.S. patent applications under our agreement. As a result, we may not
have exclusive rights under any U.S. patents that issue from these U.S. patent applications and we may not have any rights
under any foreign patents that issue from any foreign equivalents thereof. For more information regarding these license
agreements, please see the section of this Annual Report on Form 10-K titled “Business —Intellectual Property Licenses.”
LCA10
As of December 31, 2021, we owned three U.S. patents, five pending U.S. non-provisional patent applications,
three pending U.S. provisional patent applications, one European patent and related validations, three pending European
patent applications, and eight pending foreign patent applications, which are directed to compositions of matter, including
guide RNAs directed to CEP290, and methods of use for the treatment of LCA10. Our current issued U.S. patents, if the
appropriate maintenance fees are paid, are expected to expire in 2035, excluding any additional term for patent term
extensions. If issued as a U.S. patent, and if the appropriate maintenance fees are paid, the U.S. patent applications would
be expected to expire between 2035 and 2039, excluding any additional term for patent term adjustments or patent term
extensions.
Trademarks
As of December 31, 2021, our registered trademark portfolio consisted of registrations in the United States for
EDITAS, EDITAS in Stylized Letters and the Infinity Logo, registrations in Australia, China, the European Union, Japan,
Switzerland and the United Kingdom for EDITAS, registrations in Australia, China, the European Union, Japan,
Switzerland and the United Kingdom for the Infinity Logo and registrations in the European Union and United Kingdom
for UDITAS.
Competition
The biotechnology and pharmaceutical industries, including in the gene therapy, genome editing and cell therapy
fields, are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on intellectual
property and proprietary products. While we believe that our technology, development experience, and scientific
knowledge provide us with competitive advantages, we face potential competition from many different sources, including
major pharmaceutical, specialty pharmaceutical, biotechnology companies, governmental agencies, and public and private
research institutions. Any product candidates that we successfully develop and commercialize may compete with existing
therapies and new therapies may become available in the future.
We compete in the segments of the pharmaceutical, biotechnology, and other related markets that utilize
technologies encompassing genomic medicines to create therapies, including genome editing and gene therapy. There are
additional companies that are working to develop therapies in areas related to our research programs. Our platform and
product focus is the development of therapies using CRISPR technology. Other companies developing CRISPR Cas9 or
Cas12a technology or therapies using CRISPR Cas9 or Cas12a technology include Caribou Biosciences, CRISPR
Therapeutics, ERS Genomics, Intellia Therapeutics, ToolGen, Vertex Pharmaceuticals, and Verve Therapeutics. In addition,
there have been and may continue to be discoveries of new CRISPR-based gene editing technologies. There are additional
companies developing therapies using related CRISPR genome editing technologies, including other CRISPR nucleases,
base editing, prime editing and gene writing. These companies include Arbor
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Biotechnologies, Beam Therapeutics, Chroma Medicine, KSQ Therapeutics, Locus Biosciences, Mammoth Biosciences,
Metagenomi, Poseida Therapeutics, Prime Medicine, Scribe Therapeutics, Tessera Therapeutics, and Tune Therapeutics.
There are also companies developing therapies using transcription activator-like effector nucleases, meganucleases, Mega-
TALs and zinc finger nucleases. These companies include 2Seventy Bio, Allogene Therapeutics, bluebird bio, Cellectis,
Precision Biosciences, and Sangamo Therapeutics. Additional companies developing cell therapy products include
Catamaran Bio, Celularity, Century Therapeutics, Cytovia Therapeutics, Fate Therapeutics, Graphite Bio, Nkarta, ONK
Therapeutics, Shoreline Biosciences, and Wugen Therapeutics. Additional companies developing gene therapy products
include Abeona Therapeutics, Adverum Biotechnologies, AGTC Therapeutics, Astellas Gene Therapies, Generation Bio,
Homology Medicines, REGENXBIO, Sarepta Therapeutics, Solid Biosciences, Spark Therapeutics, uniQure and Voyager
Therapeutics. In addition to competition from other genome editing therapies, gene therapies or cell medicine therapies,
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.
In addition, many of our current or potential competitors, either alone or with their collaboration partners, may
have greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting
clinical trials, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,
biotechnology, and gene therapy industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and
retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial
opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more
effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may
develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may
obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to
enter the market. The key competitive factors affecting the success of all of our programs are likely to be their efficacy,
safety, convenience, and availability of reimbursement.
If our current programs are approved for the indications for which we are currently planning clinical trials, they
may compete with other products currently under development, including genome editing and gene therapy products.
Competition with other related products currently under development may include competition for clinical trial sites,
patient recruitment, and product sales.
Manufacturing
We currently perform some manufacturing activities such as the production of guide RNA for our various internal
and partner programs and some pre-clinical and early-phase clinical production for our ex vivo and cellular therapy
medicines. These activities are performed on site at our existing facilities or at current good manufacturing practice-
compliant space leased by us. We contract with third parties for the manufacturing of all other materials for preclinical
studies and our clinical trials. We have limited manufacturing operations and do not own or operate any substantial
manufacturing facilities for large-scale production of our program materials. While we have limited early-phase clinical
manufacturing capabilities, we currently have no plans to build our own late-stage clinical or commercial scale
manufacturing capabilities. The use of contracted manufacturing and reliance on collaboration partners is relatively cost-
efficient and has eliminated the need for substantial direct investment in manufacturing facilities and additional staff early
in development. Although we rely on contract manufacturers, we have personnel with manufacturing experience to oversee
our contract manufacturers. We expect third-party manufacturers to be capable of providing sufficient quantities of our
program materials to meet anticipated needs for preclinical studies and clinical trials. To meet our projected needs for
commercial manufacturing, third parties with whom we currently work might need to increase their scale of production or
we will need to secure alternate suppliers. We believe that there are alternate sources of supply that can satisfy our
preclinical, clinical, and commercial requirements, although we cannot be certain that identifying and establishing
relationships with such sources, if necessary, would not result in significant delay or material additional costs.
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Commercialization
We currently intend to build the commercial infrastructure in the United States and Europe necessary to
effectively support the commercialization of all of our programs, if and when we first believe a regulatory approval of a
product candidate under one of our programs in a particular geographic market appears probable. The commercial
infrastructure for orphan products typically consists of a targeted, specialty sales force that calls on a limited and focused
group of physicians supported by sales management, medical liaisons, internal sales support, an internal marketing group,
and distribution support.
Additional capabilities important to the orphan marketplace include the management of key accounts such as
managed care organizations, group purchasing organizations, specialty pharmacies, and government accounts. To develop
the appropriate commercial infrastructure, we will have to invest significant amounts of financial and management
resources, some of which will be committed prior to any confirmation that any product candidate we may develop will be
approved.
Outside of the United States and Europe, where appropriate, we may elect in the future to utilize strategic partners,
distributors, or contract sales forces to assist in the commercialization of our products. In certain instances, we may
consider building our own commercial infrastructure.
As product candidates advance through our pipeline, our commercial plans may change. In particular, some of our
research programs target potentially larger indications. Data, the size of the development programs, the size of the target
market, the size of a commercial infrastructure, and manufacturing needs may all influence our strategies in the United
States, Europe, and the rest of the world.
Government Regulation and Licensure of Products
Government authorities in the United States, at the federal, state and local level, and in other countries and
jurisdictions, 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 of
pharmaceutical products, including biological products. The processes for obtaining marketing approvals in the United
States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations
and other regulatory authorities, require the expenditure of substantial time and financial resources.
Licensure and Regulation of Biologics in the United States
In the United States, our candidate products would be regulated as biological products, or biologics, under the
Public Health Service Act (the “PHSA”) and the Federal Food, Drug and Cosmetic Act (the “FDCA”) and its
implementing regulations and guidances. A company, institution, or organization which takes responsibility for the
initiation and management of a clinical development program for such products, and their approval by regulatory
authorities, is generally referred to as a sponsor. The failure to comply with the applicable U.S. requirements at any time
during the product development process, including non-clinical testing, clinical testing, the approval process or post-
approval process, may subject a sponsor to delays in the conduct of the study, regulatory review and approval, and/or
administrative or judicial sanctions.
An applicant seeking approval to market and distribute a new biologic in the United States generally must
satisfactorily complete each of the following steps:
● preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the
FDA’s Good Laboratory Practice (“GLP”) regulations and standards;
● completion of the manufacture, under current Good Manufacturing Practices (“cGMP”) conditions, of the
drug substance and drug product that the sponsor intends to use in human clinical trials along with required
analytical and stability testing;
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● design of a clinical protocol and submission to the FDA of an IND application for human clinical testing,
which must become effective before human clinical trials may begin;
● approval by an independent institutional review board (“IRB”) representing each clinical site before each
clinical trial may be initiated;
● performance of adequate and well-controlled human clinical trials to establish the safety, potency, and purity
of the product candidate for each proposed indication, in accordance with current Good Clinical Practices
(“GCP”);
● preparation and submission to the FDA of a Biologic License Application (“BLA”) for a biologic product
requesting marketing for one or more proposed indications, including submission of detailed information on
the manufacture and composition of the product 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, including
those of third parties, at which the product, or components thereof, are produced to assess compliance with
cGMP requirements and to assure that the facilities, methods, and controls are adequate to preserve the
product’s identity, strength, quality, and purity, and, if applicable, the FDA’s current good tissue practice
(“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
with GCPs 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 of the new biologic product; and
● compliance with any post-approval requirements, including the potential requirement to implement a Risk
Evaluation and Mitigation Strategy (“REMS”) and any post-approval studies required by the FDA.
Preclinical Studies and Investigational New Drug Application
Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product
candidate must undergo preclinical testing. Preclinical tests include laboratory evaluations of product chemistry,
formulation and stability, as well as studies to evaluate the potential for efficacy and toxicity in animal studies. The conduct
of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and
requirements. The results of the preclinical tests, together with manufacturing information and analytical data, are
submitted to the FDA as part of an IND application.
An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate
commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational
product to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the
FDA raises concerns or questions about the product or conduct of the proposed clinical trial, including concerns that
human research subjects will be exposed to unreasonable health risks. In that case, the IND sponsor and the FDA must
resolve any outstanding FDA concerns before the clinical trials can begin or recommence.
As a result, submission of the IND may result in the FDA not allowing the trials to commence or allowing the trial
to commence on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either
during this initial 30-day period, or at any time during the 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 would delay either a proposed clinical study or cause suspension of an ongoing study, until all
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outstanding concerns have been adequately addressed and the FDA has notified the company that investigations may
proceed. This could cause significant delays or difficulties in completing planned clinical studies in a timely manner.
Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational products outside of clinical
trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or
satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve
access to investigational products for patients who may benefit from investigational therapies. FDA regulations allow
access to investigational products under an IND by the company or the treating physician for treatment purposes on a case-
by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-
emergency settings); intermediate-size patient populations; and larger populations for use of the investigational product
under a treatment protocol or treatment IND application.
When considering an IND application for expanded access to an investigational product with the purpose of
treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when
all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there
is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential
patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or
condition to be 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 the potential development of the product.
There is no obligation for a sponsor to make its drug products available for expanded access; however, as required
by the 21st Century Cures Act (the “Cures Act”), passed in 2016, if a sponsor has a policy regarding how it responds to
expanded access requests, it must make that policy publicly available. Although these requirements were rolled out over
time, they have now come into full effect. Sponsors are required to make such policies publicly available upon the earlier
of initiation of a Phase 2 or Phase 3 study; or 15 days after the investigational drug or biologic 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 a
federal framework for certain patients to access certain investigational products that have completed a Phase I clinical trial
and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment
without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There
is no obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right
to Try Act.
Human Clinical Trials in Support of a BLA
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients
with the disease to be treated under the supervision of a qualified principal investigator in accordance with GCP
requirements. Clinical trials are conducted under study protocols detailing, among other things, the objectives of the study,
inclusion and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness criteria to be
evaluated. A protocol for each clinical trial and 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 FDA
authorization to conduct the clinical trial under an IND. When a foreign clinical trial is conducted under an IND, all FDA
IND requirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor
must ensure that the trial complies with certain regulatory requirements of the FDA in order to use the trial as support for
an IND or application 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
GCP requirements encompass both ethical and data integrity standards for clinical trials. The FDA’s regulations are
intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical trials, as
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well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign trials are conducted in
a manner comparable 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 each
institution 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 IRB
must operate in compliance with FDA regulations. The FDA, IRB, or the clinical trial sponsor may suspend or discontinue
a clinical trial at any time for various reasons, including a finding that the clinical trial is not being conducted in accordance
with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also
must satisfy extensive GCP rules and the requirements for informed consent.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more
frequently if serious adverse events occur. These reports must include a development safety update report, or DSUR. In
addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected
adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed
to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the
protocol or investigator brochure. The FDA will typically inspect one or more clinical sites to assure compliance with GCP
and the integrity of the clinical data submitted.
Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the
clinical trial sponsor, known as a data safety monitoring board (“DSMB”). This group may recommend continuation of the
study as planned, changes in study conduct, or cessation of the study at designated check points based on certain available
data from the study to which only the DSMB has access. Finally, research activities involving infectious agents, hazardous
chemicals, recombinant DNA, and genetically altered organisms and agents may be subject to review and approval of an
Institutional Biosafety Committee in accordance with NIH Guidelines for Research Involving Recombinant or Synthetic
Nucleic Acid Molecules.
Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined.
Additional studies may be required after approval.
● Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety,
including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion, and
pharmacodynamics in healthy humans or, on occasion, in patients, such as patients suffering from LCA10,
sickle cell disease or cancer.
● Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse
effects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications and
determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the
sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials.
● Phase 3 clinical trials may proceed if the Phase 2 clinical trials demonstrate that a dose range of the product
candidate is potentially effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken
within an expanded patient population to further evaluate dosage, provide substantial evidence of clinical
efficacy, and further test for safety in an expanded and diverse patient population at multiple, geographically
dispersed clinical trial sites. A well-controlled, statistically robust Phase 3 trial may be designed to deliver
the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to
appropriately 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 additional
clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post-approval trials are
typically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of
patients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved under
accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not
necessary for approval, a company may be able to use the data from these clinical
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trials to meet all or part of any Phase 4 clinical trial requirement or to request a change in the product labeling. Failure to
exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.
Sponsors of clinical trials are required to register and disclose certain clinical trial information on a public registry
(clinicaltrials.gov) maintained by the U.S. National Institutes of Health, or NIH. The NIH’s Final Rule on registration and
reporting requirements for clinical trials became effective in 2017, and both NIH and the FDA have recently signaled the
government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors. The failure
to submit clinical trial information to clinicaltrials.gov, as required, is a prohibited act under the FDCA with violations
subject to potential civil monetary penalties of up to $10,000 for each day the violation continues.
Pediatric Studies
Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are
adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and
effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline
of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any
deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal
review committee must then review the information submitted, consult with each other, and agree upon a final plan. The
FDA or the applicant may request an amendment to the plan at any time.
For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of
an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric
assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with sponsors
and FDA must meet with sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and
by no later than 90 days after FDA’s receipt of the study plan.
The FDA may, on its own initiative or at the request of the sponsor, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is
ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs
to be collected before the pediatric trials begin. The law requires the FDA to send a PREA Non-Compliance letter to
sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a
deferral or deferral extension or have failed to request approval for a required pediatric formulation. Unless otherwise
required by regulation, the pediatric data requirements do not apply to products with orphan designation, although FDA has
taken steps to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to
grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
Special Regulations and Guidance Governing Gene Therapy Products
It is possible that the procedures and standards applied to gene therapy products and cell therapy products may be
applied to any CRISPR product candidates we may develop, but that remains uncertain at this point. The FDA has defined
a gene therapy product as one that mediates its effects by transcription and/or translation of transferred genetic material
and/or by integrating into the host genome and which are administered as nucleic acids, viruses, or genetically engineered
microorganisms. The products may be used to modify cells in vivo or transferred to cells ex vivo prior to administration to
the recipient.
Within the FDA, the Center for Biologics Evaluation and Research (“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
Gene Therapies, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise
CBER on its reviews. The NIH, including its Novel and Exceptional Technology Research Advisory Committee
(“NExTRAC”), also advises the FDA on gene therapy issues and other issues related to emerging biotechnologies. The
FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy
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protocols.
The FDA has issued various guidance documents regarding gene therapies, including recent final guidance
documents released in January 2020 relating to chemistry, manufacturing and controls information for gene therapy INDs,
long-term follow-up after the administration of gene therapy products, gene therapies for rare diseases and gene therapies
for retinal disorders, as well as draft guidance in January 2021 for Human Gene Therapy for Neurodegenerative Diseases.
Although the FDA has indicated that these and other guidance documents it previously issued are not legally binding,
compliance with them is likely necessary to gain approval for any gene therapy product candidate. The guidance
documents provide additional factors that the FDA will consider at each of the above stages of development and relate to,
among other things, the proper preclinical assessment of gene therapies; the chemistry, manufacturing, and control
information that should be included in an IND application; the proper design of tests to measure product potency in support
of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to
investigational gene therapies when the risk of such effects is high. Further, the FDA usually recommends that sponsors
observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of
five years of annual examinations followed by 10 years of annual queries, either in person or by questionnaire.
Until 2019, most gene therapy clinical trials required pre-review by the predecessor of NExTRAC before being
submitted for approval by the IRBs and any local biosafety boards. In 2019, the NIH eliminated the pre-review process and
going forward, the review of future gene therapy clinical trial protocols would be largely handled by IRBs. Furthermore, in
2019, the NIH removed from public access the Genetic Modification Clinical Research Information System database,
which previously contained substantial amounts of safety and other patient information regarding human gene therapy
studies performed to date.
Compliance with cGMP and GTP Requirements
Before approving a BLA, the FDA typically will inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities
are in full compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes
cannot be precisely defined.
For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance
with GTP. These standards are found in FDA regulations and guidances that govern the methods used in, and the facilities
and controls used for, the manufacture of human cells, tissues, and cellular and tissue-based products (“HCT/Ps”), which
are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary
intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to
prevent the introduction, transmission, and spread of communicable disease. FDA regulations also require tissue
establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening
and testing.
Manufacturers and others involved in the manufacture and distribution of products must also register their
establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must
register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any
product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed
misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government
authorities to ensure compliance with cGMPs and other laws. Inspections must follow a “risk-based schedule” that may
result in certain establishments being inspected more frequently. Manufacturers may also have to provide, on request,
electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by the
FDA may lead to a product being deemed to be adulterated.
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Submission and Filing of a BLA
The results of product candidate development, preclinical testing, and clinical trials, including negative or
ambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting license to market the
product. The BLA must contain extensive manufacturing information and detailed information on the composition of the
product and proposed labeling as well as payment of a user fee. Under federal law, the submission of most BLAs is subject
to an application user fee, which for federal fiscal year 2022 is $3.1 million for an application requiring clinical data. The
sponsor of a licensed BLA is also subject to an annual program fee, which for fiscal year 2022 is more than $369.000.
Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for
products with orphan designation and a waiver for certain small businesses.
The FDA conducts a preliminary review of all applications within 60 days of receipt and must inform the sponsor
at that time or before whether an application is sufficiently complete to permit substantive review. In pertinent part, FDA’s
regulations state that an application “shall not be considered as filed until all pertinent information and data have been
received” by the FDA. In the event that FDA determines that an application does not satisfy this standard, it will issue a
Refuse to File, or RTF, determination to the applicant.
On the other hand, 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 initial review of a standard application and respond to the sponsor, and six months for a priority review of the
application. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may
often be significantly extended by FDA requests for additional information or clarification. The review process and the
PDUFA goal date may be extended by three months if the FDA requests or if the sponsor otherwise provides additional
information or clarification regarding information already provided in the submission within the last three months before
the PDUFA goal date.
In connection with its review of a BLA, the FDA may refer the application to an advisory committee for review,
evaluation, and recommendation as to whether the application should be approved. In particular, the FDA may refer
applications for novel biologic products or biologic products that present difficult questions of safety or efficacy to an
advisory committee. Typically, an advisory committee is a panel of independent experts, including clinicians and other
scientific experts, that reviews, evaluates, and provides a recommendation as to whether the application should be
approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it
considers such recommendations carefully when making decisions.
The FDA’s Decision on a BLA
Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure, and potent and the
facility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure, and
potent.
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the
inspection of the manufacturing facilities and any FDA audits of non-clinical and clinical trial sites to assure compliance
with GCPs, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the product with specific prescribing information for specific indications. If the application is not approved,
the FDA will issue a complete response letter (“CRL”), which will contain the conditions that must be met in order to
secure final approval of the application, and when possible will outline recommended actions the sponsor might take to
obtain approval of the application. Sponsors that receive a CRL may submit to the FDA information that represents a
complete response to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 or
Class 2. The classification of a resubmission is based on the information submitted by a sponsor in response to an action
letter. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has two months to review a Class 1
resubmission and six months to review a Class 2 resubmission. The FDA will not approve an application until issues
identified in the complete response letter have been addressed.
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If the FDA approves a new product, it may limit the approved indications for use of the product. It may also
require that contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call
for post-approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency
may also require testing and surveillance programs to monitor the product after commercialization, or impose other
conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that
the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for
healthcare professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special
training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and
the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of post-
market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding
new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
Expedited Review Programs
The FDA is authorized to expedite the review of applications in several ways. None of these expedited programs,
however, changes the standards for approval but they may help expedite the development or approval process of product
candidates.
● Fast Track designation: Candidate products are eligible for Fast Track designation if they are intended to
treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs
for the condition. Fast Track designation applies to the combination of the product candidate and the
specific indication for which it is being studied. In addition to other benefits, such as the ability to have
greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track application
before the application is complete, a process known as rolling review.
● Breakthrough Therapy designation. To qualify for the Breakthrough Therapy program, product candidates
must be intended to treat a serious or life-threatening condition and preliminary clinical evidence must
indicate that such product candidates may demonstrate substantial improvement on one or more clinically
significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a Breakthrough
Therapy product candidate receives intensive guidance on an efficient development program, intensive
involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary
review and rolling review.
● Priority review. A product candidate is eligible for priority review if it treats a serious condition and, if
approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis
or prevention compared to marketed products. FDA aims to complete its review of priority review
applications within six months as opposed to 10 months for standard review.
● Accelerated approval. Drug or biologic products studied for their safety and effectiveness in treating
serious or life-threatening conditions and that provide meaningful therapeutic benefit over existing
treatments may receive accelerated approval. Accelerated approval means that a product candidate may be
approved on the basis of adequate and well controlled clinical trials establishing that the product candidate
has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis
of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other
clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability
or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug
or biologic product candidate receiving accelerated approval perform adequate and well controlled post-
marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval
pre-approval of promotional materials.
● Regenerative advanced therapy. With passage of the 21st Century Cures Act, or the Cures Act, in
December 2016, Congress authorized the FDA to accelerate review and approval of products designated
as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative
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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 candidate has the potential to
address unmet medical needs for such disease or condition. The benefits of a regenerative advanced
therapy designation include early interactions with the FDA to expedite development and review, benefits
available to Breakthrough Therapies, potential eligibility for priority review and accelerated approval
based on surrogate or intermediate endpoints.
Post-Approval Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor
will be required to comply with all regular post-approval regulatory requirements as well as any post-approval
requirements that the FDA have imposed as part of the approval process. The sponsor will be required to report certain
adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with
requirements concerning advertising and promotional labeling requirements. Manufacturers and certain of their
subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to
periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory
requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon
manufacturers. Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money, and effort
in the areas of production and quality control to maintain compliance with cGMP regulations and other regulatory
requirements.
A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain
tests on each lot of the product before it is released for distribution. If the product is subject to official lot release, the
manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of
manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in
addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the
FDA will conduct laboratory research related to the safety, purity, potency, and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of
distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market 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
or revocation of product license approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
● injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products
placed on 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
promotional activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are
prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that
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are not approved by the FDA, as reflected in the product’s prescribing information. In September 2021, the FDA published
final regulations which describe the types of evidence that the agency will consider in determining the intended use of a
drug or biologic.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and
administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of
the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of
penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially
restrict the manner in which a company promotes or distributes drug products. The federal government has levied large
civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter
into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
Orphan Drug Designation and Exclusivity
Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for
rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects
fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and
for which there is no reasonable expectation that the cost of developing and making available the biologic for the disease or
condition will be recovered from sales of the product in the United States.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the
date of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can be
made any time prior to the filing of an application for approval to market the product. A product becomes an orphan when
it receives orphan drug designation from the Office of Orphan Products Development at the FDA based on acceptable
confidential requests made under the regulatory provisions. The product must then go through the review and approval
process like any other product.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for
an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved
orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition
if it can present a plausible hypothesis that its product may be clinically superior to the first drug. More than one sponsor
may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking
orphan drug designation must file a complete request for designation.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has
such designation or for a select indication or use within the rare disease or condition for which it was designated, the
product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve
another sponsor’s marketing application for the same product for the same indication for seven years, except in certain
limited circumstances. In particular, the concept of what constitutes the “same drug” for purposes of orphan drug
exclusivity remains in flux in the context of gene therapies, and the FDA has recently issued guidance indicating it would
consider two gene therapy products for the same indication to be different, thus each eligible for orphan drug exclusivity, if
they express different transgenes or have or use different vectors, so long as those differences are not “minor.” The FDA
will determine whether two vectors from the same viral class are the same on a case-by-case basis and may consider
additional key features in assessing sameness. If a product designated as an orphan drug ultimately receives marketing
approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to
exclusivity.
The period of exclusivity begins on the date that the marketing application is approved by the FDA and applies
only to the indication for which the product has been designated. The FDA may approve a second application for the same
product for a different use or a second application for a clinically superior version of the product for the same use. The
FDA cannot, however, approve the same product made by another manufacturer for the same indication during the market
exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities.
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In September 2021, the Court of Appeals for the 11th Circuit held that, for the purpose of determining the scope of
market exclusivity, the term “same disease or condition” in the statute means the designated “rare disease or condition” and
could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity
applies to the entire designated disease or condition rather than the “indication or use.” It is unclear how this court decision
will be implemented by the FDA.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted,
provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory
exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if a BLA sponsor
submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the
product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the
FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted
by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection
cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory
period during which the FDA cannot approve another application.
Biosimilars and Exclusivity
The 2010 Patient Protection and Affordable Care Act, which was signed into law in March 2010, included a
subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”). The BPCIA established a
regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. A biosimilar is a biological
product that is highly similar to an existing FDA-licensed “reference product.” To date, the FDA has approved a number of
biosimilars and the first interchangeable biosimilar product was approved on July 30, 2021, and a second product
previously approved as a biosimilar was designated as interchangeable in October 2021. The FDA has also issued
numerous guidance documents outlining its approach to reviewing and licensing biosimilars and interchangeable
biosimilars under the PHSA, including a draft guidance issued in November 2020 that seeks to provide additional clarity to
manufacturers of interchangeable biosimilars.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar
to” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to
approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product
and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar product as
interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the
same clinical results as the reference product, and (for products administered multiple times) that the biologic and the
reference biologic may be switched after one has been previously administered without increasing safety risks or risks of
diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years
following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from
the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for
exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such
product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to
demonstrate the safety, purity, and potency of their product. The BPCIA also created certain exclusivity periods for
biosimilars approved as interchangeable products. There have been recent government proposals to reduce the 12-year
reference product exclusivity period, but none has been enacted to date. At the same time, since passage of the BPCIA,
many states have passed laws or amendments to laws, which address pharmacy practices involving biosimilar products.
Patent Term Restoration and Extension
A patent claiming a new biologic product, its method of use or its method of manufacture may be eligible for a
limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for
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patent term lost during product development and FDA regulatory review. The restoration period granted on a patent
covering a product is typically one-half the time between the effective date of the IND and the submission date of an
application, plus the time between the submission date of an application and the ultimate approval date. Patent term
restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval
date. Only one patent applicable to an approved product is eligible for the extension, and the application for the extension
must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for which
approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the
application for any patent term extension or restoration in consultation with the FDA.
FDA Approval of Companion Diagnostics
In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of
therapeutic products and in vitro companion diagnostics. According to the guidance, for novel drugs, a companion
diagnostic device and its corresponding therapeutic should be approved or cleared contemporaneously by the FDA for the
use indicated in the therapeutic product’s labeling. Approval or clearance of the companion diagnostic device will ensure
that the device has been adequately evaluated and has adequate performance characteristics in the intended population. In
July 2016, the FDA issued a draft guidance intended to assist sponsors of the drug therapeutic and in vitro companion
diagnostic device on issues related to co-development of the products.
The 2014 guidance also explains that a companion diagnostic device used to make treatment decisions in clinical
trials of a biologic product candidate generally will be considered an investigational device, unless it is employed for an
intended use for which the device is already approved or cleared. If used to make critical treatment decisions, such as
patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s
Investigational Device Exemption (“IDE”) regulations. Thus, the sponsor of the diagnostic device will be required to
comply with the IDE regulations. According to the guidance, if a diagnostic device and a product are to be studied together
to support their respective approvals, both products can be studied in the same investigational study, if the study meets both
the requirements of the IDE regulations and the IND regulations. The guidance provides that depending on the details of
the study plan and subjects, a sponsor may seek to submit an IND alone, or both an IND and an IDE.
In April 2020, the FDA issued additional guidance which describes considerations for the development and
labeling of companion diagnostic devices to support the indicated uses of multiple drug or biological oncology products,
when appropriate. This guidance builds upon existing policy regarding the labeling of companion diagnostics. In its 2014
guidance, the FDA stated that if evidence is sufficient to conclude that the companion diagnostic is appropriate for use with
a specific group of therapeutic products, the companion diagnostic’s intended use/indications for use should name the
specific group of therapeutic products, rather than specific products. The 2020 guidance expands on the policy statement in
the 2014 guidance by recommending that companion diagnostic developers consider a number of factors when determining
whether their test could be developed, or the labeling for approved companion diagnostics could be revised through a
supplement, to support a broader labeling claim such as use with a specific group of oncology therapeutic products (rather
than listing an individual therapeutic product(s)).
Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the
United 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 or
approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance
or approval from the FDA prior to commercial distribution.
The FDA previously has required in vitro companion diagnostics intended to select the patients who will respond
to the product candidate to obtain pre-market approval (“PMA”) simultaneously with approval of the therapeutic product
candidate. The PMA process, including the gathering of clinical and preclinical data and the submission to and review by
the FDA, can take several years or longer. It involves a rigorous premarket review during which the sponsor must prepare
and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device
and its components regarding, among other things, device design, manufacturing and labeling. PMA
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applications are subject to an application fee. For federal fiscal year 2022, the standard fee is $374,858 and the small
business fee is $93,714.
After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices
may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also
establish registration and device listings with the FDA. A medical device manufacturer’s manufacturing processes and
those of its suppliers are required to comply with the applicable portions of the Quality System Regulation, which covers
the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling,
packaging and shipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic
unscheduled inspections 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 Union
In order to market any product outside of the United States, a company must also comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing,
among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not
it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign
regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions.
Specifically, the process governing approval of medicinal products in the European Union generally follows the same lines
as in the United States. It entails satisfactory completion of preclinical studies and adequate and well-controlled clinical
trials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to the
relevant competent authorities of a marketing authorization application (“MAA”) and granting of a marketing authorization
by these authorities before the product can be marketed and sold in the European Union.
Clinical Trial Approval
Pursuant to the currently applicable Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on GCP, a
system for the approval of clinical trials in the European Union has been implemented through national legislation of the
member states. Under this system, an applicant must obtain approval from the competent national authority of a European
Union member state in which the clinical trial is to be conducted, or in multiple member states if the clinical trial is to be
conducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a specific study site
after the competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by
an investigational medicinal product dossier with supporting information prescribed by Directive 2001/20/EC and
Directive 2005/28/EC and corresponding national laws of the member states and further detailed in applicable guidance
documents.
In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014, or the Clinical Trials Regulation, was
adopted. The Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the EU. The main
characteristics of the regulation include: a streamlined application procedure via a single-entry point, the “EU portal”; a
single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for
clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in
two parts. Part I is assessed by the competent authorities of all EU Member States in which an application for authorization
of a clinical trial has been submitted (Member States concerned). Part II is assessed separately by each Member State
concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant
ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU
Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.
The Clinical Trials Regulation came into application in all the EU Member States on January 31, 2022, repealing
Clinical Trials Directive 2001/20/EC. According to the transitional provisions, if a clinical trial continues for more than
three years from the day on which the Clinical Trials Regulation became applicable, the Clinical Trials Regulation will at
that time begin to apply to the clinical trial.
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Parties conducting certain clinical studies must, as in the U.S., post clinical trial information in the European
Union at the EudraCT website: https://eudract.ema.europa.eu.
PRIME Designation in the EU
In March 2016, the EMA launched an initiative to facilitate development of product candidates in indications,
often rare, for which few or no therapies currently exist. The PRIority Medicines (“PRIME”) scheme is intended to
encourage drug development in areas of unmet medical need and provides accelerated assessment 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 benefits accrue to sponsors of product
candidates with PRIME designation, including but not limited to, early and proactive regulatory 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 dedicated EMA contact and
rapporteur from the Committee for Human Medicinal Products (“CHMP”) or Committee for Advanced Therapies are
appointed early in the PRIME scheme facilitating increased understanding of the product at the EMA’s Committee level. A
kick-off meeting initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide
guidance on the overall development and regulatory strategies.
Pediatric Studies
Applicants developing a new medicinal product must agree upon a Pediatric Investigation Plan (“PIP”) with the
EMA’s pediatric committee (“PDCO”), and must conduct pediatric clinical trials in accordance with that PIP, unless a
waiver applies (e.g., because the relevant disease or condition occurs only in adults). The PIP sets out the timing and
measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being
sought. The marketing authorization application for the product must include the results of pediatric clinical trials
conducted in accordance with the PIP, unless a waiver applies, or a deferral has been granted by the PDCO of the
obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy
and safety of the product in adults, in which case the pediatric clinical trials must be completed at a later date.
Marketing Authorization
To obtain a marketing authorization for a product under the European Union regulatory system, an applicant must
submit an MAA, either under a centralized procedure administered by the EMA or one of the procedures administered by
competent authorities in European Union Member States (decentralized procedure, national procedure, or mutual
recognition procedure). 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 must demonstrate compliance with all measures included in an EMA-approved PIP, covering all subsets of the
pediatric population, unless the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of
the measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the European Commission
that is valid for all EU member states. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory
for specific products, including for medicines produced by certain biotechnological processes, products designated as
orphan medicinal products, advanced therapy products and products with a new active substance indicated for the
treatment of certain diseases, including products for the treatment of cancer. For products with a new active substance
indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in
the interest of patients, the centralized procedure may be optional. Manufacturers must demonstrate the quality, safety, and
efficacy of their products to the EMA, which provides an opinion regarding the MAA. The European Commission grants
or refuses marketing authorization in light of the opinion delivered by the EMA.
Specifically, the grant of marketing authorization in the European Union for products containing viable human
tissues or cells such as gene therapy medicinal products is governed by Regulation 1394/2007/EC on advanced therapy
medicinal 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 rules
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concerning the authorization, supervision, and pharmacovigilance of gene therapy medicinal products, somatic cell therapy
medicinal products, and tissue engineered products. Manufacturers of advanced therapy medicinal products must
demonstrate the quality, safety, and efficacy of their products to EMA which provides an opinion regarding the application
for marketing authorization. The European Commission grants or refuses marketing authorization in light of the opinion
delivered by EMA.
Under the centralized procedure, the CHMP established at the EMA is responsible for conducting an initial
assessment of a product. Under the centralized procedure in the European Union, the maximum timeframe for the
evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to
be provided by the applicant in response to questions of the CHMP. Accelerated evaluation may be granted by the CHMP
in exceptional cases, when a medicinal product is of major interest from the point of view of public health and, in
particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days
will be reduced to 150 days, but it is possible that the CHMP may revert to the standard time limit for the centralized
procedure if it determines that it is no longer appropriate to conduct an accelerated assessment.
Specialized Procedures for Gene Therapies
The grant of marketing authorization in the European Union for gene therapy products is governed by Regulation
1394/2007/EC on advanced therapy medicinal 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 includes specific rules concerning the authorization, supervision, and pharmacovigilance of gene therapy
medicinal products. Manufacturers of advanced therapy medicinal products must demonstrate the quality, safety, and
efficacy of their products to the EMA, which provides an opinion regarding the MAA. The European Commission grants
or refuses marketing authorization in light of the opinion delivered by the EMA.
Regulatory Data Protection in the European Union
In the European Union, new chemical entities approved on the basis of a complete independent data package
qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity
pursuant to Regulation (EC) No 726/2004, as amended, and Directive 2001/83/EC, as amended. Data exclusivity prevents
regulatory 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 marketing
authorization application can be submitted, and the innovator’s data may be referenced, but no generic medicinal product
can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum
of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization
for one or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring a
significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical
entity so that the innovator gains the prescribed period of data exclusivity, another company may market another version of
the product if such company obtained marketing authorization based on an MAA with a complete independent data
package of pharmaceutical tests, preclinical tests and clinical trials.
Periods of Authorization and Renewals
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis
of a reevaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state. To
that end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version
of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization
was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing
authorization is valid for an unlimited period, unless the European Commission or the competent authority decides, on
justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal period. Any authorization
that is not followed by the placement of the drug on the EU market (in the case of the centralized procedure) or on the
market of the authorizing member state within three years after authorization ceases to be valid.
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Regulatory Requirements after Marketing Authorization
Following approval, the holder of the marketing authorization is required to comply with a range of requirements
applicable to the manufacturing, marketing, promotion and sale of the medicinal product. These include compliance with
the European Union’s stringent pharmacovigilance or safety reporting rules, pursuant to which post-authorization studies
and additional monitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which a
separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP
requirements and comparable requirements of other regulatory bodies in the European Union, which mandate the methods,
facilities, and controls used in manufacturing, processing and packing of drugs to assure their safety and identity. Finally,
the marketing and promotion of authorized products, including industry-sponsored continuing medical education and
advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union
under Directive 2001/83EC, as amended.
Reimbursement and Pricing of Prescription Pharmaceuticals
In the E.U., similar political, economic and regulatory developments to those in the United States may affect our
ability to profitably commercialize our product candidates, if approved. In markets outside of the U.S. and the E.U.,
reimbursement and healthcare payment systems vary significantly by country and many countries have instituted price
ceilings on specific products and therapies. In many countries, including those of the E.U., the pricing of prescription
pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental
authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or
pricing approval in some countries, pharmaceutical firms may be required to conduct a clinical trial that compares the cost-
effectiveness of the product to other available therapies.
Orphan Drug Designation and Exclusivity
Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an
orphan 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 ten
thousand persons in the European Union when the application is made, or (2) a life-threatening, seriously debilitating or
serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the
drug in the European Union would generate sufficient return to justify the necessary investment. For either of these
conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention, or treatment of
the condition in question that has been authorized in the European Union or, if such method exists, the drug will be of
significant benefit to those affected by that condition.
An orphan drug designation provides a number of benefits, including fee reductions, regulatory assistance, and the
possibility to apply for a centralized European Union marketing authorization. Marketing authorization for an orphan drug
leads to a ten-year period of market exclusivity. During this market exclusivity period, neither the EMA nor the European
Commission or the member states can accept an application or grant a marketing authorization for a “similar medicinal
product.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or
substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic
indication. The market exclusivity period for the authorized therapeutic indication may, however, be reduced to six years if,
at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation
because, for example, the product is sufficiently profitable not to justify market exclusivity.
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Pediatric Exclusivity
Products that are granted a marketing authorization with the results of the pediatric clinical trials conducted in
accordance with the PIP are eligible for a six-month extension of the protection under a supplementary protection
certificate (if any is in effect at the time of approval) even where the trial results are negative. In the case of orphan
medicinal products, a two-year extension of the orphan market exclusivity may be available. This pediatric reward is
subject to specific conditions and is not automatically available when data in compliance with the PIP are developed and
submitted.
Patent Term Extensions in the European Union and Other Jurisdictions
The European Union also provides for patent term extension through Supplementary Protection Certificates, or
SPCs. The rules and requirements for obtaining an SPC are similar to those in the United States. An SPC may extend the
term of a patent for up to five years after its originally scheduled expiration date and can provide up to a maximum of
fifteen years of marketing exclusivity for a drug. These periods can be extended for six additional months if pediatric
exclusivity is obtained, which is described in detail below. Although SPCs are available throughout the European Union,
sponsors must apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign
jurisdictions outside the European Union.
Brexit and the Regulatory Framework in the United Kingdom
The United Kingdom’s withdrawal from the EU took place on January 31, 2020. The EU and the U.K. reached an
agreement on their new partnership in the Trade and Cooperation Agreement, (“the Agreement”), which was applied
provisionally beginning on January 1, 2021 and which entered into force on May 1, 2021. The Agreement focuses
primarily on free trade by ensuring no tariffs or quotas on trade in goods, including healthcare products such as medicinal
products. Thereafter, the EU and the U.K. will form two separate markets governed by two distinct regulatory and legal
regimes. As such, the Agreement seeks to minimize barriers to trade in goods while accepting that border checks will
become inevitable as a consequence that the U.K. is no longer part of the single market. As of January 1, 2021, the
Medicines and Healthcare products Regulatory Agency (“MHRA”), became responsible for supervising medicines and
medical devices in Great Britain, comprising England, Scotland and Wales under domestic law whereas Northern Ireland
continues to be subject to EU rules under the Northern Ireland Protocol. The MHRA will rely on the Human Medicines
Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR has
incorporated into the domestic law the body of EU law instruments governing medicinal products that pre-existed prior to
the U.K.’s withdrawal from the EU.
Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and complements
the European Union’s General Data Protection Regulation (“ GDPR”), has achieved Royal Assent on May 23, 2018 and is
now effective in the United Kingdom, it is still unclear whether transfer of data from the European Economic Area,
(“EEA”), to the United Kingdom will remain lawful under GDPR. The Trade and Cooperation Agreement provides for a
transitional period during which the United Kingdom will be treated like an European Union member state in relation to
processing and transfers of personal data for four months from January 1, 2021. This may be extended by two further
months. After such period, the United Kingdom will be a “third country” under the GDPR unless the European
Commission adopts an adequacy decision in respect of transfers of personal data to the United Kingdom. The United
Kingdom has already determined that it considers all of the EU 27 and EEA member states to be adequate for the purposes
of data protection, ensuring that data flows from the United Kingdom to the EU/EEA remain unaffected.
General Data Protection Regulation
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU,
including personal health data, is subject to the GDPR, which became effective on May 25, 2018. The GDPR is wide-
ranging in scope and imposes numerous requirements on companies that process personal data, including requirements
relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data
relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the
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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 of personal data to countries outside
the EU, including the United States, and permits data protection authorities to impose large penalties for violations of the
GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR
also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing business or
require companies to change their business practices to ensure full compliance.
In July 2020, the Court of Justice of the European Union, (“CJEU”), invalidated the EU-U.S. Privacy Shield
framework, one of the mechanisms used to legitimize the transfer of personal data from the EU to the United States. The
CJEU decision also drew into question the long-term viability of an alternative means of data transfer, the standard
contractual clauses, for transfers of personal data from the EU to the United States. Following the withdrawal of the U.K.
from the EU, the U.K. Data Protection Act 2018 applies to the processing of personal data that takes place in the U.K. and
includes parallel obligations to those set forth by GDPR.
Coverage, Pricing, and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we
may seek regulatory approval by the FDA or other government authorities. In the United States and markets in other
countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services
generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use
any product candidates we may develop unless coverage is provided and reimbursement is adequate to cover a significant
portion of the cost of such product candidates. Even if any product candidates we may develop are approved, sales of such
product candidates will depend, in part, on the extent to which third-party payors, including government health programs in
the United States such as Medicare and Medicaid, commercial health insurers, and managed care organizations, provide
coverage, and establish adequate reimbursement levels for, such product candidates. The process for determining whether a
payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that
the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices
charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and
imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also
known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may
need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless,
product candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to
cover any product candidates we may develop could reduce physician utilization of such product candidates once approved
and have a material adverse effect on our sales, results of operations and financial condition. Additionally, a payor’s
decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further,
one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage
and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to
payor. Third-party reimbursement and coverage may not be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product development.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the
prices of pharmaceuticals have been a focus in this effort. Governments have shown significant interest in implementing
cost-containment programs, including price controls, restrictions on reimbursement, and requirements for substitution of
generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any
approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable
coverage and reimbursement status is attained for one or more products for which a company
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or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be
implemented in the future.
Outside the United States, ensuring adequate coverage and payment for any product candidates we may develop
will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing
negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a
product and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we
may develop to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our
commercialization efforts.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries
provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the
completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available
therapies (so called health technology assessments) in order to obtain reimbursement or pricing approval. For example, the
European Union provides options for its member states to restrict the range of products for which their national health
insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union
member states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on
the profitability of the company placing the product on the market. Other member states allow companies to fix their own
prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions.
Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals and
these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal
and debt crises experienced by many countries in the European Union. The downward pressure on health care costs in
general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to
the entry of new products. Political, economic, and regulatory developments may further complicate pricing negotiations,
and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European
Union member 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
products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those
countries.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of
pharmaceutical products that are granted marketing approval. Arrangements with providers, consultants, third-party payors,
and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to
physicians and teaching physicians and patient privacy laws and regulations and other healthcare laws and regulations that
may constrain our business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws
and regulations, include the following:
● the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from
knowingly and willfully soliciting, offering, paying, receiving, or providing remuneration, directly or
indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order
or recommendation of, any good or service, for which payment may be made, in whole or in part, under a
federal healthcare program such as Medicare and Medicaid;
● the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary
penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or
causing to be presented, to the federal government, claims for payment that are false, fictitious, or fraudulent
or knowingly making, using, or causing to made or used a false record or statement to avoid, decrease, or
conceal an obligation to pay money to the federal government;
● the federal civil monetary penalty and false statement laws and regulations relating to pricing and submission
of pricing information for government programs, including penalties for knowingly and
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intentionally overcharging 340b eligible entities and the submission of false or fraudulent pricing information
to government entities;
● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional
federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their
respective implementing regulations, including the Final Omnibus Rule published in January 2013, which
impose 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
covering up a material fact or making any materially false statement in connection with the delivery of or
payment for health care benefits, items or services;
● the Foreign Corrupt Practices Act, which prohibits companies and their intermediaries from making, or
offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or
retaining business or otherwise seeking favorable treatment;
● the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the
Patient Protection 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 the Centers 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, other healthcare providers and teaching hospitals, as well as ownership and investment
interests held by physicians, other healthcare providers and their immediate family members; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which
may apply to healthcare items or services that are reimbursed by non-governmental third-party payors,
including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring pharmaceutical manufacturers to report information related to payments to physicians and other health care
providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in
some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number of
federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical
products, limiting coverage and reimbursement for drugs and other medical products, government control and other
changes to the healthcare system in the United States.
By way of example, the United States and state governments continue to propose and pass legislation designed to
reduce the cost of healthcare. In March 2010, the United States Congress enacted the PPACA, which, among other things,
includes changes to the coverage and payment for products under government health care programs. In addition, other
legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act
of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit
Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the
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years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to
several 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 2031 pursuant to the Coronavirus
Aid, Relief and Economic Security Act, or CARES Act. Under subsequent legislation, these Medicare sequester reductions
have been suspended through the end of March 2022. From April 2022 through June 2022 a 1% sequester cut will be in
effect, with the full 2% cut resuming thereafter. The American Taxpayer Relief Act of 2012, among other things, reduced
Medicare payments to several providers and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other
healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may
obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.
Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and
Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs
Act of 2017 (“ the Tax Act”), which was signed by President Trump 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, became effective in 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas
ruled that the individual mandate portion of the PPACA is an essential and inseverable feature of the PPACA, and therefore
because the mandate was repealed as part of the Tax Act, the remaining provisions of the PPACA are invalid as well. In
June 2021, the U.S. Supreme Court dismissed this action after finding that the plaintiffs do not have standing to challenge
the constitutionality of the ACA. Litigation and legislation over the PPACA are likely to continue, with unpredictable and
uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA,
including directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions
from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states,
individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28,
2021, however, President Biden rescinded those orders and issued a new Executive Order which directs federal agencies to
reconsider rules and other policies that limit Americans’ access to health care, and consider actions that will protect and
strengthen that access. Under this Order, federal agencies are directed to re-examine: policies that undermine protections
for people with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under
Medicaid and the ACA that may reduce coverage or undermine the programs, including work requirements; policies that
undermine the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to
enroll in Medicaid and the ACA; and policies that reduce affordability of coverage or financial assistance, including for
dependents.
Pharmaceutical Prices
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United
States. There have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal
legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship
between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and
Medicaid. In 2020, President Trump issued several executive orders intended to lower the costs of prescription products
and certain provisions in these orders have been incorporated into regulations. These regulations include an interim final
rule implementing a most favored nation model for prices that would tie Medicare Part B payments for certain physician-
administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021.
That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a
final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into
payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care.
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop
a Section 804 Importation Program (“SIP”), to import certain prescription drugs from Canada into the United States. The
final rule is currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida,
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Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada with the
intent of developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS finalized a regulation
removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D,
either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of
the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing
litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe
harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of
which have also been delayed by the Biden administration until January 1, 2023.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. A number of states, for example,
require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit
managers, wholesale distributors, to disclose information about pricing of pharmaceuticals. In addition, regional healthcare
organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical
products and which suppliers will be included in their prescription pharmaceutical and other healthcare programs. These
measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We
expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit
the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced
demand for our product candidates or additional pricing pressures.
Federal and State Data Privacy Laws
There are multiple privacy and data security laws that may impact our business activities, in the United States and
in other countries where we conduct trials or where we may do business in the future. These laws are evolving and may
increase both our obligations and our regulatory risks in the future. In the health care industry generally, under the federal
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the U.S. Department of Health and Human
Services, or HHS, has issued regulations to protect the privacy and security of protected health information, or PHI, used or
disclosed by covered entities including certain healthcare providers, health plans and healthcare clearinghouses. HIPAA
also regulates standardization of data content, codes and formats used in healthcare transactions and standardization of
identifiers for health plans and providers. HIPAA also imposes certain obligations on the business associates of covered
entities that obtain protected health information in providing services to or on behalf of covered entities. HIPAA may apply
to us in certain circumstances and may also apply to our business partners in ways that may impact our relationships with
them. Our clinical trials are regulated by the Common Rule, which also includes specific privacy-related provisions. In
addition to federal privacy regulations, there are a number of state laws governing confidentiality and security of health
information that may be applicable to our business. In addition to possible federal civil and criminal penalties for HIPAA
violations, state attorneys general are authorized to file civil actions for damages or injunctions in federal courts to enforce
HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state attorneys general
(along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations
of HIPAA’s privacy and security rules. State attorneys general also have authority to enforce state privacy and security
laws. New laws and regulations governing privacy and security may be adopted in the future as well.
At the state level, California has enacted legislation that has been dubbed the first “GDPR-like” law in the United
States. Known as the California Consumer Privacy Act (“CCPA”), it creates new individual privacy rights for consumers
(as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling
personal data of consumers or households. The CCPA went into effect on January 1, 2020 and requires covered companies
to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of
personal information, and allow for a new cause of action for data breaches. Additionally, effective starting on January 1,
2023, the California Privacy Rights Act, or CPRA, will significantly modify the CCPA, including by expanding
consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that
will be vested with authority to implement and enforce the CCPA and the CPRA. The CCPA and CPRA could impact our
business activities depending on how it is interpreted and exemplifies the vulnerability of our business
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to not only cyber threats but also the evolving regulatory environment related to personal data and individually identifiable
health information. These provisions may apply to some of our business activities. In addition, other states, including
Virginia and Colorado, already have passed state privacy laws and other states will likely be considering similar laws in the
near future.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors
available under such laws, it is possible that some of our current or future business activities, including certain clinical
research, sales and marketing practices and the provision of certain items and services to our customers, could be subject to
challenge under one or more of such privacy and data security laws. The heightening compliance environment and the need
to build and maintain robust and secure systems to comply with different privacy compliance and/or reporting requirements
in multiple jurisdictions could increase the possibility that a healthcare company may fail to comply fully with one or more
of these requirements. If our operations are found to be in violation of any of the privacy or data security laws or
regulations described above that are applicable to us, or any other laws that apply to us, we may be subject to penalties,
including potentially significant criminal, civil and administrative penalties, damages, fines, contractual damages,
reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become
subject to a consent decree or similar agreement to resolve allegations of non-compliance with these laws, and the
curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and
our results of operations. To the extent that any product candidates we may develop, once approved, are sold in a foreign
country, we may be subject to similar foreign laws.
Additional Regulations
In addition to the foregoing, state, and federal laws regarding environmental protection and hazardous substances,
including the Occupational Safety and Health Act, the Resource Conservation and Recovery Act, and the Toxic Substances
Control Act, affect our business. These and other laws govern the use, handling, and disposal of various biologic, chemical,
and radioactive substances used in, and wastes generated by, operations. If our operations result in contamination of the
environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines.
Equivalent laws have been adopted in third countries that impose similar obligations.
Human Capital
As of February 1, 2022, we had 264 full-time employees, including 60 employees with M.D. or Ph.D. degrees. Of
these full-time employees, 212 employees are engaged in research and development activities. None of our employees are
represented by a labor union or covered by a collective bargaining agreement. We anticipate that we will continue to
increase headcount in our clinical and development organization as we progress the clinical development of EDIT-101 to
treat LCA10 and EDIT-301 to treat sickle cell disease and TDT, and further advance our current research programs and our
preclinical development activities.
At Editas, we seek to unlock the full potential of gene editing technology, and we recognize that our success is
driven by our dynamic, passionate and diverse team. We work together with integrity, guided by our distinct culture, to
develop transformative medicines for people living with serious diseases around the world. At the core of our culture are
our values – community, innovation, and results – which are built on the foundation that our people and the way we treat
one another promote creativity in all aspects of our work and drive us as a team to achieve our mission of translating the
promise of gene editing into a broad class of differentiated, transformational medicines for diseases with high unmet need.
Our Commitment to Diversity, Equity and Inclusion
We strongly believe that our greatest strength comes from the people who make up our team. Each employee
brings diverse perspectives, backgrounds, and thinking styles, and, by embracing and celebrating these differences, we
strengthen our culture and further our mission to pioneer a new field of genome editing. We are committed to preserving
and further cultivating our diverse and inclusive workforce, including in our senior management team, to ensure an
environment where employees feel empowered to achieve their fullest potential.
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As of December 31, 2021, approximately 54% of our full-time employees were women and 51% of our senior
management (director level and above) were women. As of December 31, 2021, approximately 45% of our full-time
employees identify as racially/ethnically diverse and 32% of our senior management identify as racially/ethnically diverse.
Recruitment, Retention and Development
Successful execution of our strategy is dependent on attracting, retaining and motivating a diverse team of highly
skilled employees at all levels. We believe a key component of recruiting, retaining and motivating our employees is our
total compensation package. For this reason, we provide employees with competitive compensation, including market-
competitive salary and equity awards, along with competitive benefits packages, including medical, dental, vision and life
insurance, an employee stock purchase plan, flexible spending accounts, short- and long-term disability and matching
contributions to a 401(k) tax-deferred savings plan. We also provide annual cash incentive bonus opportunities that are tied
to both company performance and individual performance to foster a pay-for-performance culture. We regularly
benchmark these total rewards against our industry peers to ensure we remain competitive and attractive to potential new
hires.
We believe that continued learning and development, training and other resources are also an essential part of
retaining our employees and creating a culture of learning and leadership. We encourage our employees to participate and
take advantage of a variety of learning and development resources, including online skills courses, professional
development events, and external training programs based on individual needs. We have also implemented formal coaching
and mentoring programs, which enable employees to connect with, and learn and develop from, individuals across our
company.
Communication and Engagement
We recognize that our employees perform best when they know how their work contributes to our overall
strategy. To achieve this, we emphasize open and direct communication through the use of a variety of channels, including
quarterly all-company business updates from the senior management team, fireside chats with new members of the board
of directors and our executive management team, open forums and company-wide written communications, and postings
on our company intranet.
In addition, we regularly conduct employee surveys to gauge employee engagement and solicit feedback, and
enhance our understanding of the views of our employees, work environment and culture. The results from engagement
surveys are used to implement programs and processes designed to enhance employee engagement and improve the
employee experience.
Health, Wellness and Safety
Employee safety and well-being is of paramount importance to us, particularly in light of the COVID-19
pandemic. Since March 2020, we have taken a number of additional steps to support our employees and government efforts
to curb the COVID-19 pandemic, including creating or implementing some or all of the following from time to time:
● A task force responsible for establishing COVID-19 safety protocols and regularly communicating updates to
all employees;
● A work from home policy, urging that all work that can be done from home should be done from home;
● Decreased density and increased physical distancing in our facilities for employees who must work onsite
using scheduling adjustments and flexibility;
● Robust cleaning protocols across our facilities;
● Provision of masks to all onsite employees and masking requirements;
● Distribution of at-home COVID-19 test kits to all employees;
● Rigorous procedures to address actual and suspected COVID-19 cases and potential exposure; and
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● Prohibition of all non-essential travel for all employees.
Our Corporate Information
We were incorporated under the name Gengine, Inc. as a Delaware corporation in September 2013, and we
changed our name to Editas Medicine, Inc. in November 2013. Our principal executive offices are located at 11 Hurley St.,
Cambridge, Massachusetts, 02141, and our telephone number is (617) 401-9000.
Available Information
We maintain an internet website at www.editasmedicine.com and make available free of charge through our
website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act of 1934, or the
Exchange Act. We make these reports available through our website as soon as reasonably practicable after we
electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission, or the SEC. You
can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at
http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the SEC by our executive
officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable
after copies of those filings are provided to us by those persons. In addition, we regularly use our website to post
information regarding our business, product development programs and governance, 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 should
not be considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report
on Form 10-K as an inactive technical reference only.
Item 1A. Risk Factors
Our business is subject to numerous risks. The following important factors, among others, could cause our actual
results to differ materially from those expressed in forward-looking statements made by us or on our behalf in this Annual
Report 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
our forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result
of new information, future events, or otherwise.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never
achieve or maintain profitability.
Since inception, we have incurred significant operating losses. Our net losses were $192.5 million, $116.0 million,
and $133.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had
an accumulated deficit of $857.7 million. We have financed our operations primarily through public offerings of our
common stock, our collaboration with Bristol Myers Squibb Company (“BMS”) through its wholly owned subsidiary, Juno
Therapeutics, Inc. (“Juno Therapeutics”), and payments under our strategic alliance with Allergan Pharmaceuticals
International Limited (which was acquired by AbbVie Inc. in May 2020 and is referred to together with its affiliates as
“Allergan”), which was terminated in August 2020. We have devoted substantially all of our efforts to research and
development. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable
future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will
increase substantially if and as we:
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● progress the clinical development of EDIT-101 to treat Leber congenital amaurosis (“LCA”) 10 (“LCA10”),
including expanding trial enrollment to explore dose response and support establishment of registrational
trial endpoints;
● progress the clinical development of EDIT-301 to treat sickle cell disease and prepare for and initiate the
clinical development of EDIT-301 to treat transfusion-dependent beta-thalassemia;
● continue our current research programs and our preclinical and clinical development of product candidates
from our current research programs, including EDIT-103, our experimental medicine to treat rhodopsin-
associated autosomal dominant retinitis pigmentosa, and EDIT-202, our experimental medicine to treat solid
tumors;
● seek to identify additional research programs and additional product candidates;
● initiate preclinical testing and clinical trials for any product candidates we identify and develop;
● maintain, expand, and protect our intellectual property portfolio and provide reimbursement of third-party
expenses 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
which we 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
support our 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 are in the early stages of the clinical development of EDIT-101 and EDIT-301 and expect that it will be many
years, if ever, before we have a product candidate ready for commercialization. To become and remain profitable, we must
develop and eventually commercialize a medicine or medicines with significant market potential. This will require us to be
successful in a range of challenging activities, including identifying product candidates, completing preclinical 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 any post-marketing requirements.
We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large
enough to achieve profitability. Other than EDIT-101 and EDIT-301, we are currently only in the preclinical testing stages
for our most advanced research programs. If we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our
company and could impair our ability to raise capital, maintain our research and development efforts, expand our business,
or continue our operations. A decline in the value of our company could cause our stockholders to lose all or part of their
investments in us.
We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay,
reduce, or eliminate our research and product development programs or commercialization efforts.
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We expect our expenses to increase in connection with our ongoing activities, particularly as we identify, continue
the 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 develop, we expect to incur significant commercialization
expenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing,
manufacturing, and distribution are not the responsibility of a collaborator. Accordingly, we will need to obtain substantial
additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on
attractive terms, we would be forced to delay, reduce, or eliminate our research and product development programs or
future commercialization efforts.
We expect that our existing cash, cash equivalents, and marketable securities at December 31, 2021 and
anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements through
2023. Our future capital requirements will depend on many factors, including:
● the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and
clinical or natural history study trials for the product candidates we develop;
● the costs of progressing the clinical development of EDIT-101 to treat LCA10, including expanding trial
enrollment to explore dose response and support establishment of registrational trial endpoints;
● the costs of progressing the clinical development of EDIT-301 to treat sickle cell disease and preparing for
and initiating the clinical development of EDIT-301 to treat transfusion-dependent beta-thalassemia;
● the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual
property and proprietary rights, and defending intellectual property-related claims;
● the costs, timing, and outcome of regulatory review of the product candidates we develop;
● the costs of future activities, including product sales, medical affairs, marketing, manufacturing, and
distribution, for any product candidates for which we receive regulatory approval;
● the success of our collaboration with BMS;
● whether BMS exercises any of its options to extend the research program term and/or to additional research
programs under our collaboration;
● 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 results
required to obtain marketing approval and achieve product sales. In addition, even if we successfully identify and develop
product candidates and those are approved, we may not achieve commercial success. Our commercial revenues, if any, will
be derived from sales of medicines that we do not expect to be commercially available for many years, if at all.
Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate
additional financing may not 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
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rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs
through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, and
licensing arrangements. We do not have any significant committed external source of funds. To the extent that we raise
additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders may
be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the
rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or
restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring
dividends.
If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or
product candidates, or we may have to grant licenses on terms that may not be favorable to us.
Our short operating history may make it difficult for our stockholders to evaluate the success of our business to date
and to assess our future viability.
We were founded and commenced operations in the second half of 2013. Our operations to date have been limited
to organizing and staffing our company, business planning, raising capital, acquiring and developing our technology,
identifying potential product candidates, undertaking preclinical studies and initiating clinical trials. Except for EDIT-101
and EDIT-301, all of our research programs are still in the preclinical or research stage of development, and the risk of
failure of all of our research programs is high. We have not yet demonstrated an ability to successfully complete any
clinical trials, including large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial-scale
medicine, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for
successful commercialization. In addition, we may encounter unforeseen expenses, difficulties, complications, delays, and
other known and unknown factors.
We expect that our financial condition and operating results will continue to fluctuate significantly from quarter-
to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, our
stockholders should not rely upon the results of any quarterly or annual periods as indications of future operating
performance.
We have never generated revenue from product sales and may never be profitable.
Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with
collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to
commercialize, product candidates we may identify for development. We do not anticipate generating revenues from
product sales for the next several years, if ever.
Even if one or more of the product candidates we develop is approved for commercial sale, we anticipate
incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase
beyond expectations if we are required by the U.S. Food and Drug Administration (the “FDA”), the European Medicines
Agency (the “EMA”), or other regulatory authorities to perform clinical and other studies in addition to those that we
currently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not become
profitable and may need to obtain additional funding to continue operations.
Risks Related to Discovery, Development, and Commercialization
We intend to identify and develop product candidates based on a novel genome editing technology, which makes it
difficult to predict the time and cost of product candidate development. No therapeutic products that utilize genome
editing technology have been approved in the United States or in Europe, and there have only been a limited number of
human clinical trials of a genome editing product candidate.
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We have concentrated our research and development efforts on our genome editing platform, which uses CRISPR
technology. 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 the
United States or Europe and there have been only a limited number of clinical trials involving the use of a therapeutic
utilizing genome editing technologies. It is difficult for us to predict the time and cost of product candidate development,
and we cannot predict whether the application of our genome editing platform, or any similar or competitive genome
editing platforms, will result in the identification, development, and regulatory approval of any medicines. There can be no
assurance that any development problems we experience in the future related to our genome editing platform or any of our
research programs will not cause significant delays or unanticipated costs, or that such development problems can be
solved. We may also experience delays in developing a sustainable, reproducible, and scalable manufacturing process or
transferring that process to commercial partners. Any of these factors may prevent us from completing our preclinical
studies or any clinical trials that we may initiate or commercializing any product candidates we develop on a timely or
profitable basis, if at all.
Regulatory requirements governing genetic medicines, and in particular any novel genetic medicines we may develop,
have changed frequently and may continue to change in the future.
Regulatory requirements governing genetic and cellular medicines, and in particular any novel genetic medicine
products we may develop, have changed frequently and may continue to change in the future. We are aware of a limited
number of genetic medicines that have received marketing authorization from the FDA and EMA. Even with respect to
more established products in the genetic medicine field, the regulatory landscape is still developing. For example, the FDA
has established the Office of Tissues and Advanced Therapies (formerly the Office of Cellular, Tissue and Gene Therapies)
within CBER to consolidate the review of genetic medicines and related products, and the Cellular, Tissue and Gene
Therapies Advisory Committee to advise CBER on its review. Genetic medicine clinical trials conducted at institutions that
receive funding for recombinant DNA research from the NIH also are potentially subject to review by the Office of
Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC; however, the NIH announced that the
RAC will only publicly review clinical trials if the trials cannot be evaluated by standard oversight bodies and pose unusual
risks.
The same applies in 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 an application for marketing authorization for a genetic medicinal candidate that is submitted to the
CHMP before CHMP adopts its final opinion. In the European Union, the development and evaluation of a genetic
medicinal product must be considered in the context of the relevant European Union guidelines. The EMA may issue new
guidelines concerning the development and marketing authorization for genetic medicinal products and require that we
comply with these new guidelines. As a result, the procedures and standards applied to genetic medicines and cell therapy
products may be applied to any product candidates we may develop, but that remains uncertain at this point.
These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen
the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in
regulatory positions and interpretations, delay or prevent approval and commercialization of any product candidates we
may develop or lead to significant post-approval limitations or restrictions. As we advance any product candidates we may
develop, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If
we fail to do so, we may be required to delay or discontinue development of these product candidates. Delay or failure to
obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could
decrease our ability to generate sufficient product revenue to maintain our business.
Although the FDA decides whether individual genetic medicine protocols may proceed, the RAC public review
process, if undertaken, can delay the initiation of a clinical trial, even if the FDA has reviewed the trial design and details
and approved its initiation. Conversely, the FDA can put an IND on a clinical hold even if the RAC has provided a
favorable review or an exemption from in-depth, public review. If we were to engage an NIH-funded institution to conduct
a clinical trial, that institution’s IBC as well as its IRB would need to review the proposed clinical trial to assess the safety
of the trial. In addition, adverse developments in clinical trials of genetic medicine products conducted by
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others may cause the FDA or other oversight bodies to change the requirements for approval of any product candidates we
may develop. Similarly, the EMA may issue new guidelines concerning the development and marketing authorization for
genetic medicine products and require that we comply with these new guidelines.
As we are initially seeking to identify and develop product candidates to treat diseases using novel technologies,
there is heightened risk that the FDA, the EMA or other regulatory authority may not consider the clinical trial endpoints
that we propose to provide clinically meaningful results. Even if the endpoints are deemed clinically meaningful, we may
not achieve these endpoints to a degree of statistical significance, particularly because many of the diseases we are
targeting with our platform have small patient populations, making development of large and rigorous clinical trials more
difficult.
Adverse developments in post-marketing experience or in clinical trials conducted by others of genetic medicines
or cell therapy products may cause the FDA, the EMA, and other regulatory bodies to revise the requirements for
development or approval of any product candidates we may develop or limit the use of products utilizing non-viral genetic
medicinal technologies, either of which could materially harm our business. In addition, the clinical trial requirements of
the FDA, the EMA, and other regulatory authorities and the criteria these regulators use to determine the safety and
efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market
of the potential products. The regulatory approval process for novel product candidates such as the product candidates we
may develop can be more expensive and take longer than for other, better known or more extensively studied
pharmaceutical or other product candidates. Regulatory agencies administering existing or future regulations or legislation
may not allow production and marketing of products utilizing non-viral genetic medicine technology in a timely manner or
under technically or commercially feasible conditions. In addition, regulatory action or private litigation could result in
expenses, delays or other impediments to our research programs or the commercialization of resulting products.
In addition, ethical, social and legal concerns about genetic medicine, genetic testing and genetic research could
result in additional regulations or prohibiting the processes we may use. Federal and state agencies, congressional
committees and foreign governments have expressed their intentions to further regulate biotechnology. More restrictive
regulations or claims that any product candidates we may develop are unsafe or pose a hazard could prevent us from
commercializing any products. New government requirements may be established that could delay or prevent regulatory
approval of any product candidates we may develop under development. It is impossible to predict whether legislative
changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or
what the impact of such changes, if any, may be.
As we advance any product candidates we may develop through clinical development, we will be required to
consult with these regulatory and advisory groups, and comply with applicable guidelines. These regulatory review
committees and advisory groups and any new guidelines they promulgate may lengthen the regulatory review process,
require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and
interpretations, delay or prevent approval and commercialization of any product candidates we may develop or lead to
significant post-approval limitations or restrictions. Delay or failure to obtain, or unexpected costs in obtaining, the
regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient
product revenue.
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 products
based on our genome editing platform. Other than EDIT-101 and EDIT-301, all of our product development programs are
still in the preclinical or research stage of development. Our research programs, including those subject to our collaboration
with BMS, may fail to identify potential product candidates for clinical development for a number of reasons. Our research
methodology may be unsuccessful in identifying potential product candidates, or our potential product candidates may be
shown to have harmful side effects or may have other characteristics that may make the products impractical to
manufacture, unmarketable, or unlikely to receive marketing approval.
If any of these events occur, we may be forced to abandon our development efforts for a program or programs,
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which would have a material adverse effect on our business, financial condition, results of operations, and prospects.
Research programs to identify new product candidates require substantial technical, financial, and human resources. We
may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.
The genome editing field is relatively new and is evolving rapidly. We are focusing our research and development efforts
on CRISPR gene editing technology using Cas9 and Cas12a enzymes, but other genome editing technologies may be
discovered that provide significant advantages over CRISPR/Cas9 or CRISPR/Cas12a, which could materially harm
our business.
To date, we have focused our efforts on genome editing technologies using CRISPR and the Cas9 and Cas12a
(also known as Cpf1) enzymes. Other companies have previously undertaken research and development of genome editing
technologies using zinc finger nucleases, engineered meganucleases, and transcription activator-like effector nucleases, but
to date none has obtained marketing approval for a product candidate. There can be no certainty that the CRISPR/Cas9 or
CRISPR/Cas12a technology will lead to the development of genomic medicines, that other genome editing technologies
will not be considered better or more attractive for the development of medicines or that either Cas9 or Cas12a, the two
CRISPR associated proteins that we use, may be useful or successful in developing therapeutics. For example, Cas9 or
Cas12a may be determined to be less attractive than other CRISPR enzymes, including CRISPR enzymes that have yet to
be discovered. Similarly, a new genome editing technology that has not been discovered yet may be determined to be more
attractive than CRISPR. Moreover, if we decide to develop genome technologies other than CRISPR technology using a
Cas9 or Cas12a enzyme, we cannot be certain we will be able to obtain rights to such technologies. Any of these factors
could reduce or eliminate our commercial 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 and EDIT-301. Except for EDIT-101 and EDIT-301, all of our product
development programs are at the preclinical or research stage. Preclinical testing and clinical trials of product
candidates may not be successful. If we are unable to commercialize any product candidates we develop or experience
significant delays in doing so, our business will be materially harmed.
We have invested a significant portion of our efforts and financial resources in the identification and development
of EDIT-101 and EDIT-301. Our ability to generate product revenues, which we do not expect will occur for many years, if
ever, will depend heavily on our successful development and eventual commercialization of EDIT-101 and EDIT-301 and
other product candidates that we have identified or may identify in the future. The success of product candidates we
identify and develop will depend on many factors, including our ability to successfully:
● identify product candidates and complete research and preclinical and clinical development of any product
candidates we may identify;
● seek and obtain regulatory and marketing approvals for any of our product candidates for which we complete
clinical trials;
● launch and commercialize any of our product candidates for which we obtain regulatory and marketing
approval by establishing a sales force, marketing, and distribution infrastructure;
● qualify for adequate coverage and reimbursement by government and third-party payors for any of our
product candidates for which we obtain regulatory and marketing approval;
● develop, maintain, and enhance a sustainable, scalable, reproducible, and transferable manufacturing process
for the product candidates we develop;
● establish and maintain supply and manufacturing relationships with third parties that can provide adequate, in
both amount and quality, products and services to support clinical development and the market demand for
any of our product candidates for which we obtain regulatory and marketing approval;
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● obtain market acceptance of any product candidates we develop as viable treatment options;
● address competing technological and market developments;
● implement and maintain internal systems and infrastructure, as needed;
● negotiate favorable terms in any collaboration, licensing, or other arrangements into which we may enter and
performing our obligations in such arrangements;
● maintain, protect, and expand our portfolio of intellectual property rights, including patents, trade secrets,
and know-how;
● avoid and defend against third-party interference or infringement claims; and
● attract, hire, and retain qualified personnel.
The foregoing also applies to our collaborators to the extent we have partnered, sold or licensed any of our
research programs to them. If we or our collaborators do not achieve one or more of these factors in a timely manner or at
all, we could experience significant delays or an inability to successfully commercialize any product candidates we
develop, which would materially harm our business.
If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the development of
any product candidates we develop, we may need to abandon or limit our further clinical development of those product
candidates.
Other than in connection with the EDIT-101 Phase 1/2 clinical trial, for which we began dosing patients in 2020,
we have not evaluated any product candidates in human clinical trials, and our proposed delivery modes, combined with
CRISPR technology, have a limited history, if any, of being tested clinically. It is impossible to predict when or if any
product candidates we develop will ultimately prove safe in humans, including EDIT-101 and EDIT-301. In the genomic
medicine field, there have been several significant adverse events from gene therapy treatments in the past, including
reported cases of leukemia and death. There can be no assurance that genome editing technologies will not cause severe or
undesirable side effects.
A significant risk in any genome editing product is that the edit will be “off-target” and cause serious adverse
events, undesirable side effects, or unexpected characteristics. For example, off-target cuts could lead to disruption of a
gene or a genetic regulatory sequence at an unintended site in the DNA. We cannot be certain that off-target editing will not
occur in any of our clinical studies. There is also the potential risk of delayed adverse events following exposure to genome
editing therapy due to the potential for 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
have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses
or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent,
less severe, 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.
If any of the product candidates we develop or the delivery modes we rely on cause undesirable side effects, it could
delay or prevent their regulatory approval, limit the commercial potential, or result in significant negative consequences
following any potential marketing approval.
Our product candidates that we are testing or may test in clinical trials, including EDIT-101 and EDIT-301, or that
are developed may be associated with off-target editing or other serious adverse events, undesirable side effects, or
unexpected characteristics. In addition to serious adverse events or side effects caused by any product candidate we
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develop and test, the administration process or related procedures also can cause undesirable side effects. If any such
events occur, our clinical trials could be suspended or terminated. If we are unable to demonstrate that such adverse events
were caused by factors other than our product candidate, the FDA, the EMA or other regulatory authorities could order us
to cease further development of, or deny approval of, any product candidates we are able to develop for any or all targeted
indications. Even if we are able to demonstrate that all future serious adverse events are not product-related, such
occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect,
or are required, to delay, suspend or terminate any clinical trial of any product candidate we develop, the commercial
prospects of such product candidates may be harmed and our ability to generate product revenues from any of these
product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to identify and develop
product candidates, and may harm our business, financial condition, result of operations, and prospects significantly.
If we successfully develop a product candidate and it receives marketing approval, the FDA could require us to
adopt a Risk Evaluation and Mitigation Strategy (“REMS”) to ensure that the benefits of treatment with such product
candidate outweighs the risks for each potential patient, which may include, among other things, a medication guide
outlining the risks of the product for distribution to patients, a communication plan to health care practitioners, extensive
patient monitoring, or distribution systems and processes that are highly controlled, restrictive, and more costly than what
is typical for the industry. Furthermore, if we or others later identify undesirable side effects caused by any of our product
candidates, several potentially significant negative consequences could result, including:
● regulatory authorities may suspend or withdraw approvals of such product candidate;
● regulatory authorities may require additional warnings on the label;
● we may be required to change the way a product candidate is administered or conduct additional clinical
trials;
● we could be sued and held liable for harm caused to patients; and
● our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of any product candidates
we may identify and develop and could have a material adverse effect on our business, financial condition, results of
operations, and prospects.
We have not extensively 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 of being evaluated in
human clinical trials. Any of our product candidates, including EDIT-101 to treat LCA10, may fail to show the desired
safety and efficacy in later 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
the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after
achieving promising results in earlier stage clinical trials. For example, ProQR Therapeutics N.V. recently announced its
failure to meet the primary endpoint of its Phase 2/3 clinical trial to treat LCA10 despite previously announcing positive
results observed in the Phase 1/2 portion of the clinical trial. Data obtained from preclinical and clinical activities are
subject to varying interpretations, which may delay, limit, or prevent regulatory approval. In addition, regulatory delays or
rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of
product development.
Any such adverse events may cause us to delay, limit, or terminate planned clinical trials, any of which would
have a material adverse effect on our business, financial condition, results of operations, and prospects.
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Because we are developing product candidates for the treatment of diseases in which there is little clinical experience
using new technologies, there is increased risk that the FDA, the EMA, or other regulatory authorities may not consider
the endpoints 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,
the EMA, or other regulatory authorities will be able to determine the clinical efficacy and safety profile of our product
candidates. As we are seeking to identify and develop product candidates to treat diseases in which there is little clinical
experience using new technologies, there is heightened risk that the FDA, the EMA, or other regulatory authorities may not
consider the clinical trial endpoints that we propose to provide clinically meaningful results. Even if the FDA does find our
success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoints to a
degree of statistical significance. This may be a particularly significant risk for many of the genetically defined diseases for
which we plan to develop product candidates because many of these diseases have small patient populations, and designing
and executing a rigorous clinical trial with appropriate statistical power is more difficult than with diseases that have larger
patient populations. The FDA weighs the benefits of a product against its risks, and the FDA may view the efficacy results
in the context of safety as not being supportive of regulatory approval. Any product candidates we develop will be based
on a novel technology that makes it difficult to predict the time and cost of development and of subsequently obtaining
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 identify and develop fail to demonstrate safety and efficacy to the
satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and commercialization of such
product candidates.
Before obtaining marketing approval from regulatory authorities for the sale of any of our product candidates, we
must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy in
humans of any such product candidates. Clinical testing is expensive, difficult to design and implement, can take many
years to complete, and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing.
The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and
interim results of a clinical trial do not necessarily predict final results.
We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that
could delay or prevent our ability to receive marketing approval or commercialize any product candidates we may identify
and develop, including:
● delays in reaching a consensus with regulators on trial design;
● regulators, institutional review boards (“IRBs”) or independent ethics committees (“IECs”) not authorizing
us or 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 protocols
with prospective contract research organizations (“CROs”) and clinical trial sites;
● clinical trials of any product candidates we develop producing negative or inconclusive results, and us
deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development or
research programs;
● the number of patients required for clinical trials of any product candidates we develop may be larger than
we anticipate; enrollment of suitable participants in these clinical trials, which may be particularly
challenging for some of the rare genetically defined diseases we are targeting in our most advanced
programs, may be delayed or slower than we anticipate; or patients may drop out of these clinical trials at a
higher rate than we anticipate;
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● our third-party contractors failing to comply with regulatory requirements or meet their contractual
obligations to us in a timely manner, or at all;
● regulators, IRBs, or IECs requiring that we or our investigators suspend or terminate clinical research or
clinical trials of any product candidates we develop for various reasons, including noncompliance with
regulatory requirements, a finding of undesirable side effects or other unexpected characteristics, or that the
participants are being exposed to unacceptable health risks or after an inspection of our clinical trial
operations or trial sites;
● the supply or quality of any product candidates we develop or other materials necessary to conduct clinical
trials of any product candidates we develop being insufficient or inadequate, including as a result of delays in
the testing, validation, manufacturing, and delivery of any product candidates we develop to the clinical sites
by us or by third parties with whom we have contracted to perform certain of those functions;
● occurrence of serious adverse events associated with any product candidates we develop that are viewed to
outweigh their potential benefits; 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
candidates we develop beyond those that we currently contemplate, if we or our collaborators are unable to successfully
complete clinical trials or other tests of any product candidates we develop, or if the results of these trials or tests are not
positive or 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 develop, or not obtain
marketing 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-marketing
testing requirements;
● have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its
distribution 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 marketing
approvals. We do not know whether clinical trials will begin as planned, will need to be restructured, or will be completed
on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the
exclusive right to commercialize any product candidates we develop, could allow our competitors to bring products to
market before we do, and could impair our ability to successfully commercialize any product candidates we 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
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regulatory approvals could be delayed or prevented.
We or our collaborators may not be able to initiate or continue clinical trials for any of our product candidates if
we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the
FDA or analogous regulatory authorities outside the United States, or as needed to provide appropriate statistical power for
a given trial. Enrollment may be challenging for the rare genetically defined diseases we are targeting. In addition, if
patients are unwilling to participate in our genome editing trials because of negative publicity from adverse events related
to the biotechnology, gene therapy, or genome editing fields, competitive clinical trials for similar patient populations,
clinical trials in competing products, or for other reasons, the timeline for recruiting patients, conducting studies, and
obtaining regulatory approval of any product candidates we develop may be delayed. For example, the recent
announcement by ProQR Therapeutics N.V. of its failure to meet the primary endpoint of its Phase 2/3 clinical trial to treat
LCA10 may result in reluctance of potential patients to enroll in other genome editing trials targeting LCA10, such as our
ongoing Phase I/II clinical trial for EDIT-101. Moreover, some of our competitors may have ongoing clinical trials for
product candidates that would treat the same indications as any product candidates we develop, and patients who would
otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
Patient enrollment is also affected by other factors, including:
● severity of the disease under investigation;
● size of the patient population and process for identifying 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;
● the ongoing COVID-19 pandemic; 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 a clinical trial, as the global incidence of LCA10 is estimated to be two to three per 100,000 live births worldwide. The
eligibility criteria of our clinical trials further limits the pool of available trial participants. Additionally, the process of
finding and diagnosing patients may prove costly. The COVID-19 pandemic, including related restrictions
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imposed by regulatory authorities and constraints on healthcare provider capacity, has previously impacted and may in the
future impact our ability to timely enroll trial participants and conduct our studies.
Our ability to successfully initiate, enroll, and complete a clinical trial in any foreign country is subject to
numerous risks unique to conducting business in foreign countries, including:
● difficulty in establishing or managing relationships with CROs and physicians;
● different standards for the conduct of clinical trials;
● different standard-of-care for patients with a particular disease;
● inability to locate qualified local consultants, physicians, and partners; and
● potential burden of complying with a variety of foreign laws, medical standards, and regulatory
requirements, including the regulation of pharmaceutical and biotechnology products and treatment.
Enrollment delays in our clinical trials may result in increased development costs for any of our product
candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. If
we or our collaborators have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we
may need to delay, limit, or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our
business, financial condition, results of operations, and prospects.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on
product 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 our product
candidates for specific indications among many potential options. As a result, we may forgo or delay pursuit of
opportunities with other product candidates or for other indications that later prove to have greater commercial potential.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial medicines or profitable market
opportunities. Our spending on current and future research and development programs and product candidates for specific
indications may not yield any commercially viable medicines. If we do not accurately evaluate the commercial potential or
target market for a particular product candidate, we may relinquish valuable rights to that product candidate through
collaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such product candidate. Any such event could have a material
adverse 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,
or experience significant delays in doing so, we may not realize the full commercial potential of any medicines we may
develop.
Our success may depend, in part, on our ability to identify patients who are likely to benefit from therapy with any
of our medicines, which may require those potential patients to have their DNA analyzed for the presence or absence of a
particular sequence. If we, or any third parties that we engage to assist 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
select patients for enrollment in our clinical trials;
● any product candidates we develop may not receive marketing approval if safe and effective use of such
product candidates depends on an in vitro diagnostic; and
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● we may not realize the full commercial potential of any product candidates we develop that receive
marketing approval if, among other reasons, we are unable to appropriately select patients who are likely to
benefit from therapy with our medicines.
As a result, we may be unable to successfully develop and realize the commercial potential of any product
candidates we may identify and develop, and our business, financial condition, results of operations, and prospects would
be materially adversely affected.
Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to
commercialize a product candidate we develop, and any such approval may be for a more narrow indication than we
seek.
We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and
approved the product candidate. Even if any product candidates we develop meet their safety and efficacy endpoints in
clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able
to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority
recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon
additional government regulation from future legislation or administrative action, or changes in regulatory authority policy
during 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 they
may impose significant limitations in the form of narrow indications, warnings or a REMS. These regulatory authorities
may require precautions or contra-indications with respect to conditions of use, or they may grant approval subject to the
performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims
that are necessary or desirable for the successful commercialization of any product candidates we develop. Any of the
foregoing scenarios could materially harm the commercial prospects for any product candidates we develop and materially
adversely affect our business, financial condition, results of operations, and prospects.
Even if any product candidates we develop receive marketing approval, they may fail to achieve the degree of market
acceptance by physicians, patients, healthcare payors, and others in the medical community necessary for commercial
success.
The commercial success of any of our product candidates will depend upon its degree of market acceptance by
physicians, patients, third-party payors, and others in the medical community. The degree of market acceptance of any of
our product candidates, 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
by the 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,
or other regulatory agencies;
● public attitudes regarding genomic medicine generally and genome editing technologies specifically;
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● the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies, as well as their willingness to accept a therapeutic intervention that involves the editing of the
patient’s genome;
● product labeling or product insert requirements of the FDA, the EMA, or other regulatory authorities,
including any limitations or warnings contained in a product’s approved labeling;
● relative convenience and ease of administration;
● the 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 of our product candidates do not achieve an adequate level of acceptance, we may not generate significant
product revenues, and we may not become profitable.
Adverse public perception of genomic medicines, and genome editing in particular, may negatively impact regulatory
approval of, or demand for, our potential products.
Our potential therapeutic products involve editing the human genome. The clinical and commercial success of our
potential products will depend in part on public understanding and acceptance of the use of genome editing therapy for the
prevention 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 upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product
candidates we develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which
greater clinical data may be available.
In addition, genome editing technology is subject to public debate and heightened regulatory scrutiny due to
ethical concerns relating to the application of genome editing technology to human embryos or the human germline. For
example, academic scientists in several countries, including the United States, have reported on their attempts to edit the
genome of human embryos as part of basic research and, in November 2018, Dr. Jiankui He, a Chinese biophysics
researcher who was an associate professor in the Department of Biology of the Southern University of Science and
Technology in Shenzhen, China, announced he had created the first human genetically edited babies, twin girls and helped
create a second gene-edited pregnancy. The announcement was negatively received by the public, in particular by those in
the scientific community. In the United States, germline editing for clinical application has been expressly prohibited since
enactment of a December 2015 U.S. FDA 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 any use of genome editing technologies in human embryos, noting that there are multiple existing
legislative and regulatory prohibitions against such work, including the Dickey-Wicker Amendment, which prohibits the
use of appropriated funds for the creation of human embryos for research purposes or for research in which human
embryos are destroyed. Laws in the United Kingdom prohibit genetically modified embryos from being implanted into
women, but embryos can be altered in research labs under license from the Human Fertilisation and Embryology Authority.
Basic research on embryos is more tightly controlled in many other European countries.
Although we do not use our technologies to edit human embryos or the human germline, such public debate
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about the use of genome editing technologies in human embryos and heightened regulatory scrutiny could prevent or delay
our development of product candidates. More restrictive government regulations or negative public opinion would have a
negative effect on our business or financial condition and may delay or impair our development and commercialization of
product candidates or demand for any products we may develop.
If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties
to sell and market any of our product candidates, we may not be successful in commercializing those product candidates
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
of pharmaceutical products. To achieve commercial success for any approved medicine for which we retain sales and
marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third
parties. In the future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or
participate in sales 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 arrangements
with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists
is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for
which we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not
occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be
costly, and our investment would be lost if we cannot retain or reposition our 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 and marketing personnel;
● the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to
prescribe any future medicines;
● the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive
disadvantage 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 distribution
services, our product revenues or the profitability of these product revenues to us may be lower than if we were to market
and sell any medicines we may develop ourselves. In addition, we may not be successful in entering into arrangements
with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We
may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to
sell and market our medicines effectively. If we do not establish commercialization capabilities successfully, either on our
own or in collaboration 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 our competitors may achieve
regulatory approval before us or develop therapies that are safer or more advanced or effective than ours.
The development and commercialization of new drug products is highly competitive. Moreover, the
biotechnology and pharmaceutical industries, including in the gene therapy, genome editing and cell therapy fields, are
characterized by rapidly advancing technologies, intense competition, and a strong emphasis on intellectual property and
proprietary products. We will face competition with respect to any of our product candidates now and in the future from
major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potential
competitors also include academic institutions, government agencies, and other public and private research
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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
or are 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 our approach, and others are based on entirely different approaches.
Our platform and product focus is the development of therapies using CRISPR technology. Other companies
developing CRISPR Cas9 or Cas12a technology or therapies using CRISPR Cas9 or Cas12a technology include Caribou
Biosciences, CRISPR Therapeutics, ERS Genomics, Intellia Therapeutics, ToolGen, Vertex Pharmaceuticals, and Verve
Therapeutics. In addition, there have been and may continue to be discoveries of new CRISPR-based gene editing
technologies. There are additional companies developing therapies using related CRISPR genome editing technologies,
including other CRISPR nucleases, base editing, prime editing and gene writing. These companies include Arbor
Biotechnologies, Beam Therapeutics, Chroma Medicine, KSQ Therapeutics, Locus Biosciences, Mammoth Biosciences,
Metagenomi, Poseida Therapeutics, Prime Medicine, Scribe Therapeutics, Tessera Therapeutics, and Tune Therapeutics.
There are also companies developing therapies using transcription activator-like effector nucleases, meganucleases, Mega-
TALs and zinc finger nucleases. These companies include 2Seventy Bio, Allogene Therapeutics, bluebird bio, Cellectis,
Precision Biosciences, and Sangamo Therapeutics. Additional companies developing cell therapy products include
Catamaran Bio, Celularity, Century Therapeutics, Cytovia Therapeutics, Fate Therapeutics, Graphite Bio, Nkarta, ONK
Therapeutics, Shoreline Biosciences, and Wugen Therapeutics. Additional companies developing gene therapy products
include Abeona Therapeutics, Adverum Biotechnologies, AGTC Therapeutics, Astellas Gene Therapies, Generation Bio,
Homology Medicines, REGENXBIO, Sarepta Therapeutics, Solid Biosciences, Spark Therapeutics, uniQure and Voyager
Therapeutics. In addition to competition from other genome editing therapies, gene therapies or cell medicine therapies,
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.
Many of our competitors may have significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing
approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology, and gene therapy industries
may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and
established companies. These competitors also compete with us in recruiting and retaining qualified scientific and
management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or
eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe
side effects, are more convenient, or are less expensive than any products that we may develop or that would render any
products that we may develop obsolete or non-competitive. Our competitors also may obtain FDA or other regulatory
approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors
establishing a strong market position before we are able to enter the market. Additionally, technologies developed by our
competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in
marketing any product candidates we develop against competitors.
In addition, as a result of the expiration or successful challenge of our patent rights, we could face more litigation
with respect to the validity and/or scope of patents relating to our competitors’ products. The availability of our
competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop
and commercialize.
If we are able to commercialize any product candidates, such products may become subject to unfavorable pricing
regulations, third-party reimbursement practices, or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing, and reimbursement for new medicines vary widely from
country to country. Some countries require approval of the sale price of a medicine before it can be marketed. In many
countries, the pricing review period begins after marketing or product licensing approval is granted. In some
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foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial
approval is granted. As a result, we might obtain marketing approval for a medicine 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 in that country. Adverse pricing
limitations may hinder our ability to recoup our investment in one or more product candidates, even if any of our product
candidates obtain marketing approval.
Our ability to commercialize any medicines successfully also will depend in part on the extent to which
reimbursement for these medicines and related treatments will be available from government health administration
authorities, private health insurers, and other organizations. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which medications they will pay for and establish
reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement
for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with
predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure
that reimbursement will be available for any 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. If reimbursement is not available or is available only to limited levels, we may not be able to
successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for newly approved medicines, and coverage may be
more limited than the purposes for which the medicine is approved by the FDA or similar regulatory authorities outside the
United States. Moreover, eligibility for reimbursement does not imply that any medicine will be paid for in all cases or at a
rate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement
levels for new medicines, if applicable, may also not be sufficient to cover our costs and may not be made permanent.
Reimbursement rates may vary according to the use of the medicine and the clinical setting in which it is used, may be
based on reimbursement levels already set for lower cost medicines and may be incorporated into existing payments for
other services. Net prices for medicines may be reduced by mandatory discounts or rebates required by government
healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of medicines from
countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare
coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain
coverage and profitable payment rates from both government-funded and private payors for any approved medicines we
may develop could have a material adverse effect on our operating results, our ability to raise capital needed to
commercialize medicines, and our overall financial condition.
Due to the novel nature of our technology and the potential for some of our product candidates to offer therapeutic
benefit in a single administration or limited number of administrations, we face uncertainty related to pricing and
reimbursement for these product candidates.
Our initial target patient populations for some of our programs are relatively small, as a result of which the pricing
and reimbursement of any of our product candidates, if approved, must be adequate to support the necessary commercial
infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell any
such product candidates will be adversely affected. The manner and level at which reimbursement is provided for services
related to any of our product candidates, e.g., for administration of our product to patients, is also important. Inadequate
reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our
products. 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 cost
that such models may require them to bear. If we determine such new models are necessary but we are unsuccessful in
developing them, or if such models are not adopted by payors, our business, financial condition, results of operations, and
prospects could be adversely affected.
We expect the cost of a single administration of genomic medicine products to be substantial, when and if they
achieve regulatory approval. We expect that coverage and reimbursement by government and private payors will be
essential for most patients to be able to afford these treatments. Accordingly, sales of any such product candidates will
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depend substantially, both domestically and abroad, on the extent to which the costs of any product candidates we develop
will be paid by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or
will be reimbursed by government authorities, private health coverage insurers, and other third-party payors. Coverage and
reimbursement by a third-party payor may depend upon several factors, including the third-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
process that could require us to provide to the payor supporting scientific, clinical, and cost-effectiveness data. There is
significant uncertainty related to third-party coverage and reimbursement of newly approved products. We may not be able
to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If coverage and reimbursement
are not available, or are available only at limited levels, we may not be able to successfully commercialize any of our
product candidates. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize a
sufficient return on our investment. If we are unable to obtain adequate levels of reimbursement, our ability to successfully
market and sell any product candidates we develop will be harmed.
If the market opportunities for any of our product candidates are smaller than we believe they are, our revenues may be
adversely affected, and our business may suffer. Because the target patient populations for some of the product
candidates we develop are small, we must be able to successfully identify patients and achieve a significant market share
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 who have the potential to benefit from treatment with our product candidates, are based on estimates. These
estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases.
The number of patients in the United States, Europe, and elsewhere may turn out to be lower than expected, and patients
may not be amenable to treatment with our products, or may become increasingly difficult to identify or gain access to, all
of which would 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 of
any medicines that we may develop.
We face an inherent risk of product liability exposure related to the testing in human clinical trials of any of our
product candidates and will face an even greater risk if we commercially sell any medicines that we may develop. If we
cannot successfully defend ourselves against claims that our product candidates or medicines caused injuries, we could
incur 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;
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● 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 we
may incur. We anticipate that we will need to increase our insurance coverage if we successfully commercialize any
medicine. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws
and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect
on the success of our business.
We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local
environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory
procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes;
the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Our
operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive
materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these
materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of
contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs
relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant
costs associated with civil or criminal fines and penalties.
Compliance with applicable environmental laws and regulations may be expensive, and current or future
environmental laws and regulations may impair our research and product development efforts. In addition, we cannot
entirely eliminate 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 the use of hazardous materials, this insurance may not provide adequate coverage against potential
liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our commercial general liability
and umbrella liability policies specifically exclude coverage for damages and fines arising from biological or hazardous
waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages
or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be
suspended, which could have a material 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 other
environmental, health, and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations could
result in significant costs or an interruption in operations, which could have a material adverse effect on our business,
financial condition, results of operations, and prospects.
Genomic medicines are novel, and our product candidates can be complex and difficult to manufacture. We could
experience production problems that result in delays in our development or commercialization programs, limit the
supply of our products, or otherwise harm our business.
Our product candidates can require processing steps that are more complex than those required for most chemical
pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as
our product candidates generally cannot be fully characterized. As a result, assays of the finished product may not be
sufficient to ensure that the product will perform in the intended manner. Problems with the manufacturing process, even
minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot
failures, product recalls, product liability claims, or insufficient inventory. If we successfully
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develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade
materials that meet FDA, EMA or other comparable applicable foreign standards or specifications with consistent 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
any approved product together with the protocols showing the results of applicable tests at any time. Under some
circumstances, the FDA, the EMA, or other regulatory authorities may require that we not distribute a lot until the agency
authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and
stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Lot failures or
product recalls could cause us to delay clinical trials, including the ongoing Phase 1/2 clinical trial for EDIT-101, or
product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations,
and prospects.
We also may encounter problems hiring and retaining the experienced scientific, quality control, and
manufacturing personnel needed to manage our manufacturing process, which could result in delays in our production or
difficulties in maintaining compliance with applicable regulatory requirements.
Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any
contamination could materially harm our ability to produce product candidates on schedule and could harm our results of
operations and cause reputational damage. Some of the raw materials that we anticipate will be required in our
manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and may be subject to
contamination or recall. A material shortage, contamination, recall, or restriction on the use of biologically derived
substances in the manufacture of any product candidates we develop could adversely impact or disrupt the commercial
manufacturing or the production of clinical material, which could materially harm our development timelines and our
business, financial condition, results of operations, and prospects.
Any problems in our manufacturing process or the facilities with which we contract could make us a less
attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions,
which could limit our access to additional attractive development programs. Problems in third-party manufacturing process
or facilities also could restrict our ability to ensure sufficient clinical material for any clinical trials we may be conducting
or are planning to conduct and meet market demand for any products we commercialize.
Risks Related to Our Dependence on Third Parties
We expect to depend on collaborations with third parties for the research, development, and commercialization of
certain of the product candidates we develop or for development of certain of our research programs. If any such
collaborations are not successful, we may not be able to capitalize on the market potential of those product candidates
or research programs.
We anticipate seeking third-party collaborators for the research, development, and commercialization of certain of
the product candidates we develop or for development of certain of our research programs. Our likely collaborators include
large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, and biotechnology
companies. If we enter into any such arrangements with any third parties, we will likely have limited control over the
amount and timing of resources that our collaborators dedicate to the development or commercialization of any product
candidates we may seek to develop with them and, if applicable, whether they exercise any additional options to
commercialize a product. Our ability to generate revenues from these arrangements will depend on our collaborators’
abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any
collaboration that we enter into.
Collaborations involving our research programs or any of our product candidates and alliance arrangements we
may enter into under which our research programs or product candidates may be involved pose the following risks to us:
● Collaborators may have significant discretion in determining the efforts and resources that they will apply to
these collaborations.
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● Collaborators may not pursue development and commercialization of any product candidates we develop or
may elect not to continue or renew development or commercialization programs based on clinical trial
results, changes in the collaborator’s strategic focus or available funding or external factors such as an
acquisition that diverts resources or creates competing priorities.
● Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical
trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a
product candidate for clinical testing.
● Collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our medicines or product candidates if the collaborators believe that competitive products are
more likely to be successfully developed or can be commercialized under terms that are more economically
attractive than ours.
● Collaborators with marketing and distribution rights to one or more medicines may not commit sufficient
resources to the marketing and distribution of such medicine or medicines.
● Collaborators may not properly obtain, maintain, enforce, or defend our intellectual property or proprietary
rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or
invalidate 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
or arbitration that diverts management attention and resources.
● We may lose certain valuable rights under circumstances identified in our collaborations, including if we
undergo a change of control.
● Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates.
● Collaboration agreements may not lead to development or commercialization of product candidates in the
most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business
combination, the continued pursuit and emphasis on our product development or commercialization program
under 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
our collaborators terminates its agreement with us, we may not receive any milestone or royalty payments under such
collaborations. If we do not receive the funding we expect under these agreements, our development 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 suitable replacement collaborator or
attract new collaborators, and our development programs may be delayed or the perception of us in 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 our collaborators.
If we are not able to establish collaborations on commercially reasonable terms, we may have to alter our development
and commercialization plans.
Our product development and research programs and the potential commercialization of any of our product
candidates will require substantial additional cash to fund expenses. For some of our product candidates and research
programs, we may decide to collaborate with other pharmaceutical and biotechnology companies for the development and
potential commercialization of those product candidates or programs.
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We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for
a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the
terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors.
Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar
regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and
complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the
existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator
may also consider alternative product candidates or technologies for similar indications that may be available to collaborate
on and whether such a collaboration could be more attractive than the one with us.
We may also be restricted under existing collaboration agreements from entering into future agreements on certain
terms with potential collaborators or allies. For example, under our amended and restated collaboration with Juno
Therapeutics, we may not use directly or indirectly, or license others to use, genome editing technology in connection with
any research, development, manufacture, commercialization or other exploration of certain T cells, subject to certain
exceptions, as more fully described in “Part I—Business—Our Collaborations and Licensing Strategy” of this Annual
Report on Form 10-K. Collaborations are also complex and time-consuming to negotiate and document. In addition, there
have been a significant number of recent business combinations among large pharmaceutical companies that have resulted
in a reduced number of potential future collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to
do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or
delay its development program or one or more of our other development programs, delay its potential commercialization or
reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or
commercialization activities at our own expense. If we elect to increase our expenditures to fund development or
commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on
acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or
bring 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 currently rely and expect to continue to rely on third parties, such as CROs, clinical data management
organizations, medical institutions, and clinical investigators, to conduct our clinical trials. We currently rely and expect to
continue to rely on third parties to conduct some aspects of our research and preclinical testing. Any of these third parties
may terminate their engagements with us at any time. If we need to enter into alternative arrangements, our product
development activities would be delayed. Additionally, the activities performed by these third parties may be delayed or
suspended in light of the ongoing COVID-19 pandemic, which may impact our ability to successfully develop and test our
product candidates and research programs in a timely manner.
Our reliance on these third parties for research and development activities will reduce our control over these
activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of
our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the
FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording,
and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the
rights, integrity, and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials
and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain
timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.
Furthermore, these third parties may also have relationships with other entities, some of which may be our
competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct
our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may
be delayed in obtaining, marketing approvals for any product candidates we develop and will not be able
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to, or may be delayed 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. Any
performance failure on the part of our distributors could delay clinical development or marketing approval of any product
candidates we develop or commercialization of our medicines, producing additional losses and depriving us of potential
product revenue.
We contract with third parties for the manufacture of materials for our research programs, preclinical studies and
clinical trials and expect to continue to do so and for commercialization of any product candidates that we develop. This
reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product
candidates, or any medicines that we may develop and commercialize, or that such supply will not be available to us at
an acceptable 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 not
operate any significant manufacturing facilities. We primarily rely on third-party contract manufacturing organizations
(“CMOs”) for the manufacture of our materials for preclinical and clinical studies and expect to continue to do so and for
commercial supply of any product candidates that we develop and for which we or our collaborators obtain marketing
approval. Additionally, the activities performed by our CMOs may be delayed or suspended in light of the ongoing
COVID-19 pandemic, which may impact our ability to successfully develop and test our product candidates, including in
clinical trials, and research programs in a timely manner.
Even though we have established supply agreements with third-party manufacturers, reliance on third-party
manufacturers entails additional risks, 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 or
inconvenient for us; and
● reliance on the third party for regulatory compliance, quality assurance, safety, and pharmacovigilance and
related reporting.
Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements
outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations
could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal
of approvals, license revocations, seizures or recalls of product candidates or medicines, operating restrictions, and
criminal prosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our
business, financial condition, results of operations, and prospects. There are a limited number of manufacturers that operate
under cGMP regulations and that might be capable of manufacturing for us.
Our current and anticipated future dependence upon others for the manufacture of any of our product candidates
may adversely affect our future profit margins and our ability to commercialize any product candidates that receive
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 the
scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize
products and technology similar or identical to ours, and our ability to successfully commercialize any of our product
candidates, 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 and
other countries with respect to our CRISPR platform technology and any proprietary product candidates and technology we
develop. We seek to protect our proprietary position by in-licensing intellectual property relating to our
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platform technology and filing patent applications in the United States and abroad related to our technologies and product
candidates that are important to our business. If we or our licensors and/or collaborators are unable to obtain or maintain
patent protection with respect to our CRISPR 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 CRISPR
technology, 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 to
protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the
value of our intellectual property or narrow the scope of our owned and licensed patents. With respect to both in-licensed
and owned intellectual property, we cannot predict whether the patent applications we and our licensors are currently
pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide
sufficient protection from competitors.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file,
prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely
manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to
obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have
access to confidential or patentable aspects of our research and development output, such as our employees, corporate
collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties,
any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby
jeopardizing our ability to seek patent protection.
Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued,
and its scope can be reinterpreted after issuance. Even if patent applications we license or own issue as patents, they may
not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from
competing with us, or otherwise provide us with any competitive advantage. Any patents that we hold or in-license may be
challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether any of our
platform advances and product candidates will be protectable or remain protected by valid and enforceable patents. Our
competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies
or products in a non-infringing manner. For example, we are aware that third parties have suggested the use of the CRISPR
technology in conjunction with a protein other than Cas9 or Cas12a. Our owned and in-licensed patents may not cover
CRISPR technology in conjunction with a protein other than Cas9 or Cas12a. If our competitors commercialize the
CRISPR technology in conjunction with a protein other than Cas9 or Cas12a, our business, financial condition, results of
operations, and prospects could be materially adversely affected.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents
may be challenged in the courts or patent offices in the United States and abroad. Our licensors are currently, and we or our
licensors may in the future become, subject to a third-party pre-issuance submission of prior art to the United States Patent
and Trademark Office (the “USPTO”) or opposition, derivation, revocation, re-examination, post-grant and inter partes
review, 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,
our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without
payment to 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
to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that
challenge priority of invention or other features of patentability. Such challenges may result in loss of patent rights, loss of
exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop
others from using or commercializing similar or identical technology and products, or limit the duration of the patent
protection of our technology and product candidates. Such proceedings also may result in substantial cost and require
significant time from our scientists and management, even if the eventual outcome is favorable to us. As discussed below,
some of our in-licensed patents are subject to interference, opposition and ex parte re-examination proceedings and
therefore subject to these risks.
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In addition, given the amount of time required for the development, testing, and regulatory review of new product
candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As
a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing
products similar or identical to ours. Moreover, some of our owned and in-licensed patents and patent applications are, and
may in the future 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 our licensors may need the cooperation of any such co-owners of our owned and in-licensed patents in order to enforce
such patents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing
could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and
prospects.
Furthermore, our owned and in-licensed patents and patent applications may be subject to a reservation of rights
by one or more third parties. For example, the research resulting in certain of our owned and in-licensed patent rights and
technology was funded in part by the U.S. government. As a result, the U.S. government has certain rights to such patent
rights and technology. These rights may permit the U.S. government to disclose our confidential information to third
parties and to exercise march-in rights to use or allow third parties to use our licensed technology. Any exercise by the
government of any of the foregoing rights could harm our competitive position, business, financial condition, results of
operations, and prospects.
Our rights to develop and commercialize our technology and product candidates are subject, in part, to the terms and
conditions of licenses granted to us by others.
We are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that are
important or necessary to the development of our genome editing technology, including our CRISPR technology, and
product candidates. These and other licenses may not provide exclusive rights to use such intellectual property and
technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our
technology and products in the future. As a result, we may not be able to prevent competitors from developing and
commercializing competitive products in territories included in all of our licenses. For example, pursuant to our license
agreements with The Broad Institute, Inc. (“Broad”), and Broad and the President and Fellows of Harvard College
(“Harvard”), the licensors may, under certain circumstances, grant a license to the patents that are the subject of such
license agreements to a third party. Such third party would have full rights to the patent rights that are the subject of such
licenses, which could impact our competitive position and enable a third party to commercialize products similar to our
future product candidates and technology. The terms of these license agreements are described more fully under “Part I—
Business—Our Collaborations and Licensing Strategy” in this Annual Report.
In addition, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement,
and defense of patents and patent applications covering the technology that we license from third parties. For example,
pursuant to each of our intellectual property licenses with Broad and Harvard, our licensors retain control of preparation,
filing, prosecution, and maintenance, and, in certain circumstances, enforcement and defense of their patents and patent
applications. Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted,
maintained, enforced, and defended in a manner consistent with the best interests of our business. If our licensors fail to
prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we
have licensed may be reduced or eliminated, and our right to develop and commercialize any of our products that are the
subject of such licensed rights could be adversely affected. Additionally, 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, and we anticipate that our obligation to reimburse our licensors for expenses related to these
matters will continue to be substantial.
Our licensors may have relied on third party consultants or collaborators or on funds from third parties such that
our licensors are not the sole and exclusive owners of the patents and patent applications we in-license. For example,
certain patent applications licensed to us by Broad are co-owned with NIH. Broad does not and does not purport to grant
any rights in NIH’s interest in these patent applications under our agreement. If other third parties have ownership rights to
our in-licensed patents and patent applications, they may be able to license such patents and patent applications to our
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competitors, and our competitors could market competing products and technology. This could have a material adverse
effect on our competitive position, business, financial conditions, results of operations, and prospects.
Some of our in-licensed patents are subject to priority and validity disputes. In addition, our owned and in-licensed
patents, patent applications and other intellectual property may be subject to further priority and validity disputes, and
other similar intellectual property 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 or at all, or to cease the development, manufacture, and commercialization of one or
more of the product candidates we develop, which could have a material adverse impact on our business.
Certain U.S. patents and a U.S. patent application directed to CRISPR/Cas9 that are co-owned by the Broad and
the Massachusetts Institute of Technology (“MIT”), and in some cases Harvard (collectively referred to as “Broad”), and
in-licensed by us were involved in a first interference with a U.S. patent application that is co-owned by the University of
California, the University of Vienna, and Emmanuelle Charpentier (collectively referred to “CVC”). An interference is a
proceeding in the USPTO before the Patent Trial and Appeal Board of the USPTO (“PTAB”) to determine priority of
invention of the subject matter of patent claims filed by different parties. In this first interference, the PTAB made a
judgment of no interference-in-fact in favor of the Broad, which was upheld on appeal. This decision was final and bars
any further interference between the same parties for claims to the same invention that was considered in the interference.
As a result of this decision, the U.S. patents and application that we in-license from the Broad and others were not modified
or revoked.
On June 24, 2019, the PTAB declared a second interference between certain pending U.S. patent applications that
are co-owned by CVC and certain U.S. patents and a U.S. patent application that are co-owned by Broad and in-licensed by
us. Most of the Broad U.S. patents and the patent application that are involved in the second interference were also part of
the first interference. The invention that was considered in the first interference related to a method involving contacting a
target DNA in a eukaryotic cell with certain defined CRISPR/Cas9 components for the purpose of cleaving or editing that
target DNA molecule or modulating transcription of at least one gene encoded thereon. The second interference is directed
to a different invention, namely a eukaryotic cell comprising a target DNA and certain defined CRISPR/Cas9 components
including a single molecule guide RNA that are capable of cleaving or editing the target DNA molecule.
On September 10, 2020, the PTAB granted Broad’s motion for priority benefit while denying CVC priority benefit
to their two earliest provisional patent applications. As a result, Broad entered the priority phase of the interference as
“Senior Party” while CVC remained the “Junior Party” for purposes of determining which entity was the first to invent the
inventions at issue. We cannot predict with any certainty how long it will take before the PTAB issues a decision at the
conclusion of the priority phase.
On December 14, 2020, the PTAB, declared two new interferences involving a pending U.S. patent application
that is owned by ToolGen, Inc. (the “ToolGen application”). One of the two interferences is between the ToolGen
application and certain U.S. patents and U.S. patent applications that are co-owned by Broad and in-licensed by us. Most of
the Broad U.S. patents and patent applications that are involved in the interference with ToolGen are also part of the second
interference with CVC. The other ToolGen interference is between the same ToolGen application and the U.S. patent
applications that are co-owned by CVC and involved in the second interference with Broad. The claims in ToolGen’s
patent application relate to a mammalian cell with a CRISPR/Cas system comprising a codon optimized nucleic acid
encoding a Cas9 polypeptide with a nuclear localization signal and a single-molecule guide RNA that, together, are capable
of forming a Cas9/RNA complex that mediates double stranded cleavage of a target nucleic acid sequence.
On June 21, 2021, the PTAB declared two new patent interferences involving a pending U.S. patent application
owned by Sigma-Aldrich (the “Sigma-Aldrich application”). One of the two new patent interferences is between the
Sigma-Aldrich application and certain U.S. patents and U.S. patent applications that are co-owned by Broad and in-
licensed by us. The second new patent interference is between the same Sigma-Aldrich application and the U.S. patent
applications that are co-owned by CVC. Most of the Broad U.S. patents and patent applications that are involved in the
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interference with Sigma-Aldrich are also part of the concurrent interferences with CVC and ToolGen. The claims in Sigma-
Aldrich’s application relate to a method for modifying a chromosomal sequence in a eukaryotic cell by integrating a donor
sequence into that chromosomal sequence. These methods use a CRISPR/Cas9 system comprising a Cas9 polypeptide with
a nuclear localization signal, a guide RNA, and a donor sequence that, together, are capable of mediating double stranded
cleavage and repair of a target nucleic acid sequence leading to integration of the donor sequence into the chromosomal
sequence.
As a result of these declarations of interference, five parallel adversarial proceedings in the USPTO before the
PTAB have been initiated – the patent interferences between Broad and CVC, Broad and ToolGen, CVC and ToolGen,
Broad and Sigma-Aldrich, and CVC and Sigma-Aldrich. We cannot predict with any certainty how long each interference
proceeding will take. It is also possible that other third parties may seek to become a party to these interferences.
Our owned and in-licensed patents and patent applications are, or may in the future become, subject to validity
disputes in the USPTO and other foreign patent offices. For example, a request for ex parte re-examination was filed with
the USPTO on February 16, 2016 against a U.S. patent that we have in-licensed from Broad, which is involved in certain of
the interferences. The request for ex parte re-examination was granted on May 9, 2016 thereby initiating a re-examination
procedure between the USPTO and The Broad Institute, acting on behalf of itself and MIT. The PTAB has suspended the
re-examination noting that it has jurisdiction over any file that involves a patent involved in an interference. It is uncertain
when the PTAB will lift the suspension. If The Broad Institute is unsuccessful during the re-examination, the patent in
question may be revoked or narrowed, which could have a material adverse effect on the scope of our rights under such
patent.
We or our licensors may also be subject to claims that former employees, collaborators, or other third parties have
an interest in our owned or in-licensed patents or patent applications, or other intellectual property rights as an inventor or
co-inventor. If we are unable to obtain an exclusive license to any such third party co-owners’ interest in such patents,
patent applications or other intellectual property rights, such co-owners may be able to license their rights to other third
parties, including our competitors. In addition, we may need the cooperation of any such co-owners to enforce any patents,
including any patents that issue from patent applications, against third parties, and such cooperation may not be provided to
us. Any of the foregoing could have 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
in Europe or other foreign jurisdictions. For example, certain European patents that we have in-licensed from Broad have
been revoked in their entirety by the European Patent Office Opposition Division (the “Opposition Division”). Certain
other European patents that we have in-licensed from Broad were maintained with amended patent claims. Certain of these
decisions have been appealed by both Broad and the opposing party(s), and it is uncertain when or in what manner the
Boards of Appeal will act on these appeals. The Opposition Division has also initiated opposition proceedings against
certain other European patents that we have in-licensed from Broad. 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. In view of certain arguments made by the third parties against the revoked patents and
similar arguments made by the third parties against other in-licensed European patents under opposition, the opposition
proceedings may lead to the revocation of certain additional in-licensed European patents. The loss of priority for, or the
loss of, these European patents could have a material adverse effect on the conduct of our business. One or more of the
third parties that have filed oppositions against these European patents or other third parties may file future oppositions
against other European patents that we in-license or own. There may be other oppositions against these European patents
that have not yet been filed or that have not yet been made available to the public.
If we or our licensors are unsuccessful in any patent related disputes, including interference proceedings, patent
oppositions, re-examinations, or other priority, inventorship, or validity disputes to which we or they are subject (including
any of the proceedings discussed above), we may lose valuable intellectual property rights through the loss of one or more
patents owned or licensed or our owned or licensed patent claims may be narrowed, invalidated, or held unenforceable. In
addition, if we or our licensors are unsuccessful in any inventorship disputes to which we or they are
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subject, we may lose valuable intellectual property rights, such as exclusive ownership of, or the exclusive right to use, our
owned or in-licensed patents and patent applications. If we or our licensors are unsuccessful in any interference proceeding
or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties, including
parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be
available on commercially reasonable terms or may be non-exclusive or may not be available at all. If we are unable to
obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or
more of the product candidates we develop. The loss of exclusivity or the narrowing of our owned and in-licensed patent
claims could limit our ability to stop others from using or commercializing similar or identical technology and products.
Any of the foregoing could result in a material adverse effect on our business, financial condition, results of operations, or
prospects. Even if we are successful in any interference proceeding or other priority, inventorship, or validity disputes, it
could result in substantial costs and be a distraction to our management and other employees.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be
prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the
United States. In addition, our intellectual property license agreements may not always include worldwide rights. For
example, certain U.S. patent applications licensed to us by Broad include The University of Tokyo (“Tokyo”) and NIH as
joint 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 parties
from practicing our inventions in all countries outside the United States, or from selling or importing products made using
our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing
products to territories where we have patent protection or licenses but enforcement is not as strong as that in the United
States. These products may compete with our products, and our patents or other intellectual property rights may not be
effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in
foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology
products, which could make it difficult for us to stop the infringement of our patents and our intellectual property rights or
marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to
enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert
our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted
narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.
We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be
commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the
world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or
license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses
to third parties. In addition, many countries limit the enforceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of
such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to
our business, our competitive position may be impaired, and our business, financial condition, results of operations, and
prospects may be adversely affected.
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 reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and
applications will be due to be paid to the USPTO and various government patent agencies outside of the United States
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over the lifetime of our owned or licensed patents and applications. In certain circumstances, we rely on our licensing
partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. government
agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the
patent application process. We are also dependent on our licensors to take the necessary action to comply with these
requirements with respect to our licensed intellectual property. In some cases, an inadvertent lapse can be cured by
payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which
non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete
loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market
with similar or identical products 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
third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license
rights that are important to our business.
We have entered into license agreements with third parties and may need to obtain additional licenses from our
existing licensors and others to advance our research or allow commercialization of product candidates we develop. It is
possible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. In that
event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the
methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a
technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected
product candidates, which could harm our business, financial condition, results of operations, and prospects significantly.
We cannot provide 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 products resulting in either an injunction prohibiting our manufacture or sales, or, with respect to our sales, an obligation
on our part to 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 any
actions against any third party for infringing on the patents we have licensed. Certain of our license agreements also require
us to meet development thresholds to maintain the license, including establishing a set timeline for developing and
commercializing products. Disputes may arise regarding intellectual property subject to a licensing agreement, including:
● the scope of rights granted under the license agreement and other interpretation-related issues;
● the extent to which our technology and processes infringe on intellectual property of the licensor that is not
subject to the licensing agreement;
● the sublicensing of patent and other rights under our collaborative development relationships;
● our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
● the inventorship and ownership of inventions and know-how resulting from the joint creation or use of
intellectual property by our licensors and us and our partners; and
● the priority of invention of patented technology.
In addition, the agreements under which we currently license intellectual property or technology from third parties
are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of
any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the
relevant intellectual property or technology, or increase what we believe to be our financial or other
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obligations under the relevant agreement, including the amount, if any, that may become due and payable to our licensors
in connection with sublicense income. If these events were to occur, they could have a material adverse effect on our
business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we
have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable
terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a
material adverse effect on our business, financial conditions, results of operations, and prospects.
We may not be successful in obtaining necessary rights to any product candidates we develop through acquisitions and
in-licenses.
We currently have rights to intellectual property, through licenses from third parties, to identify and develop
product candidates. Many pharmaceutical companies, biotechnology companies, and academic institutions are competing
with us in the field of genome editing technology and filing patent applications potentially relevant to our business. For
example, we are aware of third party patents and patent applications that may be construed to cover our CRISPR
technology and product candidates. In order to avoid infringing these third party patents, or patents that issue from these
third party patent 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 that we are evaluating for use with product candidates we develop. In addition, with respect to any
patents we co-own with third parties, we may require licenses to such co-owners’ interest in such patents. However, we
may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or
other intellectual property rights from third parties that we identify as necessary for our CRISPR technology and product
candidates we develop. For example, certain methods for editing cells, guide RNA modifications and delivery modes,
including certain adeno-associated virus vector technologies, that we are evaluating for us for use are covered by patents
held by third parties. If we are unable to successfully obtain rights to required third party intellectual rights or maintain the
existing intellectual property rights we have, we may have to abandon development of the relevant program or product
candidate, which could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
Issued patents covering our technology and product candidates could be found invalid or unenforceable if challenged in
court or before administrative bodies in the United States or abroad.
If we or one of our licensors or our collaborators were to initiate legal proceedings against a third party to enforce
a patent covering a product candidate we develop or our technology, including CRISPR genome editing technology, the
defendant could counterclaim that such patent is invalid or unenforceable. Third parties have raised challenges to the
validity of certain of our in-licensed patent claims and may in the future raise similar claims before administrative bodies in
the United States or abroad, even outside the context of litigation. These and other proceedings could result in the
revocation or cancellation of, or amendment to our patents in such a way that they no longer cover our technology or
platform, or any product candidates that we develop. The outcome following legal assertions of invalidity and
unenforceability is unpredictable. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we
would lose at least part, and perhaps all, of the patent protection on our technology or platform, or any product candidates
that we develop. Such a loss of patent protection would have a material adverse impact on our business, financial
condition, results of operations, and prospects.
The intellectual property landscape around genome editing technology, including CRISPR, is highly dynamic, and third
parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating their
intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the
success of our business.
The field of genome editing, especially in the area of CRISPR technology, is still in its infancy, and no such
products 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 for
the coming years. There may be significant intellectual property related litigation and proceedings relating to our owned
and in-licensed, and other third party, intellectual property and proprietary rights in the future.
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Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture,
market, and sell any product candidates that we develop and use our proprietary technologies without infringing,
misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties. We are subject to
and may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual
property rights with respect to our technology and any product candidates we develop, including interference, re-
examination, post-grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings
in foreign jurisdictions such as oppositions before the EPO. Third parties may assert infringement claims against us based
on existing patents or patents that may be granted in the future, regardless of their merit. We are aware of certain third party
patents and patent applications in this landscape that may be asserted to encompass our CRISPR/Cas9 technology. In
particular, we are aware of several separate families of U.S. patents and/or U.S. patent applications and foreign
counterparts which relate to CRISPR/Cas9 technology, where the earliest priority dates of each family pre-date the priority
dates of our in-licensed patents and patent applications, including patent families filed by Vilnius University, by the
University of California, the University of Vienna, and Emmanuelle Charpentier, by ToolGen, and by Sigma-Aldrich. Each
of these patent families are owned by a different third party and contain claims that may be construed to cover components
and uses of CRISPR/Cas9 technology. If we are not able to obtain or maintain a license on commercially reasonable terms
to any third-party patents that cover our product candidates or activities, such third parties could potentially assert
infringement claims against us, which could have a material adverse effect on the conduct of our business.
Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court
would find in our favor on questions of infringement, validity, enforceability, or priority. A court of competent jurisdiction
could hold that these third party patents are valid, enforceable, and infringed, which could materially and adversely affect
our ability to commercialize any product candidates we develop and any other product candidates or technologies covered
by the asserted third party patents. If we are found to infringe a third party’s intellectual property rights, and we are
unsuccessful in demonstrating that such patents are invalid or unenforceable, we could be required to obtain a license from
such third party to continue developing, manufacturing, and marketing any product candidates we develop and our
technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even
if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access
to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We also
could be forced, including by court order, to cease developing, manufacturing, and commercializing the infringing
technology or product candidates. In addition, we could be found liable for significant monetary damages, including treble
damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims
that we have misappropriated the confidential information or trade secrets of third parties could have a similar material
adverse effect on our business, financial condition, results of operations, and prospects.
If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, it could have
a material adverse effect on our business.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we
may develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Action of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman
Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA
regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years
from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a
method for using it, or a method for manufacturing it may be extended. However, an extension may not be granted because
of, for example, failure to exercise due diligence during the testing phase or regulatory review process, failure to apply
within applicable deadlines, failure to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable
requirements. Further, the applicable time period or the scope of patent protection afforded could be less than we request. If
we are unable to obtain patent term extension or if the term of any such extension is less than we request, we will be unable
to rely on our patent position to forestall the marketing of competing products following our patent expiration, and it could
have a materially adverse effect on our business, financial condition, results of operations, and prospects.
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We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged
trade secrets of their current or former employers or claims asserting ownership of what we regard as our own
intellectual property.
Many of our employees, consultants, and advisors are currently or were previously employed at universities or
other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to
ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their
work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including
trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be
necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception
or development of intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that
we regard as our own. The assignment agreements may be breached, and we may be forced to bring claims against third
parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual
property. Such claims could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be
harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets and
confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to
maintain our competitive position. With respect to our technology platform, we consider trade secrets and know-how to be
one of our primary sources of intellectual property. Trade secrets and know-how can be difficult to protect. In particular, we
anticipate that with respect to our technology platform, these trade secrets and know-how will over time be disseminated
within the industry through independent development, the publication of journal articles describing the methodology, and
the movement of personnel from academic to industry scientific positions.
We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, collaborators, CROs, contract
manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent
assignment agreements with our employees and consultants. We cannot guarantee that we have entered into such
agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes.
Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including
our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party
illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is
unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third
party, we would have no right to prevent them from using that technology or information to compete with us. If any of our
trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive
position would be materially and adversely harmed.
If we do not obtain patent term extension and data exclusivity for any product candidates we develop, our business may
be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we
develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Action of 1984 (the “Hatch-Waxman Amendments”). The Hatch-Waxman
Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA
regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of
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14 years from the date of product approval, only one patent may be extended and only those claims covering the approved
drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an
extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process,
failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to
satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be
less than we request. If we are unable to obtain patent term extension or term of any such extension is less than we request,
our competitors may obtain approval of competing products following our patent expiration, and our business, financial
condition, results of operations, and prospects could be materially harmed.
Risks Related to Regulatory Approval and Other Legal Compliance Matters
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive,
time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of any of our
product candidates. 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, our product candidates, and our ability to
generate revenue will be materially impaired.
Any of our product candidates and the activities associated with their development and commercialization,
including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising,
promotion, sale, and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in
the United States and by comparable authorities in other countries. Failure to obtain marketing approval for a product
candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not received
approval to market any product candidates from regulatory authorities in any jurisdiction. We have only limited experience
in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs to
assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and
supporting information to the various regulatory authorities for each therapeutic indication to establish the biologic product
candidate’s safety, purity, and potency. Securing regulatory approval also requires the submission of information about the
product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any of
our product candidates may not be effective, may be only moderately effective, or may prove to have undesirable or
unintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent or
limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many
years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety
of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval
policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in
regulatory review for each submitted product application, may cause delays in the approval or rejection of an application.
The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse
to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical,
or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay,
limit, or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited
or subject to restrictions or post-approval commitments that render the approved medicine not commercially viable.
If we experience delays in obtaining approval or if we fail to obtain approval of any of our product candidates, the
commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially
impaired.
We may seek certain designations for our product candidates, including Breakthrough Therapy, Fast Track and Priority
Review designations in the US, and PRIME Designation in the EU, but we might not receive such designations, and
even if we do, such designations may not lead to a faster development or regulatory review or approval process.
We may seek certain designations for one or more of our product candidates that could expedite review and
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approval by the FDA. A Breakthrough Therapy product is defined as a product that is intended, alone or in combination
with one or more other products, to treat a serious condition, and preliminary clinical evidence indicates that the product
may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. For products that have been designated as
Breakthrough Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify
the most efficient path for clinical development while minimizing the number of patients placed in ineffective control
regimens.
The FDA may also designate a product for Fast Track review if it is intended, whether alone or in combination
with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates
the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have
greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before
the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of
clinical data submitted by the sponsor, that a Fast Track product may be effective.
We may also seek a priority review designation for one or more of our product candidates. If the FDA determines
that a product candidate offers major advances in treatment or provides a treatment where no adequate therapy exists, the
FDA may designate the product candidate for priority review. A priority review designation means that the goal for the
FDA to review an application is six months, rather than the standard review period of ten months.
These designations are within the discretion of the FDA. Accordingly, even if we believe that one of our product
candidates meets the criteria for these designations, the FDA may disagree and instead determine not to make such
designation. Further, even if we receive a designation, the receipt of such designation for a product candidate may not
result in a faster development or regulatory review or approval process compared to products considered for approval
under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of
our product candidates qualifies for these designations, the FDA may later decide that the product candidates no longer
meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
In the EU, we may seek PRIME designation for some of our product candidates in the future. PRIME is a
voluntary program aimed at enhancing the EMA’s role to reinforce scientific and regulatory support in order to optimize
development and enable accelerated assessment of new medicines that are of major public health interest with the potential
to address unmet medical needs. The program focuses on medicines that target conditions for which there exists no
satisfactory method of treatment in the EU or even if such a method exists, it may offer a major therapeutic advantage over
existing treatments. PRIME is limited to medicines under development and not authorized in the EU and the applicant
intends to apply for an initial marketing authorization application through the centralized procedure. To be accepted for
PRIME, a product candidate must meet the eligibility criteria in respect of its major public health interest and therapeutic
innovation based on information that is capable of substantiating the claims. The benefits of a PRIME designation include
the appointment of a CHMP rapporteur to provide continued support and help to build knowledge ahead of a marketing
authorization application, early dialogue and scientific advice at key development milestones, and the potential to qualify
products for accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier
in the application process. PRIME enables an applicant to request parallel EMA scientific advice and health technology
assessment advice to facilitate timely market access. Even if we receive PRIME designation for any of our product
candidates, the designation may not result in a materially faster development process, review or approval compared to
conventional EMA procedures. Further, obtaining PRIME designation does not assure or increase the likelihood of EMA’s
grant of a marketing authorization.
If approved, our product candidates that are licensed and regulated as biologics may face competition from biosimilars
approved through an abbreviated regulatory pathway.
The Biologics Price Competition and Innovation Act of 2009, (“BPCIA”), was enacted as part of the Patient
Protection and Affordable Care Act, (“ACA”), to establish an abbreviated pathway for the approval of biosimilar and
interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve
biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its
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similarity to an approved biologic. Under the BPCIA, a reference biological product is granted 12 years of data exclusivity
from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or
interchangeable product based on the reference biological product until four years after the date of first licensure of the
reference product In addition, the licensure of a biosimilar product may not be made effective by the FDA until 12 years
from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company
may still develop and receive approval of a competing biologic, so long as its BLA does not reply on the reference product,
sponsor’s data or submit the application as a biosimilar application. The law is complex and is still being interpreted and
implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty, and any
new policies or processes adopted by the FDA could have a material adverse effect on the future commercial prospects for
our biological products.
We believe that any of the product candidates we develop as a biological product under a BLA should qualify for
the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional
action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for
competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Moreover, the
extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is
similar to traditional generic substitution for non-biological products will depend on a number of marketplace and
regulatory factors that are still developing. Nonetheless, the approval of a biosimilar to our product candidates would have
a material adverse impact on our business due to increased competition and pricing pressure.
We may not be able to obtain orphan drug exclusivity for one or more of our product candidates, and even if we do, that
exclusivity 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
intended to treat a rare disease or condition. A similar regulatory scheme governs approval of orphan products by the EMA
in the European Union. Generally, if a product candidate with an orphan drug designation subsequently receives the first
marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing
exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same product for
the same therapeutic indication for that time period. The applicable period is seven years in the United States and ten years
in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer
meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market
exclusivity is no longer justified.
In order for the FDA to grant orphan drug exclusivity to one of our products, the agency must find that the product
is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually
in the United States. The FDA may conclude that the condition or disease for which we seek orphan drug exclusivity does
not meet this standard. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect
the product from competition because different products can be approved for the same condition. In particular, the concept
of what constitutes the "same drug" for purposes of orphan drug exclusivity remains in flux in the context of gene
therapies. In September 2021, the FDA issued final guidance describing its current thinking on when a gene therapy
product is the “same” as another product for purposes of orphan exclusivity. Under the guidance, if either the transgene or
vector differs between two gene therapy products in a manner that does not reflect “minor” differences, the two products
would be considered different drugs for orphan drug exclusivity purposes. The FDA will determine whether two vectors
from the same viral class are the same on a case-by-case basis and may consider additional key features in assessing
sameness. In addition, even after an orphan drug is approved, the FDA can subsequently approve the same product for the
same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more
effective or makes a major contribution to patient care. Orphan drug exclusivity may also be lost if the FDA or EMA
determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient
quantity of the product to meet the needs of the patients with the rare disease or condition.
On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017 (“FDARA”). FDARA, among other
things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical
superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order
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to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act
unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical
superiority. Further, under Omnibus legislation signed by President Trump on December 27, 2020, the requirement for a
product to show clinical superiority applies to drugs and biologics that received orphan drug designation before enactment
of FDARA in 2017, but have not yet been approved or licensed by the FDA.
The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly
true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of
determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition”
and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug
exclusivity applies to the entire designated disease or condition rather than the “indication or use.” We do not know if,
when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any
changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and
policies, our business could be adversely impacted.
Failure to obtain marketing approval in foreign jurisdictions would prevent any of our product candidates from being
marketed in such jurisdictions, which, in turn, would materially impair our ability to generate revenue.
In order to market and sell any of our product candidates in the European Union and many other foreign
jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying
regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time
required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval
process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in
many countries outside the United States, it is required that the product be approved for reimbursement before the product
can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities
outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory
authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not
ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for
marketing approvals and may not receive necessary approvals to commercialize our medicines in any jurisdiction, which
would materially impair our ability to generate revenue.
Additionally, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit,
and a transition period to December 31, 2020, was established to allow the United Kingdom and the European Union to
negotiate the United Kingdom’s withdrawal. As a result, effective January 1, 2021, the United Kingdom is no longer part of
the European Single Market and European Union Customs Union. A co-operation agreement was signed between the
United Kingdom and the European Union in December 2020, which was applied provisionally beginning on January 1,
2021 and entered into force on May 1, 2021. The agreement addresses trade, economic arrangements, law enforcement,
judicial cooperation and a governance framework including procedures for dispute resolution, among other things. As both
parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how
the precise terms of the relationship between the parties will differ from the terms before withdrawal.
Since the regulatory framework for pharmaceutical products in the United Kingdom covering the quality, safety,
and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of
pharmaceutical products is derived from European Union directives and regulations, the consequences of Brexit and the
impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom
remains unclear. As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or the MHRA, became
responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under
domestic law, whereas Northern Ireland will continue to be subject to European Union rules under the Northern Ireland
Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as
the basis for regulating medicines. The HMR has incorporated into the domestic law of the body of European Union law
instruments governing medicinal products that pre-existed prior to the United Kingdom’s withdrawal from the European
Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may
force us to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates, which
could significantly and materially harm our business.
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Even if we, or any collaborators we may have, obtain marketing approvals for any of our product candidates, the terms
of approvals and ongoing regulation of our products could require the substantial expenditure of resources and may
limit how we, or they, manufacture and market our products, which could materially impair our ability to generate
revenue.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-
approval clinical data, labeling, advertising, and promotional activities for such medicine, will be subject to continual
requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety
and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to
quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding
the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted,
the approval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the
conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or
efficacy of the medicine.
Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more of our
product candidates, we, and such collaborators, and our and their contract manufacturers will continue to expend time,
money, and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, and
quality control. If we and such collaborators are not able to comply with post-approval regulatory requirements, we and
such collaborators could have the marketing approvals for our products withdrawn by regulatory authorities and our, or
such collaborators’, ability to market any future products could be limited, which could adversely affect our ability to
achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect
on our business, operating results, financial condition, and prospects.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or
other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other
personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise
prevent those agencies from performing normal business functions on which the operation of our business may rely,
which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including
government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and
statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed
and/or approved by necessary government agencies, which would adversely affect our business. In addition, government
funding of the SEC and other government agencies on which our operations may rely, including those that fund research
and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be
reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example,
over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the
FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If
a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process
our regulatory submissions, which could have a material adverse effect on our business. Further, future government
shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize
and continue our operations.
Separately, in response to the COVID-19 pandemic, since March 2020 when foreign and domestic inspections of
facilities were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch monitoring
and pre-approval inspections on a prioritized basis. The FDA has developed a rating system to assist in determining when
and where it is safest to conduct prioritized domestic inspections. As of May 2021, certain inspections, such as foreign
preapproval, surveillance, and for-cause inspections that are not deemed mission-critical, remain temporarily postponed. In
April 2021, the FDA issued guidance for industry formally announcing plans to employ remote interactive evaluations,
using risk management methods, to meet user fee commitments and goal
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dates and in May 2021 announced plans to continue progress toward resuming standard operational levels. Should FDA
determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due
to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be adequate, the FDA has
stated that it generally intends to issue a complete response letter or defer action on the application until an inspection can
be completed.
In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA’s
inability to complete required inspections for their applications. As of May 26, 2021, the FDA noted it was continuing to
ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user
fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of
manufacturing facilities with FDA quality standards. However, the FDA may not be able to continue its current pace and
review timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required
and due to the ongoing COVID-19 pandemic and travel restrictions, the FDA is unable to complete such required
inspections during the review period. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy
measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged
government shutdown or other disruption occurs, it could significantly impact the ability of the FDA to timely review and
process our regulatory submissions, which could have a material adverse effect on our business. Future shutdowns or other
disruptions could also affect other government agencies such as the SEC, which may also impact our business by delaying
review of our public filings, to the extent such review is necessary, and our ability to access the public markets.
Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from the
market, and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we
experience 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
to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved
labeling. The FDA and other regulatory agencies impose stringent restrictions on manufacturers’ communications
regarding off-label use, and if we do not market our medicines for their approved indications, we may be subject to
enforcement action for 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 the promotion and advertising of prescription products may also lead to investigations or allegations
of violations of federal and state health care fraud and abuse laws and state consumer protection laws.
In addition, later discovery of previously unknown problems with our medicines, manufacturers, or manufacturing
processes, or failure to comply with regulatory requirements, may yield various results, including:
● restrictions on such medicines, manufacturers, or manufacturing processes;
● restrictions on the labeling or marketing of a medicine;
● restrictions on the distribution or use of a medicine;
● requirements to conduct post-marketing clinical trials;
● receipt of warning or untitled letters;
● withdrawal of the medicines from the market;
● refusal to approve pending applications or supplements to approved applications that we submit;
● recall of medicines;
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● 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
resources in response and could generate negative publicity. The occurrence of any event or penalty described above may
inhibit our ability to commercialize any product candidates we 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
prescription of any of our product candidates for which we obtain marketing approval. Our future arrangements with third-
party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations
that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute
our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and
regulations include the following:
● the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and
willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, order, or recommendation of, any
good or service, for which payment may be made under federal and state healthcare programs such as
Medicare and Medicaid;
● the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam
actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment or approval from Medicare, Medicaid, or other government payors that are
false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to
the federal government, with potential liability including mandatory treble damages and significant per-claim
penalties;
● the federal Health Insurance Portability and Accountability Act of 1996, as further amended by the Health
Information Technology for Economic and Clinical Health Act, which imposes certain requirements,
including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of
individually 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
covering up a material fact or making any materially false statement in connection with the delivery of or
payment for healthcare benefits, items, or services;
● the federal transparency requirements under the federal Physician Payment Sunshine Act, which requires
manufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health and
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Human Services information related to payments and other transfers of value to physicians, other healthcare
providers and teaching hospitals, and ownership and investment interests held by physicians, other healthcare
providers and other healthcare providers and their immediate 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 to
sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-
governmental third-party payors, including private insurers, and certain state laws that require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government in addition to requiring drug
manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it
is possible that some of our business activities could be subject to challenge under one or more of such laws. If our
operations are found to be in violation of any of the laws described above or any other government regulations that apply to
us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in
government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of
our operations, any of which could adversely affect our 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 of
benefits 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 or
her competent professional organization, and/or the regulatory authorities of the individual European Union Member
States. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in
the European Union Member States. Failure to comply with these requirements could result in reputational risk, public
reprimands, administrative penalties, fines, or imprisonment.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws
and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or
other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other
governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative
penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and
the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we
expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil, or
administrative sanctions, including exclusions from government funded healthcare programs. Liabilities they incur
pursuant to these laws could result in significant costs or an interruption in operations, which could have a material adverse
effect on our business, financial condition, results of operations, and prospects.
Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to
obtain marketing 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
changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing
approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any
future collaborators, 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 criteria and in additional downward pressure on the price that we, or any future collaborators,
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may receive for any approved products.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Affordability Reconciliation Act (collectively the “ACA”). In addition, other legislative
changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011,
among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit
Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021,
was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several 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 2031 under the Coronavirus Aid, Relief, and
Economic Security Act (the “CARES Act”). Pursuant to subsequent legislation, however, these Medicare sequester
reductions have been suspended through the end of March 2022. From April 2022 through June 2022 a 1% sequester cut
will be in effect, with the full 2% cut resuming thereafter. The American Taxpayer Relief Act of 2012, among other things,
reduced Medicare payments to several providers and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and
other healthcare funding and otherwise affect the prices we may obtain for any of our products or product candidates for
which we may obtain regulatory approval or the frequency with which any such product is prescribed or used.
Since enactment of the ACA, there have been and continue to be, numerous legal challenges and Congressional
actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts for Jobs Act, or TCJA, in
2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a
minimal level of health insurance, became effective in 2019. Further, on December 14, 2018, a U.S. District Court judge in
the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature
of the ACA and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are
invalid as well. The U.S. Supreme Court heard this case on November 10, 2020 and on June 17, 2021, dismissed this action
after finding that the plaintiffs do not have standing to challenge the constitutionality of the ACA. Litigation and legislation
over the ACA are likely to continue, with unpredictable and uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA,
including directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions
from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states,
individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28,
2021, however, President Biden issued a new Executive Order which directs federal agencies to reconsider rules and other
policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access. Under
this Order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing
conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid and the ACA that
may reduce coverage or undermine the programs, including work requirements; policies that undermine the Health
Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and
the ACA; and policies that reduce affordability of coverage or financial assistance, including for dependents. This
Executive Order also directed the U.S. Department of Health and Human Services to create a special enrollment period for
the Health Insurance Marketplace in response to the COVID-19 pandemic.
The prices of prescription pharmaceuticals in the United States and foreign jurisdictions is subject to considerable
legislative and executive actions and could impact the prices we obtain for our products, if and when licensed.
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United
States. There have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal
legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship
between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and
Medicaid. In 2020, President Trump issued several executive orders intended to lower the costs of prescription products
and certain provisions in these orders have been incorporated into regulations. These regulations include an interim final
rule implementing a most favored nation model for prices that would tie Medicare Part B payments for certain
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physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective
January 1, 2021. That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021,
CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate
value into payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care.
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop
a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. The
final rule is currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New
Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada with the intent of
developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS finalized a regulation
removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D,
either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of
the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing
litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe
harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of
which have also been delayed by the Biden administration until January 1, 2023.
On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price
of pharmaceuticals. The Order directs the Department of Health and Human Services, or HHS, to create a plan within 45
days to combat “excessive pricing of prescription pharmaceuticals and enhance domestic pharmaceutical supply chains, to
reduce the prices paid by the federal government for such pharmaceuticals, and to address the recurrent problem of price
gouging.” On September 9, 2021, HHS released its plan to reduce pharmaceutical prices. The key features of that plan are
to: (a) make pharmaceutical prices more affordable and equitable for all consumers and throughout the health care system
by supporting pharmaceutical price negotiations with manufacturers; (b) improve and promote competition throughout the
prescription pharmaceutical industry by supporting market changes that strengthen supply chains, promote biosimilars and
generic drugs, and increase transparency; and (c) foster scientific innovation to promote better healthcare and improve
health by supporting public and private research and making sure that market incentives promote discovery of valuable and
accessible new treatments.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care
organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical
products and which suppliers will be included in their prescription drug and other health care programs. These measures
could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that
additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for
our product candidates or additional pricing pressures.
Our employees, principal investigators, consultants, and commercial partners may engage in misconduct or other
improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants,
and partners. Misconduct by these parties could include intentional failures to comply with FDA regulations or the
regulations applicable in the European Union and other jurisdictions, provide accurate information to the FDA, the
European Commission, and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in
the United States and abroad, report financial information or data accurately, or disclose unauthorized activities to us. In
particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and
regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and
regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer
incentive programs, and other business arrangements. Such misconduct also could involve the improper use of information
obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which
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could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct
applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply
with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, results
of operations, and prospects, including the imposition of 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
and implement 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 such programs 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 or
candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business
in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to
comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly
reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate
system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced
primarily by the Department of Justice. The SEC is involved with enforcement of the books and records provisions of the
FCPA.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized
problem. 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.
Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments
to government 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,
or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain
products and technical data relating to those products. Our expansion outside of the United States has required, and will
continue to require, us to dedicate additional resources to comply with these laws, and these laws may preclude us from
developing, manufacturing, or selling certain drugs and drug candidates outside of the United States, which could limit our
growth potential and increase our development costs. The failure to comply with laws governing international business
practices may result in substantial penalties, including suspension or debarment from government contracting. Violation of
the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA 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 termination of a government contract or
relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices
would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The
SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting
provisions.
We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations
related to data privacy and security and changes in such laws, regulations, policies, contractual obligations and failure
to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse
effect on our business, financial condition or results of operations.
We are subject to data privacy and protection laws and regulations that apply to the collection, transmission,
storage and use of personally-identifying information, which among other things, impose certain requirements relating to
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the privacy, security and transmission of personal information, including comprehensive regulatory systems in the U.S., EU
and U.K. The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions
worldwide, and there has been an increasing focus on privacy and data protection issues with the potential to affect our
business. Failure to comply with any of these laws and regulations could result in enforcement action against us, including
fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our
reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition,
results of operations or prospects.
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal
information. In particular, regulations promulgated pursuant to HIPAA establish privacy and security standards that limit
the use and disclosure of individually identifiable health information, or protected health information, and require the
implementation of administrative, physical and technological safeguards to protect the privacy of protected health
information and ensure the confidentiality, integrity and availability of electronic protected health information.
Determining whether protected health information has been handled in compliance with applicable privacy standards and
our contractual obligations can be complex and may be subject to changing interpretation. These obligations may be
applicable to some or all of our business activities now or in the future.
If we are unable to properly protect the privacy and security of protected health information, we could be found to
have breached our contracts. Further, if we fail to comply with applicable privacy laws, including applicable HIPAA
privacy and security standards, we could face civil and criminal penalties. HHS enforcement activity can result in financial
liability and reputational harm, and responses to such enforcement activity can consume significant internal resources. In
addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to
violations that threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced
or applied to our operations. In addition to the risks associated with enforcement activities and potential contractual
liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and
require ongoing modifications to our policies, procedures and systems.
In 2018, California passed into law the California Consumer Privacy Act (CCPA), which took effect on January 1,
2020 and imposed many requirements on businesses that process the personal information of California residents. Many of
the CCPA’s requirements are similar to those found in the GDPR, including requiring businesses to provide notice to data
subjects regarding the information collected about them and how such information is used and shared, and providing data
subjects the right to request access to such personal information and, in certain cases, request the erasure of such personal
information. The CCPA also affords California residents the right to opt-out of “sales” of their personal information. The
CCPA contains significant penalties for companies that violate its requirements. On November 3, 2020, California voters
passed a ballot initiative for the California Privacy Rights Act, or CPRA, which will significantly expand the CCPA to
incorporate additional GDPR-like provisions including requiring that the use, retention, and sharing of personal
information of California residents be reasonably necessary and proportionate to the purposes of collection or processing,
granting additional protections for sensitive personal information, and requiring greater disclosures related to notice to
residents regarding retention of information. Most CPRA provisions will take effect on January 1, 2023, though the
obligations will apply to any personal information collected after January 1, 2022. These provisions may apply to some of
our business activities. In addition, other states, including Virginia and Colorado, already have passed state privacy laws.
Other states will be considering these laws in the future. These laws may impact our business activities, including our
identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our
products.
Similar to the laws in the United States, there are significant privacy and data security laws that apply in Europe
and other countries. The collection, use, disclosure, transfer, or other processing of personal data, including personal health
data, regarding individuals who are located in the European Economic Area (EEA), and the processing of personal data
that takes place in the EEA, is regulated by the General Data Protection Regulation, or GDPR, which went into effect in
May 2018 and which imposes obligations on companies that operate in our industry with respect to the processing of
personal data and the cross-border transfer of such data. The GDPR imposes onerous accountability obligations requiring
data controllers and processors to maintain a record of their data processing and policies. If our or our partners’ or service
providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation,
regulatory investigations, enforcement notices requiring us to change the way we use
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personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding
financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational
harm and a potential loss of business and goodwill.
The GDPR places restrictions on the cross-border transfer of personal data from the EU to countries that have not
been found by the European Commission to offer adequate data protection legislation, such as the United States. There are
ongoing concerns about the ability of companies to transfer personal data from the EU to other countries. In July 2020, the
Court of Justice of the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to
legitimize the transfer of personal data from the EEA to the U.S. The CJEU decision also drew into question the long-term
viability of an alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the
EEA to the U.S. While we were not self-certified under the Privacy Shield, this CJEU decision may lead to increased
scrutiny on data transfers from the EEA to the U.S. generally and increase our costs of compliance with data privacy
legislation as well as our costs of negotiating appropriate privacy and security agreements with our vendors and business
partners.
Following the withdrawal of the U.K. from the EU, the U.K. Data Protection Act 2018 applies to the processing of
personal data that takes place in the U.K. and includes parallel obligations to those set forth by GDPR. As with other issues
related to Brexit, there are open questions about how personal data will be protected in the UK and whether personal
information can transfer from the EU to the UK. Following the withdrawal of the U.K. from the EU, the U.K. Data
Protection Act 2018 applies to the processing of personal data that takes place in the U.K. and includes parallel obligations
to those set forth by GDPR. While the Data Protection Act of 2018 in the United Kingdom that “implements” and
complements the European Union General Data Protection Regulation, or GDPR, has achieved Royal Assent on May 23,
2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the European Economic
Area, or EEA, to the United Kingdom will remain lawful under GDPR. The United Kingdom government has already
determined that it considers all European Union 27 and EEA member states to be adequate for the purposes of data
protection, ensuring that data flows from the United Kingdom to the European Union/EEA remain unaffected. In addition,
a recent decision from the European Commission appears to deem the UK as being “essentially adequate” for purposes of
data transfer from the EU to the UK, although this decision may be re-evaluated in the future.
Beyond GDPR, there are privacy and data security laws in a growing number of countries around the world.
While many loosely follow GDPR as a model, other laws contain different or conflicting provisions. These laws will
impact our ability to conduct our business activities, including both our clinical trials and any eventual sale and distribution
of commercial products, through increased compliance costs, costs associated with contracting and potential enforcement
actions.
While we continue to address the implications of the recent changes to data privacy regulations, data privacy
remains an evolving landscape at both the domestic and international level, with new regulations coming into effect and
continued legal challenges, and our efforts to comply with the evolving data protection rules may be unsuccessful. It is
possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. We must devote
significant resources to understanding and complying with this changing landscape. Failure to comply with laws regarding
data protection would expose us to risk of enforcement actions taken by data protection authorities in the EEA and
elsewhere and carries with it the potential for significant penalties if we are found to be non-compliant. Similarly, failure to
comply with federal and state laws in the United States regarding privacy and security of personal information could
expose us to penalties under such laws. Any such failure to comply with data protection and privacy laws could result in
government-imposed fines or orders requiring that we change our practices, claims for damages or other liabilities,
regulatory investigations and enforcement action, litigation and significant costs for remediation, any of which could
adversely affect our business. Even if we are not determined to have violated these laws, government investigations into
these issues typically require the expenditure of significant resources and generate negative publicity, which could harm
our business, financial condition, results of operations or prospects.
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Risks Related to Employee Matters, Managing Growth, Public Health and Information Technology
Our future success depends on our ability to attract and retain key executives and to attract, retain, and motivate
qualified personnel.
We are highly dependent on the principal members of our management and scientific teams. Each of these
individuals is employed “at will,” meaning we or the individual may terminate the employment relationship at any time.
We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of
these persons could impede the achievement of our research, development, and commercialization objectives. Additionally,
we are actively trying to recruit a candidate for the role of Chief Medical Officer. Any inability to fill this position in an
expedient manner may have a material adverse effect on our business.
Recruiting and retaining qualified scientific, clinical, manufacturing, and sales and marketing personnel will also
be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the
competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience
competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we
rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors may be employed by employers other than us
and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
In addition, our ability to recruit and retain qualified personnel could be impacted by other factors, such as remote or
hybrid working arrangements, including those resulting from the ongoing COVID-19 pandemic, which could impact
employees’ productivity and morale, as well as any failure to succeed in preclinical or clinical trials. The inability to recruit
or the loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research,
development and commercialization objectives.
We face risks related to health epidemics, pandemics and other widespread outbreaks of contagious disease, including
the COVID-19 pandemic, which could significantly disrupt our operations, impact our financial results or otherwise
adversely impact our business.
Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material
impact on our business operations and operating results. The ongoing COVID-19 pandemic has continued to evolve with
new, more contagious, variants emerging from time to time. In response to COVID-19 and these variants, governments
have implemented a variety of responses, including government-imposed quarantines, travel restrictions and other public
health safety measures. We have taken steps in line with guidance from the U.S. Centers for Disease Control and
Prevention, the Commonwealth of Massachusetts and the State of Colorado, the jurisdictions in which we primarily operate
our business, to protect the health and safety of our employees and the community. In particular, in March 2020, we
implemented a work from home policy, and restricted on-site activities at our facilities in Massachusetts and Colorado to
certain manufacturing, laboratory and related support activities. Under our return to onsite work plans, we gradually
resumed these activities and fully reopened our facilities in the third quarter of 2021 using a hybrid work model. However,
in response to the recent spread of the Omicron variant, for January and a portion of February we temporarily reimposed
the work from home policy and on-site activity restrictions. We continue to assess the impact of the COVID-19 pandemic
to best mitigate risk and continue the operations of our business, with focus on prioritizing the health and safety of our
employees and maintaining safe and reliable operations of our facilities.
As a result of the COVID-19 pandemic or similar public health crises that may arise, or related healthcare staffing
shortages, supply chain restrictions, or other issues, we may experience disruptions that could adversely impact our
operations, research and development, including preclinical studies, clinical trials and manufacturing activities, including:
● delays or disruptions in clinical trials that we may be conducting, including patient screening, patient
enrollment, patient dosing, clinical trial site activation, and study monitoring;
● delays or disruptions in preclinical experiments and IND- and clinical trial application-enabling studies due
to restrictions related to our staff being on site;
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● interruption or delays in the operations of the FDA, EMA and comparable foreign regulatory agencies;
● interruption of, or delays in, receiving, supplies of drug substance and drug product from our CMOs or
delays or disruptions in our pre-clinical experiments or clinical trials performed by CROs due to staffing
shortages, production and research slowdowns or stoppages and disruptions in delivery systems or research;
● limitations imposed on our business operations by local, state, or federal authorities to address such
pandemics or similar public health crises could impact our ability to conduct preclinical or clinical activities,
including conducting IND- and CTA-enabling studies or our ability to select future development candidates;
and
● business disruptions caused by potential workplace, laboratory and office closures and an increased reliance
on employees working from home, disruptions to or delays in ongoing laboratory experiments and
operations, staffing shortages, travel limitations, cyber security and data accessibility, or communication or
mass transit disruptions, any of which could adversely impact our business operations or delay necessary
interactions with local regulators, ethics committees, manufacturing sites, research or clinical trial sites and
other important agencies and contractors.
Our clinical trials for EDIT-101 and EDIT-301, as well as timely completion of preclinical activities and initiation
of planned clinical trials for other product candidates is dependent upon the availability of, for example, preclinical and
clinical trial sites, researchers and investigators, regulatory agency personnel, and materials, which may be adversely
affected by the COVID-19 pandemic and related government responses. For example, in late 2020 we experienced slowed
enrollment in the EDIT-101 clinical trial as a result of the COVID-19 pandemic, including international travel restrictions
imposed in response to the pandemic. We have also experienced some delays in obtaining materials for certain of our
programs, but these delays have not significantly impacted our operations to date. In addition, the trading prices for our
common stock and other biopharmaceutical companies have been highly volatile in part as a result of the COVID-19
pandemic. As a result, we may face difficulties raising additional capital through sales of our common stock or such sales
may be on unfavorable terms.
We cannot presently predict the scope and severity of any potential business shutdowns or disruptions. If we or
any of the third parties with whom we engage, however, were to experience shutdowns or other business disruptions, our
ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively
affected, which could have a material adverse impact on our business and our results of operation and financial condition.
We have expanded and expect to further expand our development, regulatory, clinical, manufacturing and future sales
and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt
our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations,
particularly in the areas of drug development, regulatory affairs, clinical development, manufacturing, and sales and
marketing. 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 our limited financial resources, we may not be able to effectively manage the expected expansion of our operations
or recruit and train additional qualified personnel. Moreover, the expected physical expansion of our operations may lead to
significant costs and may divert our management and business development resources. Any inability to manage growth
could delay the execution 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,
as well as our proprietary business information and that of our suppliers and business partners, employee data,
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and we may collect personally identifiable information of clinical trial participants in connection with clinical trials. We
also rely to a large extent on information technology systems to operate our business, including our financial systems. We
have outsourced elements of our confidential information processing and information technology structure, and as a result,
we are managing 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 elements of our sensitive data.
The secure maintenance of this information is important to our operations and business strategy. Despite our security
measures, our information technology infrastructure (and those of our partners, vendors and third-party providers) may be
vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. We, our partners,
vendors, and other third-party providers 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. Furthermore, in
response to the COVID-19 pandemic, we have implemented a hybrid work model, which may place our information
technology infrastructure and data at increased risk as more of our employees work from home utilizing network
connections outside our premises. We have invested in information technology security measures and the protection of
confidential and sensitive information, but there can be no assurance that our efforts will prevent system failures, accidents
or security breaches. While we believe we have not experienced any such material system failure, accident or security
breach to date, any such event may substantially impair our ability to operate our business and would compromise our, and
their, networks and the information stored could be accessed, publicly disclosed, lost, or stolen. Any such event, 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, any of which could adversely affect our business.
Although we have general liability and cybersecurity insurance coverage, our insurance may not cover all claims,
continue to be available on reasonable terms or be sufficient in amount to cover one or more large claims; additionally, the
insurer may disclaim coverage as to any claim. The successful assertion of one or more large claims against us that exceed
or are not covered by our insurance coverage or changes in our insurance policies, including premium increases or the
imposition of large deductible or co-insurance requirements, could materially harm our business, financial condition,
results of operations and prospects.
Risks Related to Our Common Stock
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. For example, since January 1, 2021, the trading price of
our common stock on the Nasdaq Global Select Market has ranged from a low of $16.37 to a high
of $99.95 through January 31, 2022. Some of the factors that may cause the market price of our common stock to fluctuate
include:
● the success of existing or new competitive products or technologies;
● the timing and results of clinical trials for EDIT-101 and EDIT-301 and any preclinical studies and clinical
trials of any other product candidates that we develop;
● commencement or termination of collaborations for our product development and research programs;
● failure or discontinuation of any of our product development and research programs;
● results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors,
or announcements about new research programs or product candidates of our competitors;
● developments or changing views regarding the use of genomic medicines, including those that involve
genome editing;
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● regulatory or legal developments in the United States and other countries;
● developments or disputes concerning patent applications, issued patents, or other proprietary rights;
● the recruitment or departure of key personnel;
● the level of expenses related to any of our research programs, clinical development programs, or product
candidates that we 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
by securities 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, including the impact of the COVID-19 pandemic; and
● the other factors described in this “Risk Factors” section.
In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly
volatile as a result of the COVID-19 pandemic. The extent to which the COVID-19 pandemic may impact our business,
preclinical studies and ongoing and planned clinical trials will depend on future developments, which are highly uncertain
and cannot be predicted with confidence, such as the emergence of new variants of the disease, the ability of governments
to vaccinate their populations and the effectiveness of existing vaccines to address any new variants, the ultimate
containment of the disease, the modification or lifting of travel restrictions and other actions implemented to contain the
outbreak or address its impact, such as social distancing and quarantines or lock-downs in the United States and other
countries, business closures or business disruptions, and the ultimate effectiveness of other actions taken in the United
States and other countries to contain and address the disease. A resurgence or other negative developments relating to the
pandemic may require us to again restrict access to our offices and laboratories for an extended period of time, or to pause
or suspend preclinical research and our clinical trials; and, further, may cause delays or restrictions at healthcare facilities
or disrupt our manufacturing and supply chain or those of our third-party suppliers and manufacturers.
In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in
particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to
changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations.
Because of the potential volatility of our stock price, we may become the target of securities litigation in the future.
Securities litigation could result in substantial costs and divert management’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 our
stock, the price of our stock and trading volume could decline.
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The trading market for our common stock depends, in part, on the research and reports that industry or financial
analysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations
of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock or fail to
regularly publish reports on us, we could lose visibility in the market for our stock, which in turn could cause our stock
price to decline.
A portion of our total outstanding shares may be sold into the market in the near future, which could cause the market
price 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. These
sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares,
could reduce the market price of our common stock.
We have registered substantially all shares of common stock that we may issue under our equity compensation
plans. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitations
applicable to affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public
market, the market price of our common stock could decline.
We incur costs as a result of operating as a public company, and our management is required to devote substantial time
to compliance initiatives and corporate governance practices.
As a public company we have incurred, and will continue to incur, significant legal, accounting, and other
expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market, and other applicable securities
rules and regulations impose various requirements on public companies, including establishment and maintenance of
effective disclosure and financial controls and corporate governance practices. We have had to hire additional accounting,
finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a
public company, and our management and other personnel devote a substantial amount of time towards maintaining
compliance with these requirements. These requirements increase our legal and financial compliance costs and make some
activities more time-consuming and costly.
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 not
improve our results of operations or enhance the value of our common stock. The failure by our management to apply these
funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of
our common stock to decline, and delay the development of our product candidates. Pending their use, we may invest our
cash reserves in a manner that does not produce income or that loses value.
We do not expect to pay any dividends for the foreseeable future. Accordingly, stockholders must rely on capital
appreciation, 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
future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt
agreements may 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 might
discourage, delay, or prevent a change in control of our company or changes in our management and, therefore,
depress the trading price of our common stock.
Provisions in our restated certificate of incorporation and amended and restated bylaws or Delaware law may
discourage, 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. These
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provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These
provisions include:
● limitations on the removal of directors;
● a classified board of directors so that not all members of our board of directors are elected at one time;
● advance notice requirements for stockholder proposals and nominations;
● the inability of stockholders to act by written consent or to call special meetings;
● the requirement that at least 75% of the votes cast by all our stockholders approve the amendment or repeal
of certain 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 without
stockholder approval, which could be used to institute a rights plan, or a poison pill, that would work to
dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been
approved by our board of directors.
In addition, Section 203 of the General Corporation Law of the State of Delaware prohibits a publicly held
Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which
together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three
years after the date of the transaction in which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
The existence of the foregoing provisions could deter potential acquirers of our company, thereby reducing the
likelihood that our stockholders could receive a premium for their shares of common stock in an acquisition.
Our restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located
within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage
lawsuits against the company and our directors and officers.
Our restated certificate of incorporation provides that, unless our board of directors otherwise determines, the state
courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court
for the 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 our stockholders, any action asserting a claim against us or any of our directors or officers arising pursuant to any
provision of the General Corporation Law of the State of Delaware or our restated certificate of incorporation or amended
and restated bylaws, 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 such stockholders find favorable for disputes with us or our directors or officers, which may discourage such
lawsuits against us and our directors and officers. This exclusive forum provision would not apply to suits brought to
enforce a duty or liability created by the Exchange Act of 1934, which provides for exclusive jurisdiction of the federal
courts. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum
provision and asserts claims under the Securities Act of 1933, as amended (the “Securities Act”), inasmuch as Section 22
of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or
liability created by the Securities Act or the rules and regulations thereunder; provided, that with respect to claims under
the Securities Act, our stockholders will not be deemed to have waived our compliance with the federal securities laws and
the rules and regulations thereunder.
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Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties.
We lease 59,783 square feet of office and laboratory space in Cambridge, Massachusetts under a lease that expires
in October 2023. We believe that our facilities are sufficient to meet our current needs and that suitable additional space
will be available as and when needed.
Item 3. Legal Proceedings.
From time to time, we may become involved in litigation or other legal proceedings relating to claims arising
from the ordinary course of business. There can be no assurance that any proceedings that result from these third-party
actions will be resolved in our favor. In addition, if they are not resolved in our favor, there can be no assurance that the
result will not have a material adverse effect on our business, financial condition, results of operations, or prospects.
Certain of our intellectual property rights, including ones licensed to us under our licensing agreements, are subject to, and
from time to time may be subject to, priority and validity disputes. For additional information regarding these matters, see
“Item 1A. Risk Factors—Risks Related to Our Intellectual Property.” Regardless of outcome, litigation or other legal
proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management
resources, and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information
Our common stock trades on the Nasdaq Global Select Market under the symbol “EDIT.” Trading of our common
stock commenced on February 3, 2016 in connection with our initial public offering. Prior to that time, there was no
established public trading market for our common stock.
Holders
As of February 14, 2022, we had approximately 18 holders of record of our common stock. This number does not
include beneficial owners whose shares were held in street name.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future
earnings to fund the development and growth of our business. We do not expect to pay any cash dividends in the
foreseeable future. In addition, the terms of any future debt agreements that we may enter into may preclude us from
paying dividends without the lenders’ consent or at all.
Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or to be
“filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or otherwise subject to the liabilities under that Section, nor shall such information be incorporated by reference into any
future filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except to the extent
that we specifically incorporate it by reference into such filing.
The following graph compares the performance of our common stock to The Nasdaq Composite Index and to The
Nasdaq Biotechnology Index from December 30, 2016 through December 31, 2021. The comparison assumes $100 was
invested after the market closed on December 30, 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.
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Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliates Purchasers
Neither we nor any affiliated purchaser or anyone acting on behalf of us or an affiliated purchaser made any
purchases of shares of our common stock during the fourth quarter of 2021.
Item 6. [Reserved]
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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 together
with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on
Form 10-K 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 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 cause our actual results to differ materially from
those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed
in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the cautionary statements included in this Annual Report on
Form 10-K, particularly in the section entitled “Risk Factors” in Part I, Item 1A that could cause actual results or events
to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the
potential 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 Annual
Report on Form 10-K completely and with the understanding that our actual future results may be materially different from
what we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of
this Annual Report on Form 10-K,and we do not assume any obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required by applicable law.
Overview
We are a leading, clinical stage gene editing company dedicated to developing potentially transformative gene
editing medicines to treat a broad range of serious diseases. We have developed a proprietary gene editing platform based
on CRISPR technology and we continue to expand its capabilities. Our product development strategy is to target diseases
of high unmet need where we aim to make differentiated, transformational medicines using our gene editing platform. We
are advancing in vivo gene editing medicines, in which the medicine is injected or infused into the patient to edit the cells
inside their body, ex vivo gene-edited cell medicines, in which cells collected from a patient are edited with our technology
and then administered back to that same patient, and cellular therapy medicines, in which we use our technology to edit
induced human pluripotent stem cells that are subsequently differentiated into effector cells, such as natural killer (“NK”)
cells, to develop medicines that can be administered to a patient. While our discovery efforts have ranged across several
diseases and therapeutic areas, the areas where our programs are more mature are in our in vivo gene editing medicines to
treat ocular diseases, our ex vivo gene-edited cell medicines to treat hemoglobinopathies, and our cellular therapy
medicines to treat cancer.
In ocular diseases, our most advanced program is designed to address a specific genetic form of retinal
degeneration called Leber congenital amaurosis 10 (“LCA10”), a CEP290-related retinal degenerative disorder for which
we are not aware of any available therapies. In mid-2019, we initiated our Phase 1/2 BRILLIANCE clinical trial of EDIT-
101, an experimental gene editing medicine to treat LCA10. The BRILLIANCE trial is designed to assess the safety,
tolerability, and efficacy of EDIT-101. We initially planned to enroll up to 18 patients in the United States and Europe in up
to five cohorts, and in 2021 completed dosing of the first three cohorts, the adult low-, mid- and high-dose cohorts. We are
expanding enrollment in one or more of the previously completed adult cohorts to explore dose response and support
establishment of registrational trial endpoints. We anticipate establishing these registrational trial endpoints by the end of
2022. We remain on track to complete dosing of the pediatric mid-dose cohort in the first half of 2022, and expect to
initiate dosing of the pediatric high-dose cohort in 2022.
In the third quarter of 2021, we released preliminary clinical data from the first six patients with LCA10 treated
with EDIT-101 demonstrating a favorable safety profile and encouraging signals of clinical benefit. For additional
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information regarding these clinical data, please see “Business—Our Gene Editing Medicine Programs—In Vivo Gene
Editing Medicines - Ocular—Leber Congenital Amaurosis 10.” We expect to provide a clinical update on the
BRILLIANCE trial in the second half of 2022, including safety and efficacy assessments on all patients who have had at
least six months of follow-up evaluations.
For our ex vivo gene-edited cell medicines, our lead program is EDIT-301, an experimental medicine to treat
sickle cell disease, a severe inherited blood disease that causes premature death, and transfusion-dependent beta-
thalassemia (“TDT”). In January 2021, the U.S. Food and Drug Administration (the “FDA”) cleared the start of enrollment
and dosing of patients in the first phase of our Phase 1/2 clinical trial of EDIT-301, which we refer to as our RUBY trial,
for the treatment of sickle cell disease. This study is designed to validate the safety and beneficial effects of the cell editing
process. The RUBY trial is currently enrolling study participants and is on track to begin dosing in the first half of 2022
with initial clinical results expected by the end of 2022. Prior to initiating a registrational trial, we will be required to
develop a potency assay to ensure that the characteristics of the product released are as expected and confirmed by clinical
data collected in the first patients treated, in response to an FDA partial clinical hold. In November 2021, we filed an IND
application for a Phase 1/2 clinical trial of EDIT-301 for the treatment of TDT, which was cleared by the FDA in December
2021. We expect to initiate dosing in this trial during 2022.
In cellular therapy medicines, we continue to develop our capabilities to generate cells from induced human
pluripotent stem cells to develop engineered cell medicines to treat cancer. We have advanced development of engineered
iPSC-derived NK (“iNK”) cell medicines for solid tumors and generated edited NK cells from iPSCs with significantly
increased anti-cancer activity. In December 2021, we declared a development candidate, referred to as EDIT-202, a highly
differentiated iNK investigational medicine with double knock-in and double knock-out gene edits that are intended to
enhance adaptive immune response and improve cell proliferation, cytolytic activity and persistence, as well as overcome
suppressive tumor microenvironments. We expect to advance EDIT-202 in preclinical development during 2022.We are
also advancing alpha-beta T cell experimental medicines in collaboration with Bristol-Myers Squibb Company (“BMS”).
In May 2015, we entered into a collaboration with Juno Therapeutics, Inc., a wholly-owned subsidiary of BMS (“Juno
Therapeutics”), to develop novel engineered alpha-beta T cell therapies for cancer and autoimmune diseases, which was
amended and restated in each of May 2018 and November 2019, at which time we also entered into a related license
agreement with Juno Therapeutics, which we collectively refer to as our collaboration with them.
Since our inception in September 2013, our operations have focused on organizing and staffing our company,
business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in gene
editing, seeking to identify potential product candidates, and undertaking preclinical studies. Except for EDIT-101 and
EDIT-301, all of our research programs are still in the preclinical or research stage of development and the risk of failure of
all of our research programs is high. We have not generated any revenue from product sales. We have primarily financed
our operations through various equity financings and payments received under our research collaboration with BMS and
our former strategic alliance with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”),
which was terminated in August 2020.
Since inception, we have incurred significant operating losses. Our net losses were $192.5 million, $116.0 million,
and $133.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had
an accumulated deficit of $857.7 million. We expect to continue to incur significant expenses and operating losses for the
foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate
that our expenses will increase substantially as we continue our current research programs and our preclinical development
activities; progress the clinical development of EDIT-101 and EDIT-301; seek to identify additional research programs and
additional product candidates; initiate preclinical testing and clinical trials for other product candidates we identify and
develop, including preparing for and initiating the clinical development of EDIT-301 for the treatment of transfusion-
dependent beta-thalassemia; maintain, expand, and protect our intellectual property portfolio, including reimbursing our
licensors for such expenses related to the intellectual property that we in-license from such licensors; further develop our
genome editing platform; hire additional clinical, quality control, and scientific personnel; and incur additional costs
associated with operating as a public company. We do not expect to be profitable for the year ending December 31, 2022 or
the foreseeable future.
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Although we did not experience any significant impact on our financial condition, results of operations or
liquidity due to the ongoing COVID-19 pandemic during the year ended December 31, 2021, the pandemic has
continuously evolved with new, more contagious, variants emerging from time to time, and near-term risks to our business
remain. In response to COVID-19 and these variants, governments have implemented a variety of responses, including
government-imposed quarantines, travel restrictions and other public health safety measures. As a result, the ultimate
impact of the COVID-19 pandemic continues to be highly uncertain and we do not yet know the full extent of potential
delays or impacts on our business, our ability to continue to raise additional capital, the EDIT-101 or EDIT-301 clinical
trials, ongoing preclinical activities, or the global economy as a whole. We have taken steps in line with guidance from the
U.S. Centers for Disease Control and Prevention, the Commonwealth of Massachusetts and the State of Colorado, the
jurisdictions in which we primarily operate our business, to protect the health and safety of our employees and the
community. In March 2020, we implemented a work from home policy, and restricted on-site activities at our facilities in
Massachusetts and Colorado to certain manufacturing, laboratory and related support activities in light of the COVID-19
pandemic. Under our return to onsite work plans, we gradually resumed manufacturing, laboratory and related support
activities at our facilities in Massachusetts and Colorado, and fully reopened our facilities in the third quarter of 2021 using
a hybrid work model. However, in response to the recent spread of the Omicron variant, for January and a portion of
February we temporarily reimposed the work from home policy and on-site activity restrictions. We will continue to
monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of
our employees and maintaining safe and reliable operations of our facilities.
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Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and we do not expect to generate any revenue
from product sales for the foreseeable future. In connection with our collaboration with BMS, we have received an
aggregate of $127.5 million in payments, which have primarily consisted of the initial upfront and amendment payments,
development milestone payments and research funding support. We no longer receive research funding support. During the
year ended December 31, 2021, we recognized $24.7 million of revenue related to our collaboration with BMS of which
$22.7 million was previously deferred revenue. As of December 31, 2021, we had $68.0 million of deferred revenue
related to BMS, of which $56.7 million is classified as long-term on our consolidated balance sheet. Under this
collaboration, we will recognize revenue upon delivery of option packages to BMS or when milestones are achieved. As
such, we expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing of when
these events occur.
In connection with our former strategic alliance with Allergan, we received an aggregate of $130.0 million in
payments, which consisted of the initial upfront payment, an option exercise payment and a milestone payment. Prior to the
termination of our agreements with Allergan, certain of these payments were deferred and were being recognized over the
remaining contract term using the proportional performance method. During the third quarter of 2020, as a result of the
termination of our agreements with Allergan, we recognized $63.2 million of revenue that consisted of previously deferred
revenue net of a payment made to Allergan in connection with the termination.
For additional information about our revenue recognition policy related to the BMS collaboration or the Allergan
strategic alliance, see “—Critical Accounting Policies and Estimates—Revenue Recognition” included in this Annual
Report on Form 10-K.
For the foreseeable future we expect substantially all of our revenue will be generated from our collaboration with
Juno Therapeutics, and any other collaborations or agreements we may enter into.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research, preclinical development,
process and scale-up development, manufacture and clinical development of our product candidates, and the performance
of development activities under our collaboration agreements. These costs are expensed as incurred and include:
● employee-related expenses including salaries, benefits, and stock-based compensation expense;
● costs incurred under clinical trial agreements with investigative sites;
● costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical
and regulatory activities, including fees paid to third-party professional consultants, service providers and
suppliers;
● costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in
manufacturing preclinical and clinical study materials;
● costs incurred for the research and development activities under our collaboration agreements;
● facility costs including rent, depreciation, and maintenance expenses; and
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● fees for acquiring and maintaining licenses under our third-party licensing agreements, including any
sublicensing or success payments made to our licensors.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will
be necessary to complete the development of any product candidates we may identify and develop. This is due to the
numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:
● successful completion of preclinical studies, IND-enabling studies and natural history studies;
● successful enrollment in, and completion of, clinical trials;
● receipt of marketing approvals from applicable regulatory authorities;
● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
● obtaining and maintaining patent and trade secret protection and non-patent exclusivity;
● launching commercial sales of a product, if and when approved, whether alone or in collaboration with
others;
● acceptance of a product, if and when approved, by patients, the medical community, and third-party payors;
● effectively competing with other therapies and treatment options;
● a continued acceptable safety profile following approval;
● enforcing and defending intellectual property and proprietary rights and claims; and
● achieving desirable medicinal properties for the intended indications.
A change in the outcome of any of these variables with respect to the development of any product candidates we
develop would significantly change the costs, timing, and viability associated with the development of that product
candidate.
Research and development activities are central to our business model. We expect research and development costs
to increase significantly for the foreseeable future as our development programs progress, including as we progress the
clinical development of EDIT-101 and EDIT-301 as well as supporting preclinical studies for our other research programs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based
compensation 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 not
otherwise 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
research and development activities and potential commercialization of any product candidates we identify and develop.
These increases will include increased costs related to the hiring of additional personnel and fees to outside consultants. We
also anticipate increased expenses related to reimbursement of third-party patent-related expenses and expenses associated
with operating as a public company, including costs for audit, legal, regulatory, and tax-related services,
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director and officer insurance premiums, and investor relations costs. With respect to reimbursement of third-party
intellectual property-related expenses specifically, given the ongoing nature of the opposition and interference proceedings
involving the patents licensed to us under our license agreement with The Broad Institute, Inc. (“Broad”) and the President
and Fellows of Harvard College (“Harvard”), we anticipate general and administrative expenses will continue to be
significant.
Other (Expense) Income, Net
For the year ended December 31, 2021, other (expense) income, net consisted primarily of changes in interest
income and accretion of discounts associated with other marketable securities.
For the year ended December 31, 2020, other (expense) income, net consisted primarily of changes in the fair
value of equity securities, interest income and accretion of discounts associated with other marketable securities.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our
consolidated financial statements, which have been prepared in accordance with United States generally accepted
accounting principles. The preparation of our consolidated financial statements requires us to make judgments and
estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent
assets and liabilities 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 these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and
estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any,
will be reflected in the 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 financial
statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policy used in
the preparation of our consolidated financial statements requires the most significant judgments and estimates.
Revenue Recognition
We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”), Topic 606, Revenue Recognition (“ASC 606”). Accordingly, we recognize revenue following the
five step 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 transaction
price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or
as) we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that we will
collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract
inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised
within each contract and determine those that are performance obligations, and whether each promised good or service is
distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance
obligation when (or as) the performance obligation is satisfied. As part of the accounting for these arrangements, we must
develop assumptions that require judgment to determine the standalone selling price for each performance obligation
identified in the contract. A significant portion of revenue recognized from our strategic alliance with Allergan, prior to
termination, was related to research services performed for each clinical development program whereby revenue was
recognized as the underlying services were performed using a proportional performance model. Prior to the termination of
the arrangement with Allergan, we measured proportional performance based on full time employee hours incurred relative
to projected full time employee hours to complete the research services for each clinical development program. We
evaluated the measure of progress each reporting period and, if necessary, adjusted the measure of performance and related
revenue recognition.
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our
consolidated balance sheets.
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Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This
process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that
have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the
service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers
invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our
accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at
that time. Examples of estimated accrued research and development expenses include fees paid to clinical research
organizations, to investigative sites in connection with clinical trials, to sponsored research organizations, to service
providers in connection with preclinical development activities and to service providers related to product manufacturing,
development and distribution of clinical supplies.
We base our accrued expenses related to clinical trials on our estimates of the services performed and efforts
expended pursuant to our contractual arrangements, including those with clinical research organizations. The financial
terms of these agreements are sometimes subject to negotiation, vary from contract to contract and may result in uneven
payment flows. There may be instances in which payments made to our service providers will exceed the level of services
performed and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors
such as the successful enrollment of patients and the completion of clinical milestones. In accruing service fees, we
estimate the time period over which services will be performed and the level of effort to be expended in each period. If the
actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid
accordingly.
Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates
of the status and timing of services performed differs from the actual status and timing of services performed, we may
report amounts that are too high or too low in any particular period. To date, there have been no material differences from
our estimates to the amounts actually incurred.
Results of Operations
Comparison of Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the years ended December 31, 2021 and 2020,
together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Collaboration and other research and development
revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Other income, net
Other (expense) income, net
Interest income, net
Total other income, net
Net loss
Year Ended
December 31,
2021
2020
Dollar Change Percentage Change
$
25,544
$
90,732
$
(65,188)
(72) %
142,507
76,183
218,690
157,996
67,576
225,572
(1,698)
2,342
644
(192,502)
$
16,259
2,605
18,864
(115,976) $
$
(15,489)
8,607
(6,882)
(17,957)
(263)
(18,220)
(76,526)
(10) %
13 %
(3) %
n/m
(10) %
(97) %
66 %
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For our results of operations, we have included the respective percentage of changes, unless greater than 100% or
less than (100)%, in which case we have denoted such changes as not meaningful (n/m).
Collaboration and Other Research and Development Revenues
Collaboration and other research and development revenues decreased by $65.2 million, to $25.5 million for the
year ended December 31, 2021 from $90.7 million for the year ended December 31, 2020. This decrease was primarily
attributable to $70.6 million of revenue recognized in the year ended December 31, 2020 as a result of the termination of
our strategic alliance with Allergan, as well as to $7.6 million in revenue recognized in 2020 pursuant to an out-license
agreement we entered into during the second quarter 2020, for which there was no similar revenue recognized during 2021.
This decrease was partially offset by an increase of $13.5 million in revenue recognized pursuant to our research
collaboration with Juno Therapeutics during the year ended December 31, 2021 compared to the year ended December 31,
2020.
Research and Development Expenses
Research and development expenses decreased by $15.5 million, to $142.5 million for the year ended December
31, 2021 from $158.0 million for the year ended December 31, 2020. The following table summarizes our research and
development expenses for the years ended December 31, 2021 and December 31, 2020, together with the changes in those
items in dollars (in thousands) and the respective percentages of change:
External research and development expenses
Employee related expenses
Stock-based compensation expenses
Facility expenses
Sublicense and license fees
Other expenses
Total research and development expenses
$
$
Year Ended
December 31,
2021
53,964
40,474
16,553
16,446
11,624
3,446
142,507
$
$
2020
Dollar Change
63,807
32,349
11,580
13,372
32,888
4,000
157,996
$
$
(9,843)
8,125
4,973
3,074
(21,264)
(554)
(15,489)
Percentage Change
(15) %
25 %
43 %
23 %
(65) %
(14) %
(10) %
The decrease in research and development expenses for the year ended December 31, 2021 compared to the year
ended December 31, 2020 was primarily attributable to:
● approximately $21.3 million in decreased sublicense and license fees resulting from success payments that
were triggered during the fourth quarter of 2020 in connection to a license and sponsored research agreement
with Broad which was partially offset by a success payment that was triggered during the first quarter of
2021;
● approximately $9.8 million in decreased external research and development expenses related to expenses
incurred in the year ended December 31, 2020 under our profit-sharing arrangement with Allergan, including
a one-time in-process research and development expense of $5.0 million for re-acquiring the rights to EDIT-
101 from Allergan in the third quarter of 2020, as well as a decrease in expenses incurred
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related to an in-license arrangement that we entered into during the first quarter 2020 for which there was no
similar expense in 2021; and
● approximately $0.6 million in decreased other expenses.
These decreases were partially offset by the following increases in research and development expenses:
● approximately $8.1 million in increased employee-related expenses due to an increase in the size of our
workforce;
● approximately $5.0 million in increased stock-based compensation expenses primarily due to expense
recognized in relation to an increase in restricted stock units granted to employees; and
● approximately $3.1 million in increased facility and other related expenses primarily related to an increase in
lab space.
General and Administrative Expenses
General and administrative expenses increased by approximately $8.6 million, to $76.2 million for the year ended
December 31, 2021 from $67.6 million for the year ended December 31, 2020. The following table summarizes our general
and administrative expenses for the years ended December 31, 2021 and December 31, 2020, together with the changes in
those items in dollars (in thousands) and the respective percentages of change:
Stock-based compensation expenses
Employee related expenses
Intellectual property and patent related fees
Facility and other expenses
Professional service expenses
Total general and administrative expenses
Year Ended
December 31,
2021
26,846
16,929
16,542
8,276
7,590
76,183
$
$
$
$
2020
11,576
15,758
18,654
7,922
13,666
67,576
$
Dollar Change
15,270
1,171
(2,112)
354
(6,076)
8,607
$
Percentage Change
n/m
7 %
(11) %
4 %
(44) %
13 %
The increase in general and administrative expenses for the year ended December 31, 2021 compared to the year
ended December 31, 2020 was primarily attributable to:
● approximately $15.3 million in increased stock-based compensation expenses related to the acceleration of
vesting of certain equity awards held by our former Chief Executive Officer in connection with her
separation from our company in February 2021, as well as stock-based compensation expenses as a result of
market-based and performance-based awards that were granted to our current Chief Executive Officer and
certain other employees in 2021;
● approximately $1.2 million in increased employee-related expenses primarily due to an increase in the size of
our workforce and the timing of hiring key executives; and
● approximately $0.4 million in increased facility and other expenses.
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These increases were partially offset by the following decreases in general and administrative expenses:
● approximately $6.1 million in decreased professional service expenses primarily due to additional
professional service expenses incurred in the third quarter of 2020 in connection with the termination of the
Allergan agreement; and
● approximately $2.1 million in decreased intellectual property and patent related fees.
Total Other Income, Net
For the year ended December 31, 2021, total other income, net was $0.6 million, which was primarily attributable
to interest income and accretion of discounts associated with marketable securities.
For the year ended December 31, 2020, total other income, net was $18.9 million, which was primarily
attributable to the realized gains related to the sale of corporate equity securities, interest income and accretion of discounts
associated with marketable securities.
Comparison of Years Ended December 31, 2020 and 2019
For a discussion of our results of operations for the year ended December 31, 2020 as compared to the year ended
December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations
in our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26,
2021.
Liquidity and Capital Resources
Sources of Liquidity
In January 2021, we completed a public offering in which we sold 3,500,000 shares of our common stock and
received net proceeds of approximately $216.9 million. In February 2021, the underwriters in the public offering exercised
their option to purchase an additional 525,000 shares, resulting in additional net proceeds to us of approximately $32.6
million. As of December 31, 2021, we have raised an aggregate of $898.0 million in net proceeds through the sale of shares
of our common stock in public offerings and at-the-market offerings. We also have funded our business from payments
received under our research collaboration with Juno Therapeutics and our former strategic alliance with Allergan. As of
December 31, 2021, we had cash, cash equivalents and marketable securities of $619.9 million.
In May 2021, we entered into a common stock sales agreement with Cowen and Company, LLC (“Cowen”) under
which we from time to time can issue and sell shares of our common stock through Cowen in at-the-market offerings for
aggregate gross sale proceeds of up to $300.0 million (the “ATM Facility”). We have not sold any shares of our common
stock under this ATM Facility as of the date of this Annual Report on Form 10-K.
In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn milestone and
other payments under our collaboration agreement with Juno Therapeutics. Our ability to earn the milestone payments and
the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and
commercial activities and, as such, are uncertain at this time. As of December 31, 2021, our right to contingent payments
under our collaboration agreement with Juno Therapeutics is our only significant committed potential external source of
funds.
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Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2021 and
2020, respectively (in thousands):
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Net Cash Used in Operating Activities
Year Ended
December 31,
2021
2020
$
$
(163,803)
(54,466)
282,106
63,837
$
$
(179,843)
(140,522)
224,122
(96,243)
The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in
components of working capital.
Net cash used in operating activities was approximately $163.8 million for the year ended December 31, 2021,
which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, a success
payment that was settled in cash during the year, patent costs and license fees, rent expenses and increased costs as a result
of staffing needs due to our expanding operations. These expenses were partially offset by cash inflows from license fees
received in the period.
Net cash used in operating activities was approximately $179.8 million for the year ended December 31, 2020,
which primarily consisted of our net loss which was adjusted for a non-cash research and development expense of $27.5
million related to a success payment that was triggered during the year that was subsequently settled in shares of common
stock. The changes in working capital relate to our on-going preclinical and clinical activities, patent costs and license fees,
rent expenses and increased costs as a result of staffing needs due to our expanding operations. These expenses were
partially offset by the recognition of deferred revenue relating to the Allergan termination and a milestone payment.
Net Cash Used in Investing Activities
Net cash used in investing activities was approximately $54.5 million for the year ended December 31, 2021,
primarily related to costs to acquire marketable securities of $409.0 million and purchases of property and equipment of
$8.0 million, partially offset by proceeds from maturities of marketable securities of $362.4 million.
Net cash used in investing activities was approximately $140.5 million for the year ended December 31, 2020,
primarily related to the costs to acquire marketable securities of $458.4 million and costs to acquire property and
equipment of $7.2 million, partially offset by proceeds from maturities of marketable securities of $305.0 million and
proceeds from the sale of corporate equity securities of $20.0 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately $282.1 million for the year ended December 31,
2021 and consisted of $249.5 million in net proceeds received from the offering of our common stock in the first quarter
and $31.5 million in proceeds received from exercises of options for our common stock.
Net cash provided by financing activities was approximately $224.1 million for the year ended December 31,
2020, primarily related to $203.7 million in net proceeds received from the offering of our common stock in the second
quarter, and $19.5 million in proceeds received from exercises of options for our common stock.
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For a discussion of our cash flows for the year ended December 31, 2019, see Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended
December 31, 2020, which was filed with the SEC on February 26, 2021.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the
clinical development of EDIT-101 and EDIT-301; further advance our current research programs and our preclinical
development activities; seek to identify product candidates and additional research programs; initiate preclinical testing and
clinical trials for other product candidates we identify and develop, including preparing for and initiating the clinical
development of EDIT-301 for the treatment of transfusion-dependent beta-thalassemia; maintain, expand, and protect our
intellectual property portfolio, including reimbursing our licensors for expenses related to the intellectual property that we
in-license from such licensors; hire additional clinical, quality control, and scientific personnel; and incur 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 incur significant commercialization expenses related to product sales, marketing, manufacturing,
and distribution to the extent that such sales, marketing, and distribution are not the responsibility of a collaborator. We do
not expect to generate significant recurring 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 as a public company. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms,
we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization
efforts.
We expect that our existing cash, cash equivalents and marketable securities at December 31, 2021 will
enable us to fund our operating expenses and capital expenditure requirements through 2023. Our forecast of the period of
time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a
forward-looking statement and involves significant risks and uncertainties. We have based this forecast on assumptions that
may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our
capital resources and liquidity. We could utilize our available capital resources sooner than we currently expect. The
amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but
not limited to:
● the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and
clinical or natural history study trials for the product candidates we develop;
● the costs of progressing the clinical development of EDIT-101 to treat LCA10, including expanding trial
enrollment to explore dose response and support establishment of registrational trial endpoints;
● the costs of progressing the clinical development of EDIT-301 to treat sickle cell disease and preparing for
and initiating the clinical development of EDIT-301 to treat transfusion-dependent beta-thalassemia;
● the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual
property and proprietary rights, and defending intellectual property-related claims;
● the costs, timing, and outcome of regulatory review of the product candidates we develop;
● the costs of future activities, including product sales, medical affairs, marketing, manufacturing, and
distribution, for any product candidates for which we receive regulatory approval;
● the success of our collaboration with Juno Therapeutics;
● whether Juno Therapeutics exercises any of its options to extend the research program term and/or to
additional research programs under our collaboration;
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● 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
results required to obtain marketing approval and achieve product sales. In addition, any product candidate that we identify
and develop, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from
sales of genomic medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we
will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may
not be available 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 needs
through 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 that
adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or
declaring dividends.
If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or
product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds
through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product
development or future commercialization efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
Contractual Obligations
As of December 31, 2021, we had non-cancelable operating leases with total future minimum lease payments of
$29.1 million, of which $12.0 million will be payable in 2022. These minimum lease payments exclude our share of the
facility operating expenses, real-estate taxes and other costs that are reimbursable to the landlord under the leases.
Our agreements with certain institutions to license intellectual property include potential milestone and success
fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may
be required to pay. Our agreements to license intellectual property include potential milestone payments that are dependent
upon the development of products using the intellectual property licensed under the agreements and contingent upon the
achievement of development or regulatory approval milestones, as well as commercial milestones. These potential
obligations are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations
are not known with certainty. For further information regarding these agreements, please see “Business—Our
Collaborations and Licensing Strategy.”
We also enter into contracts in the normal course of business with contract research organizations, contract
manufacturing organizations and other vendors to assist in the performance of our research and development activities and
other services and products for operating purposes. These contracts generally provide for termination at any time upon
prior notice.
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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, 2021, we had cash and cash
equivalents of $203.5 million, primarily held in money market mutual funds consisting of U.S. government-backed
securities, and marketable securities of $416.4 million, primarily consisting of U.S. treasury and government-backed
securities, corporate debt securities, and commercial paper. Our primary exposure to market risk is interest rate sensitivity,
which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash
equivalents, are in the form, or may be in the form of, money market 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 interest rates would not have a material effect on the fair
market value of our investments.
While we contract with certain vendors and institutions internationally, substantially all of our total liabilities as of
December 31, 2021 were denominated in the United States dollar and we believe that we do not have any material
exposure to foreign currency exchange rate risk.
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Item 8. Financial Statement and Other Supplementary Information.
EDITAS MEDICINE, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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122
124
125
126
127
128
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Editas Medicine, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Editas Medicine, Inc. (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity
and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Description of the
Matter
Accrued Research and Development Expense
The Company’s accrual for research and development expenses totaled $4.5 million at
December 31, 2021. As discussed in Note 2 to the consolidated financial statements, the
Company expenses research and development costs as incurred. The Company’s
determination of costs incurred to conduct research and development on the Company’s
product candidates, as well as the related accrued expenses at each reporting period
incorporates judgment and utilizes various assumptions, including an evaluation of the
information provided to the Company by third parties on actual costs incurred but not yet
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How We Addressed the
Matter in Our Audit
billed, estimated project timelines and patient enrollment. Payments for these activities are
based on the terms of the individual arrangements, which often differ from the pattern of
costs incurred.
Auditing the Company’s research and development accruals is especially complex due to the
judgments and estimations of the research and development expenses. The Company uses
judgment and estimation to estimate costs incurred and not yet billed at each reporting
period as a result of the volume of pre-clinical and clinical trials and the related
manufacturing activities, as well as the extent of third-party vendors utilized. Additionally,
due to the timing of invoices received from third parties, actual amounts incurred are not
always known as of the audit report date.
We obtained an understanding of the Company’s process, evaluated and tested the design
and operating effectiveness of internal controls that address the risks related to the
completeness and valuation of accrued research and development expenses.
To test the research and development accrual, our audit procedures included, among others,
testing the accuracy and completeness of the underlying data used in the estimates and
evaluating and testing the significant assumptions that are used by management to estimate
the accruals. To test the significant assumptions, we inspected the contracts and any
amendments to the contracts with third-party service providers, corroborated the progress of
pre-clinical and clinical trials and other research and development projects with the
Company’s research and development personnel that oversee the clinical trials and the
related manufacturing activities, and obtained information received directly from third
parties, which included the third parties’ estimate of costs incurred to date. We also tested
subsequent invoicing received from third parties.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
February 24, 2022
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Editas Medicine, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Marketable securities
Property and equipment, net
Right-of-use assets
Restricted cash and other non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue, current
Operating lease liabilities
Total current liabilities
Operating lease liabilities, net of current portion
Deferred revenue, net of current portion
Other non-current liabilities
Total liabilities
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; 68,489,257
and 62,689,457 shares issued, and 68,435,257 and 62,563,457 shares outstanding at
December 31, 2021 and December 31, 2020, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
$
$
203,519
296,326
267
7,198
507,310
120,071
17,118
26,173
6,811
677,483
5,050
20,192
11,333
10,309
46,884
16,069
60,888
—
123,841
—
7
1,411,827
(493)
(857,699)
553,642
677,483
$
$
$
$
139,682
262,428
6,048
10,929
419,087
109,664
14,020
25,128
4,703
572,602
6,408
24,046
20,943
6,811
58,208
19,324
73,984
27,500
179,016
—
6
1,058,823
(46)
(665,197)
393,586
572,602
The accompanying notes are an integral part of the consolidated financial statements.
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Editas Medicine, Inc.
Consolidated Statements of Operations
(amounts in thousands, except per share and share data)
Collaboration and other research and development revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income, net:
Other (expense) income, net
Interest income, net
Total other income, net
Net loss
Reconciliation of net loss to net loss attributable to common
stockholders:
Net loss
Net loss per share, basic and diluted
Weighted-average common shares outstanding, basic and diluted
Year Ended
December 31,
2020
2019
2021
$
25,544
$
90,732
$
20,531
142,507
76,183
218,690
(193,146)
(1,698)
2,342
644
(192,502)
$
(192,502)
$
$
(2.85)
67,619,388
157,996
67,576
225,572
(134,840)
16,259
2,605
18,864
(115,976) $
$
96,898
64,555
161,453
(140,922)
(137)
7,313
7,176
(133,746)
(115,976) $
(1.98) $
$
$
58,609,389
(133,746)
(2.68)
49,983,329
The accompanying notes are an integral part of the consolidated financial statements.
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Editas Medicine, Inc.
Consolidated Statements of Comprehensive Loss
(amounts in thousands)
Net loss
Other comprehensive loss:
Unrealized (loss) gain on marketable debt securities
Comprehensive loss
2021
(192,502)
(447)
(192,949)
$
$
$
$
Year Ended
December 31,
2020
(115,976)
2019
(133,746)
$
(153)
(116,129)
136
(133,610)
The accompanying notes are an integral part of the consolidated financial statements.
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Editas Medicine, Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands except share data)
Common Stock
Shares
48,758,951
—
Amount
5
—
$
Balance at December 31, 2018
Cumulative effect adjustment for adoption of new accounting guidance
Issuance of common stock from at-the-market offering, net of issuance costs of $0.2
4,341,428
million
1,120,186
Exercise of stock options
—
Stock-based compensation expense
99,919
Vesting of restricted common stock awards
35,314
Purchase of common stock under benefits plans
—
Unrealized gain on marketable debt securities
—
Net loss
Balance at December 31, 2019
54,355,798
Issuance of common stock from public offering, net of issuance costs of $0.1 million 6,900,000
964,412
Exercise of stock options
—
Stock-based compensation expense
304,638
Vesting of restricted common stock awards
38,609
Purchase of common stock under benefit plan
—
Unrealized loss on marketable debt securities
—
Net loss
Balance at December 31, 2020
62,563,457
Issuance of common stock from public offering, net of issuance costs of $0.3 million 4,025,000
303,599
Issuance of common stock for repayment of notes payable
1,233,958
Exercise of stock options
—
Stock-based compensation expense
267,268
Vesting of restricted common stock awards
41,975
Purchase of common stock under benefit plans
—
Unrealized loss on marketable debt securities
—
Net loss
68,435,257
Balance at December 31, 2021
—
—
—
—
—
—
—
5
1
—
—
—
—
—
—
6
1
—
—
—
—
—
—
—
7
$
$
$
Additional
Paid-In
Capital
$ 652,464
—
116,356
14,863
27,243
—
620
—
—
$ 811,546
203,725
19,500
23,156
—
896
—
—
$1,058,823
249,458
27,500
31,495
43,399
—
1,152
—
—
$ 1,411,827
Accumulated
Other
Total
AccumulatedComprehensive Stockholders’
Deficit
(416,278)$
803
(Loss) Income
(29)
—
$
Equity
236,162
803
—
—
—
—
—
—
(133,746)
(549,221)$
—
—
—
—
—
—
(115,976)
(665,197)$
—
—
—
—
—
—
—
(192,502)
(857,699)$
—
—
—
—
—
136
— $
107
$
—
—
—
—
—
(153)
—
(46)
—
—
—
—
—
—
(447)
—
(493)
$
$
116,356
14,863
27,243
—
620
136
(133,746)
262,437
203,726
19,500
23,156
—
896
(153)
(115,976)
393,586
249,459
27,500
31,495
43,399
—
1,152
(447)
(192,502)
553,642
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
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Editas Medicine, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
Cash flow from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Depreciation
Realized gain on corporate equity securities
Non-cash research and development expenses
Other non-cash items, net
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Right-of-use assets
Other non-current assets
Accounts payable
Accrued expenses
Deferred revenue
Operating lease liabilities
Other current and non-current liabilities
Net cash used in operating activities
Cash flow from investing activities
Purchases of property and equipment
Proceeds from the sale of equipment
Purchases of marketable securities
Proceeds from maturities of marketable securities
Proceeds from sale of corporate equity securities
Net cash (used in) provided by investing activities
Cash flow from financing activities
Proceeds from offering of common stock, net of issuance costs
Proceeds from exercise of stock options
Issuance of common stock under benefit plans
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash and non-cash activities:
Fixed asset additions included in accounts payable and accrued expenses
Cash paid in connection with operating lease liabilities
Offering costs included in accounts payable and accrued expenses
Right-of-use assets obtained in exchange of operating lease obligations
Issuance of common stock for settlement of success payments (see Note 8)
Year Ended
December 31,
2020
2019
2021
$ (192,502) $ (115,976) $
(133,746)
43,399
5,053
—
—
1,657
5,781
3,731
9,691
(2,108)
(1,139)
(4,166)
(22,706)
(10,494)
—
(163,803)
(7,977)
—
(408,891)
362,402
—
(54,466)
23,156
3,959
(16,366)
27,500
104
(5,630)
(4,643)
3,633
(719)
855
1,707
(91,794)
(2,946)
(2,683)
(179,843)
(7,162)
12
(458,404)
305,000
20,032
(140,522)
249,459
31,495
1,152
282,106
63,837
143,559
$ 207,396
203,726
19,501
895
224,122
(96,243)
239,802
$ 143,559
$
$
749
13,094
—
10,736
—
656
9,760
—
—
27,500
$
$
27,243
2,830
—
—
(2,928)
(388)
(495)
(9,300)
(15)
274
9,485
55,395
9,324
1,652
(40,669)
(6,167)
102
(342,183)
360,500
—
12,252
116,341
14,863
620
131,824
103,407
136,395
239,802
728
5,970
15
19,461
—
The accompanying notes are an integral part of the consolidated financial statements.
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1. Nature of Business
Editas Medicine, Inc.
Notes to Consolidated Financial Statements
Editas Medicine, Inc. (the “Company”) is a leading, clinical stage genome editing company dedicated to
developing potentially transformative genomic medicines to treat a broad range of serious diseases. The Company was
incorporated in the state of Delaware in September 2013. Its principal offices are in Cambridge, Massachusetts.
Since its inception, the Company has devoted substantially all of its efforts to business planning, research and
development, recruiting management and technical staff, and raising capital. The Company has primarily financed its
operations through various equity financings, payments received under a research collaboration with Juno Therapeutics, a
wholly-owned subsidiary of the Bristol-Myers Squibb Company (“Juno Therapeutics”), and payments received under a
strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (together with its affiliates,
“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
candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its
product candidates, 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.
Liquidity
In January 2021, the Company completed a public offering whereby it sold 3,500,000 shares of its common stock
and received net proceeds of approximately $216.9 million. In February 2021, the underwriters in the public offering
exercised their option to purchase an additional 525,000 shares, resulting in additional net proceeds to the Company of
approximately $32.6 million.
In May 2021, the Company entered into a common stock sales agreement with Cowen and Company, LLC
(“Cowen”), under which the Company from time to time can issue and sell shares of its common stock through Cowen in
at-the-market offerings for aggregate gross sale proceeds of up to $300.0 million (the “ATM Facility”). As of December 31,
2021 the Company has not sold any shares of its common stock under the ATM Facility.
The Company has incurred annual net operating losses in every year since its inception. The Company has an
accumulated deficit of $857.7 million at December 31, 2021. The Company expects that its existing cash, cash equivalents
and marketable securities on December 31, 2021 will enable it to fund its operating expenses and capital expenditure
requirements through 2023.The Company 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 product revenue or revenues from collaborative partners, on terms acceptable to the
Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when
needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Editas Medicine, Inc. and its wholly
owned subsidiary, Editas Securities Corporation, which is a Delaware subsidiary created to buy, sell and hold securities. All
intercompany transactions and balances have been eliminated.
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Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is
meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting
Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board
(“FASB”).
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates 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,
estimates related to revenue recognition, stock-based compensation expense, the accrual for research and development
expenses, valuations of in-process research and development assets and deferred tax valuation allowances. The Company
bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be
reasonable under the circumstances. Actual results may differ from those estimates or assumptions.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments
measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s
own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset
or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that
reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and
are 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 asset
or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market
participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes
between the following:
● Level 1 – Quoted market prices in active markets for identical assets or liabilities.
● Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted
market prices, interest rates, and yield curves.
● Level 3 – Unobservable inputs developed using estimates of assumptions developed by the Company, which
reflect 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 in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within
the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
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.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with original maturities of 90 days or less at
acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money
market funds.
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The Company has restricted cash of $3.9 million held as collateral for the Company’s office and lab facilities and
credit card program. The restricted funds are maintained in a traditional bank account.
The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balance
sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):
Cash and cash equivalents
Restricted cash included in "Restricted cash and other non-current assets"
Total cash, cash equivalents, and restricted cash
Marketable Securities
Year Ended
December 31,
2021
619,916
3,877
623,793
$
$
$
$
2020
511,774
3,877
515,651
The Company classifies marketable securities with a remaining maturity when purchased of greater than three
months and less than one year from the balance sheet date as current. Marketable securities are classified as long-term
assets on the consolidated balance sheets if the contractual maturity exceeds one year and the Company does not intend to
utilize the marketable securities to fund current operations. As of December 31, 2021, the Company’s marketable securities
consisted of investments in available-for-sale debt securities.
Available-for-sale debt securities are carried at fair value with the unrealized gains and losses included in other
comprehensive loss as a component of stockholders’ equity until realized. Any premium or discount arising at purchase 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).
At each reporting date, the Company records an allowance for credit losses and reports it as credit loss expense
which is included in “Other income (expense), net” in the Company’s consolidated statement of operations. The estimate
for credit losses includes a measure of the expected risk of credit loss even if the risk is remote. When assessing financial
assets for credit losses, the Company pools financial assets with similar risk characteristics and performs a collective
evaluation. A credit loss on an available-for-sale debt security is limited to the difference in fair value and the amortized
cost. A previously recognized credit loss may be increased or decreased in subsequent periods if the Company’s estimate of
fair value changes. To determine whether to record a credit loss, the Company considers issuer or vendor specific credit
ratings and historical losses as well as current economic conditions and its expectations for future economic conditions. To
date, the Company has not had any credit losses, and the Company did not have an allowance for credit losses as of
December 31, 2021 and 2020.
During 2020, the Company’s marketable securities also included corporate equity securities. The Company
classified investments in equity securities that had a readily determinable fair value as marketable securities in the
Company’s consolidated balance sheets. The fair value of these securities were based on a quoted price for an identical
equity security. If the equity security had a restriction that was determined to be an attribute of the security that would
transfer to a market participant, the fair value of the security was measured based on the quoted price for an otherwise
identical unrestricted equity security, adjusted for the effect of the restriction. The adjustment reflects the discount that a
market participant would demand for the risk relating to the inability to dispose of the security for a specified period of
time. The Company recorded changes in the fair value of its equity securities in “Other income (expense), net” in the
Company’s consolidated statement of operations.
Accounts Receivable
The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for
receivables when collection becomes doubtful. The Company's receivables primarily relate to amounts reimbursed under
its collaboration agreements. The Company believes that credit risk associated with its collaborations partners is not
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significant. To date, the Company has not had any write-offs of bad debt, and the Company did not have an allowance for
doubtful accounts as of December 31, 2021 and 2020.
Concentrations of Credit Risk and Off-Balance Sheet Risk
The Company has no financial instruments with off-balance sheet risk such as foreign exchange contracts, option
contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to a
concentration of credit risk are cash, cash equivalents, marketable securities and receivables owed to the Company from
collaboration partners. The Company’s cash, cash equivalents and marketable securities are held in accounts at a financial
institution that may exceed federally insured limits. The Company has not experienced any credit losses in such accounts
and does not believe it is exposed to any significant credit risk on these funds.
Property and Equipment
Property and equipment consists of computers, laboratory equipment, furniture and office equipment, and
leasehold improvements and is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve
or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and
betterments are capitalized. Depreciation is calculated over the estimated useful lives of the assets using the straight-line
method. The Company capitalizes laboratory equipment used for research and development if it has alternative future use
in research and development or otherwise.
Asset:
Lab equipment
Computer equipment and software
Furniture and equipment
Leasehold improvements
Estimated Useful life
5 years
3 years
5 years
Shorter of useful life or remaining lease term
Impairment of Long-lived Assets
The Company evaluates long-lived assets for potential impairment when events or changes in circumstances
indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values
of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the
assets exceed their fair value. The Company has not recognized any impairment losses from inception through December
31, 2021.
Profit-Sharing Arrangements
The Company considers the nature and contractual terms of the arrangements and assesses whether such
arrangements involve a joint operating activity pursuant to which the Company is an active participant and is exposed to
significant risks and rewards with respect to such arrangement. If the Company is an active participant and is exposed to
significant risks and rewards with respect to such arrangement, the Company accounts for such arrangement as a
collaboration under ASC Topic 808, Collaborative Arrangements (“ASC 808”). ASC 808 describes arrangements within its
scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative
guidance, in certain cases by analogy.
Payments received from a collaboration partner to which this policy applies are recorded as contra-expense in the
applicable period and may include development costs or patent expense reimbursements. The Company classifies payments
made under the cost sharing provisions of such arrangements as a component of research and development expenses to
reflect the joint risk sharing nature of such profit-sharing arrangements. The Company classifies payments owed or
receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in the Company’s
consolidated balance sheets. The Company had one agreement that was accounted for in accordance with
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ASC 808 prior to the termination of the arrangement during the year ended 2020. The arrangements and payments are
described more fully in Note 9.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers
(“ASC 606”). The Company enters into collaboration agreements and certain other agreements that are within the scope of
ASC 606, under which the Company licenses, may license or grants an option to license rights to certain of the Company’s
product candidates and performs research and development services in connection with such arrangements. 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 sales milestone
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
an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To
determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC
606, 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 in
the 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
Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is
probable that the 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 to
additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise
such options, unless the option provides a material right to the customer. Performance obligations are promised goods or
services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer
can benefit from the good or service on its own or together with other readily available resources and (ii) the promised
good or service is separately identifiable from other promises in the contract. In assessing whether promised good or
services are distinct, the Company considers factors such as the stage of development of the underlying intellectual
property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is
readily available and whether the goods or services are integral or dependent to other goods or services in the contract.
The Company estimates the transaction price based on the amount expected to be received for transferring the
promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At
the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential
payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method
or expected value method to estimate the amount expected to be received based on which method best predicts the amount
expected to be received. The amount of variable consideration that is included in the transaction price may be constrained
and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the
cumulative revenue recognized will not occur in a future period.
The Company’s contracts often include development and regulatory milestone payments that are as assessed under
the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone
payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not
considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company
re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if
necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up
basis, which would affect collaboration and other research and development revenues in the period of adjustment.
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For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and
the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later
of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been
allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting
from 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 must
develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation
identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may
include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable
consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable
consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with
the 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
for the related goods or services. For performance obligations which consist of licenses and other promises, the Company
utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined
performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring
progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of
performance and related 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 its
obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to
consideration is unconditional.
Research and Development Expenses
Research and development expenses are charged to expense as incurred in performing research and development
activities. 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 clinical
activities on the Company’s behalf, the cost of purchasing lab supplies and non-capital equipment used in preclinical and
clinical 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 licensing
agreements which are typically expensed when incurred if the technology licensed has no alternate future uses, including
any sublicensing or success payments made to the Company’s licensors. In accruing service fees, the Company estimates
the time period over which services will be performed and the level of effort to be expended in each period. If the actual
timing of the performance of services or the level of effort varies from the Company’s estimate, the accrual or prepaid is
adjusted accordingly. The Company defers and capitalizes non-refundable advance payments made by the Company for
research and development activities until the related goods are received or the related services are performed. In
circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
In-process Research and Development Assets
In-process research and development assets that are acquired in a transaction that does not qualify as a business
combination under GAAP and that do not have an alternative future use are expensed in the period in which the assets are
acquired.
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Patent Costs
The Company expenses patent and patent application costs and related legal costs for the prosecution and
maintenance of such patents and patent applications, including patents and patent applications the Company in-licenses, as
incurred, and classifies such costs as general and administrative expenses in the accompanying consolidated statements of
operations.
Leases
The Company accounts for leases in accordance with ASC 842. At the inception of an arrangement the Company
determines whether the arrangement contains a lease. If a lease is identified in an arrangement, the Company recognizes a
right-of-use asset and liability on its balance sheet and determines whether the lease should be classified as a finance or
operating lease. The Company does not recognize assets or liabilities for leases with lease terms of less than 12 months.
Lease payments for short-term leases are recorded to operating expense on a straight-line basis over the lease term and
variable lease payments are recorded in the period in which the obligation for those payments is incurred.
A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease: (i) there is
a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to
purchase the leased asset that it is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining
economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of
the fair value of the leased asset, and (v) the nature of the leased asset is specialized to the point that it is expected to
provide the lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases.
Finance and operating lease assets and liabilities are recognized at the lease commencement date based on the
present value of the lease payments over the lease term using the discount rate implicit in the lease. If the rate is not readily
determinable, the Company utilizes its incremental borrowing rate at the lease commencement date. Operating lease assets
are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the straight-line
method as an operating expense over the lease term. Finance lease assets are amortized to depreciation expense using the
straight-line method over the shorter of the useful life of the related asset or the lease term. Finance lease payments are
bifurcated into (i) a portion that is recorded as imputed interest expense and (ii) a portion that reduces the finance liability
associated with the lease.
The Company does not separate lease and non-lease components when determining which lease payments to
include in the calculation of its lease assets and liabilities. Variable lease payments are expensed as incurred. If a lease
includes an option to extend or terminate the lease, the Company reflects the option in the lease term if it is reasonably
certain it will exercise the option.
Stock-based Compensation Expense
The Company accounts for all stock-based awards granted to employees and non-employees as stock-based
compensation expense at fair value in accordance with FASB ASC Topic 718 Compensation—Stock Compensation (“ASC
718”). The Company estimates the grant date fair value of restricted stock based on the market value of the Company’s
common stock on the date of the grant. The Company estimates the grant date fair value of each option award using the
Black-Scholes option-pricing model.
The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (1) the
expected stock price volatility, (2) the calculation of expected term of the award, (3) the risk-free interest rate, and (4) the
expected dividend yield. Because there had been no public market for the Company’s common stock prior to its initial
public offering, there was a lack of company-specific historical and implied volatility data. Accordingly, the Company
based its estimates of expected volatility on the historical volatility of a group of similar companies that are publicly traded.
The Company calculates historical volatility based on a period of time commensurate with the expected term. The
Company computes expected volatility based on the historical volatility of a representative group of companies with
similar characteristics to the Company, including their stages of product development and focus on the life science
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industry. The Company uses the simplified 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 have sufficient historical exercise data to provide a reasonable basis upon which to estimate the
expected term. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the
basis for the expected term. The Company determines the risk-free interest rate based on a treasury instrument whose term
is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the
Company has never paid dividends and does not have current plans to pay any dividends on its common stock.
Restricted stock awards (“RSAs”) are subject to repurchase rights. Accordingly, the Company has recorded the
proceeds from the issuance of RSAs as a liability in the consolidated balance sheets. The restricted stock liability is
reclassified into stockholders’ equity as the restricted stock vests.
Service-Based Awards
For stock-based awards issued to employees, non-employee service providers and members of the Company’s
board of directors (the “Board”), the Company recognizes the grant date fair value of the service-based options, RSAs or
restricted stock unit awards (“RSUs”) on a straight-line basis over the requisite service period, which is generally the
vesting period of the respective award. If an employee or non-employee service requirement is concluded to be non-
substantive, the stock-based compensation expense would be expensed immediately.
Market-Based Awards
For market-based awards, the Company recognizes the grant date fair value of the market-based options over the
earlier of the derived service period, pursuant to a Monte-Carlo simulation model, or when the market-based vesting
conditions are met. The Company estimates an award's derived service period based on the best estimate of the period over
which an award's vesting condition(s) will be achieved. If the market-based vesting conditions are met ahead of the derived
service period, the expense will be accelerated. If the market-based vesting conditions are not met and the market-based
award is cancelled, the expense will not be reversed unless the market-based award is forfeited.
Performance-Based Awards
For performance-based awards, the Company recognizes the grant date fair value of the performance-based
options or RSUs over the requisite service period using the accelerated attribution method to the extent achievement of the
performance condition is probable. Certain awards are subject to both performance and continued service conditions.
The Company classifies stock-based compensation expense in its consolidated statement of operations and
comprehensive loss in the same manner in which the award recipient’s salary or service payments are classified. Forfeitures
are recorded as they occur. If factors change or different assumptions are used, the Company’s stock-based compensation
expense could be materially different in the future
Success Payments, Research Funding Payments and Notes Payables
Certain arrangements require the Company to make payments, if and when, the Company’s market capitalization
reaches specified thresholds for a specific period of time or upon a sale of the Company for consideration in excess of those
thresholds or above a specific amount. The payments are accounted for under the provisions of ASC 718, whereby the
Company recognizes the expense and liability when it becomes probable that the amounts will become due. The Company
records this expense as a research and development expense in its consolidated statements of operations. The arrangements
and payments are described more fully in Note 8.
The payments are payable in either cash, common stock or promissory notes payable, depending upon the licensor
and the Company’s election. If the Company elects to issue a promissory note relating to contractual obligations, the
promissory note bears interest at 4.8% per annum. Outstanding principal and accrued interest on the promissory notes are
typically payable on the earlier of five months or a specified period of time following a Company sale or change of control
event, subject to certain exceptions.
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Income taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for
deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured
using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The
Company 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 uncertain
tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely
than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the
technical merits of the tax position as well as consideration of the available facts and circumstances.
The Company assesses the impact of various tax reform proposals and modifications to existing tax treaties in all
jurisdictions where they have operations to determine the potential effect on the Company’s business and any assumptions
they have made about their future taxable income. The Company cannot predict whether any specific proposals will be
enacted, the terms of any such proposals or what effect, if any, such proposals would have on the Company if they were to
be enacted.
Beginning in 2022, the Tax Cut and Jobs Act of 2017 eliminates the currently available option to deduct research
and development expenditures and requires taxpayers to amortize them over five years. The U.S. Congress is considering
legislation that would defer the amortization requirement to future periods, however, the Company has no assurance that
the provision will be repealed or otherwise modified.
Comprehensive Loss
Comprehensive loss currently consists of net loss and changes in unrealized gains and losses on marketable
securities.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is
available 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 the Company’s operations and manage the Company’s business as a single operating segment, which is the business
of developing and commercializing genome editing technology.
3. Cash Equivalents and Marketable Securities
Cash equivalents and marketable securities consisted of the following at December 31, 2021 (in thousands):
December 31, 2021
Cash equivalents and marketable securities:
Money market funds
U.S. Treasuries
Government agency securities
Commercial paper
Corporate notes/bonds
Total
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
203,519 $
124,016
126,927
89,699
76,248
620,409 $
— $
—
—
—
—
— $
— $
1
—
1
—
2
$
— $ 203,519
123,933
(84)
126,699
(228)
89,687
(13)
(170)
76,078
(495) $ 619,916
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Cash equivalents and marketable securities consisted of the following at December 31, 2020 (in thousands):
December 31, 2020
Cash equivalents and marketable securities:
Money market funds
U.S. Treasuries
Government agency securities
Commercial paper
Corporate notes/bonds
Total
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
139,682
180,376
107,665
41,912
42,185
511,820
$
$
—
—
—
—
—
—
$
— $
8
—
10
—
18
$
$
— $ 139,682
180,373
(11)
107,645
(20)
41,914
(8)
(25)
42,160
(64) $ 511,774
As of December 31, 2021, the Company did not hold any marketable securities that had been in an unrealized loss
position for more than twelve months. Furthermore, the Company has determined that there were no material changes in
the credit risk of the debt securities. As of December 31, 2021, the Company holds 51 securities with an aggregate fair
value of $120.1 million that had remaining maturities between one and two years.
4. Fair Value Measurements
Assets measured at fair value on a recurring basis as of December 31, 2021 were as follows (in thousands):
Financial Assets
Cash equivalents:
Money market funds
Marketable securities:
U.S. Treasuries
Government agency securities
Commercial paper
Corporate bonds
Restricted cash and other non-current assets:
Money market funds
Total financial assets
Quoted Prices Significant
in Active
Markets for
Identical Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2021
$ 203,519
$
203,519
$
— $
123,933
126,699
89,687
76,078
123,933
—
—
—
—
126,699
89,687
76,078
3,877
$ 623,793
$
3,877
331,329
—
$ 292,464
$
—
—
—
—
—
—
—
Assets measured at fair value on a recurring basis as of December 31, 2020 were as follows (in thousands):
Financial Assets
Cash equivalents:
Money market funds
Marketable securities:
U.S. Treasuries
Government agency securities
Commercial paper
Corporate bonds
Restricted cash and other non-current assets:
Money market funds
Total financial assets
Quoted Prices Significant
in Active
Markets for
Identical Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2020
$ 139,682
$
139,682
$
— $
180,373
107,645
41,904
42,170
180,373
—
—
—
—
107,645
41,904
42,170
3,877
$ 515,651
$
3,877
323,932
—
$ 191,719
$
—
—
—
—
—
—
—
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During the year ended December 31, 2020, the Company held an investment in Beam Therapeutics Inc. (“Beam
Therapeutics”) consisting of shares of Beam Therapeutics’ common stock. Prior to Beam Therapeutics’ initial public
offering in February 2020, the Company valued such investment based on the cost of the equity securities adjusted for any
observable market transactions. Following the initial public offering, the equity securities had a readily determinable fair
value, and were included in marketable securities on the consolidated balance sheet. The Company sold this investment in
October 2020, resulting in a realized gain of $16.4 million recorded in other income (expense), net on the consolidated
statements of operations.
5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
Laboratory equipment
Leasehold improvements
Construction-in-progress
Computer equipment
Furniture and office equipment
Software
Total property and equipment
Less: accumulated depreciation
Property and equipment, net
$
$
21,579
8,162
1,529
876
264
215
32,625
(15,507)
17,118
As of
December 31,
2021
$
December 31,
2020
18,433
4,967
858
500
239
118
25,115
(11,095)
14,020
$
The Company recorded $5.1 million, $4.0 million, and $2.8 million in depreciation expense during the years
ended December 31, 2021, 2020 and 2019, respectively.
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
Employee related expenses
External research and development expenses
Professional service expenses
Intellectual property and patent related fees
Other expenses
Total accrued expenses
7. Leases
As of
December 31,
2021
2020
$
$
10,159
5,614
2,345
1,408
666
20,192
$
$
5,323
12,820
533
4,240
1,130
24,046
The Company has multiple lease agreements for office, laboratory and manufacturing space with varying
contractual terms set to expire between 2021 and 2025. Typically, base rent payments commence at the beginning of each
lease term and continue through the term of the respective lease. The Company’s lease agreements have escalating rent
clauses, which require higher rent payments in future years. The Company has two significant leases for office and
laboratory space located in Cambridge, Massachusetts that are summarized below.
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The Company’s leases are included on its consolidated balance sheet as follows (in thousands):
Right-of-use assets
Operating lease liabilities, current
Operating lease liabilities, noncurrent
As of
December 31,
2021
December 31,
2020
$
$
$
26,173
(10,309)
(16,069)
$
$
$
25,128
(6,811)
(19,324)
During the years ended December 31, 2021 and 2020, the Company recorded $10.9 million and $10.5 million
related to operating lease costs and $2.1 million and $1.1 million related to variable costs associated with the Company’s
operating leases.
Maturities of the Company’s lease liabilities as of December 31, 2021 were as follows (in thousands):
Maturity of lease liabilities:
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Less: imputed interest
Total operating lease liabilities at December 31, 2021
Year Ended
December 31, 2021
12,021
11,932
4,510
506
110
—
29,079
(2,751)
26,328
$
$
$
$
$
$
$
$
$
The weighted-average remaining lease term is 2.4 years and the weighted-average discount rate is 8.3%.
Hurley Street
In 2016, the Company entered into a lease agreement for 59,783 square feet of office and laboratory space located
on Hurley Street in Cambridge, Massachusetts. The term of the lease began on October 1, 2016 and continues until October
2023. In connection with the 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 security deposit may decrease over time. The letter of credit, which is collateralized by the
Company, is recorded in restricted cash and other non-current assets in the accompanying consolidated balance sheets as of
December 31, 2021 and December 31, 2020.
The Company has the option to extend the lease for an additional five-year term at market-based rates. The base
rent payments commenced in November 2016 and continue through the term of the lease and are subject to increases over
the term of the lease.
One Main Street
In 2019, the Company entered into a lease agreement for 31,571 square feet of office space located on One Main
Street in Cambridge, Massachusetts. The term of the lease began on January 15, 2020 and continues until January 2025. In
connection with the lease and as a security deposit, the Company issued a letter of credit in the amount of approximately
$0.8 million.
The Company has the option to extend the lease for an additional five-year term at market-based rates. The base
rent payments commenced in January 2020 and continue through the term of the lease and are subject to increases over the
term of the lease.
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8. Commitments and Contingencies
The Company is a party to a number of license agreements under which the Company licenses patents, patent
applications and other intellectual property from third parties. As such, the Company is obligated to reimburse licensors for
various costs including upfront licenses fees, annual license fees, certain licensor expense reimbursements, success
payments, research funding payments, and milestones triggerable upon certain development, regulatory, and commercial
events as well as royalties on future products. These contracts are generally cancellable, with notice, at the Company’s
option and do not have significant cancellation penalties.
Broad Sponsored Research Agreement
In 2018, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with
The Broad Institute, Inc. (“Broad”). The Sponsored Research Agreement provides for Broad to conduct research useful or
relevant to genome editing in the field of genomic medicines for the prevention or treatment of human disease with funding
from the Company. Under the Sponsored Research Agreement, Broad granted to the Company an exclusive right of first
negotiation for licenses from Broad with respect to patentable inventions developed by Broad in the course of the
sponsored research, subject to certain limitations and retained rights (“Sponsored Invention Licenses”).
Under the Sponsored Research Agreement, the Company is obligated to make payments (“Market Cap Research
Funding”) in the event the Company’s market capitalization reaches certain amounts for a specified period of time. Unless
the Company has undergone a change in control, Market Cap Research Funding is payable by the Company in cash, in
shares of common stock, or in the form of promissory notes, which may be settled in shares of common stock at the
election of the Company. In aggregate, the Company has triggered $25.0 million in Market Cap Research Funding and has
primarily settled these amounts through the issuance of shares of its common stock. The remaining $100.0 million in
Market Cap Research Funding may be triggered when the Company’s market capitalization reaches various low-ten to
eleven dollar amounts or in the event of a Company sale. The Company is not required to make additional Market Cap
Research Funding payments if the Company, whether directly or through its affiliates or sublicensees, is not researching,
developing, or commercializing products based on or incorporating inventions exclusively licensed to the Company from
Broad subject to certain exclusions.
The Sponsored Research Agreement is terminable by each party upon the occurrence of specified bankruptcy
events of the other party and otherwise will continue in effect until the remaining Market Cap Research Funding payments
are received by Broad and such time as the Company has no further rights of first negotiation for Sponsored Invention
Licenses, unless otherwise mutually agreed between the parties.
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Broad & Harvard License Agreements
The Company has entered into agreements with Broad and the President and Fellows of Harvard College
(“Harvard”) to license certain patent rights owned or co-owned by the institutions. The foundational patent rights that were
in-licensed by the Company include Cas9-I (“Cas9-I License Agreement”), Cas12a (formerly known as Cpf1) (“Cpf1
License Agreement”), and Cas9-II (“Cas9-II License Agreement”) (collectively referred to herein as the “License
Agreements”). The Company received exclusive, worldwide, royalty-bearing, sublicensable licenses to certain patent rights
to develop and commercialize licensed product and a non-exclusive, worldwide, royalty-bearing sublicensable license
under the same patent rights for all other purposes, subject to certain limitations and retained rights. The Company is
obligated to use commercially reasonable efforts to research, develop, and commercialize licensed products. The Company
is also required to achieve certain development milestones within specified time periods for products covered by the
License Agreements, with Broad or Harvard, as applicable, having the right to terminate the License Agreements, on a
license agreement-by-license agreement basis, if the Company fails to achieve these milestones within the required time
periods. Broad or Harvard may grant licenses under specified circumstances to third parties that wish to develop and
commercialize products that target a particular gene that otherwise would fall within the scope of the exclusive licenses
granted to the Company, provided that the Company is not, directly or through any of its affiliates, sublicensees, or
collaborators, researching, developing, or commercializing a product directed toward the same gene target, or can
demonstrate to Broad’s and/or Harvard’s, as applicable, reasonable satisfaction that the Company is interested in
researching, developing, and commercializing a product directed toward the same gene target, that the Company has a
commercially reasonable research, development, and commercialization plan to do so, and the Company commences and
continues reasonable commercial efforts under such plan. The Company has the right to terminate each of the License
Agreements at will with four months written notice to Broad. Unless terminated earlier, the term of each of the License
Agreements will expire on a country-by-country basis, upon the expiration of the last to expire valid claim of the licensed
patent rights in such country.
Milestones
In aggregate, the Company may pay up to $14.8 million, $20.0 million, and $3.7 million in clinical and regulatory
milestones under the Cas9-I License Agreement, Cpf1 License Agreement, and Cas9-II License Agreement, respectively.
In addition, the Company owes aggregate sales milestones totaling $54.0 million, $54.0 million, and $13.5 million under
the Cas9-I License Agreement, Cpf1 License Agreement, and Cas9-II License Agreement, respectively. If the licensed
product or service prevents or treats a human disease that afflicts fewer than a specified number of patients in the aggregate
in the United States (“U.S.”) or a specified number of patients per year in the U.S., the clinical and regulatory milestones
reduce to $4.1 million, $5.5 million, and $1.1 million under the Cas9-I License Agreement, Cpf1 License Agreement, and
Cas9-II License Agreement, respectively. In addition, the aggregated sales milestones reduce to $36.0 million, $36.0
million, and $9.0 million under the Cas9-I License Agreement, Cpf1 License Agreement, and Cas9-II License Agreement,
respectively. Certain clinical and regulatory milestones are subject to a multiplier payout equivalent to a double-digit
percentage in the event of a change of control.
Royalties
The Company is required to pay on a product-by-product and country-by-country basis, a mid single-digit
percentage royalty on net sales of licensed products made by the Company, its affiliates, or its sublicensees. The royalty
percentage depends on the product and service, and whether such licensed product or licensed service is covered by a valid
claim. If the Company is legally required to pay royalties to a third party on net sales of the Company’s products because
such third party holds patent rights that cover such licensed product, then the Company can credit up to a specified
percentage of the amount paid to such third party against the royalties due to the institutions. Such credit may not exceed
50% of the applicable royalties paid by the Company to the applicable third party. The Company’s obligation to pay
royalties will expire on a product-by-product and country-by-country basis upon the later of the expiration of the last to
expire valid claim of the patent rights that covers each licensed product or service in each country or the tenth anniversary
of the date of the first commercial sale of the licensed product or licensed service.
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Licensor Expense Reimbursements
The Company is obligated to reimburse to Broad and Harvard for expenses incurred by each of them associated
with the prosecution and maintenance of the patent rights that the Company licenses from them pursuant to the license
agreement by and among the Company, Broad and Harvard, including the interference and opposition proceedings
involving patents licensed to the Company under the license agreement, and other license agreements between the
Company and Broad. As such, the Company anticipates that it has a substantial commitment in connection with these
proceedings until such time as these proceedings have been resolved, but the amount of such commitment is not
determinable. The Company incurred an aggregate of $10.6 million, $13.1 million, and $13.5 million in expense during the
years ended December 31, 2021, 2020 and 2019, respectively, for such reimbursement.
Success Payments
Under the Cpf1 License Agreement and Cas9-II License Agreement, the Company is obligated to make payments
(“Success Payments”) in the event the Company’s market capitalization reaches certain thresholds for a specified period of
time, or in the event of a change in control of the Company, if the consideration is in excess of those thresholds. Unless the
Company has undergone a change in control, Success Payments are payable by the Company in cash or in the form of
promissory notes, which may be settled in shares of common stock at the election of the Company. In the event of a change
in control of the Company, the Success Payments are required to be paid in cash. The Success Payments under the Cpf1
License Agreement are triggered when the Company’s market capitalization reaches certain amounts ranging from $750.0
million to $10.0 billion for a specified period of time. The Success Payments under the Cas9-II License Agreement are
triggered when the Company’s market capitalization reaches certain amounts ranging from $1.0 billion to $9.0 billion for a
specified period of time. In aggregate, the Company has triggered $25.0 million and $7.5 million of Success Payments
under the Cpf1 License Agreement and Cas9-II License Agreement, respectively. The Company has primarily settled these
amounts through the issuance of shares of its common stock.
The remaining $100.0 million and $22.5 million in Success Payments under the Cpf1 License Agreement and
Cas9-II License Agreement, respectively are only payable if the market capitalization threshold are met and the Company
or any affiliate or sublicensee has at least one product candidate covered by a claim of a patent right licensed to the
Company that is or was subject of a clinical trial.
Other Payments
The Company pays nominal annual license fees to the institutions. If the Company sublicenses any of the patent
rights to a third party, the institutions have the right to receive sublicense income, which may be offset by the licensor
expense reimbursement payments that the Company has made to the institution subject to certain limitations.
Litigation
The Company is not a party to any litigation and did not have contingency reserves established for any litigation
liabilities as of December 31, 2021 or 2020.
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9. Collaboration Agreements
The Company has entered into multiple collaboration and strategic alliances with third parties that typically
involve research and development services in exchange for upfront fees, option payments, milestone payments and royalty
payments to or from the Company.
Collaboration Revenue
As of December 31, 2021, the Company’s contract liabilities were primarily related to the Company’s
collaboration with Juno Therapeutics as well as other out-license agreements that are individually insignificant. The
following table presents changes in the Company’s accounts receivable and contract liabilities for the year ended December
31, 2021 (in thousands):
For the year ended December 31, 2021
Accounts receivable
Contract liabilities:
Deferred revenue
Balance at
December 31, 2020
$
6,048 $
Additions
Deductions
406 $
(6,187) $
Balance at
December 31, 2021
267
$
94,927 $
— $
(22,706) $
72,221
During the three and twelve months ended December 31, 2021, the Company recognized the following
collaboration revenue (in thousands):
Three Months Ended
Year Ended
Revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period
Performance obligations satisfied in previous periods
$
$
December 31, 2021
11,334
$
— $
22,706
—
Juno Therapeutics Collaboration Agreement
In 2019, the Company entered into an amended and restated collaboration agreement (“Juno Collaboration
Agreement”) and license agreement (“Juno License Agreement”) with Juno Therapeutics to focus on the research,
development, and commercialization of autologous and allogenic alpha-beta T cell medicines for the treatment of all
diseases, subject to certain exceptions. The Company and Juno Therapeutics started their collaboration in 2015 and have
amended the agreement twice. The Company received a $70.0 million up-front, non-refundable, non-creditable cash
payment (“Amendment Fee”) in connection with the execution of the 2019 amendment. The Company may develop
genome editing tools, specific to a gene target and enzyme combination (or a “Program”) that, following the exercise of its
option and the Company’s grant of a license, Juno Therapeutics may use in its development of gene edited alpha-beta T-cell
therapies and certain other T-cell derived from pluripotent stem cells or any other precursor cell for the treatment of all
diseases, subject to certain exceptions (the “Juno Field”). To assess the Programs prior to opt-in, the Company granted Juno
Therapeutics a non-exclusive perpetual research license in the Juno Field. If Juno Therapeutics exercises their option to the
Program, they receive an exclusive, worldwide, development and commercialization license in the Juno Field for a nominal
option exercise fee. The Juno License Agreement provided that the Company would manufacture clinical grade materials
through a Phase 1 clinical trial if requested by Juno Therapeutics at an incremental cost to be negotiated by the parties.
However, Juno Therapeutics has sole responsibility, at its own cost, for the worldwide research, development,
manufacturing, and commercialization of its products. They must use commercially reasonable efforts and meet certain
regulatory and commercial diligence requirements. The first development and commercialization license was delivered to
Juno Therapeutics at the onset of the amended arrangement for which the Company received $0.5 million in consideration
for the license (the “First Development and Commercialization License).
On a product-by-product basis, the Company is eligible to receive up to $27.5 million in development milestones
and $107.5 million in regulatory milestones. The Company is also eligible to receive up to an aggregate of $60.0 million
for the first two licensed products to reach certain sales milestones. The Company is entitled to a high-single digit to low
double-digit percentage of royalties on net sales of licensed products, subject to reductions in certain
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circumstances, through the later of the expiration of the patent(s) related to the licensed products or six years post-first
commercial sale of such licensed products.
The amended term of the Juno Collaboration Agreement is five years, which is subject to two one-year extension
periods. During the term, including the extension periods, the Company may not alone, or with a third party, research,
develop, manufacture, or commercialize a product in the Juno Field. Juno Therapeutics has the right to terminate the Juno
Collaboration Agreement at any time upon no less than six months prior written notice. Per the termination provisions of
the Juno License Agreement, Juno Therapeutics has the right to terminate the License Agreement either on a licensed
product-by-product basis or in its entirety for any reason at any time upon ninety days prior written notice. If Juno
Therapeutics terminates the license agreement without cause, the exclusive licenses granted to Juno Therapeutics
automatically revert back to the Company.
Accounting Assessment
The Company concluded that the Juno Collaboration Agreement and the Juno License Agreement qualify as a
contract with a customer under ASC 606 as one combined arrangement. The contract modification was accounted for on a
prospective basis as if it were a termination of the existing contract and the creation of a new contract since the promised
goods and services were distinct from the goods and services that were transferred on or before the effective date of the
amendment.
The Company identified the following performance obligations: (i) First Development and Commercialization
License and (ii) seventeen material rights for additional development and commercialization licenses for other Programs.
The Company also evaluated the (i) the research license, (ii) contract term extensions, (iii) clinical supply arrangement, (iv)
participation by employees on the oversight committee, alliance and technology transfer teams and (v) certain intellectual
property rights and concluded that none of these met the definition of a performance obligation as a result of the promise
being quantitively and qualitatively immaterial in the context of the arrangement or the promise did not convey a material
right to Juno Therapeutics. The Company also concluded that there was not an implicit promise to perform research and
development services.
As of December 31, 2021 the total transaction price was approximately $110.0 million comprised of the
following: (i) $70.0 million Amendment Fee, (ii) $32.0 million in remaining deferred revenue balance that was not
recognized pursuant the 2018 amendment agreement (iii) $3.0 million related to option exercise fees for delivered licenses
and (iv) $5.0 million related to a development milestone payment that was received by the Company. The outstanding
milestone payments and extension term fees were fully constrained as of December 31, 2021, as a result of the uncertainty
of whether any of the milestones will be achieved or the term would be extended. The assessment of the constraint utilizing
the most likely amount method considers the stage of development and the risks associated with the remaining
development required to achieve the milestones, as well as whether the achievement of the milestone is outside the control
of the Company or Juno Therapeutics. The Company has determined that any commercial milestones and sales-based
royalties will be recognized when the related sales occurs. The Company reevaluates the transaction price at the end of
each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company concluded that rights and attributes of each of the development and commercialization licenses are
identical for both the license granted at inception and the licenses that may be issued in the future upon exercise of the
associated option. The Company has considered the early stage of the science and the uncertainty of success and concluded
that the probability of scientific success and opt-in is equal amongst all Programs. In addition, each Program is multi-
functional, and a combination of Programs can be utilized in the development of a product candidate. As such, the
Company concluded that the standalone selling price of each material right is the same. The Company will recognize the
transaction price allocated to each material right when the material right is exercised, lapsed or expired.
During the year ended December 31, 2021 and 2020, the Company recognized $24.7 million and $11.3 million of
revenue related to Juno Therapeutics. As of December 31, 2021, the Company recorded $68.0 million of deferred revenue,
of which $56.7 million is classified as long-term on our condensed consolidated balance sheet. As of December 31, 2020,
the $73.7 million was classified as long-term in the accompanying consolidated balance sheets. There were no material
sublicense fees paid to licensors in connection with the consideration received pursuant to the Juno
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Collaboration Agreement for the year ended December 31, 2021 and 2020.
Allergan Pharmaceuticals Strategic Alliance and Profit-Sharing 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”).
Under the terms of the Allergan Agreement, the Company received a $90.0 million up-front, non-refundable, non-
creditable cash payment to primarily fund the Company’s ocular research and development efforts to provide Allergan with
the option to exclusively exercise the worldwide development and commercialization rights to five ocular development
programs meeting certain criteria. Subsequently Allergan and the Company entered into an agreement (the “Profit-Sharing
Agreement”) to equally split U.S. profit and losses of EDIT-101, an experimental medicine or leber congenital amaurosis
10 or LCA10 that was the only program licensed to Allergan under the Allergan Agreement. In August 2020, the Company
and Allergan agreed to terminate the Allergan Agreement and the Profit-Sharing Agreement (together with the Allergan
Agreement, the “Initial Agreements”). In connection with the termination, the Company entered into a transition services
agreement with Allergan (together with the termination agreement, the ‘Termination Agreements”), primarily to facilitate
the transfer of EDIT-101 back to the Company.
Pursuant to the Termination Agreements, the Company regained full global rights to research, develop,
manufacture, and commercialize its ocular medicines, including EDIT-101. Allergan has no further obligations pursuant to
the Initial Agreements, all unexercised options and contingent payments contemplated under the Initial Agreements have
terminated, which includes Allergan’s worldwide developmental and commercialization rights to EDIT-101. Under the
Termination Agreements, Allergan granted the Company a non-exclusive license to certain know-how that is necessary to
develop, manufacture and commercialize EDIT-101 and transferred to the Company certain materials produced under the
Initial Agreements. The Company will use commercially reasonable efforts to develop and commercialize products
directed at four collaboration targets, one of which is LCA10.
In connection with the Termination Agreements, the Company agreed to make a $20.0 million payment to
Allergan, $17.5 million of which was paid as of December 31, 2020. In addition, the Company will make certain payments
on achievements of clinical and regulatory milestones up to $20.0 million for each target program and aggregated sales
milestones for all products covered by the Termination Agreement up to $90.0 million. Allergan is also entitled to royalties
in a low-single digit percentage, subject to reduction under specified circumstances, on net sales of specified products. The
Company’s obligation to pay royalties will expire on a country-by-country and product-by-product basis upon the later of
the expiration of regulatory-based exclusivity with respect to such product in such country and the tenth anniversary of the
first commercial sale of such product.
Accounting Assessment
The Company evaluated the Termination Agreements in accordance with the provisions ASC 606 and concluded
that they resulted in a modification followed by a termination of the Initial Agreements. Upon execution of the Termination
Agreements, the Company is no longer obligated to transfer control of any goods or services to Allergan, and therefore
there are no remaining performance obligations. As part of this assessment, the Company considered that Allergan
relinquished its right to the remaining exclusive license options under the Allergan Agreement and the Company reacquired
the development and commercialization rights to EDIT-101. Allergan no longer has any involvement in the development
activities of the collaboration targets. Since there are no remaining performance obligations, the Company accounted for
the modification as part of the existing contract with a cumulative catch-up adjustment.
The Company concluded that $5.0 million of the $20.0 million payment that was paid to Allergan was for re-
acquired rights to EDIT-101 that had no alternative future use, and as such the Company recorded it as in-process research
and development expenses as of December 31, 2020. The remainder of the $20.0 million payment was recorded as a
reduction to the contract liability and partially offset the recognition of $77.1 million in previously deferred revenue that
was received under the Initial Agreements that was recognized on the termination date.
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The contingent payments associated with the collaboration targets not previously licensed by Allergan under the
Allergan Agreement did not impact the amount of deferred revenue recognized upon termination because it is not probable
that a significant reversal of revenue will occur. The contingent milestone and royalty payments associated with EDIT-101
qualify for scope exceptions from derivative accounting, and therefore there is no accounting for the contingent payments
upon termination.
During the year ended December 31, 2020, the Company recognized revenue related to Allergan of approximately
$70.6 million. There was no revenue recognized related to Allergan for the year ended December 31, 2021.
Beam Therapeutics License Agreement
In 2018, the Company entered into a license agreement with Beam Therapeutics Inc. (“Beam,” and such
agreement, the “Beam License Agreement”). Pursuant to the Beam License Agreement, the Company granted to Beam a
worldwide, exclusive (subject to certain exceptions), sublicensable (subject to certain conditions), development and
commercialization license under certain intellectual property controlled by the Company for the use of base editing
therapies for the treatment of any field of human diseases and conditions, such to certain exceptions. Additionally, the
Company granted Beam a non-exclusive research license. Lastly, the Company provided to Beam with an exclusive option
to obtain three development and commercialization licenses to additional groups of intellectual property owned or
controlled by the Company, on a group-by-group basis, during the specified option period, subject to certain exceptions.
The Company received preferred stock valued at $3.6 million and received a nominal upfront cash payment. The
Company subsequently sold its equity investment in Beam following Beam’s initial public offering in 2021. The Company
is also eligible to receive additional consideration if Beam exercises its option to obtain additional licenses for a fee ranging
from a mid-teen million-dollar amount to a low to mid-eight-digit dollar amount per license, depending on the timing of the
option exercise. To the extent that any products are commercialized, the Company would be entitled to receive tiered low
single-digit royalty payments, plus any royalties that would be due from the Company to any applicable licensors related to
the sale of such licensed products.
Unless earlier terminated by either party pursuant to the terms of the agreement, 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 product in such country. Beam has the right, at its sole
discretion, at any time to terminate the Beam License Agreement in its entirety or on a group-by-group of intellectual
property basis, upon ninety days written notice to the Company. Upon termination, all rights and licenses granted by the
Company will immediately terminate.
Accounting Assessment
The Company identified the following performance obligations (i) the research license and (ii) the initial
development and commercialization license. In addition, the Company concluded that the three options for the additional
development and commercialization licenses are not discounted and therefore they do not represent material rights.
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The total transaction price at the inception of the arrangement was determined to be approximately $3.8 million,
consisting of the upfront cash payment and the non-cash value of the preferred shares received by the Company. The
consideration associated with the exercise of the option(s) will be accounted for if and when Beam elects to exercise their
options. The other forms of consideration, including nominal cost reimbursement for past patent and license fees and
sublicense income reimbursement are based on the most-likely amount and were excluded from the initial transaction price
as the most likely amount was estimated to be zero or the amount was otherwise fully constrained due to the significant
uncertainties surrounding each payment. The commercial-based milestone reimbursement and the sales-based royalty
payments will be recognized when the related sales occur as they were determined to relate predominantly to the licenses
granted and therefore have also been excluded from the transaction price. Since both of the performance obligations were
delivered at the inception of the arrangement and the licenses were made available for Beam’s use and benefit, the
Company recognized the total transaction price at the inception of the agreement.
During the years ended December 31, 2021 and 2020, the Company recognized revenue under the Beam License
Agreement of approximately $0.3 million and $0.2 million, respectively.
10. Preferred Stock
The Company’s amended and restated certificate of incorporation authorized 5,000,000 shares of undesignated
preferred stock that may be issued from time to time by the Company’s board of directors in one or more series. As of
December 31, 2021, the Company had no shares of preferred stock issued or outstanding.
11. Common Stock
The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by the
rights, powers, and preferences of holders of the preferred stock that may be issued from time to time. The common stock
had the following characteristics as of December 31, 2021:
Voting
The holders of shares of common stock are entitled to one vote for each share of common stock held at any
meeting of stockholders and at the time of any written action in lieu of a meeting.
Dividends
The holders of shares of common stock are entitled to receive dividends, if and when declared by the Company’s
board of directors. Cash dividends may not be declared or paid to holders of shares of common stock until all unpaid
dividends on the redeemable convertible preferred stock have been paid in accordance with their terms. No dividends have
been declared or paid by the Company since its inception.
2013 Stock Incentive Plan
In 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 or other awards including restricted stock awards, unrestricted stock awards, and restricted stock units to the
Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 1,057,692 shares of the
Company’s common stock, which has been amended several times, and as of July 2015, a total of 6,317,769 shares were
reserved.
The terms of stock awards agreements, including vesting requirements, are determined by the board of directors
and are subject to the provisions of the 2013 Plan. The stock options granted to employees generally vest over a four-year
period and expire ten years from the date of grant. Certain awards contain performance based vesting criteria. There has
only been one such award to date. Certain options provide for accelerated vesting in the event of a change in control, as
defined in the applicable options. Awards granted to non-employee consultants generally vest monthly over a period
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of one to four years. In connection with the Company’s initial public offering (“IPO”), the Company’s board of directors
determined to grant no further awards under the 2013 Plan.
2015 Stock Incentive Plan
The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentive
plan (the “2015 Plan”). 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, directors and consultants and advisors are eligible to receive awards under the 2015 Plan.
The number of shares reserved for issuance under the 2015 Plan is subject to further increases for (a) any
additional shares of the Company’s common stock subject to outstanding awards under the 2013 Plan that expire,
terminate, or are otherwise surrendered, cancelled, forfeited, or repurchased by the Company at their original issuance price
pursuant to a contractual repurchase right and (b) annual increases, to be added as of the first day of each fiscal year, from
January 1, 2017 until, and including, January 1, 2026, equal to the lowest of 2,923,076 shares of common stock, 4% of the
number of shares of common stock outstanding on such first day of the fiscal year in question and an amount determined
by the Company’s board of directors. In January 2022, the shares under the 2015 Plan were increased by 2,738,110 shares
pursuant to the annual increase described in the prior sentence.
2015 Employee Stock Purchase Plan
The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stock
purchase plan (the “2015 ESPP”). The number of shares reserved for issuance 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% of the total number of shares of common stock
outstanding on the first day of the applicable year, and (c) an amount determined by the board of directors. The first
offering under the 2015 ESPP opened on December 1, 2017. In January 2022, the shares under the 2015 ESPP Plan were
increased by 684,527 shares pursuant to the annual increase described in the prior sentence.
Inducement Awards
From time to time the Company’s board of directors approves inducement awards to certain employees outside of
the existing equity compensation plans in connection with such employees commencing employment with the Company.
Inducement awards are typically a service-based option and a restricted stock unit and are subject to the Company’s typical
vesting terms and the employee’s continued service relationship with the Company through the applicable vesting dates. In
June 2021, the Company’s board of directors approved two inducement grants to the Company’s recently hired Chief
Scientific Officer and Chief Regulatory Officer. The inducement grant for the Chief Medical Officer, granted in November
2020, was cancelled upon her departure from the Company in February 2022.
Shares Reserved for Future Issuance
Shares reserved for outstanding stock option awards under the
2013 Stock Incentive Plan, as amended
Shares reserved for outstanding stock option awards and
restricted stock units under the 2015 Stock Incentive Plan
Shares reserved for outstanding inducement stock option award
and restricted stock units
Remaining shares reserved, but unissued, for future awards
under the 2015 Stock Incentive Plan
Remaining shares reserved, but unissued, for future awards
under the 2015 Employee Stock Purchase Plan
149
As of December 31,
2021
2020
145,255
3,036,797
408,765
7,524,431
2,722,040
13,837,288
174,362
3,839,345
280,000
5,599,450
2,137,127
12,030,284
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12. Stock-Based Compensation
Total compensation cost recognized for all stock-based compensation awards in the consolidated statements of
operations was as follows (in thousands):
Research and development
General and administrative
Total stock-based compensation expense
Restricted Stock and Restricted Stock Unit Awards
Year Ended
December 31,
2021
2020
$
$
16,553
26,846
43,399
$
$
11,580
11,576
23,156
The following table summarizes restricted stock and restricted stock unit awards activity for the instruments
discussed above as of December 31, 2020 and 2021 is as follows:
Unvested restricted stock and restricted stock unit awards as of December 31, 2020
Issued
Vested
Forfeited
Unvested restricted stock and restricted stock unit awards as of December 31, 2021
Weighted
Average
Grant Date
Fair Value
Per Share
27.35
47.79
33.79
39.29
41.28
Shares
$
507,450
629,797
$
(267,268) $
(241,247) $
$
628,732
The expense related to restricted stock and restricted stock unit awards granted for the years ended December 31,
2021, 2020 and 2019 was $14.6 million, $4.4 million, and $6.4 million, respectively.
The restricted stock and restricted stock units granted in the year ended December 31, 2021 include 226,747 units
granted to certain employees that contain performance-based vesting provisions. The expense related to the performance-
based vesting restricted stock units was $4.0 million as of December 31, 2021.
As of December 31, 2021, total unrecognized compensation expense related to unvested restricted stock and
restricted stock unit awards was $13.9 million, which the Company expects to recognize over a remaining weighted-
average period of 2.0 years.
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Stock Options
The following is a summary of stock option activity for the year ended December 31, 2021:
Outstanding at December 31, 2020
Granted
Exercised
Cancelled
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Weighted Average
Exercise Price
Shares
3,912,257
1,299,997
(1,233,958)
(962,211)
3,016,085
1,449,990
$
$
$
$
$
$
27.26
44.85
25.52
31.38
34.24
29.30
Remaining
Contractual Life (years)
7.9
Aggregate Intrinsic
Value (in thousands)
167,640
$
7.5
6.6
$
$
5,052,469
4,594,818
The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was $27.2
million, $15.6 million, and $14.6 million, respectively.
Using the Black-Scholes option pricing model, the weighted average fair value of options containing service-
based vesting granted during the years ended December 31, 2021, 2020, and 2019 was $17.54, $16.60, and $15.67,
respectively. The expense related to options containing service-based vesting was $18.8 million, $16.1 million, and $18.1
million for the years ended December 31, 2021, 2020, and 2019, respectively.
The fair value of each service-based vesting option issued was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions:
Expected volatility
Expected option term (in years)
Risk free interest rate
Expected dividend yield
2021
61.2 %
6.25
1.5 %
—
Year Ended
December 31,
2020
60.0 %
6.25
1.5 %
—
2019
73.8 %
6.25
2.0 %
—
The stock options granted in the year ended December 31, 2021 include option grants to the Company’s Chief
Executive Officer to purchase 196,637 and 341,978 shares of the Company’s common stock that contained market-based
and performance-based vesting provisions, respectively. The total expense for the year ended December 31, 2021 related to
awards containing market-based and performance-based vesting provisions was $4.3 million and $5.3 million, respectively.
As of December 31, 2021, total unrecognized compensation expense related to stock options was $27.9 million,
which the Company expects to recognize over a remaining weighted-average period of 2.5 years.
13. 401(k) Savings Plan
The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986,
as amended (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service
requirements, and allows participants to defer a portion of their annual compensation on a pretax basis. Effective in 2017,
the Company 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 $1.2 million, $1.1 million, and $0.8 million in
contributions to the 401(k) Plan for the years ended December 31, 2021, 2020 and 2019, respectively.
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14. Income Taxes
The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2021
and 2020.
A reconciliation of the income tax expense computed using the federal statutory income tax rate to the Company’s
effective income tax rate is as follows:
Income tax computed at federal statutory tax rate
State taxes, net of federal benefit
General business credit carryovers
162m Limitation
Stock Options
Non-deductible expenses
Tax Rate Changes
Change in valuation allowance
Year Ended
December 31,
2021
2020
21 %
8.89 %
2.95 %
(1.44)%
1.12 %
0.24 %
5.03 %
(37.80)%
— %
21 %
5.20 %
4.80 %
— %
(1.8)%
(0.1)%
— %
(29.10)%
— %
The principal components of the Company’s deferred tax assets and liabilities consist of the following at December 31,
2021 and 2020 (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Accrued expenses
Capitalized patent costs
Lease Liabilities
Deferred revenue
Other
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities
Depreciation and amortization
Right-of-use assets
Net deferred taxes
Year Ended
December 31,
2021
2020
$
$
127,092
25,028
3,991
63,093
7,929
21,709
10,431
259,273
(251,071)
8,202
(8,202)
(335)
(7,867)
$
— $
70,751
19,353
11,372
46,197
7,083
25,724
5,204
185,684
(178,307)
7,377
(7,377)
(567)
(6,810)
—
The Company has incurred net operating losses (“NOL”) since inception. At December 31, 2021 and 2020, the
Company had federal net operating loss carryforwards of $447.4 million and $261.9 million, respectively. Of the amount as
of December 31, 2021, $371.9 million will carryforward indefinitely while $75.5 million will expire beginning in 2033 and
will continue to expire through 2037. As of December 31, 2021, and 2020, the Company also had state net operating loss
carryforwards of approximately $507.1 million and $258.4 million, respectively, which may be available to offset future
income tax liabilities and will expire beginning in 2035 and will continue to expire through 2040. Loss generated in 2021
expires in 2041.
Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the NOL and tax credit
carryforward are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL
and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes
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in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections
382 and 383 of the Code, respectively, as well as other similar state provisions. The Company conducted an analysis under
Section 382 to determine if historical changes in ownership through December 31, 2019 would limit or otherwise restrict its
ability to utilize its NOL and research and development credit carryforwards. As a result of this analysis, the Company does
not believe there are any significant limitations on its ability to utilize these carryforwards. However, future changes in
ownership occurring after December 31, 2019 could affect the limitation in future years, and any limitation may result in
expiration of a portion 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 tax
assets, which principally comprise of NOL carryforwards, research and development credit carryforwards and capitalized
license and patent costs. The Company’s management has determined that it is more likely than not that the Company will
not recognize the benefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $251.1
million and $178.3 million has been established at December 31, 2021 and 2020, respectively. The increase in the valuation
allowance of $72.8 million for the year ended December 31, 2021 was primarily due to current period pre-tax losses
incurred and research tax credits generated.
The Company applies ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves
related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in
its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present
related to the tax benefit. At December 31, 2021 and 2020, the Company had no unrecognized tax benefits. Interest and
penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying
statements of operations.
The Company has not as of yet conducted a study of its research and development credit carry forwards. This
study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study
is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation
allowance has been provided against the Company’s research and development credits, and if an adjustment is required,
this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the
consolidated balance 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, the
California state jurisdiction and the Colorado state jurisdiction. Since the Company is in a loss carryforward position, the
Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in
which a loss carryforward is available. The Company did not have any international operations as of December 31, 2021.
The Company is currently under examination by the Internal Revenue Service ("IRS") for the period ended December 31,
2018 related to its R&D tax credits.
15. Net Loss per Share
Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the period, without consideration for potentially
dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by
the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period
determined using the treasury stock and if converted methods. Contingently issuable shares are included in the calculation
of basic loss per share as of the beginning of the period in which all the necessary conditions have been satisfied.
Contingently issuable shares are included in diluted loss per share based on the number of shares, if any, that would be
issuable under the terms of the arrangement if the end of the reporting period was the end of the contingency period, if the
results are dilutive.
For purposes of the diluted net loss per share calculation, stock options are considered to be common stock
equivalents, but they were excluded from the Company’s calculation of diluted net loss per share allocable to common
stockholders because their inclusion would have been anti-dilutive. Therefore, basic and diluted net loss per share
applicable to common stockholders was the same for all periods presented.
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The following common stock equivalents were excluded from the calculation of diluted net loss per share
allocable to common stockholders because their inclusion would have been anti-dilutive:
Unvested restricted stock and restricted stock unit awards
Outstanding stock options
Estimated number of shares issuable for convertible notes (1)
Total
As of December 31,
2021
628,732
3,016,085
—
3,644,817
2020
507,450
3,912,257
392,240
4,811,947
(1) Represents the number of shares that would have been issued if the Company had elected to pay the success
payment that was triggered in the fourth quarter of 2020 as discussed in Note 8, in shares of the Company’s
common stock, based on the closing price of the common stock on December 31, 2020. The number of shares
issued, for purposes of this presentation, is calculated by dividing the principal of the notes payable, including
accrued interest, by the stock price per share
The table above reflects restricted stock issued upon exercise of unvested stock options as exercised on the dates
that the shares are no longer subject to repurchase.
16. Subsequent Events
None.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. The term “disclosure
controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
“Exchange Act”) means controls and other procedures of a company that are designed to ensure that information required
to be disclosed by 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 and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of
December 31, 2021, our principal executive officer and principal financial officer concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the
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preparation of financial statements for external purposes in accordance with general accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the 2013 framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded
that our internal control over financial reporting was effective as of December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by
Ernst & Young LLP, an independent registered public accounting firm, and has issued an attestation report on such audit,
which is included herein.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) occurred during our fiscal quarter ended December 31, 2021 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Editas Medicine, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Editas Medicine Inc.’s internal control over financial reporting as of December 31, 2021, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Editas Medicine Inc. (the “Company”)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of Editas Medicine Inc. as of December 31, 2021 and 2020, the
related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2021, and the related notes, and our report dated February 24, 2022 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission of the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
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Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 24, 2022
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Except to the extent provided below, the information required by this Item 10 will be included in the section
captioned “Corporate Governance” and the subsections thereof, “Nominees for Election as Class III Directors,” “Directors
Continuing in Office,” “Executive Officers Who Are Not Directors,” and “Delinquent Section 16(a) Reports,” if applicable,
in our definitive proxy statement to be filed with the Securities and Exchange Commission (“SEC”) with respect to our
2022 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 persons performing similar functions. A copy of the code is posted on the Corporate Governance section of our website,
which is located at www.editasmedicine.com. If we make any substantive amendments to, or grant any waivers from, the
code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on
our website or in a current report on Form 8-K. We will provide any person, without charge, a
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copy of such Code of Business Conduct and Ethics upon written request, which may be mailed to 11 Hurley Street,
Cambridge, MA 02141, Attn: Corporate Secretary.
Item 11. Executive Compensation.
The information required by this Item 11 will be included in the section captioned “Executive Compensation” in
our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders, 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
the SEC with respect to our 2022 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be included in the sections captioned “Transactions with Related
Persons” and “Director Independence” in our definitive proxy statement to be filed with the SEC with respect to our 2022
Annual 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 “Audit
Committee Pre-Approval Policy and Procedures” in our definitive proxy statement to be filed with the SEC with respect to
our 2022 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules.
(1)
Financial Statements
PART IV
Our consolidated financial statements are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are
incorporated herein by reference.
(2)
Financial Statement Schedules
Schedules have been omitted since they are either not required or not applicable or the information is otherwise
included herein.
(3)
Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are listed in the following Exhibit Index.
EXHIBIT INDEX
Exhibit
Number
Description of Exhibit
Form
File No.
Date of
Filing
Exhibit
Number
Filed
Herewith
Incorporated by Reference
3.1 Restated Certificate of Incorporation of the
8-K
001-37687
2/8/2016
3.1
Registrant
157
Table of Contents
Exhibit
Number
Description of Exhibit
Form
File No.
Date of
Filing
Exhibit
Number
Filed
Herewith
Incorporated by Reference
3.2 Amended and Restated By-laws of the Registrant
4.1 Specimen Stock Certificate evidencing the shares of
8-K
S-1
2/8/2016
001-37687
333-208856 1/4/2016
common stock
4.2 Description of Registrant’s Securities Registered
Pursuant to Section 12 of the Securities Exchange
Act of 1934
10.1+ 2013 Stock Incentive Plan, as amended
10.2+ Form of Incentive Stock Option Agreement under
2013 Stock Incentive Plan, as amended
10.3+ Form of Nonstatutory Stock Option Agreement
under 2013 Stock Incentive Plan, as amended
10.4+ Form of Early Exercise Nonstatutory Stock Option
Agreement under 2013 Stock Incentive Plan, as
amended
10.5+ Form of Restricted Stock Agreement under 2013
Stock Incentive Plan, as amended
10.6+ 2015 Stock Incentive Plan
10.7+ Form of Incentive Stock Option Agreement under
2015 Stock Incentive Plan
10.8+ Form of Nonstatutory Stock Option Agreement
under 2015 Stock Incentive Plan
3.2
4.1
4.2
10-K
001-37687
2/26/2020
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
333-208856 1/4/2016
333-208856 1/4/2016
10.5
10.6
333-208856 1/4/2016
10.7
333-208856 1/4/2016
10.8
333-208856 1/4/2016
10.9
333-208856 1/4/2016
333-208856 1/4/2016
10.10
10.11
333-208856 1/4/2016
10.12
10.9+ Form of Restricted Stock Agreement under 2015
10-Q
001-37687
11/8/2017
10.1
Stock Incentive Plan
10.10+ Form of Restricted Stock Unit Award Agreement
8-K
001-37687
1/22/2019
10.1
under the 2015 Stock Incentive Plan
10.11+ Employment Offer Letter, dated August 6, 2019,
10-Q
001-37687
11/12/2019 10.1
between the Registrant and Cynthia Collins
10.12+ Letter Agreement, dated February 15, 2021, by and
between the Registrant and Cynthia Collins
10.13+ Employment Offer Letter, dated February 14, 2021,
between the Registrant and James C. Mullen
10.14+ Employment Offer Letter, dated December 27,
2019, between the Registrant and Michelle
Robertson
10-K
001-37687
2/26/2021
10.13
10-K
001-37687
2/26/2021
10.14
10-K
001-37687
2/26/2020
10.14
10.15+ Employment Offer Letter, dated September 25,
10-K
001-37687
2/26/2021
10.18
2020, between the Registrant and Lisa A. Michaels,
M.D.
10.16+ Employment Offer Letter, dated April 19, 2021,
between the Registrant and Mark S. Shearman
10.17+ Employment Offer Letter, dated September 22,
2021, between the Registrant and Bruce Eaton
10-Q
001-37687
8/5/2021
10.2
10-Q
001-37687
11/9/2021
10.1
10.18+ Form of Inducement Stock Option Agreement for
10-K
001-37687
2/26/2020
10.15
the Registrant’s executive officers
10.19+ Form of Inducement Restricted Stock Unit Award
Agreement for the Registrant’s executive officers
10-K
001-37687
2/26/2020
10.16
10.20† Amended and Restated Cas9-I License Agreement,
8-K
001-37687
1/23/2017
99.2
dated December 16, 2016, among the Registrant, the
President and Fellows of Harvard College
(“Harvard”), and the Broad Institute, Inc. (the
“Broad”)
158
Table of Contents
Exhibit
Number
Description of Exhibit
Form
File No.
Date of
Filing
Exhibit
Number
Filed
Herewith
Incorporated by Reference
10.21 Amendment No.1 to Amended and Restated Cas9-I
License Agreement, by and among Editas Medicine,
Inc., Harvard, and Broad, dated March 3, 2017
8-K
001-37687
3/7/2017
99.1
10.22* Second Amended and Restated License and
10-K
001-37687
2/26/2020
10.20
Collaboration Agreement, dated November 11,
2019, between the Registrant and Juno
Therapeutics, Inc. (“Juno”)
10.23* License and Agreement, dated November 11, 2019,
10-K
001-37687
2/26/2020
10.21
between the Registrant and Juno
10.24† Sponsored Research Agreement, dated June 7, 2018,
10-Q/A 001-37687
10/23/2018 10.2
between the Registrant and Broad
10.25* First Amendment to Sponsored Research
Agreement, dated January 11, 2021, between the
Registrant and Broad
10.26+ Summary of Director Compensation Program
10.27+ 2015 Employee Stock Purchase Plan
10.28+ Amended Severance Benefits Plan
10.29 Form of Indemnification Agreement between the
Registrant and each of its directors and executive
officers
10.30 Lease Agreement, dated February 12, 2016,
between Registrant and ARE-MA Region No. 55
Exchange Holding LLC
10-K
001-37687
2/26/2021
10.24
10-Q
S-1
001-37687
8/5/2021
333-208856 1/4/2016
10.3
10.25
S-1
333-208856 1/4/2016
10.28
8-K
001-37687
2/19/2016
99.1
10.31† Cpf1 License Agreement, dated as of December 16,
8-K
001-37687
1/23/2017
99.1
2016, by and between the Registrant and Broad
10.32† Cas9-II License Agreement, dated as of
8-K
001-37687
1/23/2017
99.3
December 16, 2016, by and between the Registrant
and Broad
10.33* Omnibus Amendment, dated as of January 11, 2021,
by and between the Registrant and Broad
10.34* Letter Agreement, dated as of November 18, 2019,
by and among, the Registrant, Broad and Harvard
10.35* Letter Agreement, dated as of December 16, 2019,
by and among, the Registrant, Broad and Harvard
10.36 Common Stock Sales Agreement, dated as of May
14, 2021, by and between the Company and Cowen
and Company, LLC
10-K
001-37687
2/26/2021
10.32
10-K
001-37687
2/26/2020
10.30
10-K
001-37687
2/26/2020
10.31
8-K
001-37687
5/14/2021
1.1
10.37* Termination Agreement, dated August 5, 2020, by
10-Q
001-37687
11/6/2020
10.1
10-K
001-37687
3/30/2016
21.1
and between the Registrant and Allergan Sales, LLC
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young
31.1 Rule 13a-14(a) Certification of Principal Executive
Officer
31.2 Rule 13a-14(a) Certification of Principal Financial
Officer
32.1 Certification of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C.
§1350
159
X
X
X
X
X
Table of Contents
Exhibit
Number
Description of Exhibit
Form
File No.
Date of
Filing
Exhibit
Number
Filed
Herewith
Incorporated by Reference
101 The following financial statements from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated
Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive
Loss, (iv) Consolidated Statement of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and
(vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed
tags.
104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,
formatted in Inline XBRL.
† Confidential treatment has been granted as to certain portions, which portions have been omitted and filed
*
separately with the Securities and Exchange Commission.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Certain portions of
this exhibit have been omitted because they are not material and would likely cause competitive harm to the
Registrant if disclosed.
+ Management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary.
None.
160
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: February 24, 2022
EDITAS MEDICINE, INC.
By:
/s/ James C. Mullen
James C. Mullen
Principal Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ James C. Mullen
James C. Mullen
President and Chief Executive Officer, Chairman
of the Board (principal executive officer)
February 24, 2022
/s/ Michelle Robertson
Michelle Robertson
/s/ Meeta Chatterjee
Meeta Chatterjee, Ph.D.
/s/ Bernadette Connaughton
Bernadette Connaughton
/s/ Andrew Hirsch
Andrew Hirsch
/s/ Jessica Hopfield
Jessica Hopfield, Ph.D.
/s/ Emma Reeve
Emma Reeve
/s/ David Scadden
David Scadden, M.D.
/s/ Akshay K. Vaishnaw
Akshay K. Vaishnaw, M.D., Ph.D.
Chief Financial Officer (principal financial and
accounting officer)
February 24, 2022
Director
Director
February 24, 2022
February 24, 2022
Director
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
Director
Director
Director
Director
161
Exhibit 10.28
Severance Benefits Plan
1.
Establishment of Plan. Editas Medicine, Inc., a Delaware corporation (the “Company”), hereby
establishes an unfunded severance benefits plan (the “Plan”) that is intended to be a welfare benefit plan within
the meaning of Section 3(1) of ERISA. The Plan is in effect for Covered Employees who experience a Covered
Termination occurring after the Effective Date and before the termination of this Plan. This Plan supersedes any
and all (i) severance plans and separation policies applying to Covered Employees that may have been in effect
before the Effective Date with respect to any termination that would, under the terms of this Plan, constitute a
Covered Termination and (ii) the provisions of any agreements between any Covered Employee and the
Company that provide for severance benefits solely as such agreements relate to severance benefits.
2.
Purpose. The purpose of the Plan is to establish the conditions under which Covered Employees
will receive the severance benefits described herein if employment with the Company (or its successor in a
Change in Control (as defined below)) terminates under the circumstances specified herein. The severance
benefits paid under the Plan are intended to assist employees in making a transition to new employment and are
not intended to be a reward for prior service with the Company.
3.
Definitions. For purposes of this Plan,
(a)
“Base Salary” shall mean, for any Covered Employee, such Covered Employee’s base rate
of pay as in effect immediately before a Covered Termination (or prior to the Change of Control, if
greater) and exclusive of any bonuses, overtime pay, shift differentials, “adders,” any other form of
premium pay, or other forms of compensation.
(b)
(c)
(d)
“Benefits Continuation” shall have the meaning set forth in Section 8(a) hereof.
“Board” shall mean the Board of Directors of the Company.
“Cause” shall mean any of: (a) your conviction of, or plea of guilty or nolo contendere to,
any crime involving dishonesty or moral turpitude or any felony; or
(b) a good faith finding by the Company that you have (i) engaged in material dishonesty, willful
misconduct or gross negligence, (ii) committed an act that poses a material risk of injury to the
reputation, business or business relationships of the Company, (iii) materially breached the terms of any
restrictive covenants or
Confidential
confidentiality agreement with the Company (and not cured same within any cure period contained in
such covenants or confidentiality agreement); (iv) failed or refused to comply in any material respect
with the Company’s material policies or procedures and in a manner that poses a material risk of injury to
the reputation, business or business relationships of the Company; (v) willful failure or refusal to perform
your duties and/or responsibilities, provided that in the case of (iv) or (v) that you were given written
notice of such violation or failure by the Company and a period of at least 30 days to cure (provided that
the Company reasonably determines that such violation or failure is curable).
(e)
“Change in Control” shall mean the occurrence of any of the following events, provided
that such event or occurrence constitutes a change in the ownership or effective control of the Company,
or a change in the ownership of a substantial portion of the assets of the Company, as defined in Treasury
Regulation §§1.409A-3(i)(5)(v), (vi) and (vii): (i) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act)
50% or more of either (x) the then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company or
(2) any acquisition by any entity pursuant to a Business Combination (as defined below) which complies
with clauses (x) and (y) of subsection (iii) of this definition; or (ii) a change in the composition of the
Board that results in the Continuing Directors (as defined below) no longer constituting a majority of the
Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the
term “Continuing Director” means at any date a member of the Board (x) who was a member of the
Board on the date of the initial adoption of the Plan by the Board or (y) who was nominated or elected
subsequent to such date by at least a majority of the directors who were Continuing Directors at the time
of such nomination or election or whose election to the Board was recommended or endorsed by at least
a majority of the directors who were Continuing Directors at the time of such nomination or election;
provided, however, that there shall be excluded from this clause (y) any individual whose initial
assumption of office occurred as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on
behalf of a person other than the Board; or (iii) the consummation of a merger, consolidation,
reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of
all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately
following such Business Combination, each of the following two conditions is satisfied: (x) all or
substantially all of the individuals and entities who were the beneficial owners of the Outstanding
Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the then- outstanding shares of common stock and the
combined voting power of the then- outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such Business Combination (which
shall include, without limitation, a corporation which as a result of such transaction owns the Company
or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially
the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no
Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-
outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of
the then-outstanding securities of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business Combination); or (iv) the
liquidation or dissolution of the Company.
(f)
“Change in Control Termination” shall mean a termination of the Covered Employee’s
employment by the Company without Cause or by the Covered Employee for Good Reason, in either
case within the twelve (12) months following a Change in Control.
(g)
(h)
(i)
“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Company” shall mean Editas Medicine, Inc. or, following a Change in Control, any
successor thereto.
(j)
“Covered Employees” shall mean all Regular Full-Time Employees (both exempt and
non-exempt) who are (i) Executives or (ii) otherwise designated by the Board or by an authorized
committee to be a Covered Employee under this Plan, who experience a Covered Termination and who
are not designated as ineligible to receive severance benefits under the Plan as provided in Section 5
hereof. For the avoidance of doubt, neither Temporary Employees nor Part-Time Employees are eligible
for severance benefits under the Plan. An employee’s full-time, part-time or temporary status for the
purpose of this Plan is determined by the Plan Administrator upon review of the employee’s status
immediately before termination. Any person who is classified by the Company as an independent
contractor or third party employee is not eligible for severance benefits even if such classification is
modified retroactively.
(k)
“Covered Termination” shall mean (i) Non-Change in Control Termination or (ii) a
Change in Control Termination.
(l)
(m)
(n)
or above.
“Effective Date” shall mean December 10, 2015.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Executive” shall mean any employee of the Company holding the title of Vice President
(o)
“Good Reason” is defined as: (i) a material diminution in the employee’s base
compensation; (ii) a material diminution in the employee’s authority, duties, or responsibilities; (iii) a
material change in the geographic location at which the employee must perform the services; or (iv) any
other action or inaction that constitutes a material breach by the Company of any agreement under which
the employee provides services; provided, however, that in any case the employee has not consented to
the condition which would otherwise give rise to a Good Reason. In order to establish a “Good Reason”
for terminating employment, an employee must provide written notice to the Company of the existence
of the condition giving rise to the Good Reason, which notice must be provided within 90 days of the
initial existence of such condition, the Company must fail to cure the condition within 30 days thereafter,
and an employee’s termination of employment must occur no later than one year following the initial
existence of the condition giving rise to Good Reason.
(p)
“Non-Change in Control Termination” shall mean a termination of the Covered
Employee’s employment by the Company without Cause prior to or more than twelve (12) months
following a Change in Control.
(q)
“Other C-Level Officer” shall mean the Chief Financial Officer, the Chief Operating
Officer, the Chief Technology Officer and any other officer of the Company reporting directly to the
Chief Executive Officer or otherwise designated by the Board as an Other C-Level Officer for purposes
of the Plan.
(r)
“Part-Time Employees” shall mean employees who are not Regular Full- Time Employees
and are treated as such by the Company.
(s)
(t)
(u)
“Participants” shall mean Covered Employees.
“Plan Administrator” shall have the meaning set forth in Section 14 hereof.
“Release” shall have the meaning set forth in Section 6 hereof.
(v)
(w)
“Release Effective Date” shall have the meaning set forth in Section 13(c)(i) hereof.
“Regular Full-Time Employees” shall mean employees, other than Temporary Employees,
normally scheduled to work at least 30 hours a week unless the Company’s local practices, as from time
to time in force, whether or not in writing, establish a different hours threshold for regular full-time
employees.
(x)
(y)
“Severance Pay” shall have the meaning set forth in Section 7 hereof.
“Severance Period” shall mean the applicable severance period determined under the chart
in Section 7 hereof based on the type of Covered Termination and the Title/ Role of the Covered
Employee.
(z)
writing.
“Temporary Employees” are employees treated as such by the Company, whether or not in
4.
Coverage. A Covered Employee may be entitled to receive severance benefits under the Plan if
such employee experiences a Covered Termination. In order to receive severance benefits under the Plan,
Covered Employees must meet the eligibility and other requirements provided below in Sections 5 and 6 of the
Plan.
5.
Eligibility for Severance Benefits. The following employees will not be eligible for severance
benefits, except to the extent specifically determined otherwise by the Plan Administrator: (a) an employee who
is terminated for Cause; (b) an employee who retires, terminates employment as a result of an inability to
performs his duties due to physical or mental disability or dies; (c) an employee who voluntarily terminates his
employment, except, in the case of a Covered Termination for Good Reason; (d) an employee who is employed
for a specific period of time in accordance with the terms of a written employment agreement; and (e) an
employee who promptly becomes employed by another member of the controlled group of entities of which the
Company (or its successor in the Change in Control) is a member as defined in Sections 414(b) and (c) of Code.
6.
Release; Timing of Severance Benefits. Receipt of any severance benefits under the Plan
requires that the Covered Employee execute and deliver a severance and release of claims agreement in a form
prescribed by the Company (which will include, at a minimum, a release of all releasable claims, non-
disparagement and cooperation obligations, a reaffirmation of continuing obligations under the Restrictive
Covenant Agreements, and an agreement, to the extent permitted by law, not to compete with the Company for
twelve (12) months following separation from employment with the Company) (the “Release”), which Release
becomes binding within 60 days following the Covered Employee’s termination of employment. The Severance
Pay will be paid in accordance with the terms of the Plan and the Company’s regular pay practices in effect from
time to time and the Benefits Continuation will be paid in the
amount and at the time premium payments are made by other participants in the Company’s health benefit plans
with the same coverage. The payments, which at all times are subject to the Covered Employee’s compliance
with the Covered Employee’s continuing obligations under the Release, shall be made or commence on the first
payroll date after the Release Effective Date.
7.
Cash Severance. A Covered Employee entitled to severance benefits under this Plan shall be
entitled to the continuation of such employee’s monthly Base Salary for the Severance Period indicated below
(“Severance Pay”), based upon his or her title/role.
Title/ Role of
Covered Employee
Chief Executive Officer
Other C-Level Officer or
Senior Vice President
Vice President
Non-Change in
Control Termination
Severance Period
Change in Control
Termination
Severance Period
Twelve (12) months
Twelve (12) months
Twelve (12) months
Twelve (12) months
Six (6) months
Nine (9) months
(a) For purposes of this Section 7 and Section 8 below, a Covered Employee’s title/role shall be
such employee’s title/role immediately prior to the Covered Termination or, if such employee’s title/role was
changed in connection with the Change in Control, immediately prior to the Change in Control.
8.
Other Severance Benefits. In addition to the foregoing Severance Pay, the severance benefits
under the Plan shall include the following benefits:
(a)
Company contributions to the cost of COBRA coverage on behalf of the Covered
Employee and any applicable dependents for no longer than the Covered Employee’s applicable
Severance Period if the Covered Employee elects COBRA coverage, and only so long as such coverage
continues in force. Such costs shall be determined on the same basis as the Company’s contribution to
Company-provided health and dental insurance coverage in effect for an active employee with the same
coverage elections; provided that if the Covered Employee commences new employment and is eligible
for a new group health plan, the Company’s continued contributions toward health and dental coverage
shall end when the new employment begins (“Benefits Continuation”).
(b)
Any unpaid annual bonus in respect to any completed bonus period which has ended prior
to the date of the Participant’s Covered Termination and which the Board deems granted to the
Participant in its discretion pursuant to the Company’s contingent compensation program, payable at the
same time as annual bonuses are paid to other
employees of the Company or, if later, upon the Release Effective Date.
(c)
In the case of a Change in Control Termination, a bonus amount equal to the multiple of
(i) a fraction the numerator of which is the Severance Period and the denominator of which is twelve (12)
and (ii) the Covered Employee’s target annual bonus for the year of the Change in Control Termination,
payable in a lump sum on the Release Effective Date.
9.
Equity Awards. In the case of a Change in Control Termination, any unvested equity awards
shall become fully vested and exercisable, or free from forfeiture or repurchase, effective upon the Release
Effective Date. Except as set forth in the foregoing sentence, the treatment of a Covered Employee’s equity
awards with the Company upon a Covered Termination shall be dictated by the terms of the applicable award
agreements.
10.
Recoupment. If a Covered Employee fails to comply with the terms of the Plan, including the
provisions of Section 6 above, the Company may require payment to the Company of any benefits described in
Sections 7 and 8 above that the Covered Employee has already received to the extent permitted by applicable
law and with the “value” determined in the sole discretion of the Plan Administrator. Payment is due in cash or
by check within 10 days after the Company provides notice to a Covered Employee that it is enforcing this
provision. Any benefits described in Sections 7 and 8 above not yet received by such Covered Employee will be
immediately forfeited.
11.
Death. If a Participant dies after the date of his or her Covered Termination but before all
payments or benefits to which such Participant is entitled pursuant to the Plan have been paid or provided,
payments will be made to any beneficiary designated by the Participant prior to or in connection with such
Participant’s Covered Termination or, if no such beneficiary has been designated, to the Participant’s estate. For
the avoidance of doubt, if a Participant dies during such Participant’s applicable Severance Period, Benefits
Continuation will continue for the Participant’s applicable dependents for the remainder of the Participant’s
Severance Period.
12. Withholding. The Company may withhold from any payment or benefit under the Plan: (a) any
federal, state, or local income or payroll taxes required by law to be withheld with respect to such payment; (b)
such sum as the Company may reasonably estimate is necessary to cover any taxes for which the Company may
be liable and which may be assessed with regard to such payment; and (c) such other amounts as appropriately
may be withheld under the Company’s payroll policies and procedures from time to time in effect.
13.
Section 409A. It is expected that the payments and benefits provided under this Plan will be
exempt from the application of Section 409A of the Code, and the guidance issued thereunder (“Section 409A”).
The Plan shall be interpreted consistent with this intent to the maximum extent permitted and generally, with the
provisions of Section 409A. A termination of employment shall not be deemed to have occurred for purposes of
any provision of this Plan
providing for the payment of any amounts or benefits upon or following a termination of employment (which
amounts or benefits constitute nonqualified deferred compensation within the meaning of Section 409A) unless
such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of
any such provision of this Plan, references to a “termination,” “termination of employment” or like terms shall
mean “separation from service”. Neither the Participant nor the Company shall have the right to accelerate or
defer the delivery of any payment or benefit except to the extent specifically permitted or required by Section
409A.
Notwithstanding the foregoing, to the extent the severance payments or benefits under this Plan are
subject to Section 409A, the following rules shall apply with respect to distribution of the payments and benefits,
if any, to be provided to Participants under this Plan:
(a)
Each installment of the payments and benefits provided under this Plan will be treated as a
separate “payment” for purposes of Section 409A. Whenever a payment under this Plan specifies a
payment period with reference to a number of days (e.g., “payment shall be made within 10 days
following the date of termination”), the actual date of payment within the specified period shall be in the
Company’s sole discretion. Notwithstanding any other provision of this Plan to the contrary, in no event
shall any payment under this Plan that constitutes “non-qualified deferred compensation” for purposes of
Section 409A be subject to transfer, offset, counterclaim or recoupment by any other amount unless
otherwise permitted by Section 409A.
(b)
Notwithstanding any other payment provision herein to the contrary, if the Company or
appropriately-related affiliates become publicly-traded and a Covered Employee is deemed on the date of
termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)
(B) with respect to such entity, then each of the following shall apply:
(i)
With regard to any payment that is considered “non-qualified deferred
compensation” under Section 409A payable on account of a “separation from service,” such
payment shall be made on the date which is the earlier of (A) the day following the expiration of
the six month period measured from the date of such “separation from service” of the Covered
Employee, and (B) the date of the Covered Employee’s death (the “Delay Period”) to the extent
required under Section 409A. Upon the expiration of the Delay Period, all payments delayed
pursuant to this provision (whether otherwise payable in a single sum or in installments in the
absence of such delay) shall be paid to or for the Covered Employee in a lump sum, and all
remaining payments due under this Plan shall be paid or provided for in accordance with the
normal payment dates specified herein; and
(ii)
To the extent that any benefits to be provided during the Delay Period are
considered “non-qualified deferred compensation” under Section 409A
payable on account of a “separation from service,” and such benefits are not otherwise exempt
from Section 409A, the Covered Employee shall pay the cost of such benefits during the Delay
Period, and the Company shall reimburse the Covered Employee, to the extent that such costs
would otherwise have been paid by the Company or to the extent that such benefits would
otherwise have been provided by the Company at no cost to the Covered Employee, the
Company’s share of the cost of such benefits upon expiration of the Delay Period. Any remaining
benefits shall be reimbursed or provided by the Company in accordance with the procedures
specified in this Plan.
(c)
To the extent that severance benefits pursuant to this Plan are conditioned upon a Release,
the Covered Employee shall forfeit all rights to such payments and benefits unless such release is signed
and delivered (and no longer subject to revocation, if applicable) within 60 days following the date of the
termination of the Covered Employee’s employment with the Company. If the Release is no longer
subject to revocation as provided in the preceding sentence, then the following shall apply:
(i)
To the extent any severance benefits to be provided are not “non- qualified
deferred compensation” for purposes of Section 409A, then such benefits shall commence upon
the first scheduled payment date immediately after the date the Release is executed and no longer
subject to revocation (the “Release Effective Date”). The first such cash payment shall include all
amounts that otherwise would have been due prior thereto under the terms of this Agreement
applied as though such payments commenced immediately upon the termination of Covered
Employee’s employment with the Company, and any payments made after the Release Effective
Date shall continue as provided herein. The delayed benefits shall in any event expire at the time
such benefits would have expired had such benefits commenced immediately following the
termination of Covered Employee’s employment with the Company.
(ii)
To the extent any such severance benefits to be provided are “non- qualified
deferred compensation” for purposes of Section 409A, then the Release must become irrevocable
within 60 days of the date of termination and benefits shall be made or commence upon the date
provided in Section 6, provided that if the 60th day following the termination of the Covered
Employee’s employment with the Company falls in the calendar year following the calendar year
containing the date of termination, the benefits will be made no earlier than the first business day
of that following calendar year. The first such cash payment shall include all amounts that
otherwise would have been due prior thereto under the terms of this Agreement had such
payments commenced immediately upon the termination of Covered Employee’s employment
with the Company, and any payments made after the first such payment shall continue as
provided herein. The delayed benefits shall in any event expire at the time such benefits would
have expired had such benefits commenced immediately following the termination of Covered
Employee’s employment with the Company.
(d)
The Company makes no representations or warranties and shall have no liability to any
Participant or any other person, other than with respect to payments made by the Company in violation of
the provisions of this Plan, if any provisions of or payments under this Plan are determined to constitute
deferred compensation subject to Section 409A of the Code but not to satisfy the conditions of that
section.
14.
Section 280G. Notwithstanding any other provision of this Plan, except as set forth in Section
14(b), in the event that the Company undergoes a “Change in Ownership or Control” (as defined below), the
following provisions shall apply:
(a) The Company shall not be obligated to provide to the Covered Employee any portion of any
“Contingent Compensation Payments” (as defined below) that the Covered Employee would otherwise be
entitled to receive to the extent necessary to eliminate any “excess parachute payments” (as defined in Section
280G(b)(1) of the Code) for the Covered Employee. For purposes of this Section 14, the Contingent
Compensation Payments so eliminated shall be referred to as the “Eliminated Payments” and the aggregate
amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor
provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated
Amount.”
(b) Notwithstanding the provisions of Section 14(a), no such reduction in Contingent Compensation
Payments shall be made if (1) the Eliminated Amount (computed without regard to this sentence) exceeds (2)
100% of the aggregate present value (determined in accordance with Treasury Regulation Section 1.280G-1,
Q/A-31 and Q/A-32 or any successor provisions) of the amount of any additional taxes that would be incurred
by the Covered Employee if the Eliminated Payments (determined without regard to this sentence) were paid to
the Covered Employee (including state and federal income taxes on the Eliminated Payments, the excise tax
imposed by Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in
excess of the Covered Employee’s “base amount” (as defined in Section 280G(b)(3) of the Code), and any
withholding taxes). The override of such reduction in Contingent Compensation Payments pursuant to this
Section 14(b) shall be referred to as a “Section 14(b) Override.” For purpose of this paragraph, if any federal or
state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of such taxes shall
be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state
income tax rate provided by law.
(c) For purposes of this Section 14 the following terms shall have the following respective meanings:
(i) “Change in Ownership or Control” shall mean a change in the ownership or effective control
of the Company or in the ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
(ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of
compensation that is made or made available (under this Agreement or otherwise) to a “disqualified
individual” (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of
Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.
(d) Any payments or other benefits otherwise due to the Covered Employee following a Change in
Ownership or Control that could reasonably be characterized (as determined by the Company) as Contingent
Compensation Payments (the “Potential Payments”) shall not be made until the dates provided for in this Section
14(d). Within thirty (30) days after each date on which the Covered Employee first become entitled to receive
(whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or
Control, the Company shall determine and notify the Covered Employee (with reasonable detail regarding the
basis for its determinations) (1) which Potential Payments constitute Contingent Compensation Payments, (2)
the Eliminated Amount and (3) whether the Section 14(b) Override is applicable. Within thirty (30) days after
delivery of such notice to the Covered Employee, the Covered Employee shall deliver a response to the
Company (the “Covered Employee Response”) stating either (A) that the Covered Employee agrees with the
Company’s determination pursuant to the preceding sentence or (B) that the Covered Employee disagrees with
such determination, in which case the Covered Employee shall set forth (x) which Potential Payments should be
characterized as Contingent Compensation Payments, (y) the Eliminated Amount, and (z) whether the Section
14(b) Override is applicable. In the event that the Covered Employee fails to deliver an Covered Employee
Response on or before the required date, the Company’s initial determination shall be final. If the Covered
Employee states in the Covered Employee Response that the Covered Employee agrees with the Company’s
determination, the Company shall make the Potential Payments to the Covered Employee within three (3)
business days following delivery to the Company of the Covered Employee Response (except for any Potential
Payments which are not due to be made until after such date, which Potential Payments shall be made on the
date on which they are due). If the Covered Employee states in the Covered Employee Response that the
Covered Employee disagree with the Company’s determination, then, for a period of sixty (60) days following
delivery of the Covered Employee Response, the Covered Employee and the Company shall use good faith
efforts to resolve such dispute. If such dispute is not resolved within such 60-day period, such dispute shall be
settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. The Company shall, within three (3) business days following delivery to the Company of the
Covered Employee Response, make to the Covered Employee those Potential Payments as to which there is no
dispute between the Company and the Covered Employee regarding whether they should be made (except for
any such Potential Payments which are not
due to be made until after such date, which Potential Payments shall be made on the date on which they are due).
The balance of the Potential Payments shall be made within three (3) business days following the resolution of
such dispute.
(e) The Contingent Compensation Payments to be treated as Eliminated Payments shall be determined by
the Company by determining the “Contingent Compensation Payment Ratio” (as defined below) for each
Contingent Compensation Payment and then reducing the Contingent Compensation Payments in order
beginning with the Contingent Compensation Payment with the highest Contingent Compensation Payment
Ratio. For Contingent Compensation Payments with the same Contingent Compensation Payment Ratio, such
Contingent Compensation Payment shall be reduced based on the time of payment of such Contingent
Compensation Payments with amounts having later payment dates being reduced first. For Contingent
Compensation Payments with the same Contingent Compensation Payment Ratio and the same time of payment,
such Contingent Compensation Payments shall be reduced on a pro rata basis (but not below zero) prior to
reducing Contingent Compensation Payment with a lower Contingent Compensation Payment Ratio. The term
“Contingent Compensation Payment Ratio” shall mean a fraction the numerator of which is the value of the
applicable Contingent Compensation Payment that must be taken into account by the Covered Employee for
purposes of Section 4999(a) of the Code, and the denominator of which is the actual amount to be received by
the Covered Employee in respect of the applicable Contingent Compensation Payment. For example, in the case
of an equity grant that is treated as contingent on the Change in Ownership or Control because the time at which
the payment is made or the payment vests is accelerated, the denominator shall be determined by reference to the
fair market value of the equity at the acceleration date, and not in accordance with the methodology for
determining the value of accelerated payments set forth in Treasury Regulation Section 1.280G-1 Q/A-24(b) or
(c)).
(f) The provisions of this Section 14 are intended to apply to any and all payments or benefits available to
the Covered Employee under this Plan or any other agreement or plan of the Company under which the Covered
Employee receives Contingent Compensation Payments.
15.
Plan Administration.
(a)Plan Administrator. The Plan Administrator shall be the Board or a committee thereof
designated by the Board (the “Committee”); provided, however, that the Board or such Committee may
in its sole discretion appoint a new Plan Administrator to administer the Plan following a Change in
Control. The Plan Administrator shall also serve as the Named Fiduciary of the Plan under ERISA. The
Plan Administrator shall be the “administrator” within the meaning of Section 3(16) of ERISA and shall
have all the responsibilities and duties contained therein.
The Plan Administrator can be contacted at the following address:
Editas Medicine, Inc.
11 Hurley Street
Cambridge, MA 02141
(b)Decisions, Powers and Duties. The general administration of the Plan and the responsibility for
carrying out its provisions shall be vested in the Plan Administrator. The Plan Administrator shall have
such powers and authority as are necessary to discharge such duties and responsibilities which also
include, but are not limited to, interpretation and construction of the Plan, the determination of all
questions of fact, including, without limit, eligibility, participation and benefits, the resolution of any
ambiguities and all other related or incidental matters, and such duties and powers of the plan
administration which are not assumed from time to time by any other appropriate entity, individual or
institution. The Plan Administrator may adopt rules and regulations of uniform applicability in its
interpretation and implementation of the Plan.
The Plan Administrator shall discharge its duties and responsibilities and exercise its powers and
authority in its sole discretion and in accordance with the terms of the controlling legal documents and
applicable law, and its actions and decisions that are not arbitrary and capricious shall be binding on any
employee, and employee’s spouse or other dependent or beneficiary and any other interested parties
whether or not in being or under a disability.
16.
Indemnification. To the extent permitted by law, all employees, officers, directors, agents and
representatives of the Company shall be indemnified by the Company and held harmless against any claims and
the expenses of defending against such claims, resulting from any action or conduct relating to the
administration of the Plan, whether as a member of the Committee or otherwise, except to the extent that such
claims arise from gross negligence, willful neglect, or willful misconduct.
17.
Plan Not an Employment Contract. The Plan is not a contract between the Company and any
employee, nor is it a condition of employment of any employee. Nothing contained in the Plan gives, or is
intended to give, any employee the right to be retained in the service of the Company, or to interfere with the
right of the Company to discharge or terminate the employment of any employee at any time and for any reason.
No employee shall have the right or claim to benefits beyond those expressly provided in this Plan, if any. All
rights and claims are limited as set forth in the Plan.
18.
Severability. In case any one or more of the provisions of this Plan (or part thereof) shall be held
to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect
the other provisions hereof, and this Plan shall be construed as if such invalid, illegal or unenforceable
provisions (or part thereof) never had been
contained herein.
19.
Non-Assignability. No right or interest of any Covered Employee in the Plan shall be assignable
or transferable in whole or in part either directly or by operation of law or otherwise, including, but not limited
to, execution, levy, garnishment, attachment, pledge or bankruptcy.
20.
Integration With Other Pay or Benefits Requirements. The severance payments and benefits
provided for in the Plan are the maximum benefits that the Company will pay to Covered Employees on a
Covered Termination, except to the extent otherwise specifically provided in a separate agreement. To the extent
that the Company owes any amounts in the nature of severance benefits under any other program, policy or plan
of the Company that is not otherwise superseded by this Plan, or to the extent that any federal, state or local law,
including, without limitation, so-called “plant closing” laws, requires the Company to give advance notice or
make a payment of any kind to an employee because of that employee’s involuntary termination due to a layoff,
reduction in force, plant or facility closing, sale of business, or similar event, the benefits provided under this
Plan or the other arrangement shall either be reduced or eliminated to avoid any duplication of payment. The
Company intends for the benefits provided under this Plan to partially or fully satisfy any and all statutory
obligations that may arise out of an employee’s involuntary termination for the foregoing reasons and the
Company shall so construe and implement the terms of the Plan.
21.
Amendment or Termination. The Board may amend, modify, or terminate the Plan at any time
in its sole discretion; provided, however, that (a) any such amendment, modification or termination made prior to
a Change in Control that adversely affects the rights of any Covered Employee shall be unanimously approved
by the Company’s Board of Directors, (b) no such amendment, modification or termination may affect the rights
of a Covered Employee then receiving payments or benefits under the Plan without the consent of such person,
and (c) no such amendment, modification or termination made after a Change in Control shall be effective for
one year. The Board intends to review the Plan at least annually.
22.
Governing Law. The Plan and the rights of all persons under the Plan shall be construed in
accordance with and under applicable provisions of ERISA, and the regulations thereunder, and the laws of the
Commonwealth of Massachusetts (without regard to conflict of laws provisions) to the extent not preempted by
federal law.
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. 333-253715, 333-216528, 333-222266, and 333-239389) of Editas
Medicine Inc.,
(2) Registration Statement (Form S-8 No. 333-209351) pertaining to the Editas Medicine Inc. 2013 Stock
Incentive Plan, 2015 Stock Incentive Plan and 2015 Employee Stock Purchase Plan of Editas Medicine Inc.,
(3) Registration Statements (Form S-8 Nos. 333-216445, 333-223529, and 333-230266) pertaining to the 2015
Stock Incentive Plan and 2015 Employee Stock Purchase Plan of Editas Medicine, Inc., and
(4) Registration Statement (Form S-8 No. 333-236662) pertaining to the Editas Medicine Inc. 2015 Stock
Incentive Plan, 2015 Employee Stock Purchase Plan, Inducement Stock Option Award (October 2019 –
January 2020), Inducement Restricted Stock Unit Award (October 2019 – January 2020), and Registration
Statement (Form S-8 No. 333-253716) pertaining to the Editas Medicine Inc. 2015 Stock Incentive Plan,
2015 Employee Stock Purchase Plan, Inducement Stock Option Award (November 2020), Inducement
Restricted Stock Unit Award (November 2020);
of our reports dated February 24, 2022, 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 Annual
Report (Form 10-K) of Editas Medicine, Inc. for the year ended December 31, 2021.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 24, 2022
CERTIFICATIONS
Exhibit 31.1
I, James C. Mullen, 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 a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 24, 2022
By:
/s/ James C. Mullen
James C. Mullen
Chief Executive Officer
Principal Executive Officer
I, Michelle Robertson, certify that:
CERTIFICATIONS
1. I have reviewed this Annual Report on Form 10-K of Editas Medicine, Inc.;
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 24, 2022
By:
/s/ Michelle Robertson
Michelle Robertson
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 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 ended
December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of
the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. (section) 1350, 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
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: February 24, 2022
By:
/s/ James C. Mullen
James C. Mullen
President and Chief Executive Officer
By:
/s/ Michelle Robertson
Michelle Robertson
Chief Financial Officer