Homology Medicines
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIODFROM TO Commission File Number: 001-38433Homology Medicines, Inc.(Exact name of Registrant as specified in its Charter) Delaware47-3468154(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)One Patriots ParkBedford, MA01730(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (781) 301-7277 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.0001 par valueThe Nasdaq Global Select Market(Title of each class)(Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act:None(Title of class) Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theRegistrant 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 12months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer☐ Accelerated filer☐Non-accelerated filer☒ Small 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 toSection 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒As of June 29, 2018, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock held by non-affiliates was approximately $365.0 million basedon the closing price of the registrant’s common stock on The Nasdaq Stock Market on June 29, 2018. The calculation excludes shares of the registrant’s common stock held by current executive officers, directors andstockholders that the registrant has concluded are affiliates of the registrant. This determination of affiliate status is not a determination for other purposes.The number of shares of registrant’s common stock outstanding as of March 7, 2019 was 37,538,555.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s Definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report. Table of Contents PagePART I Item 1.Business1Item 1A.Risk Factors38Item 1B.Unresolved Staff Comments79Item 2.Properties79Item 3.Legal Proceedings79Item 4.Mine Safety Disclosures79 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities79Item 6.Selected Financial Data81Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations82Item 7A.Quantitative and Qualitative Disclosures About Market Risk94Item 8.Financial Statements and Supplementary Data94Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure94Item 9A.Controls and Procedures95Item 9B.Other Information95 PART III Item 10.Directors, Executive Officers and Corporate Governance96Item 11.Executive Compensation99Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters105Item 13.Certain Relationships and Related Transactions, and Director Independence108Item 14.Principal Accountant Fees and Services109 PART IV Item 15.Exhibits, Financial Statement Schedules110Item 16.Form 10-K Summary111i FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harborprovisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Reporton Form 10-K, including statements regarding our future results of operations and financial position, anticipated use of cash, business strategy, prospectiveproducts, product approvals, research and development costs, anticipated timing and likelihood of success of clinical trials, expected timing of the release ofclinical trial data, the plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements.These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievementsto be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,”“intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similarexpressions. The forward-looking statements in this Annual Report on Form 10-K are only predictions. We have based these forward-looking statementslargely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition andresults of operations. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number ofimportant factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under thesections in Item 1A., "Risk Factors" of Part I and Items 7 and 7A., "Management's Discussion and Analysis of Financial Condition and Results of Operations"and "Quantitative and Qualitative Disclosures About Market Risk," respectively, of Part II of this Annual Report on Form 10-K.Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible formanagement to predict all risk factors and uncertainties.You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K completely and with theunderstanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by thesecautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein,whether as a result of any new information, future events, changed circumstances or otherwise. ii PART IItem 1. Business.OverviewWe are a genetic medicines company dedicated to transforming the lives of patients suffering from rare genetic diseases with significant unmetmedical needs by curing the underlying cause of the disease. Our proprietary platform is designed to utilize our human hematopoietic stem-cell derivedadeno-associated virus vectors, or AAVHSCs, to precisely and efficiently deliver single administration genetic medicines in vivo either through a genetherapy or nuclease-free gene editing modality across a broad range of genetic disorders. The unique properties of our proprietary suite of 15 novel AAVHSCsenable us to focus on a method of gene editing called gene correction, either through the replacement of an entire diseased gene in the genome with a wholefunctional copy or the precise repair of individual mutated nucleotides, by harnessing the naturally occurring DNA repair process of homologousrecombination, or HR. We believe our HR-driven gene editing approach will allow us to efficiently perform gene correction at therapeutic levels withoutunwanted on- and off-target modifications, and to directly measure and confirm those modifications in an unbiased manner to ensure only the intendedchanges are made. By utilizing the body’s natural mechanism of correcting gene defects, we also avoid the need for exogenous nucleases, or bacteria-derivedenzymes used in other gene editing approaches to cut DNA, that are known to significantly increase the risk of unwanted modifications. Our diverse set ofAAVHSCs allows us to precisely target, via a single injection, a wide range of disease-relevant tissues, including the liver, central nervous system, or CNS,bone marrow, lung, muscle and eye, across both modalities—gene editing and gene therapy. We believe these advantages will allow us to safely providetransformative cures using either modality.We have generated compelling preclinical data for our first and lead product candidate, HMI-102, a gene therapy for the treatment ofphenylketonuria, or PKU, and expect to advance HMI-102 into a Phase 1/2 clinical trial in adult PKU patients and report initial clinical data in 2019. Wecontinue to advance our gene editing modality and have generated in vivo preclinical data demonstrating achievement of gene correction efficiencies in theliver that are significantly greater than both nuclease-based and other adeno-associated virus, or AAV, based approaches and are at a therapeutic level. Wehave nominated a lead gene editing product development candidate, HMI-103, for the treatment of PKU in pediatric patients. We have also nominated a leadgene therapy CNS product development candidate, HMI-202, for the treatment of metachromatic leukodystrophy, or MLD. We have initiated IND-enablingstudies for both programs.Our management team has a successful track record of discovering, developing and commercializing therapeutics with a particular focus on rarediseases. Our genetic medicines platform is based on gene editing and gene therapy technologies resulting from the pioneering work conducted onAAVHSCs in the laboratory of the City of Hope Medical Center in California, or COH. We have a robust intellectual property portfolio with issuedcomposition of matter patents in the United States for our suite of 15 AAVHSCs and we believe the breadth and depth of our intellectual property is astrategic asset that has the potential to provide us with a significant competitive advantage. We continue to build on our intellectual property estate throughour ongoing product and platform development efforts. We have internal process development and Good Manufacturing Practices, or GMP, manufacturingcapabilities and recently completed the build-out of a current GMP, or cGMP, manufacturing facility to support our clinical development programs in bothgene therapy and gene editing and expect to commence manufacturing in the first half of 2019. In November 2017, we entered into a collaboration withNovartis Institutes for Biomedical Research, Inc., or Novartis, to develop new genetic medicines using our HR-based gene correction approach inophthalmology, which leverages our platform technology into a new therapeutic area, as well as other exploratory areas.Since our inception in 2015, we have raised approximately $288 million in net proceeds through our initial public offering, or IPO, in April 2018 andpreferred stock financings. We will require additional capital in order to advance HMI-102 and our other product candidates through clinical developmentand commercialization. We believe that our compelling preclinical data, scientific expertise, product development strategy, manufacturing capabilities, androbust intellectual property position us as a leader in the development of genetic medicines.Our Opportunity in Genetic MedicinesWe are currently focused on monogenic diseases where the genetic abnormality is known to occur in a single diseased gene. The majority ofmonogenic diseases harbor thousands of individual mutations within the diseased gene, each resulting in a loss of function. Replacing an entire diseasedgene with a whole functional gene is the optimal therapeutic approach for addressing these monogenic disorders. This can be accomplished either through amethod of gene therapy called gene transfer in slowly or non-dividing cells, or through a method of gene editing called gene correction in rapidly dividingcells.1 The current focus of most nuclease-based gene editing methods is gene knockout, or knocking out a diseased gene to prevent the expression of anundesired protein. Since gene knockout does not result in a fully-corrected gene, this method can only potentially address the minority of monogenicdiseases where a diseased protein requires knock-down or inactivation. In addition to our knockout capabilities, our HR-driven gene correction methodallows us to achieve integration into the patient’s genome and potentially address the significant majority of monogenic diseases by replacing an entirediseased gene with a whole functional gene or repairing a single mutation to fully correct the defect. Gene therapy, on the other hand, seeks to introduce afunctional copy of a defective gene or gene sequence into a patient’s own cells, but not incorporate such copy into the patient’s genome. This method, calledgene transfer, results in the expression of the therapeutic protein of interest without changing the genome.DNA Repair PathwaysHuman cells harbor two primary independent pathways to maintain the integrity of DNA: homologous recombination, or HR, and non-homologousend joining, or NHEJ, which are described below: •HR is a process in which cells repair DNA through highly precise incorporation of correct DNA sequences that are homologous, ormatching, to the site of damage. HR has evolved to repair DNA with high fidelity and avoids the introduction of unwanted mutations at thesite of correction. In the late 1990’s, researchers discovered that certain adeno-associated virus, or AAV, vectors deliver gene sequencesinto the genome specifically through the HR process. These AAV vectors delivered long single strands of homologous DNA to specificregions in the genome and induced the HR pathway, but their low efficiency of approximately 1% limited their use as a viable option for invivo therapeutics. •NHEJ is a less selective, error-prone process that rapidly joins the ends of broken DNA resulting in a high frequency of insertions ordeletions at the break site. The discovery of nuclease-based gene editing technologies provided researchers with novel tools to specificallyintroduce DNA breaks into the genome. The most common repair pathway following a DNA break is NHEJ. Despite high potential for error,the majority of nuclease-based gene editing companies primarily utilize the NHEJ pathway.While the introduction of nuclease-based gene editing technologies provides the capability to initiate DNA repair pathways in the cell and furtherincrease the frequency of targeted gene modification, we believe its major limitation is the preferential utilization of the error-prone NHEJ pathway instead ofthe HR pathway. Because of this preference, the greatest utility of nuclease-based gene editing technologies may lie in their ability to knockout genes ratherthan replace an entire diseased gene in the genome with a whole functional copy. Furthermore, the use of nuclease-based gene editing technologies forinsertion of a corrective sequence requires the separate delivery of both nuclease and homologous DNA template to the same location at the same time, andcarries the risk of unwanted mutations from NHEJ including insertions and deletions or opposite orientation insertion of the template DNA.We believe the unique characteristics of our genetic medicines platform will allow us to focus on the HR pathway, enabling precise nuclease-free genecorrection with improved efficiency and a broader set of disease targets.2 Our ApproachOur unique genetic medicines platform is designed to provide us the flexibility to choose the best suited method from either gene correction or genetransfer for each disease we pursue, based on such factors as the targeted disease biology, the biodistribution of our AAVHSCs to key tissues, and the rate ofcell division the tissues exhibit. Our product development strategy is to continue to develop in parallel both gene therapy and gene editing modalities, whileinitially leveraging the experience from our gene transfer modality to further advance our gene correction modality. Refer to Figure 1 below for a graphicaldepiction of our platform.Figure 1. Our Genetic Medicines Platform.While others are working on identifying and testing ways to mitigate the inherent risk in working with nucleases, our approach avoids the use ofnucleases entirely. By targeting the HR pathway, our proprietary AAVHSCs mitigate the risks of nuclease-based technologies and have the potential toovercome other AAV vector limitations by combining the precision and high fidelity of HR with highly efficient in vivo gene correction, which we believe iscapable of providing potential cures for a wide range of rare genetic diseases.3 Our novel AAVHSCs are packaged with either a gene editing or traditional gene therapy construct. The gene editing construct includes lengthy guidesequences, or homology arms, which are designed to enable the specific alignment to the desired genomic location and then, through the natural process ofHR, enable correction of the diseased gene in the genome by replacement with a whole functional copy. Our gene therapy construct includes a functionalcopy of the gene and a promotor sequence that is designed to enable the gene to be turned on in the cell and ultimately transcribed to express the therapeuticprotein of interest without integrating into the genome. Refer to Figure 2 below for a graphical depiction of how our AAVHSCs enable each therapeuticmodality.Figure 2. How Our AAVHSCs Enable Each Therapeutic Modality.We believe our approach has several key advantages that include: •Our proprietary AAVHSC platform enables both gene therapy and gene editing modalities. Our platform provides us the flexibility todeliver genetic medicines through the best suited modality from either gene therapy or gene editing for each disease we pursue, based onsuch factors as the targeted disease biology, the biodistribution of our AAVHSCs to key tissues, and the rate of cell division the tissuesexhibit. Our AAVHSCs are naturally occurring as they were originally isolated from normal human CD34 cells and have the potential toresult in an improved safety profile. •Ability to perform nuclease-free gene editing mediated by HR with high gene correction efficiency. Our suite of 15 novel AAVHSCs aredesigned to enable us to take advantage of the precise and high-fidelity process of HR-directed gene insertion for nuclease-free geneediting while achieving gene correction efficiencies that are in therapeutic ranges and significantly higher than both nuclease-based andother AAV-based approaches. While nuclease-based gene editing technologies have achieved high gene knockout efficiencies inpreclinical studies, they have shown limited published evidence of gene correction efficiencies to date. •Ability to introduce an entire gene into the genome or the precise repair of individual mutated nucleotides in addition to gene knockout.Our HR-based gene editing approach provides the flexibility to introduce an entire copy of a functional gene into the genome in additionto repairing single mutations or knocking out entire genes, thus allowing us to potentially address the significant majority of monogenicdiseases. •High precision and lack of unwanted off-target or on-target DNA modifications. Our gene editing approach leverages HR, which makesDNA repairs with high fidelity, and enables us to precisely perform gene correction without unwanted off- and on-target modifications.Furthermore, we are able to directly measure and confirm those modifications throughout the entire genome to ensure only the intendedchanges are made.4 •Ability to target multiple tissues. In preclinical studies, intravenous administration of our suite of AAVHSCs have demonstrated ability totarget a wide variety of tissues including the liver, CNS, muscle, bone marrow, eye, heart and lung, enabling us to potentially address abroad range of monogenic diseases. •In vivo administration with a single component delivery system. Our platform is designed to perform gene editing at high efficiencywithout the use of a nuclease, enabling us to deliver genetic medicines in vivo using a single vector system that contains everythingrequired to edit DNA. These characteristics simplify the manufacturing and delivery of our therapeutic candidates relative to existingnuclease-based gene editing approaches. •Ability to target a broad range of patients given low frequency of preexisting neutralizing antibodies. We believe our AAVHSCs cantarget a broad range of patient populations given the low prevalence of preexisting neutralizing antibodies relative to other AAV vectors.Our Pipeline StrategyWe believe our genetic medicines platform can be applied broadly to treat and potentially cure a wide range of genetic diseases, and we havecarefully designed and prioritized our pipeline strategy to maximize this opportunity. We are initially pursuing monogenic diseases where we know exactlywhat we are seeking to correct and exactly which gene to insert into patients’ cells, thus mitigating the uncertainty of the disease biology. We are prioritizingmonogenic diseases with significant unmet medical needs, validated regulatory pathways, well-accepted biomarkers and significant commercialopportunities. We are currently focused on developing product candidates to treat monogenic diseases in the liver, CNS, bone marrow, and the eye, giventhat our AAVHSCs naturally show a high degree of tropism or ability to preferentially target cells in these organs and organ systems. These tissues areaffected in many rare genetic diseases.Our initial focus areas include developing product candidates for intracellular, inborn errors of metabolism and other genetic conditions that areespecially well suited to correction by our gene editing or gene therapy methods. In slow- or non-dividing cells (e.g., CNS and adult liver cells), gene therapycan potentially be curative, while rapidly dividing cells (e.g., hematopoietic CD34+ cells and pediatric liver cells) require a gene editing approach to providea permanent correction in the genome that can be replicated with each cell division. We are purposefully deploying our proprietary AAVHSCs in certainindications first with a gene therapy approach followed by a gene editing approach, in order to maximize the likelihood of translating our platform intowidespread clinical and commercial success.We are advancing into the clinic with our first and lead product candidate, HMI-102, for the treatment of PKU, a rare, inherited metabolic disorder thatcauses a buildup of the amino acid phenylalanine, or Phe, throughout the body, including the brain. Elevated Phe levels in children lead to impaired braindevelopment, severe intellectual disability and behavior problems with a high frequency of seizures. To date, no treatment addresses the core genetic defectin PKU. The current standard of care consists of a highly restrictive diet, which is not always effective in normalizing the levels of serum Phe and itsimportant metabolite, tyrosine, which is a precursor to several neurotransmitters. Low adherence to the diet leads to significant cognitive and behavioralproblems, such as impairments in executive function, including planning, problem solving, information processing, and ability to focus. There are currentlytwo FDA approved products for the treatment of PKU. Kuvan, in conjunction with dietary supplementation, provides limited or no benefit to approximately90% of patients with PKU. Palynziq, approved in 2018, is a pegylated plant-derived enzyme called phenylalanine ammonia lyase, or PAL. This approachusing PAL does not correct the underlying genetic disorder (human phenylalanine hydroxylase, or PAH, deficiency) and does not reconstitute the naturalpathway that is needed to address the neurocognitive defects associated with PKU.PKU has an easily measurable and translatable biomarker (blood Phe levels), facilitating both a rapid path to the clinic and characterization oftherapeutic response. Our PKU program is initially focused on adults using the gene therapy approach. This strategy is designed to help us to furthercharacterize the delivery, expression, safety, and manufacturing of our AAVHSCs, and to apply these learnings to our gene editing approach in the pediatricPKU population and to our broader platform. Preclinical studies in a well-established mouse model of PKU, called the ENU2 mouse, treated with HMI-102showed a reduction in serum Phe to normal levels within one week following a single intravenous administration and the reduction in serum Phe persisted for48 weeks, consistent with the lifespan of this model. We anticipate entering into a Phase 1/2 clinical trial and reporting initial clinical data for HMI-102 inadult PKU patients in 2019. We have also received orphan drug designation for the use of AAVHSCs expressing PAH for the treatment of PAH deficiency,which is the primary cause of PKU, from the U.S. Food and Drug Administration, or FDA, and from the European Medicines Agency, or EMA.We are building a deep pipeline across a wide range of diseases and tissue types to leverage the broad potential of our platform. We have nominatedlead development candidates in both gene editing for the treatment of PKU in pediatric patients, HMI-103, and gene therapy for a CNS indication,metachromatic leukodystrophy (MLD), HMI-202, and have initiated IND-5 enabling studies for these programs. We also may selectively enter into strategic alliances with pharmaceutical or biopharmaceutical companies to expandindications and accelerate development of programs where collaborators can contribute further disease-specific expertise to our platform.Our Product PipelineThe current status of our programs is summarized in the table below: Our StrategyOur goal is to transform the lives of patients suffering from severe genetic diseases by using gene editing and gene therapy to cure the underlyingcause of the disease. The critical components of our strategy to achieve this goal include: •Transform the treatment paradigm for rare genetically-defined diseases with the delivery of single-administration curative therapies.Utilizing our proprietary AAVHSCs, we intend to deliver genetic medicines in vivo via a single administration to address theunderlying genetic problem in a given disease. For each of the programs in our pipeline, we have identified the mutations of a specificgene that we believe can potentially be addressed by replacing an aberrant gene with a healthy one via HR-driven gene correction,resulting in specific integration into the patient’s genome, or by introducing a functional copy of a defective gene via gene therapy.Our genetic medicines platform allows us to choose the best suited modality for each disease we pursue, and we believe our nuclease-free editing approach will provide life-long clinical benefits for patients. •Advance our pipeline programs through clinical proof-of-concept and commercialization. We intend to advance our lead productcandidate, HMI-102, into a Phase 1/2 clinical trial in adult PKU patients in 2019. We believe that our approach of initially utilizingour AAVHSCs for gene therapy in adult PKU patients while, in parallel, advancing gene editing for pediatric PKU patients willmaximize the efficiency of our pipeline development while providing potential solutions for the unique needs of each particular PKUpatient population. Given the well-defined nature of PKU and the concentration of treatment centers, we intend to bring HMI-102, ifapproved, to patients through a small, targeted internal commercial organization. •Continue to expand our pipeline within existing therapeutic areas and expand into new therapeutic areas. We are focused onapplying the transformative potential of our genetic medicines platform to developing treatments for patients with monogenicdiseases. Initially, we are targeting diseases occurring in the liver, the CNS and hematopoietic system. Given the ability of ourAAVHSCs to deliver to a wide range of disease-relevant tissues, we believe there are many additional indications for which ourtechnology may be applicable, including other inborn errors of metabolism, lysosomal storage diseases, hematological diseases, andophthalmic diseases, as well as for ex vivo cell therapy. Our research and development collaboration with Novartis for selectophthalmic targets and other exploratory disease areas illustrates the broad potential of our platform. In addition to our Novartiscollaboration, we may also choose to selectively collaborate to6 expand the indications we can pursue and accelerate development of programs where collaborators can contribute further disease-specific expertise to our platform. •Strengthen our platform by leveraging our discovery and development capabilities and selectively collaborating. We are committedto investing in our research and development activities to expand the capabilities of our platform, specifically our AAVHSCs as well asHR gene editing technology. We are optimizing our AAVHSC genetic medicines platform with focused efforts on AAVHSCcharacterization, gene therapy and editing construct design and screening, and genomic assays to characterize and quantify our editingtechnology. To augment our own efforts, we intend to continue to collaborate with academic institutions to pursue new scientific andtherapeutic insights and strengthen our position as a leader in gene correction. •Control manufacturing through our in-house capabilities. We have developed an internal process development platform thataccommodates both gene therapy and gene editing technologies. We have constructed a 25,000 square foot cGMP manufacturingfacility that is designed to accommodate all pipeline programs, and we expect to start manufacturing in the first half of 2019. Webelieve the quality, reliability and scalability of our gene editing and gene therapy manufacturing approach is a core competitiveadvantage crucial to our long-term success and that internal manufacturing capabilities will further safeguard our intellectual property. •Continue to strengthen and expand our intellectual property portfolio. We have exclusive worldwide rights to our technologiesincluding issued composition of matter patents in the United States for 15 of our novel AAVHSCs for both gene editing and genetherapy. We exclusively acquired rights to this foundational intellectual property for the AAVHSCs from COH for developing andcommercializing therapeutics based on these vectors. We continue to focus on strengthening our intellectual property estate throughthe discovery of new AAVHSCs, further characterization around our existing AAVHSCs as well as the core technology involved indelivering our product candidates to patients. To further advance our leadership in nuclease-free gene editing and gene therapy, weactively explore opportunities to collaborate with other leading scientific institutions in the field.Genetically Defined Disease and Genetic MedicineEach person’s genetic material, or genome, is encoded by DNA in sequences of genetic code called genes. Genes, in turn, through a process calledgene expression, produce proteins that perform a vast array of functions within all living organisms. The human genome consists of roughly three billion basepairs of nucleotides, which are the basic structural unit of nucleic acids like DNA, and small changes, or mutations, routinely occur in the base pairs of ourDNA. A mutation in the gene or in sequences that control the expression of that gene can cause proteins to be produced aberrantly in the cell—for example,too little or too much protein can be produced in the cell—which can cause disease.Significant investments in the human genome project, clinical data collection and analysis, and the development of affordable and efficient DNAsequencing and informatics tools have transformed the scientific community’s understanding of genetically defined diseases and brought significantadvancement to the field of genetic medicine. For example, many diseases previously thought to be genetically complex in nature have now been re-categorized as multiple distinct diseases that present with similar clinical dispositions, but are caused by different single-gene defects. Currently, there areapproximately 3,600 diseases that are understood to be caused by single-gene mutations, which vary dramatically in their pathologies, their sites ofmanifestation, and the specific natures of their root causes.According to the Online Mendelian Inheritance in Man database, a majority of genetically defined diseases are autosomal recessive in nature(meaning two copies of an abnormal gene must be present in order for the disease or trait to develop) resulting in a loss of function, whereas the remainingdiseases are autosomal dominant (meaning you need only one copy of the mutated gene to be affected) with a gain of function. In loss of function-baseddiseases, the mutation results in a protein that is not adequately produced; conversely, in the case of gain of function diseases the mutated gene product isinappropriately or excessively active. The majority of genetic diseases harbor thousands of individual mutations within a single gene, each resulting in a lossof function, thus treatment requires replacing or supplementing the diseased gene with the whole correct gene. Two approaches are currently used to restorefunction—gene therapy and gene editing.Current Treatment Modalities and their LimitationsTraditional genetic medicines have focused on the addition of new genes to human cells without integration into the genome, or gene therapy. Recentadvances in the field, however, have led to the development of gene editing technologies that enable the introduction of DNA breaks to potentially achieve atherapeutic effect. However, nuclease-based gene editing7 approaches have been limited due to high rates of unwanted on- and off-target modifications and low gene correction efficiency due to the cell trying torapidly repair the introduced DNA break. Other therapeutic approaches to genetic disease do not address the underlying genetic cause of the disease and offersolutions that typically only treat symptoms and require chronic administration, and as a result most genetic diseases tend to have significant unmet need.Gene Therapy OverviewGene therapy, through the process of gene transfer, seeks to introduce a functional copy of a defective gene or gene sequence into a patient’s owncells alongside the existing genome, without integration, as an episome within a cell. The episome drives functional gene expression using engineeredpromoters that can be designed to limit expression to specific cell types or be expressed in all cell types. Gene therapy is a viable option for delivery ofpotential cures in diseases where the target cell type does not divide frequently (e.g., neurons in the CNS and adult liver cells). However, since gene therapyworks through an episome that does not integrate into the genome, each time a cell divides, the number of episomes per cell decreases by 50%. After a fewrounds of cell division, the episomes will be lost, limiting therapeutic relevance in rapidly dividing cells (e.g., blood, lung and pediatric liver cells).Gene therapy has been studied for over 50 years, and the first therapeutic use of gene transfer in humans occurred in 1990. Since then, more than 2,300gene therapy trials have been planned or completed, covering a broad range of disease targets. Recently, gene therapies have progressed beyond academictrials to regulatory approvals, resulting in a growing acceptance and de-risking of the modality. In 2012, UniQure’s Glybera became the first gene therapy tobe approved by the EMA and was followed by the EMA approval of GlaxoSmithKline’s Strimvelis in 2016. Spark Therapeutics’ Luxturna is the first directlyadministered gene therapy approved in the U.S. that targets a disease caused by mutations in a specific gene.Gene Editing OverviewGene editing is a powerful new approach that has been developed in the last few years to change the course of genetic disease by physicallycorrecting aberrant genes in a variety of tissues in the body. Gene editing is the process of replacing, deleting, or repairing defective DNA in its nativelocation. The current focus of gene editing is knocking out a diseased gene or correcting an individual mutation within a gene that is frequent within thedisease population, neither of which can address the larger population of recessive genetic diseases that would require the insertion of a full corrective gene.Unlike the gene therapy approach, in gene editing the repaired genetic region is replicated through normal cell division and allows the protein to beexpressed using its natural regulators. There are two approaches to gene editing, the traditional nuclease-based approach and our nuclease-free HR-drivengene correction approach.Gene editing technologies to date primarily leverage two independent pathways to modify DNA: HR and NHEJ. HR is a process in which cells repairDNA through highly precise incorporation of correct DNA sequences complementary to the site of damage. HR has evolved to repair DNA with high fidelityand avoids the introduction of unwanted mutations at the site of correction. NHEJ is a less selective, error-prone process that rapidly joins the ends of brokenDNA resulting in a high frequency of insertions or deletions at the break site.Nuclease-Based Gene EditingNuclease-based gene editing utilizes nucleases, which are enzymes that were initially identified in bacteria and evolved to act like “molecularscissors.” Nuclease-based gene editing is fundamentally a two-step process. First, a nuclease, which is capable of cutting one or both strands in the double-stranded DNA, is directed to the desired site and makes a specific cut. After the desired cut or cuts are made, the cell’s DNA repair machinery responds tocomplete the edit through one of two possible repair mechanisms—the more common NHEJ or the less common HR—that can be leveraged for therapeuticeffect.NHEJ occurs in the absence of a DNA template for the cell to copy as it repairs a DNA cut. This is the primary or default pathway that the cell uses torepair double-stranded breaks. The NHEJ mechanism can be used to introduce small insertions or deletions, or indels, resulting in the knocking out of thefunction of the gene. NHEJ creates indels due to its mode of repair and can also result in the introduction of off-target, unwanted mutations includingchromosomal aberrations.8 Nuclease-based HR occurs with the co-delivery of the nuclease and a DNA template that is similar to the DNA that has been cut. Consequently, thecell can use this template to construct reparative DNA, resulting in the replacement of defective genetic sequences with correct ones. The HR mechanism isthe preferred repair pathway when using a nuclease-based approach to insert a corrective sequence due to its high fidelity. However, a majority of the repair tothe genome after being cut with a nuclease continues to go through the NHEJ mechanism and is the more frequent repair pathway, even in the presence of aDNA template. This has the potential to result in unwanted mutations at the cut site including: •insertion of the template DNA in the wrong orientation; •unwanted mutations added at the site of integration; •integration of template DNA fragments; and •insertion of inverted terminal repeat sequences if AAV is used as the delivery vehicle. Figure 3. Non-Homologous End Joining and Homologous Recombination.Much of the early recognition for gene editing’s potential has come in response to these nuclease-based approaches, which include: TranscriptionActivator-Like Effector Nucleases, or TALENs; Clustered, Regularly Interspaced Short Palindromic Repeats (CRISPR) Associated protein-9, orCRISPR/Cas9; Zinc Finger Nucleases, or ZFN; and Transcription Activator-Like meganuclease, or megaTAL. While these approaches have already made andwill likely continue to make an impact on biology research, we believe they face significant shortcomings.Limitations of Nuclease-Based Gene Editing •Unwanted on- and off-target DNA modifications. The use of exogenous nucleases results in DNA breakage which is predominantly repairedvia NHEJ, an error-prone process involving the insertion or deletion of DNA residues as well as the possibility that DNA will be cut in thewrong place, resulting in unwanted mutations driven through NHEJ instead of a therapeutic correction at the precise location. This processcoupled with the ability of these nucleases to break the DNA at off-target sites comprises one of the major safety concerns about these geneediting methods. •Inability to efficiently and precisely introduce an entire gene to the genome. Current gene editing approaches are unable to achieve highefficiencies of targeted gene correction in vivo.9 •Complexity of vector delivery and manufacturing to achieve gene insertion. In order to deliver an entire functional gene, existing nuclease-based gene editing approaches require co-delivery of multiple constructs of editing machinery into the same cell at the right place and at thesame time. The need to use multiple vectors also increases the complexity and cost of manufacturing.Nuclease-Free Gene Editing OpportunityGene editing through the precise HR pathway can also be conducted without the use of nucleases. Although such approaches were pioneered in the1990’s before the advent of the nuclease-based gene editing platforms, their use and progression to clinical trials since has been held back by issuesincluding gene correction efficiencies that are typically well below those needed to achieve potential therapeutic effect. Nevertheless, early work in the fieldof nuclease-free gene editing elucidated some of the key characteristics of various platforms that are now providing higher editing frequencies. However, thepublished efficiency of this technology for gene correction is approximately 1%, significantly below levels that are typical for generating a therapeuticeffect. This underscores a clear need for novel nuclease-free gene editing technologies capable of achieving higher gene correction efficiencies.Our Genetic Medicines PlatformOur proprietary genetic medicines platform is built on our novel AAVHSCs, which allow us to choose the best suited modality from either genecorrection or gene therapy for each disease we pursue, based on such factors as the targeted disease biology, the biodistribution of our AAVHSCs to keytissues, and the rate of cell division the target tissues exhibit. The unique characteristics of our platform enable nuclease-free gene editing, specifically genecorrection, and broad, systemic tissue distribution. Our AAVHSCs are designed to directly integrate corrective DNA through HR with therapeutically relevantefficiencies. Our HR-based gene editing approach utilizes a single component AAV system that contains everything required to selectively edit DNA with noneed for exogenous nucleases or editing machinery. This single-component system simplifies the manufacturing and delivery of our therapeutics. OurAAVHSCs are naturally occurring and have been modified to be non-replicating to minimize potential safety issues. We believe our platform’s combinedattributes will allow us to develop more efficient and safer therapeutics for a wide range of genetic diseases.Homologous Recombination—A Powerful Basis for Gene EditingUnlike other gene editing approaches, our technology is based on the natural DNA repair process of HR, and is designed to enable precise andefficient correction or replacement of gene mutations without an exogenous nuclease. HR is a process that is used by cells to repair DNA through theincorporation of a template of homologous DNA. This pathway is not prone to the nucleotide insertions and/or deletions that occur frequently in the NHEJprocess.By pursuing one-time correction of underlying genomic defects using a nuclease-free, naturally occurring DNA repair process that addresses theunderlying genetic problem in a given disease, we believe our approach has the potential to simplify production and delivery of therapeutics, minimize therisk of unwanted mutations and provide life-long clinical benefits for patients. Our gene editing approach has the potential to be curative in both dividingand non-dividing cells as it provides a permanent correction in the genome that is then replicated with each cell division so that new generations of cells willcarry the corrected gene.Our genetic medicines platform induces the endogenous HR cellular process using our AAVHSCs to insert replacement or corrective genes into cellsthat contain mutated or deleterious genes. We engineer our AAVHSCs to contain long, single-stranded DNA corrective sequences highly specific to the targetregion in the genome. These single-stranded DNA molecules are then delivered to cells in our AAVHSC vectors, which we believe results in precise andefficient gene correction via the HR pathway. The design of our long and specific sequences, up to the 4.7 kilobase packaging limit of our AAVHSCs, isintended to significantly reduce the risk of off-target integration. Based on the packaging size of our AAVHSCs, we believe our caspids are capable ofaccommodating and delivering up to approximately 85% of the genes in the human genome and thus have the ability to address a significant majority ofgenetic disorders. The engagement of the HR pathway to drive gene correction results in a highly precise and efficient on-target integration, withoutintroducing unwanted mutations at the corrective site. These guide sequences can be engineered to be as long as necessary to deliver highly efficient HR-based on-target correction while significantly minimizing off-target effects. We typically use homology arms as long as 1,600 base pairs of DNA to targetcorrective gene sequences into precise regions of the genome, in contrast to the guide sequences used in CRISPR/Cas 9-based gene editing, which aretypically less than 30 base pairs in length. We also benefit from the ability of our platform to utilize HR to precisely insert gene sequences into the DNA ofcells, similar to how mammalian cells repair their own DNA. This is a key distinction from approaches that rely on exogenous nucleases that were initiallyidentified in organisms, such as bacteria, and evolved just to cut DNA. In order to bring about the excision and subsequent replacement that some forms ofgene editing10 require, those other approaches must combine multiple additional techniques and deliver into the cell the requisite cellular machinery at the right place at thesame time, increasing the complexity of the task, introducing the possibility of integrating the wrong DNA due to non-HR-based repair mechanisms, andreducing the likelihood of success. Figure 4. Schematic of Homologous Recombination.Our Proprietary AAVHSCsOur genetic medicines platform is based on a suite of 15 proprietary AAVHSCs which we can deploy with either gene editing or gene therapyconstructs. Both applications rely on a unique ability of our AAVHSCs to efficiently target multiple tissues in the body. Our AAVHSCs were isolated fromhuman stem cells and we believe they can direct nuclease-free gene correction with higher efficiency and precision relative to that indicated in publisheddata for other AAV-based gene editing approaches. Our genetic medicines platform is based on gene editing and gene therapy technologies resulting from thepioneering work conducted on AAVHSCs in the laboratory of COH. Our AAVHSCs display the following advantages:Single AAVHSC Platform for Both Gene Therapy and Gene Editing ModalitiesOur platform provides us the flexibility to deliver genetic medicines through the best suited modality from either gene therapy or gene editing foreach disease we pursue, based on such factors as the targeted disease biology, the biodistribution of our AAVHSCs to key tissues, and the rate of cell divisionthe tissues exhibit.11 Ability to Perform Nuclease-free Gene Editing Mediated by HR with Higher EfficiencyA 2016 study conducted by COH assessed the ability of AAVHSCs to carry out gene editing in vivo using a luciferase gene that lacked a promotersequence. A vector with homology arms was designed to introduce D-luciferin, or luciferase, into the Rosa26 locus in the mouse genome. Rosa26 is a locus inthe mouse genome that is known to have a strong promoter capable of driving constitutive expression of genes in all cell types. AAVHSC15 constructs with(N=3) and without (N=2) homology arms and an AAV8 construct with homology arms (N=3), were injected into mice intravenously at a dose of 1e13 vectorgenomes per kilogram, or vg/kg. High levels of luciferase expression were detected throughout the mouse up to 63 days after injection of the AAVHSC15construct with homology arms. Luciferase expression was not seen if the homology arms were not present and was barely detectable when AAV8 was usedinstead of AAVHSC15. These data were published in Proceedings of the National Academy of Sciences of the United States of America, or PNAS, in July2018. Figure 5. In vivo Gene Editing. Mice treated with our AAVHSC15 construct with homology arms specific to Rosa26 showed high expression ofluciferase up to 63 days. Control mice injected without homology arms or with AAV8 constructs had none or limited luciferase expression.12 Factor 8, or F8, is a locus in the mouse genome that is known to have a strong promoter but is expressed only in the liver. In a study we conducted in2017 at our headquarters, AAVHSC15 and AAVHSC17 constructs, at a dose of 5e12vg/kg (N=3), containing homology arms specific to the murine F8 locuswere injected into mice intravenously. Live luciferase imaging was conducted pre-dosing and weekly thereafter through week nine, with the exception ofweek four. Murine biodistribution data with AAVHSC15 and AAVHSC17 both show tropism to multiple tissues beyond the liver. However, in this study onlyliver-specific expression of luciferase was observed as early as 24 hours and sustained through 60 days post-injection, suggesting significant editing in themurine F8 locus. To assess the evidence of F8 gene correction, genomic DNA from the livers were extracted at 60 days post-injection and integration wasassessed molecularly confirming editing of the promoterless luciferase into 6% to 12% of the F8 alleles, which we believe to be therapeutically relevant, asdepicted in Figure 6 below. Figure 6. In vivo Gene Editing. In the active groups, liver-specific expression of luciferase was observed up to 60 days and gene correctionefficiencies were observed in a range of 6% to 12%.In a subsequent study we conducted in 2017 using our internal manufacturing process, an AAVHSC15 construct, at a dose of 1.5e14vg/kg, containinghomology arms specific to the murine F8 locus was injected into mice (N=3) intravenously. Genomic DNA from the livers were extracted at seven days post-injection in this study and editing efficiency was determined molecularly. As depicted in Figure 7 below, F8 gene correction editing efficiencies averaging19.5% were observed. Figure 7. In vivo Gene Editing. In the dosed group, liver-specific expression of luciferase was observed up to seven days post-injection and genecorrection efficiencies were observed averaging 19.5%.Ability to Introduce Entire Gene into the Genome Mediated via HRIn order to generate evidence regarding this gene editing capability, we carried out cellular assays with the widely used reporter protein greenfluorescent protein, or GFP, which glows visibly green when it is expressed in a cell. In this study, which was conducted in 2016 at Charles River Labs in theNetherlands in collaboration with Charles River Labs and COH, a series of AAV vectors using sequences from widely used strains such as AAV2, AAV6, andAAV8, as well as our AAVHSC strains was constructed such that a promoterless copy of the gene for GFP was surrounded by 1,600 base pairs of anendogenous human gene, PPP1R12C. Previous work demonstrated that these surrounding sequences or homology arms can direct the process of HR into thegenomic DNA at the desired site. Genes require promoters to signal the cell machinery to copy the gene instructions into messenger RNA or mRNA, which isthen turned into protein. The artificial GFP construct alone is unable to direct the synthesis of mRNA and therefore no GFP protein can be synthesized fromthe episomal vector. The PPP1R12C gene sequences are homologous to a specific region in the human genome and are meant to direct the incorporation ofGFP into the13 genome of the human near a particular, known endogenous promoter. The synthesis of GFP protein, as detected by its fluorescence, can be used as a surrogatefor the successful integration of the GFP gene downstream of this promoter.These GFP constructs were introduced into a broad panel of human cell lines and primary cells and recombination frequencies were determined usingbioluminescence from expression of GFP. All cells were treated with a multiplicity of infection of 150,000. AAVHSCs resulted in much higher GFP positivecells and thus HR events than other AAV strains. This high level of HR has been observed with multiple genomic targets and independently confirmed inmultiple laboratories. These data were published in PNAS in July 2018. Figure 8. Targeted gene correction of AAVHSCs vs. other AAV strains was measured by assaying for the expression of GFP. Our AAVHSCsresulted in significantly higher GFP expression compared to other AAV strains, indicating higher levels of HR.Direct confirmation of HR was observed using a DNA-based assay that can detect the insertion of the GFP gene at the desired location in the genome.The level of GFP expression was found to directly correlate to the recombination frequency. Furthermore, studies in cell lines with various mutations in DNArepair and recombination genes identified BRCA2 as a critical gene in AAVHSC-directed gene editing. Mutations in BRCA2, a gene that encodes a proteinknown to be essential for HR, completely eliminate gene editing but have no effect on transduction efficiencies, thereby providing evidence that the geneediting is accomplished through HR.We believe our approach, when compared to published third party data, can result in significantly higher and therapeutically meaningful in vivo genecorrection efficiencies than those provided by existing methods, although we have not conducted any head-to-head studies comparing our AAVHSCs withexisting products or treatment methods. In a 2015 study described in Nature and depicted in the second bar from the right in figure below for illustrativepurposes, third-party researchers injected a gene editing construct, packaged in AAV8, targeting the murine albumin gene with a cDNA encoding humanFactor 9, a gene responsible for encoding the production of a protein called coagulation factor IX, into a C57BL6 mouse at a dosage of 5e13vg/kg (N=7).Genomic DNA was harvested from the livers at 14 weeks post-dosing and a two-step nested qPCR assay was used to quantify the percentage of alleles withthe integration of human Factor 9. The efficiency was determined to be approximately 0.5%. A qPCR assay was then used to measure the percentage ofmRNA transcripts with the integration of human Factor 9. This assay was based on primers specific for the wild type albumin transcript and another setspecific to the albumin transcript with the integration of human Factor 9. In this assay, the estimated proportion of transcripts from the edited allele wasdetermined to be approximately 0.1%.14 In an unrelated 2017 study described in EMBO Molecular Medicine and depicted in the far right bar in the figure below for illustrative purposes,third-party researchers injected a gene editing construct, packaged in AAV8, targeting the murine albumin gene with a cDNA encoding human UGT1A1, agene belonging to a family of genes responsible for encoding the production of certain enzymes, into a mouse model at a dosage of 1e12 total vg (N=6). Inthis study, the estimated editing efficiency was determined through immunohistochemical assessment of hepatocytes staining positive for human UGT1A1.Using this method, the estimated efficiency was determined to range from 0.033% at one month post-dosing to 0.015% at one year post-dosing. Figure 9. Significantly higher and therapeutically meaningful in vivo gene correction efficiencies observed in the livers of mice using ourapproach compared to published third party data.We have successfully inserted full-length cDNA encoding luciferase and PAH into two separate genomic regions in vivo reaching levels of efficiencyrequired for therapeutic efficacy. The ability to introduce entire genes specifically into the genome at these efficiencies provides an opportunity to targetmultiple monogenic diseases where the correction of a defective gene would result in therapeutic benefit. Given that a majority of monogenic diseases harbormutations that render the gene inactive, we believe our gene correction modality can be expanded well beyond our initial focus on liver-based inborn errorsof metabolism.High Precision and Lack of Unwanted Off-target or On-target DNA ModificationsUsing next-generation sequencing, we have developed methodologies to test for on-target mutations at the site of integration. Using these methods,we observed that HR using our AAVHSCs is very precise at the site of correction. We have amplified the corrected region in the genome and sequenced morethan 2 million reads and were not able to detect any indels or traces of viral sequence at the detection limit of this sequencing.We developed a method to enable whole genome unbiased next-generation sequencing for the detection and mapping of off-target integration sites.By leveraging the potential ability of our AAVHSCs to drive HR-based targeted integration we can utilize next-generation sequencing technologies toidentify and quantify where the inserted sequence maps. Using this method, and based on over 2.2 million sequence reads, we estimate that 99.967% ofinsertions are at the targeted site and that the balance is within expected background of the assay.Ability to Target Multiple TissuesThrough intravenous administration of our AAVHSCs into rodents and non-human primates, we have generated evidence of their ability to target anumber of tissues including: •crossing the blood-brain barrier to neurons throughout the brain, spinal cord, and dorsal root ganglion; •retinal ganglion cells and neurons of the retinal outer nuclear layer; we have also demonstrated the ability to target retinal tissue viaintravenous injection as well as multiple layers of target cells through sub-retinal injection; •skeletal muscle myocytes in all skeletal muscle tissues examined, including gastrocnemius, soleus, diaphragm, esophagus, and biceps;15 •cardiomyocytes throughout the heart; and •extensive liver tropism. Figure 10. Our AAVHSCs show significant biodistribution to key tissues for treating genetic diseases.In vivo Administration with a Single Component Delivery SystemOur platform is designed to perform gene editing at higher efficiency without the use of a nuclease, enabling us to deliver genetic medicines in vivousing a single vector system. Existing nuclease-based gene editing technologies, when replacing a defective gene with a functional gene through geneediting, require the use of two or more different vector constructs in combination to perform their gene editing functions. One or more vector constructs housethe nuclease, and the other vector construct houses the DNA template, and all vectors must reach and penetrate the specific target cell at the same time to editthe DNA. In contrast to these nuclease-based gene editing technologies, our AAVHSC technology is a single component system that contains everythingrequired to selectively edit DNA across all gene editing methods with no need for additional exogenous nucleases, template DNA or editing machinery.We believe our ability to perform gene editing at efficiencies that are significantly greater than both nuclease-based and other AAV-based approaches,coupled with our single component delivery system, enable us to administer genetic medicines in vivo. We believe the advantages of in vivo administrationof therapeutics via a single component delivery system include the following: •simpler and faster manufacturing relative to ex vivo resulting in reduced manufacturing costs; •improved delivery of therapeutic as only a single vector is required to reach a cell instead of multiple vectors; •ease of use for the patient, eliminating the need for bone marrow extraction, a common requirement for many ex vivo gene editing therapies;and •improved safety profile, eliminating the risk of rejection or other unwanted immune response that can result from the administration of an exvivo therapy.16 Figure 11. Our nuclease-free AAVHSC single component gene editing construct vs. nuclease-based multiple component gene editing construct forgene correction applications.Ability to Target a Broad Range of Patients Given Low Frequency of Preexisting Neutralizing AntibodiesA potential concern for all AAV vectors is the presence of preexisting neutralizing antibodies that have the potential to reduce their effectiveness. Weconducted a study across 100 human serum donors representing different ethnic segments of the U.S. population. Based on the initial results, we believe thefindings suggest that approximately 80% of individuals lack antibodies that recognize AAVHSCs, which is comparable to AAV9, a commonly used vectorfor development of other gene therapies. These findings were published in Human Gene Therapy Clinical Development in March 2018. Our Product CandidatesWe believe our genetic medicines platform can be applied broadly to treat and cure a wide range of genetic diseases, and have carefully designed andprioritized our pipeline strategy to maximize this opportunity. We are initially pursuing diseases where the genetic abnormality is known and is found in asingle gene. These are also known as monogenic diseases. We therefore know exactly what we are correcting and exactly what gene to insert into the patient’scells, thus mitigating against the uncertainty of the disease biology. We are prioritizing monogenic diseases with significant unmet medical needs, validatedregulatory pathways and significant commercial opportunities. We are currently focused on developing product candidates to treat monogenic diseases in theliver, bone marrow and the CNS, given that our AAVHSCs naturally show a high degree of tropism or ability to preferentially target cells in these organs andorgan systems. These tissues are affected in many rare genetic diseases.HMI-102 for Treatment of PKU in Adult Patients and HMI-103 for Treatment of PKU in Pediatric PatientsOur lead program, HMI-102, is an AAVHSC vector gene therapy candidate designed to treat PAH deficiency, the underlying genetic cause of PKU.We have received orphan drug designation from the FDA and the EMA for the use of AAVHSCs expressing PAH for the treatment of PAH deficiency, theprimary cause of PKU. We expect to initiate a Phase 1/2 clinical trial in PKU patients and to report initial clinical data in 2019. HMI-102 is intended to treatadult patients with deficiencies in PAH regardless of the specific underlying PAH mutation. We are also developing HMI-103, an AAVHSC vector geneediting candidate, to address the pediatric PKU population. HMI-103 is designed to replace the defective PAH gene through the targeted integration of anormal copy into the PAH genomic region. We are in IND-enabling studies with HMI-103.PKU Disease OverviewPKU is an inborn error of metabolism that results from mutations in the PAH gene. PAH is an enzyme that is normally expressed in the liver and isnecessary to metabolize dietary phenylalanine, or Phe, to the amino acid tyrosine, which is a precursor to several neurotransmitters including dopamine. PKUresults from mutations in PAH that render its enzymatic activity deficient. If it is not metabolized by PAH, Phe builds up throughout the body, including inthe blood and the nervous system. Approximately 75% of all dietary Phe is typically metabolized by PAH so the absence of PAH leads directly to thepathological excess of Phe as well as a deficiency of tyrosine. Excessive blood Phe and low levels of tyrosine result in intellectual disability, which ispossibly caused by a variety of mechanisms including effects on neuronal development, myelination, and neurotransmitter synthesis. Blood Phe is an easilymeasurable and translatable biomarker. It is also a surrogate clinical endpoint in clinical trials for PKU, facilitating both a rapid path to the clinic andcharacterization of therapeutic response.Newborns in all 50 states are screened for PKU. It has been estimated that the incidence of PKU in the United States is one in 12,707, which translatesto approximately 300 cases per year with an overall prevalence of 15,000. It has also been estimated that the prevalence of PKU in the European Union is25,000. Worldwide, the estimated prevalence is 50,000.The majority of patients are identified soon after birth and are primarily treated by dietary restriction of Phe. While Phe-restricted diets havedramatically reduced the intellectual deficiencies associated with this disease, they fail to address the cognitive and behavioral problems that continuethroughout a patient’s life. Lifetime adherence to a Phe-restricted diet is challenging and blood Phe is not achievable within the recommended range for thevast majority of patients. The inability to achieve recommended levels of Phe results in neurological as well as metabolic problems. Long-term studies inadults identify neurocognitive, psychosocial, quality of life, growth, nutrition, bone pathology and maternal PKU outcomes that are suboptimal despite earlyand continuous treatment. In a retrospective study of PKU patients, young children were adherent to Phe-restricted diet, whereas most adolescents (79%) didnot achieve recommended Phe levels, and 88% of adults were no longer on a Phe-restricted diet. Relaxing of dietary restrictions beyond preschool years, orfailure to adhere to physician-17 assigned diets, which is the current guideline for most adolescents and adults, results in loss of metabolic control and wide fluctuations in Phe levels that areboth directly associated with progressive neurological damage.We conducted a five-year retrospective chart review of PKU patients, which confirmed key elements of our proposed Phase 1/2 clinical trial design.Consistent findings from two PKU academic centers of excellence in the U.S. in 152 PKU patients showed that actively monitored patients, including thoseon restrictive low Phe diet, had Phe levels well-above the generally accepted threshold of 360 umol/L, underscoring the need for treatments that restore thenormal biochemical pathway. Furthermore, we established that elevated Phe was higher in the classic PKU population, defined as patients with Phe levelsgreater than 1200 umol/L (66% of the study population), and was significantly elevated in the adult population compared to those patients who were lessthan 18 years of age. Figure 12. Retrospective five-year chart review demonstrates actively monitored Classic PKU patients across two academic centers have Phelevels >700 umol/L.Current TreatmentsThere are currently no available treatments that address the core underlying genetic biochemical defect in PKU, the deficiency of PAH.Saproterin dihydrochloride, or Kuvan, is an FDA approved therapy to reduce elevations in serum Phe. Saproterin is a synthetic version of BH4, acofactor that is required for PAH activity. The addition of saproterin helps deficient PAH to metabolize some Phe. However, clinical data suggests thatsaproterin is not fully effective in lowering high serum levels of Phe back to normal levels and must be used in conjunction with a low Phe diet. Kuvanreported worldwide sales of $434 million in 2018.Pegvaliase, or Palynziq, is a pegylated plant-derived enzyme called phenylalanine ammonia lyase that was approved in the U.S. by the FDA in 2018.This approach does not correct the underlying genetic disorder (PAH deficiency) and will not reconstitute the natural pathway that is needed to address theneurocognitive defects associated with PKU. We believe Palynziq to have certain limitations including that it must be administered via multiple dailyinjections and its label contains a black box warning that it causes severe allergic reaction (anaphylaxis) that may be life threatening and can happen at anytime during treatment with Palynziq. The label states that patients must carry auto-injectable epinephrine with them at all times during Palynziq treatment. In2016, BioMarin reported that patients in its Phase 3 trials did not meet the secondary efficacy endpoints for cognitive benefit.Our Gene Therapy and Gene Editing Approaches to PKUWe are taking two approaches towards developing a potential therapy for PKU. The first is a gene therapy in which a gene construct encoding humanPAH is delivered to liver cells where it directs production of normal PAH via episomal expression driven off an exogenous promoter. The second potentialtherapy involves true gene correction of the defect found in the chromosomes of affected patients. We believe that the gene therapy approach offers anexpedited clinical development path towards delivery of a therapeutic to adult patients where the majority of target cells are non-dividing in the liver. Webelieve the gene correction approach would be more efficient in newborn and pediatric patients due to the higher rate of dividing cells18 as the child grows. The goal of both approaches is to enable production of functional PAH, thus restoring the normal biochemical pathway of Phemetabolism. This can reduce the abnormally high levels of Phe in the blood, while also increasing tyrosine levels, the product of PAH-driven Phemetabolism. Using gene editing to correct the defective PAH gene in young patients has the potential to provide long-term benefit as the corrected gene willpersist as cells replicate. Correcting the gene while it remains under the control of its natural promoter early in disease progression has the potential tonormalize not only Phe levels, but also tyrosine levels, the product of the PAH enzyme and a precursor to neurotransmitter synthesis. This may allow affectedchildren to avoid many of the serious neurological consequences associated with PKU.We believe that an effective gene therapy or gene correction for PKU has the potential to eliminate the need for Phe restricted diet and may lead tosignificant improvements in the morbidity and quality of life for patients. Published estimates suggest that restoration of PAH activity to 10% or more ofnormal levels would lead to significant improvements in serum Phe levels and potentially represent a curative therapy.HMI-102: Our Gene Therapy Approach for PKUWe identified HMI-102 as our lead product candidate after screening multiple vector constructs. HMI-102 consists of an AAVHSC15 vectorcontaining the coding sequence of human PAH under control of a promoter designed to continuously express PAH, specifically in the liver. We choseAAVHSC15 as the basis of this product candidate because of its observed propensity to target liver cells, the normal site for PAH protein expression.The potential of an AAVHSC15-delivered PAH gene was assessed in a well-established mouse model of PKU called the ENU2 mouse. This modelcontains a mutation in the murine Pah gene that results in abolished activity and results in elevated serum Phe levels. Baseline levels of serum Phe in thesemice are approximately 1,500 micromoles per liter compared to normal levels of 80 micromoles per liter, levels that are similar to those seen in classic PKUpatients and normal controls, respectively. Single intravenous injections of HMI-102 into these deficient mice resulted in reductions of serum Phe to levelsthat are within the range for normal mice. As depicted in Figure 13, the reduction in serum Phe levels persisted for 48 weeks in treated mice on a normalprotein diet, consistent with the lifespan of the model. In addition to a reduction in serum Phe, the administration of our gene therapy candidate also resultedin elevations of serum tyrosine due to the restoration of the normal biochemical pathway. 19 Figure 13. A single injection of HMI-102 resulted in rapid and sustained reductions in serum Phe and increased tyrosine levels in PAH deficientmice that are on a regular diet.A subsequent study was performed to further characterize the effect of HMI-102 on normalizing levels of Phe and neurotransmitter metabolism in thebrain. As shown in Figure 14, a single administration of HMI-102 in the ENU2 mouse model reduced levels of Phe in the brain to normal levels as measuredat 4 weeks post-dosing. Furthermore, the brain concentrations of 5-HIAA, a metabolite of serotonin, was increased to normal levels. These results indicate thatHMI-102 administration directly impacts the metabolic pathway associated with loss of PAH.Figure 14. HMI-102 normalizes key neurological measures underscoring restoration of normal biochemical pathway.During the development of our AAVHSC15 genetic medicine candidates, we tested for liver transduction comparisons across species, specifically inmice and non-human primates, to establish a dosing rationale based on weight. Vector genomes were measured in the livers of both mice and non-humanprimates from multiple studies across two doses that result in restoration of the normal Phe biochemical pathway in mice. The results of these studies, shownin Figure 15 below, demonstrate that dosing based on weight resulted in equivalent levels of vector genomes in the livers of mice and non-human primates,suggesting that one-to-one weight-based scaling is appropriate for our AAVHSC15 candidates as we project doses for the clinical development of ourcandidates.20 Figure 15. Mouse versus non-human primate liver vector genome data are supportive of one-to-one weight-based dosing.HMI-103: Our Gene Editing Approach for PKUIn order to address the pediatric PKU population, we are developing a gene editing therapy for PKU that is designed to replace the defective PAH genewith a normal copy. This therapy is designed to correct the defect in treated liver cells, such that they would be indistinguishable from those from anunaffected individual. These cells would direct the synthesis of PAH from its natural promoter, and therefore would be capable of normal regulation of itsexpression. The corrected copy of the PAH gene would be retained as these cells divide into daughter cells as the liver grows. Screening for PKU of allnewborns in the United States allows the identification of affected individuals before serious neurological complications develop. We believe our AAVHSCvector HR approach possesses the efficacy and safety characteristics that would be appropriate to treat PKU in newly identified patients. As we furtherdevelop our expertise in treating PKU by correcting the defective PAH gene in the liver, we intend to develop treatments for other inborn errors ofmetabolism in the liver.We have conducted in vivo experiments showing the integration of a promoterless human PAH cDNA into the human PAH gene locus using ahumanized liver mouse model. In this model, human hepatocytes constitute the majority of the liver cells, providing an in vivo model to test human specificediting constructs for the integration and expression of human PAH. Injection of our lead human AAVHSC PAH editing candidate in this model results in theinsertion of a promoterless PAH cDNA into the human PAH gene and mRNA expression of the corrected PAH. Figure 16 below shows a comparison of thelevels of corrected PAH gene expression from the human liver model to that observed using a murine-specific editing construct in the ENU2 PKU model thatis known to restore Phe metabolism. As depicted, we can achieve levels of human-specific PAH gene editing and expression of the corrected PAH in thehuman liver that are known to correct the phenotype in the mouse. Furthermore, the human-specific editing candidate does not edit in the murine cells thatare in the humanized liver model, showing selectivity to human only.Based on these data, we have nominated HMI-103 as a product development candidate consisting of an AAVHSC15 vector and the PAH gene withflanking homology arms and have initiated IND-enabling studies using our gene editing approach for the treatment of the pediatric PKU population.Figure 16. HMI-103 targets human PAH gene and results in corrective levels of gene expression as measured by edited mRNA in an in vivohumanized murine model.Additional Product OpportunitiesCNS DiseasesOur CNS programs, which are initially focused on MLD, are designed to take advantage of our AAVHSCs’ natural ability to cross the blood-brainbarrier in non-human primates.21 HMI-202: Our Gene Therapy for MLDWe have nominated a product development candidate, HMI-202, for the treatment of MLD, our lead CNS program and have initiated IND-enablingstudies. MLD is a lysosomal storage disease caused by mutation of a gene called arylsulfatase A, or ARSA. The protein ARSA is required for the breakdown ofcellular metabolic products that in MLD accumulate in all cells of the body. Cells responsible for the production of myelin are especially sensitive to thetoxic build-up of these cellular metabolic products, leading to progressive serious neurological deterioration. The late infantile form of MLD, which is themost common form, includes rapidly progressive motor and cognitive decline and loss of vision. The majority of these patients do not survive past the firstdecade of life. Stem cell transplants are currently the only effective treatment but have significant drawbacks, including the use of immunosuppressiontherapy, delayed onset of ARSA expression post engraftment, conditioning regimens, and the risk of death from the stem cell transplant.We have generated preclinical data showing that a single intravenous dose of HMI-202 crossed the blood-brain-barrier in a mouse model and hadbroad tissue tropism in physiologically relevant regions of the CNS, resulting in increased human ARSA enzyme activity to levels well-above the therapeuticthreshold when compared to average adult human enzyme activity. Human ARSA enzyme activity levels between 10 to 375% of normal were observed andwell-tolerated in a dose responsive manner after IV administration, as depicted in Figure 17. It is believed that levels of enzyme activity of 10 to 15% ofnormal could potentially be curative, based on human data from healthy subjects with enzyme activity levels in this range.Figure 17. Single IV administration of HMI-202 gene therapy MLD development candidate results in therapeutic levels of ARSA in relevantbrain regions.Other CNS DiseasesAnother CNS disease we are evaluating is Friedreich’s ataxia or FA. In FA, mutations in a gene called frataxin, or FXN, lead to progressivedeterioration of the spinal cord leading to difficulty walking and eventual complete incapacitation and shortened life-span. FA is the most common form ofinherited ataxia with a prevalence of 1:40,000. Other diseases in this area include a subset of Parkinson’s disease which is associated with Gaucher disease.Gaucher disease patients have a defect in the gene for glucocerebrosidase which is important for various processes in the body and in certain patients thesemutations also lead to the development of Parkinson’s disease. We believe our gene therapy technology has the potential to address directly the deficiency inglucocerebrosidase in the brain in a manner that is not possible with other Gaucher disease treatments that do not cross the blood-brain barrier.22 HemoglobinopathiesWe are also pursuing treatment of diseases that affect blood cells such as sickle cell disease and beta thalassemia using our AAVHSC vector HRtechnology. We believe that our potential ability to correct the defective beta globin gene in blood precursor cells may lead to long-term functional cures foraffected patients. Sickle cell disease affects over 100,000 individuals and beta thalassemia over 1,000 individuals in the United States.Ophthalmological DiseasesA number of serious, but rare diseases of the eye such as Leber’s congenital amaurosis and Choroideremia, as well as more common diseases such asmacular degeneration have been targeted using gene therapy approaches by academic groups as well as the pharmaceutical industry. Certain of ourAAVHSCs have shown the unique ability to deliver genes to the eye when administered intravenously. Furthermore, in preclinical studies we conducted atour headquarters in 2017 in a minipig model, we evaluated the ability of our AAVHSCs, containing a vector that expresses a GFP transgene, to transduceretinal cells following localized delivery via subretinal injection to the eye at a dose of 1.3e12vg/kg (N=2). Expression of GFP was seen in all layers of theretina including the retinal pigment epithelium, photoreceptors and the outer nuclear layer out to day 28 and the AAVHSC subretinal treatment was welltolerated. We believe these studies suggest that our AAVHSCs have the potential to be useful as therapeutic vectors for treating retinal diseases in humansbased on significant tropism to these target cells. We believe that these vectors have the potential to deliver long-lasting therapeutic benefit to patients thatmay eliminate the need for the regular and burdensome intravitreal injections that are required for many current treatments. We are collaborating withNovartis, experts in developing and marketing ophthalmic drugs, for select ophthalmology programs.ManufacturingAs a company committed to curing diseases, the ability to deliver our novel therapeutic vectors to patients is critical. Therefore, we have built stronginternal scientific AAV process development and manufacturing capabilities and we have invested in a cGMP manufacturing facility to support our clinicaldevelopment programs. We have established scalable manufacturing platforms for both gene editing and gene therapy. We view the development of internalmanufacturing capacity and expertise as a key competitive advantage as it allows for better control over process development timelines, costs andintellectual property, and allows us to master our unique technology. Our process development and manufacturing teams are composed of industry veteransin the field of AAV and protein technologies, as well as experts in our novel AAVHSCs, with experience in both early development and commercialization oftherapeutics.Our process development and manufacturing strategy is to leverage technology platforms for both gene therapy and gene editing that are scalable andfacilitate rapid development to the clinic. The gene therapy and gene editing platforms include development from vector design through to drug productmanufacture. Expertise and learnings will be leveraged across both platform technologies.Our gene therapy manufacturing strategy initially focuses on utilizing mammalian cells for our AAVHSC vector-based product candidates. Ourcurrent production process for the PKU program utilizes HEK293 cells in a serum free suspension bioreactor. The HEK293 is a well-characterized system andcommonly used host cell for many clinical stage AAV vector products. Additionally, these cells are familiar to regulatory authorities and commercial rawmaterials and reagents are readily available. We have established a relationship with a contract manufacturing organization, or CMO, who has expertise in theuse of HEK293 gene therapy manufacturing. We have established an external and internal cGMP manufacturing process to supply Phase 1/2 and pivotal trialmaterial for our PKU clinical development program.Our gene editing manufacturing strategy is to internally control the process development and manufacturing to safeguard the proprietary nature of ourtechnology, as well as to master all aspects of this technology. Furthermore, as part of our research and development collaboration with Novartis, we haveretained process development and manufacturing rights to the gene editing programs included within the collaboration.We have constructed a 25,000 square foot cGMP manufacturing facility that can accommodate both gene therapy and gene editing pipeline programs.Our new manufacturing facility includes multiple bioreactor suites and we expect to process multiple product candidates in parallel. The initial bioreactorscale is 500 liters, with the capability to increase capacity to 2,000 liters. This will give us the ability to produce large scale volumes and support our growingpipeline. Our manufacturing model leverages single use, disposable, closed system operations aligned to our gene therapy and gene editing technologyplatforms to ensure flexibility, robust quality and cost effectiveness. Our manufacturing facility is expected to be available for cGMP manufacturing of ourproduct candidates in the first half of 2019.23 CompetitionThe biotechnology and pharmaceutical industries, including in the gene therapy and gene editing fields, are characterized by rapidly advancingtechnologies, 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 and biotechnology companies, academic institutions and governmental agencies, and public andprivate research institutions that conduct research, seek patent protection, and establish collaborative arrangements for research, development,manufacturing, and commercialization. Not only must we compete with other companies that are focused on gene therapy and/or gene editing technologies,any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available inthe future.We compete in the segments of the pharmaceutical, biotechnology and other related markets that utilize technologies encompassing genomicmedicines to create therapies, including gene therapy and gene editing. There are additional companies that are working to develop therapies in areas relatedto our research programs.Our platform and product focus is the development of genetic medicines using our proprietary AAVHSCs in vivo either through the gene therapy ornuclease-free gene editing modality. If our current programs are approved for the indications for which we are currently planning clinical trials, they maycompete with other products currently under development, including gene editing and gene therapy products or other types of therapies, such as smallmolecule, antibody or protein therapies. If our PKU treatments are approved, they may compete with therapies from BioMarin, Synlogic, CensaPharmaceuticals, Rubius Therapeutics, Nestle Health and American Gene Technologies. However, we believe that only gene therapy or gene editingapproaches have the potential to restore the normal Phe biochemical pathway with a single administration. As such, the major competition in this space maybe limited to BioMarin and American Gene Technologies, both of which are behind our development program according to public filings. If our MLDtreatment is approved, it may compete with therapies from Orchard Therapeutics and/or Shire. We believe that our in vivo gene therapy approach for MLDcould be used early in the disease progression with the potential for earlier protein expression, offering advantages over Orchard’s ex vivo approach, as well asadvantages over chronic, intrathecal enzyme replacement therapies, such as Shire’s approach. There are a number of companies developing nuclease-basedgene editing technologies using CRISPR/Cas9, TALENs, meganucleases, Mega-TALs and ZFNs, including bluebird bio, Caribou Biosciences, Cellectis,CRISPR Therapeutics, Editas Medicine, Intellia Therapeutics, Precision BioSciences and Sangamo Therapeutics and non-nuclease-based technology,including LogicBio Therapeutics, however none of these are developing a treatment for PKU or MLD.In addition, many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financialresources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials and marketing approved products than wedo. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being concentrated amonga smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and managementpersonnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessaryfor, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, moreeffective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also mayobtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitorsestablishing 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 likelyto be their efficacy, safety, convenience and availability of reimbursement.Furthermore, we rely upon a combination of patents and trade secret protection, as well as license and confidentiality agreements to protect theintellectual property related to our proprietary technologies, product candidate development programs and product candidates. Our success depends in largepart on our ability to secure and maintain patent protection in the United States and other countries with respect to HMI-102 and any future productcandidates. Moreover, our industry is characterized by the existence of large numbers of patents and frequent allegations of patent infringement. If, therefore,we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained or in-licensed is notsufficiently broad or if the validity of such patent is threatened, we may not be able to compete effectively in our markets, as it could create opportunities forcompetitors to enter the market or dissuade other companies from collaborating with us to develop products and technology, any of which would hurt ourcompetitive position and could impair our ability to successfully commercialize our product candidates in any indication for which they are approved. Formore information regarding these competitive risks, see “Risk Factors—Risks Related to Our Intellectual Property.”24 Intellectual PropertyOur success depends in large part upon our ability to secure and maintain proprietary protection for our technologies and products and to operatewithout infringing the proprietary rights of others. Our policy is to protect our proprietary position by, among other methods, filing or collaboration with ourlicensors to file U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to thedevelopment and implementation of our business. We also use other forms of protection, such as confidential information and trademark protection,particularly where we do not believe patent protection is appropriate or obtainable.Our patent portfolio consists of a combination of issued patents and pending patent applications that are licensed from third parties. As of December31, 2018, we have an exclusive license or co-exclusive license under 11 United States issued patents and 35 patent applications, pending in the United Statesand internationally.For any individual patent, the term depends on the applicable law in the country in which the patent is granted. In most countries where we have filedpatent applications or in-licensed patents and patent applications, patents have a term of 20 years from the application filing date or earliest claimed non-provisional priority date. In the United States, the patent term is 20 years but may be shortened if a patent is terminally disclaimed over another patent thatexpires earlier. The term of a U.S. patent may also be lengthened by a patent term adjustment, in order to address administrative delays by the United StatesPatent and Trademark Office in granting a patent.In the United States, the term of a patent that covers an FDA-approved drug or biologic may be eligible for patent term extension in order to restorethe period of a patent term lost during the premarket FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, orthe Hatch-Waxman Act, permits a patent term extension of up to five years beyond the natural expiration of the patent. The patent term restoration period isgenerally equal to the regulatory review period for the approved product which period occurs after the date the patent issued, subject to certain exceptions.Only one patent may be extended for a regulatory review period for any product, and the application for the extension must be submitted prior to theexpiration of the patent. In the future, we may decide to apply for restoration of patent term for one of our currently owned or licensed patents to extend itscurrent expiration date, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant BLA.Licensed Intellectual PropertyCertain of our issued patents and pending patent applications are exclusively licensed to us in all fields of use from COH. Certain of our issuedpatents and pending patent applications are co-exclusively licensed to us in all human therapeutic applications with and from the California Institute ofTechnology, or Caltech.The City of Hope PortfolioIn April 2016, we exclusively licensed two families of patents and patent applications directed to novel AAV capsids and their manufacture andmethods of use, including their use in genome editing from COH.These two families of patents and patent applications together include nine granted patents in the United States and 13 pending applications in theUnited States, Europe, Canada, Australia and other selected countries in Central America, South America, and Asia. The first family of issued patents andpatent applications is material to HMI-102 and relates to our novel AAV capsids and vectors and their use in cellular transduction. The eight issued U.S.patents in this family are expected to expire in 2031, and may be extended by up to five years in certain countries via patent term extension depending on theregulatory pathway of the products covered by such patents. The second family includes one issued U.S. patent and patent applications directed to our AAVcapsids, their methods of manufacture, and their use in genome editing. The issued patent in this family is expected to expire in 2035, and may be extendedby up to five years in certain countries via patent term extension depending on the regulatory pathway of the products covered by such patents.The Caltech PortfolioIn September 2016, we co-exclusively licensed, with another commercial third party, two families of patents and patent applications directed to novelAAV capsids and vectors that demonstrate enhanced blood-brain barrier penetration for the potential treatment of CNS diseases from Caltech.These families of patents and patent applications include two granted patents in the United States and 22 pending applications in the United States,Europe, Canada, Australia and other selected countries in Central America, South America,25 and Asia, and one international patent application under the Patent Cooperation Treaty. The two issued U.S. patents relate to novel AAV capsids and vectorsand are expected to expire in 2034. Certain other patent applications directed to novel AAV capsids and vectors, if they were to issue, may have laterexpirations.We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive advantage. Our policyrequires inventors who are identified on any company-owned patent applications to assign rights to us. We also rely on confidentiality agreements with ouremployees, consultants and other advisors to protect our proprietary information. Our policy is to require third parties that receive material confidentialinformation to enter into confidentiality agreements with us.TrademarksOur trademarks Homology Medicines and HMI are pending or registered in the United States and certain international countries. We currently ownthree pending trademark applications in the United States, approximately 20 registered trademarks around the world, as well as 13 pending trademarkapplications. This includes our trademarks Homology Medicines, AMEnDR, and HMI, which are pending or registered in the United States and certain othercountries.Strategic CollaborationsCollaboration and License Agreement with the Novartis Institutes for BioMedical Research, Inc.In November 2017, we entered into a collaboration and license agreement with Novartis, pursuant to which we agreed to collaborate on researching,developing, and commercializing novel genome editing products that modulate certain gene targets.Under the terms of the agreement, we and Novartis agreed to collaborate to identify and synthesize gene editing vector candidates that modulatecertain ophthalmic gene targets, against which Novartis agreed to develop licensed products. Our obligation to perform research for the targets will continuefor five years from the effective date of the agreement.We and Novartis agreed also to collaborate to explore the applicability of our technology with respect to other gene targets. Our obligation to performsuch exploratory research concludes in November 2020.In February 2019, Novartis elected to discontinue our collaboration on the sickle cell disease program with an effective date of August 2019. Wecontinue to work with Novartis to identify new targets for the partnership based on the existing exploratory research component of our agreement, and ourcollaboration on two ophthalmic programs also continues. We have assumed all worldwide rights to the sickle cell disease program, and our efforts todevelop an in vivo gene editing approach are ongoing.Subject to certain limitations pursuant to the terms of the agreement, Novartis will be responsible for the internal and external costs incurred by us forthe research activities as contemplated under the agreement. Novartis will also pay for the development of gene editing vector candidates and licensedproducts.Subject to the terms of the agreement, we will generally be responsible for manufacturing gene editing vector candidates for certain ophthalmic genetargets for research, and gene editing vector candidates and licensed products for development and commercialization, and Novartis will bear all suchmanufacturing costs that we incur.Subject to the terms of the agreement, taking into account Novartis’ election to discontinue our collaboration on the sickle cell disease program, wehave granted Novartis the following licenses: (i) a worldwide, non-exclusive, sublicensable license under certain of our intellectual property rights to performNovartis’ responsibilities under the applicable research plan; (ii) a worldwide, sublicensable license under certain of our intellectual property rights toconduct preclinical development activities, which license is co-exclusive (with us) during the research term, and exclusive for the remainder of the term of theagreement; (iii) a worldwide, non-exclusive, perpetual, irrevocable license, without the right to grant sublicenses, to use certain reagents generated as a resultof our exploratory research activities under the agreement solely for Novartis’ internal research purposes; (iv) an exclusive, royalty-bearing, sublicensablelicense under certain of our intellectual property rights to develop and commercialize certain gene editing vector candidates and licensed products directedto certain ophthalmic gene targets; (v) as of the effective date, a co-exclusive (with us), royalty-bearing, sublicensable, worldwide license under certain of ourintellectual property rights to manufacture certain gene editing vector candidates and/or licensed products directed to certain ophthalmic gene targets, whichlicense will be exclusive as of a certain date on which Novartis is permitted to manufacture certain gene editing vector candidates and/or licensed productspursuant to the terms of the agreement; and (vi) a non-26 exclusive, royalty-free, fully paid, perpetual, irrevocable, worldwide license under certain of our intellectual property rights in connection with research,development, manufacturing, commercialization or other exploitation of products or services.Subject to the terms of the agreement, Novartis granted to us the following licenses: (i) a worldwide, non-exclusive, sublicensable license undercertain of Novartis’ intellectual property rights to perform certain research activities during the research term and (ii) a non-exclusive, royalty-bearing,perpetual, irrevocable, worldwide, sublicensable license under certain of Novartis’ intellectual property rights that may arise under the agreement that relateto our manufacturing know-how for our manufacture of gene editing vector candidates and products created using our platform technology.Under the terms of the agreement, we received an upfront payment of $35.0 million and Novartis also purchased shares of our Series B preferred stockfor an aggregate purchase price of $15.0 million. Taking into consideration Novartis’ election to discontinue our collaboration on the sickle cell diseaseprogram, we are also eligible to receive up to a total of $10.0 million upon completion of certain development candidate selection activities. In addition, weare eligible to receive up to a total of $530.0 million in milestone payments, including up to $180.0 million in development milestone payments, up to$170.0 million in regulatory milestone payments and up to $180.0 million in commercial milestone payments, with respect to the licensed products. We arealso eligible to earn tiered royalties on net sales of licensed products by Novartis, its affiliates or sublicensees ranging from mid single-digit to sub-teendouble-digit percentages, which royalties are potentially subject to various reductions and offsets. If any of the exploratory research efforts are advanced intoformal research and development programs, the parties will negotiate the economics including potential milestone payments for such programs.The term of the agreement continues on a target-by-target basis until the expiration of all royalty payment obligations for the licensed products thatmodulate the applicable target on a country-by-country basis. Our royalty obligations under the agreement continue on a country-by-country and licensedproduct-by-licensed product basis until the later of (a) 10 years after the first commercial sale of such licensed product in a country, (b) the date on whichsuch licensed product is no longer covered by certain intellectual property rights, and (c) the date on which certain regulatory exclusivity for such productexpires. Either party may terminate the agreement on a target-by-target basis for the other party’s material breach with respect to such target, or in the event ofthe other party’s bankruptcy. Novartis may terminate the agreement for convenience on a target-by-target basis. We may terminate the agreement if Novartisfiles, or joins a third party in filing or maintaining, a patent challenge against certain of the patent rights we license to Novartis under the terms of theagreement.License Agreement with the California Institute of TechnologyIn September 2016, we entered into a license agreement with Caltech, pursuant to which Caltech granted us a co-exclusive (subject to certain reservednon-commercial rights), sublicensable, and worldwide license under certain AAV-related patents owned by Caltech for human therapeutic applications.Under this agreement, Caltech also granted us a non-exclusive, worldwide license under certain patents and other intellectual property controlled by Caltechto develop, manufacture, commercialize, and otherwise exploit products covered by such intellectual property rights for human therapeutic applications. Wemay grant sublicenses under the non-exclusive license to third parties to the extent necessary or useful for our, or our sublicensees’, development,manufacturing, or sale of such products.Under the Caltech agreement, we paid Caltech an initial licensing fee of $100,000. We are also required to pay Caltech up to a total of $7.2 million inmilestone payments for the first licensed product; royalties, in the low single-digit percentages on net sales of licensed products, subject to a certain annualminimum royalty; and mid to high single-digit percentages of sublicensing revenues. Subject to certain exceptions, our royalty obligations under theagreement continue on a country-by-country and licensed product-by-licensed product basis until the earliest of (a) the date on which such licensed productis no longer covered by certain intellectual property rights, (b) 10 years after the first commercial sale of such licensed product, or (c) 15 years after theeffective date of the agreement. As partial consideration for the licenses granted under the agreement, we issued 101,405 shares of our common stock toCaltech.The agreement will expire upon the expiration of the last-to-expire patent that is licensed to us or as long as royalties are due under the agreement,whichever is later. We agreed to use commercially reasonable efforts to introduce commercially, and reasonably fulfill market demand for, licensed productsas soon as practicable. Either party may terminate the agreement in the event of the other party’s uncured material breach and in the event of the other party’sbankruptcy or insolvency. We may terminate the agreement for convenience.27 City of Hope License AgreementIn April 2016, we entered into a license agreement with COH, pursuant to which COH granted us an exclusive, sublicensable, worldwide license tocertain AAV vector-related patents and know-how owned by COH to develop, manufacture, use and commercialize products and services covered by suchpatents and know-how in any and all fields. COH also granted us a non-exclusive, sublicensable, worldwide license to certain background patents owned byCOH to develop, manufacture, use and commercialize licensed products and licensed services in any and all fields.Under the agreement, we paid COH an initial licensing fee of $75,000, and made a subsequent payment of $4.5 million representing a percentage ofsublicensing revenue. We are also required to pay COH an annual license maintenance fee; up to a total of $3.2 million in potential milestone fees; a royaltyin the low single-digit percentages on net sales of licensed products or services, subject to certain reductions in certain circumstances, with a certain annualminimum royalty; and low double-digit percentages of sublicensing revenues. As partial consideration for the licenses granted under the agreement, weissued 154,837 shares of our common stock to COH.The COH agreement will expire on a country-by-country and on a licensed patent-by-licensed patent basis upon the expiration of the last-to-expirevalid claim of such patent in such country. We agreed to use commercially reasonable efforts to develop and commercialize licensed products and licensedservices. If we fail to achieve certain diligence milestones, COH may terminate the agreement or convert the exclusive rights under the agreement fromexclusive to non-exclusive. Either party may terminate the agreement in the event of the other party’s material breach, subject to an opportunity to cure, andin the event of the other party’s bankruptcy or insolvency. We may terminate the agreement for convenience.Government Regulation and Product ApprovalGovernmental authorities in the U.S., at the federal, state and local level, and other countries extensively regulate, among other things, the research,development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing, post-approval monitoring and reportingand export and import of products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreigncountries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, are extensive andrequire the expenditure of substantial time and financial resources. For the purposes of this Section, the term “gene therapy” includes both traditional genetherapy products as well as gene editing and our gene correction product candidates.FDA Approval ProcessWe expect our future product candidates to be regulated as biologics. Biological products, including gene therapy products, are subject to extensiveregulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act, and other federal, state,local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern, among other things, the research,development, safety, testing, packaging, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approvalmonitoring and reporting, sampling, and import and export of biological products.We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of thegoverning regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process ofobtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require theexpenditure of substantial time and financial resources. U.S. Biological Products Development ProcessThe FDA determined that more than minimally manipulated products must be approved by the FDA through the Biologics License Application, orBLA, process before they may be legally marketed in the United States. The process required by the FDA before a biologic may be marketed in the UnitedStates generally involves the following: •completion of extensive nonclinical, sometimes referred to as pre-clinical laboratory tests, and pre-clinical animal trials and applicablerequirements for the humane use of laboratory animals and formulation studies in accordance with applicable regulations, including goodlaboratory practices, or GLPs; •submission to the FDA of an IND application, which must become effective before human clinical trials may begin;28 •approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the trial is commenced; •performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinicalpractices, or GCPs, and any additional requirements for the protection of human research subjects and their health information, to establish thesafety and efficacy of the proposed biological product for its intended use; •submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, potency and efficacy from resultsof nonclinical testing and clinical trials; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength,quality and purity; •potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA; and •FDA review and approval, or licensure, of the BLA.Before testing any biological product candidate, including a gene therapy product, in humans, the product candidate enters the preclinical testingstage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animalstudies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations andrequirements, including GLPs.The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing and controls, information about productchemistry, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing,such as reproductive toxicity tests and carcinogenicity in animals, may continue even after the IND is submitted. The IND automatically becomes effective30 days after receipt by the FDA, after which human clinical trials may begin unless the FDA places the clinical study on a clinical hold within that 30-daytime period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin.In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involvingrecombinant or synthetic nucleic acid molecules had historically been subject to the Office of Biotechnology Activities, or OBA, pursuant to the NIHGuideline. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight frameworkfor gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinicaltrials of gene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16,2018, the NIH announced that it will no longer accept new human gene transfer protocols for review as a part of the protocol registration process or convenethe RAC to review individual clinical protocols. These trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight atthe local level will continue as set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includesevaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizingrecombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to publichealth or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unlessthe research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research,many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualifiedinvestigators, generally physicians not employed by or under the study sponsor’s control. Clinical trials are conducted under protocols detailing, amongother things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, the efficacy measurements to be evaluated andthe parameters to be used to monitor subject safety, including stopping rules that assure a clinical study will be stopped if certain adverse events shouldoccur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitoredin accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent.Further, each clinical study must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which theclinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risksto individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form andcontent of the informed consent that must be signed by each clinical study subject or his or her legal representative and must monitor the clinical study untilcompleted.29 Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: •Phase I. The biological product candidate is initially introduced into healthy human subjects and tested for safety. In the case of someproducts for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthyvolunteers, the initial human testing is often conducted in patients. •Phase II. The biological product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, topreliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosingschedule. •Phase III. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population atgeographically dispersed clinical study sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product andprovide an adequate basis for product labeling.In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of a biological product.In rare instances, a single Phase 3 trial, together with other confirmatory evidence may be sufficient to support a BLA submission. Post-approval clinicaltrials, sometimes referred to as Phase IV clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additionalexperience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends thatsponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of five years of annualexaminations followed by ten years of annual queries, either in person or by questionnaire.During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, andclinical study investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports mustbe promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other trials, tests in laboratory animalsor in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reactionover that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determinesthat the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reactionwithin seven calendar days after the sponsor’s initial receipt of the information. Phase I, Phase II and Phase III clinical trials may not be completedsuccessfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend or permanently discontinue aclinical study at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk orthe clinical study is not being conducted in accordance with FDA regulations. Similarly, an IRB can suspend or terminate approval of a clinical study at itsinstitution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the biological product candidate has been associatedwith unexpected serious harm to patients. The FDA and the IRB may also halt, terminate or impose other conditions if either believes the patients are subjectto unacceptable risk.There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors ofclinical trials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publiclyavailable at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and otheraspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials aftercompletion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved.Human gene therapy products based on gene-editing technology are a new category of therapeutics. Because this is a relatively new and expandingarea of novel therapeutic interventions, there can be no assurance as to the length of the study period, the number of patients the FDA will require to beenrolled in the trials in order to establish the safety, efficacy, purity and potency of human gene therapy products, or that the data generated in these trialswill be acceptable to the FDA to support marketing approval.Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional information about the physicalcharacteristics of the biological product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance withcGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes theimportance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistentlyproducing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality,potency and purity of the final biological product. Additionally, appropriate packaging must be30 selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptabledeterioration over its shelf life.U.S. Review and Approval ProcessesAfter the completion of clinical trials of a biological product candidate, FDA approval of a BLA must be obtained before commercial marketing anddistribution of the biological product. The BLA must include results of product development, laboratory and animal trials, human trials, information on themanufacture, pharmacology, chemistry and controls of the product, proposed labeling and other relevant information. In addition, under the PediatricResearch Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological product candidate forthe claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which theproduct is safe and effective.The Food and Drug Administration Safety and Innovation Act, or FDASIA, requires that a sponsor who is planning to submit a marketing applicationfor a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administrationsubmit an initial Pediatric Study Plan, or PSP, within sixty days after an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. Theinitial PSP must include, among other things, an outline of the pediatric study or studies that the sponsor plans to conduct, including to the extent practicablestudy objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and anyrequest for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supportinginformation, along with any other information specified in FDA regulations. The FDA and the sponsor must reach agreement on the PSP. A sponsor cansubmit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinicalstudies, early phase clinical trials, and/or other clinical development programs. The FDA may grant deferrals for submission of data or full or partial waivers.Unless otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted.The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even iffiled, that any approval will be granted on a timely basis, if at all.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA userfees on an annual basis. PDUFA also imposes an annual program fee for marketed products. Fee waivers or reductions are available in certain circumstances,including a waiver of the application fee for the first human drug application filed by a small business. Additionally, no user fees are assessed on BLAs forproducts designated as orphan drugs, unless the product also includes a non-orphan indication.Within 60 days following submission of the application, the FDA reviews the submitted BLA to determine if it is substantially complete before theagency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and mayrequest additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject toreview before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. UnderPDUFA, the FDA has agreed to certain performance goals to complete the review of BLAs. The FDA may give a priority review designation to biologicalproducts that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA toreview an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Under the current PDUFA agreement,these six and ten month review periods are measured from the “filing” date rather than the receipt date for original BLAs, which typically adds approximatelytwo months to the timeline for review and decision from the date of submission.The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, pure and potent, or effective, for its intended use,and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP requirements to assure and preserve theproduct’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products thatpresent difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluationand a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of anadvisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA alsowill determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product candidate. If theFDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.31 Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that theclinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP and GCP compliance, an applicant mustincur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteriafor approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret thesame data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of thespecific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, forexample, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take toplace the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of thedeficiencies identified in the letter, or withdraw the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in aresubmission of the BLA, the FDA will issue an approval letter. Under the current PDUFA guidelines, the FDA has committed to reviewing suchresubmissions in two or six months of receipt depending on the type of information included.If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated usesfor which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensurethe benefits of the product outweigh its potential risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicineand to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physiciancommunication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDAalso may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Therequirement for a REMS can materially affect the potential market and profitability of the product.Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or ifproblems occur after the product reaches the marketplace. Changes to some of the conditions established in an approved BLA, including changes inindications, product labeling, manufacturing processes or facilities, require submission and FDA approval of a new BLA or BLA supplement before thechange can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDAuses the same procedures and actions in reviewing BLA supplements as it does in reviewing BLAs. The FDA may require one or more Phase IV post-marketstudies or surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of theproduct based on the results of these post-marketing studies.Orphan Drug DesignationThe FDA may grant Orphan Drug Designation to drugs or biologics intended to treat a rare disease or condition that affects fewer than 200,000individuals in the United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost ofdeveloping and marketing the drug or biologic for this type of disease or condition will be recovered from its sales in the United States. Orphan productdesignation must be requested before submitting a BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and itspotential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of theregulatory review and approval process.In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and BLA user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphandesignation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application, including a full BLA, to marketthe same drug or biologic for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority overthe product with orphan exclusivity or where the manufacturer with orphan exclusivity is unable to assure sufficient quantities of the approved orphan-designated product. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity orobtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could blockthe approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our productcandidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as32 an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Inaddition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or ifthe manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We have receivedorphan drug designation for the use of AAVHSC expressing human PAH for the treatment of PKU. There can be no assurance that we will receive orphan drugdesignation for additional indications or for any additional product candidates.Expedited Development and Review ProgramsThe FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new biological products that meet certaincriteria. Specifically, new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease orcondition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination ofthe product and the specific indication for which it is being studied. The sponsor of a new biologic may request that the FDA designate the biologic as a FastTrack product at any time during the clinical development of the product. The FDA must determine if the biologic product candidate qualifies for Fast Trackdesignation within 60 days of receipt of the sponsor’s request. Unique to a Fast Track product, the FDA may consider for review sections of the marketingapplication on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of theapplication, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user feesupon submission of the first section of the application.Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended toexpedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it has the potential to treat aserious condition and, if approved, would provide a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketedproducts. The FDA will attempt to direct additional resources to the evaluation of an application for a new biological product designated for priority reviewin an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Biological products studied for their safety andeffectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible foraccelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product hasan 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 orirreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lackof alternative treatments. As a condition of approval, the FDA may require that a sponsor of a biological product subject to accelerated approval performadequate and well-controlled post-marketing Phase IV clinical studies. Failure to conduct required post-approval trials, or to confirm a clinical benefit duringpost-marketing trials, will allow the FDA to withdraw the approved biologic product from the market on an expedited basis. In addition, the FDA currentlyrequires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch ofthe product. Fast Track designation, priority review and accelerated approval do not change the standards for approval but may expedite the development orapproval process.In addition, under the provisions of FDASIA, enacted in 2012, the FDA established a Breakthrough Therapy Designation which is intended toexpedite the development and review of products that treat serious or life-threatening diseases or conditions. A breakthrough therapy is defined as a drug thatis intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidenceindicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantialtreatment effects observed early in clinical development. The designation includes all of the features of Fast Track designation, as well as more intensive FDAinteraction and guidance. The Breakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, but these can alsobe granted to the same product candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and providingadvice, intended to expedite the development and review of an application for approval of a breakthrough therapy. All requests for breakthrough therapydesignation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request.Fast Track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval but mayexpedite the development or approval process. Even if we receive one or both of these designations for our product candidates, the FDA may later decide thatour product candidates no longer meets the conditions for qualification. In addition, receiving these designations may not provide us with a materialcommercial advantage.33 Post-Approval RequirementsMaintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time andfinancial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP requirements.We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we maycommercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including quality control andquality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological products, include reporting ofcGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverseeffects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required toperform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturersubmits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the resultsof all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines,before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on thesafety, purity, potency, and effectiveness of biological products.To help reduce the increased risk of the introduction of adventitious agents, the PHS Act emphasizes the importance of manufacturing controls forproducts whose attributes cannot be precisely defined. The PHS Act also provides authority to the FDA to immediately suspend biologics licenses insituations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and toauthorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States.The FDA may require one or more Phase IV post-market studies or surveillance to further assess and monitor the product’s safety and effectivenessafter commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. We also must comply with theFDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or inpatient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educationalactivities, and promotional activities involving the internet. Biologics may be marketed only for the approved indications and in accordance with theprovisions of the approved labeling.Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on themarketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S.requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer toadministrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawalof an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution,injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgementof profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required toregister their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain stateagencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area ofproduction and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product,manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process orfacility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indicationsand additional labeling claims, are also subject to further FDA review and approval.U.S. Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents may be eligiblefor limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-WaxmanAmendments. The Hatch-Waxman Amendments permit a patent34 restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patentterm restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration periodis generally equal to the regulatory review period for the approved product which period occurs after the date the patent issued, subject to certain exceptions.Only one patent may be extended for a regulatory review period for any product, and the application for the extension must be submitted prior to theexpiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent termextension or restoration. In the future, we may intend to apply for restoration of patent term for one of our currently owned or licensed patents to extend itscurrent expiration date, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant BLA.For patents that might expire during the BLA review phase, the patent owner may request an interim patent term extension. If eligible, an interimpatent term extension may be granted for a period of not more than one year. The patent owner may apply for not more than four subsequent interimextensions. Any interim extension granted will not be longer than the maximum period of extension allowed post-approval.Biosimilars and ExclusivityThe Patient Protection and Affordable Care Act, or Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the BiologicsPrice Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to orinterchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review andapproval of biosimilars.Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms ofsafety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a productis biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product inany given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated orswitched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the referencebiologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which suchproducts are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the referenceproduct was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date onwhich the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of thereference product if the FDA approves a full BLA for the competing 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 biosimilarsapproved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readilysubstituted by pharmacies, which are governed by state pharmacy law.A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existingexclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be grantedbased on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reducethe 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also beenthe subject of recent litigation. As a result, the ultimate impact, implementation, and meaning of the BPCIA remains subject to significant uncertainty.Other Healthcare Laws and Compliance RequirementsPharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the statesand foreign jurisdictions in which they conduct their business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, falseclaims, privacy and security and physician sunshine laws and regulations. If their operations are found to be in violation of any of such laws or any othergovernmental regulations that apply, they may35 be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of operations, exclusionfrom participation in federal and state healthcare programs and individual imprisonment.Coverage and ReimbursementSales of any product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreigngovernment healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. These third-partypayors are increasingly reducing reimbursements for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreigngovernments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement andrequirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies injurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or adecision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverseeffect on sales.Healthcare ReformIn March 2010, President Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education ReconciliationAct, each as amended, collectively known as the Affordable Care Act, which substantially changed the way healthcare is financed by both governmental andprivate insurers, and significantly affected the pharmaceutical industry. The Affordable Care Act contains a number of provisions, including those governingenrollment in federal healthcare programs, reimbursement adjustments and fraud and abuse changes. Additionally, the Affordable Care Act: •increases the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; •requires collection of rebates for drugs paid by Medicaid managed care organizations; •requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70 percent point-of-salediscounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for themanufacturer’s outpatient drugs to be covered under Medicare Part D; and •imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federalgovernment programs.Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will beadditional challenges and amendments to the Affordable Care Act in the future. Other legislative changes have been proposed and adopted since theAffordable Care Act was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to severaltypes of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for theirmarketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed to, among other things, bring moretransparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursementmethodologies for drug products. Individual states in the United States have also become increasingly active in implementing regulations designed tocontrol pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketingcost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.Additional RegulationIn addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safetyand Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use,handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result incontamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that weare in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on ourbusiness. We cannot predict, however, how changes in these laws may affect our future operations.36 Government Regulation Outside of the United StatesIn addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things,clinical studies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contaminationrisks, their use may be restricted in some countries.Whether or not we obtain FDA approval of a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior tothe commencement of clinical studies or marketing of the product in those countries. Certain countries outside of the United States have a similar process thatrequires the submission of a clinical study application, or CTA, much like the IND prior to the commencement of human clinical studies. In the EuropeanUnion, for example, a CTA must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and theIRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical study development may proceed.The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country.In all cases, the clinical studies are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have theirorigin in the Declaration of Helsinki.To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketingauthorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of,among other things, country-specific document requirements. The European Union also provides opportunities for market exclusivity. For example, in theEuropean Union, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two yearsof market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess ageneric application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’sdata may be referenced, but no generic product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a productwill be considered by the European Union’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity. Productsreceiving orphan designation in the European Union can receive ten years of market exclusivity, during which time no similar medicinal product for the sameindication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union for pediatricstudies. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when theapplication is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justifyinvestment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EuropeanUnion, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000.Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization,entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before theapplication for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designationhas been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not conveyany advantage in, or shorten the duration of, the regulatory review and approval process.The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteriafor orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketingauthorization may be granted to a similar product for the same indication at any time if: •the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; •the applicant consents to a second orphan medicinal product application; or •the applicant cannot supply enough orphan medicinal product.37 For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing theconduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical studies are conductedin accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal ofregulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.EmployeesAs of December 31, 2018, we had 124 full-time employees, including 39 employees with M.D. or Ph.D. degrees. Of these full-time employees, 102employees are engaged in research and development activities, including technical operations, clinical and regulatory and research and development. Noneof our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to begood.Corporate InformationWe were incorporated in Delaware in March 2015. Our principal executive offices are located at One Patriots Park, Bedford, MA 01730 and ourtelephone number is (781) 301-7277. Our website address is www.homologymedicines.com. Information contained on or accessible through our website isnot a part of this Annual Report on Form 10-K, and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual referenceonly.Available InformationWe file electronically with the SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statementsand other information. Our SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. We make available on ourwebsite at www. homologymedicines.com, under “Investors,” free of charge, copies of these reports as soon as reasonably practicable after filing or furnishingthese reports with the SEC.Item 1A. Risk Factors.Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the otherinformation included or incorporated by reference in this Annual Report on Form 10-K. If any of the following risks occur, our business, financialcondition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of ourcommon stock could decline. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects,financial condition and results of operations.Risks Related to Our Financial Position and Need for Additional CapitalWe have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future. If we are unable to achieveand sustain profitability, the market value of our common stock will likely decline. We may never achieve or maintain profitability.We are a preclinical-stage genetic medicines company with a limited operating history. We have never been profitable and do not expect to beprofitable in the foreseeable future. We have incurred net losses in each year since beginning to develop our product candidates, including net losses ofapproximately $57.2 million and $30.0 million for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had anaccumulated deficit of approximately $97.4 million. In addition, we have not commercialized any products and have never generated any revenue fromproduct sales. We have devoted most of our financial resources to research and development, including our preclinical development activities.We expect to continue to incur significant additional operating losses for the foreseeable future as we seek to advance product candidates throughpreclinical and clinical development, expand our research and development activities, develop new product candidates, complete clinical trials, seekregulatory approval and, if we receive FDA approval, commercialize our products. Furthermore, the costs of advancing product candidates into eachsucceeding clinical phase tend to increase substantially over time. The total costs to advance any of our product candidates to marketing approval in even asingle jurisdiction would be substantial. Because of the numerous risks and uncertainties associated with genetic medicine product development, we areunable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to38 begin generating revenue from the commercialization of products or achieve or maintain profitability. Our expenses will also increase substantially if and aswe: •continue our current research programs and our preclinical development of product candidates from our current research programs; •seek to identify, assess, acquire and/or develop additional research programs and additional product candidates; •initiate preclinical testing and clinical trials for any product candidates we identify and develop; •establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketingapproval; •maintain, expand and protect our intellectual property portfolio; •further develop our genetic medicines platform; •hire additional clinical, scientific and commercial personnel; •add operational, financial and management information systems and personnel, including personnel to support our product development andplanned future commercialization efforts, as well as to support our transition to a public reporting company; •acquire or in-license other commercial products, product candidates and technologies; •make royalty, milestone or other payments under current and any future in-license agreements; •validate and build-out a commercial-scale current Good Manufacturing Practices, or cGMP, manufacturing facility; and •operate as a public company.Furthermore, our ability to successfully develop, commercialize and license our products and generate product revenue is subject to substantialadditional risks and uncertainties. Each of our programs and product candidates will require additional preclinical and clinical development, potentialregulatory approval in multiple jurisdictions, securing manufacturing supply, capacity and expertise, building of a commercial organization, substantialinvestment and significant marketing efforts before we generate any revenue from product sales. These risks are further described under “—Risks Related toDiscovery, Development, Clinical Testing, Manufacturing and Regulatory Approval” and “—Risks Related to Commercialization.” As a result, we expect tocontinue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have,an adverse effect on our stockholders’ equity and working capital. The amount of our future net losses will depend, in part, on the rate of future growth of ourexpenses and our ability to generate revenues. If we are unable to develop and commercialize one or more of our product candidates either alone or withcollaborators, or if revenues from any product candidate that receives marketing approval are insufficient, we will not achieve profitability. Even if we doachieve profitability, we may not be able to sustain or increase profitability. If we are unable to achieve and then maintain profitability, the value of ourequity securities will be materially and adversely affected.We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the developmentand commercialization of our product candidates.We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize our lead productcandidate, HMI-102. We will require additional capital, which we may raise through equity offerings, debt financings, marketing and distributionarrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable us to complete the development andpotential commercialization of HMI-102, HMI-103, HMI-202 and our other product candidates. In addition, we may not be able to enter into anycollaborations that will generate significant cash. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raisecapital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy. In addition, attempting tosecure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate developmentefforts.Based upon our current operating plan, we believe that our existing cash resources will enable us to fund our operating expenses and capitalexpenditure requirements through the end of 2020, including the top-line data readout for our planned Phase 1/2 clinical trial for HMI-102, the advancementof our lead gene editing product candidate, HMI-103, and our lead CNS gene therapy product candidate, HMI-202, the scale-up of our manufacturingprocesses, the build-out of our internal manufacturing capacity and the expansion of our intellectual property portfolio. This estimate is based onassumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances39 could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because ofcircumstances beyond our control. Because the length of time and activities associated with successful development of HMI-102, HMI-103, HMI-202 and ourother product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing andcommercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: •the initiation, progress, timing, costs and results of our planned clinical trials for HMI-102 and our other product candidates; •the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities; •the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; •the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us orHMI-102, HMI-103, HMI-202 or any of our product candidates; •the effect of competing technological and market developments; •the cost and timing of completion of commercial-scale manufacturing activities; •the costs of operating as a public company; •the extent to which we in-license or acquire other products and technologies; •the cost of establishing sales, marketing and distribution capabilities for HMI-102, HMI-103, HMI-202 or any of our product candidates inregions where we choose to commercialize our products; and •the initiation, progress, timing and results of our commercialization of HMI-102, HMI-103, HMI-202 or any of our product candidates, ifapproved for commercial sale.We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficientamounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of HMI-102,HMI-103, HMI-202 or other product candidates or potentially discontinue operations.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or productcandidates.Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debtfinancings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We do not currently have anycommitted external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if webelieve that we have sufficient funds for our current or future operating plans.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders willbe diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debtfinancing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specificactions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategicalliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, futurerevenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity ordebt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grantrights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.We have a limited operating history and no history of commercializing genetic medicine products, which may make it difficult to evaluate the prospects forour future viability.We were established and began operations in 2015. Our operations to date have been limited to financing and staffing our company, developing ourtechnology and identifying and developing our product candidates. We have not yet demonstrated an ability to successfully complete any clinical trials,including large-scale, pivotal clinical trials, obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on ourbehalf, or conduct sales and marketing40 activities necessary for successful product commercialization. Typically, it takes about six to ten years to develop a new drug from the time it enters Phase 1clinical trials to when it is approved for treating patients, but in many cases it may take longer. Consequently, predictions about our future success orviability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing geneticmedicine products.In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other knownand unknown factors. We will eventually need to transition from a company with a research focus to a company capable of supporting commercial activities.We may not be successful in such a transition.As we continue to build our business, we expect our financial condition and operating results may fluctuate significantly from quarter to quarter andyear to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any particular quarterly orannual period as indications of future operating performance.We are heavily dependent on the success of HMI-102, our most advanced product candidate, which is still under preclinical development, and if HMI-102does not receive regulatory approval or is not successfully commercialized, our business may be harmed.To date, we have invested a significant portion of our efforts and financial resources in the development of HMI-102. Our future success and ability togenerate product revenue is substantially dependent on our ability to successfully develop, obtain regulatory approval for and successfully commercializethis product candidate. We currently have no products that are approved for commercial sale and may never be able to develop marketable products. Weexpect that a substantial portion of our efforts and expenditures over the next few years will be devoted to HMI-102, which will require additional preclinicaland clinical development, management of clinical, preclinical, and manufacturing activities, regulatory approval in multiple jurisdictions, securingmanufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenuesfrom any commercial sales. Accordingly, our business currently depends heavily on the successful development, regulatory approval and commercializationof HMI-102, which may never occur. We cannot be certain that HMI-102 will be successful in clinical trials, receive regulatory approval or be successfullycommercialized even if we receive regulatory approval. Even if we receive approval to market HMI-102 from the FDA or other regulatory bodies, we cannotbe certain that our product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commerciallyavailable alternatives. Additionally, the research, testing, manufacturing, labeling, approval, sale, marketing and distribution of genetic medicine productsare and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each havediffering regulations. We are not permitted to market HMI-102 in the United States until it receives approval of a biologics license application, or BLA fromthe FDA, or in any foreign countries until it receives the requisite approval from such countries.We have not submitted a BLA to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so forthe foreseeable future.HMI-102 is our most advanced product candidate, and because our other product candidates are based on similar technology, if HMI-102 showsunexpected adverse events or a lack of efficacy in the indications we intend to treat, or if we experience other regulatory or developmental issues, ourdevelopment plans and business could be significantly harmed. Further, competitors may be developing products with similar technology and mayexperience problems with their products that could identify problems that would potentially harm our business.We may not be successful in our efforts to identify additional product candidates.Part of our strategy involves identifying novel product candidates. The process by which we identify product candidates may fail to yield productcandidates for clinical development for a number of reasons, including those discussed in these risk factors and also: •we may not be able to assemble sufficient resources to acquire or discover additional product candidates; •competitors may develop alternatives that render our potential product candidates obsolete or less attractive; •potential product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;41 •potential product candidates may, on further study, be shown to have harmful side effects, toxicities or other characteristics that indicate thatthey are unlikely to be products that will receive marketing approval and achieve market acceptance; •potential product candidates may not be effective in treating their targeted diseases; •the market for a potential product candidate may change so that the continued development of that product candidate is no longer reasonable; •a potential product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or •the regulatory pathway for a potential product candidate is too complex and difficult to navigate successfully or economically.In addition, we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. As a result,we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with otherproduct candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidatesthrough collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development andcommercialization rights. If we are unable to identify additional suitable product candidates for clinical development, this would adversely impact ourbusiness strategy and our financial position and share price and could potentially cause us to cease operations.We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.As of March 1, 2019, we had 139 employees. We will need to significantly expand our organization, and we may have difficulty identifying, hiringand integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify,recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionateamount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be ableto effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of businessopportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expendituresand may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage ourgrowth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implementour business strategy. Our future financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part,on our ability to effectively manage any future growth.Many of the biotechnology companies that we compete against for qualified personnel and consultants have greater financial and other resources,different risk profiles and a longer history in the industry than we do. If we are unable to continue to attract and retain high-quality personnel and consultants,the rate and success at which we can discover and develop product candidates and operate our business will be limited.We may be required to make significant payments in connection with our license agreements with each of the City of Hope and the California Institute ofTechnology.Under our license agreements with each of City of Hope Medical Center, or COH, and California Institute of Technology, or Caltech, we are subject tosignificant obligations, including payment obligations upon achievement of specified milestones and royalties on product sales, as well as other materialobligations. If these payments become due, we may not have sufficient funds available to meet our obligations or we may have to direct funds from otherdevelopment efforts, and as a result, our development efforts may be materially harmed.Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory ApprovalWe intend to identify and develop product candidates based on our novel genetic medicines platform, which makes it difficult to predict the time and costof product candidate development. No products that utilize gene editing technology have been approved in the United States or in Europe, and there haveonly been a limited number of human clinical trials42 involving a gene editing product candidate. Moreover, none of those trials has involved our nuclease-free gene editing technology.We have concentrated our research and development efforts on our genetic medicines platform, which uses both nuclease-free gene editing and genetherapy technologies. Our future success depends on the successful development of this novel therapeutic approach. To date, no product that utilizes geneediting has been approved in the United States or Europe. There have been a limited number of clinical trials of gene editing technologies, however noproduct candidates have been approved, and none of these clinical trials involved product candidates that utilize our novel gene correction editingtechnology. In addition, because our programs are all in the research or preclinical stage, we have not yet been able to assess safety in humans, and there maybe long-term effects from treatment with any of our future product candidates that we cannot predict at this time. Any gene correction editing productcandidates we may develop will act at the level of DNA, and, because animal DNA differs from human DNA, it will be difficult for us to test our future productcandidates in animal models for either safety or efficacy. Also, animal models may not exist for some of the diseases we expect to pursue. Our geneticmedicines platform is based on a suite of 15 proprietary AAVHSCs which we can deploy with either gene editing or gene therapy constructs. Bothapplications rely on a unique ability of our AAVHSCs to efficiently target multiple tissues in the body. The mechanism of action by which these vectorstarget particular tissues is still not completely understood. Therefore, it is difficult for us to determine that our vectors will be able to properly integratecorrective DNA in or deliver gene transfer constructs to enough tissue cells to reach therapeutic levels. We cannot be certain that our AAVHSCs will be ableto meet safety and efficacy levels needed to be therapeutic in humans or that they will not cause significant adverse events or toxicities. Furthermore, recentwork conducted by a third party in non-human primates suggests that intravenous delivery of certain AAV vectors at very high doses may result in severetoxicity. To date, we have not observed the severe toxicities described in these publications after intravenous administration in non-human primates with ournaturally occurring AAVHSC vectors, and we have not seen these toxicities in our product candidates. However, we cannot be certain that we will be able toavoid triggering toxicities in our future pre-clinical or clinical studies. Any such results could impact our ability to develop a product candidate. As a resultof these factors, it is more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of ourgenetic medicines platform, or any similar or competitive gene therapy or gene editing platforms, will result in the identification, development, andregulatory approval of any medicines, or that other genetic medicine technologies will not be considered better or more attractive for the development ofmedicines. There can be no assurance that any development problems we experience in the future related to our genetic medicines platform or any of ourresearch programs will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delaysin developing a sustainable, reproducible, and scalable manufacturing process or transferring that process to commercial partners. Any of these factors mayprevent us from completing our preclinical studies or any clinical trials that we may initiate or commercializing any product candidates we may develop on atimely or profitable basis, if at all.Because gene therapy and gene editing are novel and the regulatory landscape that governs any product candidates we may develop is uncertain andcontinues to change, we cannot predict the time and cost of obtaining regulatory approval, if we receive it at all, for any product candidates we maydevelop.Regulatory requirements governing products created with genome editing technology or involving gene therapy treatment have changed frequentlyand will likely continue to change in the future. Approvals by one regulatory agency may not be indicative of what any other regulatory agency may requirefor approval, and there is substantial, and sometimes uncoordinated, overlap in those responsible for regulation of gene therapy products, cell therapyproducts and other products created with genome editing technology. For example, in addition to the submission of an investigational new drug application,or IND, to the FDA, before initiation of a clinical trial in the United States, certain human clinical trials for cell therapy products and gene therapy hadhistorically been subject to review by the Recombinant DNA Advisory Committee, or the RAC, of the National Institutes of Health, or NIH, Office ofBiotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Following aninitial review, RAC members would make a recommendation as to whether the protocol raises important scientific, safety, medical, ethical or social issuesthat warrant in-depth discussion at the RAC’s quarterly meetings. Even though the FDA decides whether individual cell therapy or gene therapy protocolsmay proceed under an IND, the RAC’s recommendations were shared with the FDA and the RAC public review process, if undertaken, could delay theinitiation of a clinical trial, even if the FDA had reviewed the trial design and details and has not objected to its initiation or has notified the sponsor that thestudy may begin. Conversely, the FDA can put an IND on clinical hold even if the RAC provided a favorable review or has recommended against an in-depth,public review. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversightframework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect tohuman clinical trials of gene therapy products, and requesting public comment on its proposed modifications. The NIH also announced that it will no longeraccept new human gene transfer protocols for review as part of the protocol registration process under the existing NIH Guidelines or convene the RAC toreview individual clinical protocols. These trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local43 level will continue as otherwise set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includesevaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizingrecombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to publichealth or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unlessthe research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research,many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Even though we may not be required to submit aprotocol for our gene therapy product candidates through the NIH for RAC review, we will still be subject to significant regulatory oversight by the FDA, andin addition to the government regulators, the applicable IBC and institutional review board, or IRB, of each institution at which we or our collaboratorsconduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review and approve the proposed clinical trial.The same applies in the European Union. The European Medicines Agency, or the EMA, has a Committee for Advanced Therapies, or CAT, that isresponsible for assessing the quality, safety and efficacy of advanced therapy medicinal products. Advanced-therapy medical products include gene therapymedicine, somatic-cell therapy medicines and tissue-engineered medicines. The role of the CAT is to prepare a draft opinion on an application for marketingauthorization for a gene therapy medicinal candidate that is submitted to the EMA. In the European Union, the development and evaluation of a genetherapy medicinal product must be considered in the context of the relevant European Union guidelines. The EMA may issue new guidelines concerning thedevelopment and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines. Similarly complexregulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product candidates, furthercomplicating the regulatory landscape. As a result, the procedures and standards applied to gene therapy products and cell therapy products may be appliedto any of our gene therapy or genome editing product candidates, but that remains uncertain at this point.The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to evaluate the safety andefficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. Theregulatory approval process for product candidates created with novel genome editing technology such as ours can be more lengthy, rigorous and expensivethan the process for other better known or more extensively studied product candidates and technologies. Since we are developing novel treatments fordiseases in which there is little clinical experience with new endpoints and methodologies, there is heightened risk that the FDA, the EMA or comparableregulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may bemore difficult to analyze. This may be a particularly significant risk for many of the genetically defined diseases for which we may develop productcandidates alone or with collaborators due to small patient populations for those diseases, and designing and executing a rigorous clinical trial withappropriate statistical power is more difficult than with diseases that have larger patient populations. Regulatory agencies administering existing or futureregulations or legislation may not allow production and marketing of products utilizing genome editing technology in a timely manner or under technicallyor commercially feasible conditions. Even if our product candidates obtain required regulatory approvals, such approvals may later be withdrawn as a resultof changes in regulations or the interpretation of regulations by applicable regulatory agencies.Changes in applicable regulatory guidelines may lengthen the regulatory review process for our product candidates, require additional studies ortrials, increase development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of suchproduct candidates, or lead to significant post-approval limitations or restrictions. Additionally, adverse developments in clinical trials conducted by othersof gene therapy products or products created using genome editing technology, or adverse public perception of the field of genome editing, may cause theFDA, the EMA and other regulatory bodies to revise the requirements for approval of any product candidates we may develop or limit the use of productsutilizing genome editing technologies, either of which could materially harm our business. Furthermore, regulatory action or private litigation could result inexpenses, delays or other impediments to our research programs or the development or commercialization of current or future product candidates.As we advance product candidates, we will be required to consult with these regulatory and advisory groups and comply with all applicableguidelines, rules and regulations. If we fail to do so, we may be required to delay or terminate development of such product candidates. Delay or failure toobtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a product candidate to market could decrease our ability to generatesufficient product revenue to maintain our business.Clinical trials are expensive, time-consuming, difficult to design and implement, and involve an uncertain outcome.Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during theclinical trial process. The results of preclinical studies and early clinical trials of our product44 candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desiredsafety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biotechnology andgenetic medicine industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstandingpromising results in earlier trials. Even if our future clinical trials are completed as planned, we cannot be certain that their results will support the safety andeffectiveness of HMI-102 for PKU or any other potential indication. Our future clinical trial results may not be successful.To date, we have not completed any clinical trials required for the approval of HMI-102 or any of our product candidates. Although we plan to initiatea Phase 1/2 clinical trial for HMI-102 in 2019, we may experience delays in conducting any clinical trials and we do not know whether planned clinical trialswill begin on time, need to be redesigned, recruit and enroll patients on time or be completed on schedule, or at all. Clinical trials can be delayed orterminated for a variety of reasons, including delays or failures related to: •the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies; •obtaining regulatory approval to commence a trial; •reaching an agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensivenegotiation and may vary significantly among different CROs and trial sites; •obtaining institutional review board, or IRB, approval at each site; •recruiting suitable patients to participate in a trial; •developing and validating the companion diagnostic to be used in a clinical trial, if applicable; •having patients complete a trial or return for post-treatment follow-up; •clinical sites deviating from trial protocol or dropping out of a trial; •addressing patient safety concerns that arise during the course of a trial; •adding a sufficient number of clinical trial sites; or •manufacturing sufficient quantities of product candidate for use in clinical trials.We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketingapproval or commercialize our product candidates or significantly increase the cost of such trials, including: •we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials; •clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, toconduct additional clinical trials or abandon development programs; •the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trialsmay be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; •our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or atall; •we or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpectedcharacteristics, or a finding that the participants are being exposed to unacceptable health risks; •the cost of clinical trials of our product candidates may be greater than we anticipate and we may not have funds to cover the costs; •the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may beinsufficient or inadequate;45 •regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and •any future collaborators that conduct clinical trials may face any of the above issues, and may conduct clinical trials in ways they view asadvantageous to them but that are suboptimal for us.If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we areunable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are onlymodestly positive or if there are safety concerns, we may: •incur unplanned costs; •be delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all; •obtain marketing approval in some countries and not in others; •obtain marketing approval for indications or patient populations that are not as broad as intended or desired; •obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxedwarnings; •be subject to additional post-marketing testing requirements; or •have the product removed from the market after obtaining marketing approval.We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted,by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspensionor termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols,inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseensafety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lackof adequate funding to continue the clinical trial. Furthermore, we may rely on CROs and clinical trial sites to ensure the proper and timely conduct ofclinical trials and while we would have agreements governing their committed activities, we would have limited influence over their actual performance, asdescribed in “—Risks Related to Our Dependence on Third Parties.”Our most advanced product candidate, HMI-102, is still in preclinical development and will require extensive clinical testing before we are preparedto submit a BLA for regulatory approval. We cannot predict with any certainty if or when we might complete the development of HMI-102 and submit a BLAfor regulatory approval of HMI-102 or whether any such BLA will be approved by the FDA. We may seek feedback from the FDA or other regulatoryauthorities on our clinical development program, and the FDA or such regulatory authorities may not provide such feedback on a timely basis, or suchfeedback may not be favorable, which could further delay our development programs.If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, thecommercial prospects of HMI-102 could be harmed, and our ability to generate revenues from HMI-102 may be delayed. In addition, any delays in ourclinical trials could increase our costs, slow down the development and approval process and jeopardize our ability to commence product sales and generaterevenues. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause, or leadto, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.Adverse public perception of genetic medicine, and gene editing in particular, may negatively impact regulatory approval of, or demand for, our potentialproducts.Our potential therapeutic products involve editing the human genome. The clinical and commercial success of our potential products will depend inpart on public acceptance of the use of gene editing and gene therapy for the prevention or treatment of human diseases. Public attitudes may be influencedby claims that gene therapy and gene editing are unsafe, unethical, or immoral, and, consequently, our products may not gain the acceptance of the public orthe medical community. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend uponphysicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop in lieu of, or inaddition to, existing treatments with which they are already familiar and for which greater clinical data may be available.46 In addition, gene editing technology is subject to public debate and heightened regulatory scrutiny due to ethical concerns relating to the applicationof gene editing technology to human embryos or the human germline. For example, in April 2015, Chinese scientists reported on their attempts to edit thegenome of human embryos to modify the gene for hemoglobin beta. This is the gene in which a mutation occurs in patients with the inherited blood disorderbeta thalassemia. Although this research was purposefully conducted in embryos that were not viable, the work prompted calls for a moratorium or othertypes of restrictions on gene editing of human eggs, sperm, and embryos. The Alliance for Regenerative Medicine in Washington has called for a voluntarymoratorium on the use of gene editing technologies in research that involved altering human embryos or human germline cells. Similarly, the NIH hasannounced that it would not fund any use of gene editing technologies in human embryos, noting that there are multiple existing legislative and regulatoryprohibitions against such work, including the Dickey-Wicker Amendment, which prohibits the use of appropriated funds for the creation of human embryosfor research purposes or for research in which human embryos are destroyed. Laws in the United Kingdom prohibit genetically modified embryos from beingimplanted into women, but embryos can be altered in research labs under license from the Human Fertilisation and Embryology Authority. Research onembryos is more tightly controlled in many other European countries.Although we do not use our technologies to edit human embryos or the human germline, such public debate about the use of gene editingtechnologies in human embryos and heightened regulatory scrutiny could prevent or delay our development of product candidates. More restrictivegovernment regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair ourdevelopment and commercialization of product candidates or demand for any products we may develop. Adverse events in our preclinical studies or clinicaltrials or those of our competitors or of academic researchers utilizing gene therapy or gene editing technologies, even if not ultimately attributable to productcandidates we may discover and develop, and the resulting publicity could result in increased governmental regulation, unfavorable public perception,potential regulatory delays in the testing or approval of potential product candidates we may identify and develop, stricter labeling requirements for thoseproduct candidates that are approved, a decrease in demand for any such product candidates and a suspension or withdrawal of approval by regulatoryauthorities of our product candidates.A Breakthrough Therapy Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatoryreview or approval process and it does not increase the likelihood that our product candidates will receive marketing approval.We may seek a Breakthrough Therapy Designation for our product candidates if the clinical data support such a designation for one or more productcandidates. A breakthrough therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, totreat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug, or biologic in our case, may demonstratesubstantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early inclinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and thesponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective controlregimens. Biologics designated as breakthrough therapies by the FDA may also be eligible for priority review.Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets thecriteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of aBreakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to drugs consideredfor approval under non-expedited FDA review procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our productcandidates qualify as breakthrough therapies, the FDA may later decide that the product no longer meets the conditions for qualification or decide that thetime period for FDA review or approval will not be shortened.A Fast Track Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review orapproval process, and does not increase the likelihood that our product candidates will receive marketing approval.We do not currently have Fast Track Designation for any of our product candidates but intend to seek such designation for some or all of our productcandidates. If a drug or biologic, in our case, is intended for the treatment of a serious or life-threatening condition and the biologic demonstrates thepotential to address unmet medical needs for this condition, the biologic sponsor may apply for FDA Fast Track Designation. The FDA has broad discretionwhether or not to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDAwould decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared toconventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from ourclinical development program. Many biologics that have received Fast Track Designation have failed to obtain approval.47 We may also seek accelerated approval for products that have obtained Fast Track Designation. Under the FDA’s accelerated approval program, theFDA may approve a biologic for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments basedupon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversiblemorbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account theseverity, rarity or prevalence of the condition and the availability or lack of alternative treatments. For biologics granted accelerated approval, post-marketing confirmatory trials are required to describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. These confirmatorytrials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed and/or initiated prior to approval. Moreover,the FDA may withdraw approval of any product candidate or indication approved under the accelerated approval pathway if, for example: •the trial or trials required to verify the predicted clinical benefit of the product candidate fail to verify such benefit or do not demonstratesufficient clinical benefit to justify the risks associated with the biologic; •other evidence demonstrates that the product candidate is not shown to be safe or effective under the conditions of use; •we fail to conduct any required post-approval trial of the product candidate with due diligence; or •we disseminate false or misleading promotional materials relating to the product candidate.We intend to seek orphan drug designation for our product candidates, but any orphan drug designations we receive may not confer marketing exclusivityor other expected benefits.In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and user-fee waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for thedisease for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity in the United States provides that theFDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limitedcircumstances. The applicable exclusivity period is ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longermeets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.Even if we, or any future collaborators, obtain orphan drug designation for a product candidate, we, or they, may not be able to obtain or maintainorphan drug exclusivity for that product candidate. We may not be the first to obtain marketing approval of any product candidate for which we haveobtained orphan drug designation for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. Inaddition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indicationor may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of theproduct to meet the needs of patients with the rare disease or condition. Further, even if we, or any future collaborators, obtain orphan drug exclusivity for aproduct, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may be approved forthe same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the samecondition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patientcare or the manufacturer of the product with orphan exclusivity is unable to maintain sufficient product quantity. Orphan drug designation neither shortensthe development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process, nor does it preventcompetitors from obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drugdesignation.We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities onwhich we rely may not continue to meet regulatory requirements and have limited capacity.We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates. We recentlycompleted the build-out of a cGMP manufacturing facility to support our clinical development programs in both gene therapy and gene editing and expect tostart manufacturing in the first half of 2019. However, if we experience delays or are unable to establish and scale our internal manufacturing capabilities, wewill need to contract with manufacturers that can produce the preclinical, clinical and commercial supply of our products. Each supplier may require licensesto manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable to transfer or sublicense theintellectual property rights we may have with respect to such activities.48 All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for ourproduct candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stageclinical studies must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures (including recordkeeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved forsale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in theproperties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply allnecessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s current good laboratory practices, or GLP, and cGMPregulations enforced by the FDA through its facilities inspection program. Some of our contract manufacturers have not produced a commercially-approvedproduct and therefore have not obtained the requisite FDA approvals to do so. Our facilities and quality systems and the facilities and quality systems ofsome or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatoryapproval of our product candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect amanufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems forcompliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval ofthe products will not be granted.The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-partycontractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications orapplicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may becostly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study orcommercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contractcould materially harm our business.If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among otherthings, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. As a result, our business,financial condition and results of operations may be materially harmed.Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. An alternativemanufacturer would need to be qualified through a BLA supplement which could result in further delay. The regulatory agencies may also require additionalstudies if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in adelay in our desired clinical and commercial timelines.These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates,cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractualrequirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies maybe delayed or we could lose potential revenue.If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number ofpatients who remain in the study until its conclusion. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients tocomplete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Theenrollment of patients depends on many factors, including: •the patient eligibility criteria defined in the protocol; •the size of the patient population required for analysis of the trial’s primary endpoints; •the proximity of patients to study sites; •the design of the trial; •our ability to recruit clinical trial investigators with the appropriate competencies and experience;49 •clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other availabletherapies, including any new products that may be approved for the indications we are investigating; •our ability to obtain and maintain patient consents; and •the risk that patients enrolled in clinical trials will drop out of the trials before completion.In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our productcandidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in ourtrials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expectto conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who areavailable for our clinical trials in such clinical trial site.Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effecton our ability to develop HMI-102, HMI-103, HMI-202 or our other product candidates, or could render further development impossible.Our product candidates may cause serious adverse events or undesirable side effects or have other properties which may delay or prevent their regulatoryapproval, limit the commercial profile of an approved label, or, result in significant negative consequences following marketing approval, if any.Serious adverse events or undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or haltclinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects, toxicities or unexpected characteristics, includingdeath. A significant risk in any gene editing product is that the edit will be “off-target” (or “on-target,” but unwanted) and cause serious adverse events,undesirable side effects, toxicities or unexpected characteristics. For example, off-target cuts could lead to disruption of a gene or a genetic regulatorysequence at an unintended site in the DNA, or, in those instances where we also provide a segment of DNA to serve as a repair template, it is possible thatfollowing off-target cut events, DNA from such repair template could be integrated into the genome at an unintended site, potentially disrupting anotherimportant gene or genomic element. We cannot be certain that off-target editing will not occur in any of our planned or future clinical studies. There is alsothe potential risk of delayed adverse events following exposure to gene editing therapy, due to the potential for persistent biological activity of the geneticmaterial or other product components used to carry the genetic material.If unacceptable side effects arise in the development of our product candidates, we, the FDA, the IRBs at the institutions in which our studies areconducted or DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinicaltrials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or theability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriatelyrecognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effectprofiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potentialside effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition andprospects significantly.If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by any such product,including during any long-term follow-up observation period recommended or required for patients who receive treatment using our products, a number ofpotentially significant negative consequences could result, including: •regulatory authorities may withdraw approvals of such product; •we may be required to recall a product or change the way such product is administered to patients; •additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product; •regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;50 •we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks ofsuch side effects for distribution to patients; •the product could become less competitive; •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 the particular product candidate, if approved, and couldsignificantly harm our business, results of operations and prospects.The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if weare ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following thecommencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approvalpolicies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinicaldevelopment and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that neither HMI-102,HMI-103, HMI-202, nor any other product candidates we may seek to develop in the future will ever obtain regulatory approval. Neither we nor any futurecollaborator is permitted to market any of our product candidates in the United States until we receive regulatory approval of a BLA from the FDA. It ispossible that the FDA may refuse to accept for substantive review any biologic license applications, or BLAs, that we submit for our product candidates ormay conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates.Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate withsubstantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates aresafe and effective, or in the case of biologics, safe, pure, and potent, for their intended uses. Results from nonclinical studies and clinical trials can beinterpreted in different ways. Even if we believe the nonclinical or clinical data for our product candidates are promising, such data may not be sufficient tosupport approval by the FDA and other regulatory authorities. The FDA may also require us to conduct additional preclinical studies or clinical trials for ourproduct candidates either prior to or post-approval, or it may object to elements of our clinical development program. Depending on the extent of these orany other FDA-required studies, approval of any BLA or application that we submit may be delayed by several years, or may require us to expendsignificantly more resources than we have available.Of the large number of potential products in development, only a small percentage successfully complete the FDA or foreign regulatory approvalprocesses and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing toobtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limitedindications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costlypost-marketing clinical trials, including Phase 4 clinical trials, and/or the implementation of a REMS, which may be required to ensure safe use of the drugafter approval. The FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patientpopulation than we originally requested, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable forthe successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our productcandidates.Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, orotherwise prevent new products and services from being developed or commercialized in a timely manner, 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 theagency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and developmentactivities is subject to the political process, which is inherently fluid and unpredictable.51 Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary governmentagencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, theU.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop criticalactivities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatorysubmissions, which could have a material adverse effect on our business.Even if we obtain FDA approval for HMI-102, HMI-103, HMI-202 or any other product candidates in the United States, we may never obtain approval foror commercialize it in any other jurisdiction, which would limit our ability to realize its full market potential.In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on acountry-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in othercountries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. Inaddition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one countrydoes not guarantee regulatory approval in any other country.Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials whichcould be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of ourproducts in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do nothave experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or toobtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability torealize the full market potential of any product we develop will be unrealized.Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review,which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experienceunanticipated problems with our product candidates.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among otherthings, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements includesubmissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance withcGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirementsregarding the distribution of samples to physicians and recordkeeping and GCP requirements for any clinical trials that we conduct post-approval.The FDA closely regulates the post-approval marketing and promotion of genetic medicines to ensure they are marketed only for the approvedindications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communicationsregarding off-label use and if we market our products for uses beyond their approved indications, we may be subject to enforcement action for off-labelmarketing. Violations of the U.S. federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs may lead to FDAenforcement actions and investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes,including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply withregulatory requirements, may yield various results, including: •restrictions on manufacturing such products; •restrictions on the labeling or marketing of a product; •restrictions on product distribution or use; •requirements to conduct post-marketing studies or clinical trials; •warning letters or holds on clinical trials;52 •withdrawal of the products from the market; •refusal to approve pending applications or supplements to approved applications that we submit; •recall of products; •fines, restitution or disgorgement of profits or revenues; •suspension or withdrawal of marketing approvals; •refusal to permit the import or export of our products; •product seizure or detention; or •injunctions or the imposition of civil or criminal penalties.The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of HMI-102, HMI-103, HMI-202 or any other product candidate. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. TheCures Act, among other things, is intended to modernize the regulation of drugs and biologics and spur innovation and contains provisions applicable to thedevelopment of gene therapies. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if weare not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained which would adversely affect our business,prospects and ability to achieve or sustain profitability.We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executiveaction, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, theTrump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on,or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking,issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these requirements will be implemented, and the extentto which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage inoversight and implementation activities in the normal course, our business may be negatively impacted.Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we maydevelop.The use of our product candidates, including HMI-102, HMI-103, HMI-202 or any other product candidate, in clinical trials and the sale of anyproducts for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us byconsumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, largejudgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend againstproduct liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims mayresult in: •impairment of our business reputation and significant negative media attention; •withdrawal of participants from our clinical trials; •significant costs to defend the related litigation and related litigation; •distraction of management’s attention from our primary business; •substantial monetary awards to patients or other claimants; •inability to commercialize HMI-102, HMI-103, HMI-202 or any other product candidate; •product recalls, withdrawals or labeling, marketing or promotional restrictions; •decreased demand for HMI-102, HMI-103, HMI-202 or any other product candidate, if approved for commercial sale; and •loss of revenue.53 Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include generalliability, employment practices liability, property, auto, workers’ compensation, umbrella, and directors’ and officers’ insurance.Any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we maysuffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonablecost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for HMI-102, HMI-103, HMI-202 or any otherproduct candidate, we intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain productliability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us couldcause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, includingpreventing or limiting the commercialization of any product candidates we develop. We do not carry specific biological or hazardous waste insurancecoverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological orhazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized withfines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liabilityinsurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Asa result, it may be more difficult for us to attract and retain qualified people to serve on our Board of Directors, our board committees or as executive officers.We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may requireus to pay substantial amounts, which would adversely affect our cash position and results of operations.Our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage inconnection with development and commercialization may engage in misconduct or other improper activities, including noncompliance with regulatorystandards and requirements, which could have a material adverse effect on our business.Misconduct by our employees and independent contractors, including principal investigators, contract research organizations, or CROs, consultants,vendors, and any third parties we may engage in connection with development and commercialization, could include intentional, reckless or negligentconduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, EMA rules and regulations and other similar regulatory requirements,including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) data privacy,security, fraud and abuse and other healthcare laws and regulations; or (iv) laws that require the reporting of true, complete and accurate financial informationand data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended toprevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these lawscould also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in pre-clinicalstudies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It isnot always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activitymay not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuitsstemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraudor other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting ourrights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal andadministrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcareprograms or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profitsand future earnings, and curtailment of our operations.Our business and operations would suffer in the event of system failures.Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses,unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur andcause interruptions in our operations, it could result in a material disruption of our product candidate development programs. For example, the loss ofpreclinical or clinical trial data from54 completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce thedata. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure ofpersonal, confidential or proprietary information, we could incur liability and the further development of HMI-102, HMI-103, HMI-202 or any other productcandidate could be delayed.In the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, proprietary businessinformation, personal data and personally identifiable information of our clinical trial subjects and employees, in our data centers and on our networks. Thesecure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technologyand infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulnerability, malfeasance orother disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise ournetworks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information couldresult in legal claims or proceedings, liability under laws that protect the privacy of personal information, significant regulatory penalties, and such an eventcould disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adverselyaffect our reputation and delay our clinical development of our product candidates.Interim “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data becomeavailable and are subject to audit and verification procedures that could result in material changes in the final data.From time to time, we may publish interim “top-line” or preliminary data from our clinical studies. Interim data from clinical trials that we maycomplete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient databecome available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materiallydifferent from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data areavailable. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indicationsthat may be more profitable or for which there is a greater likelihood of success.Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specificindications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greatercommercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable marketopportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield anycommercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we mayrelinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been moreadvantageous for us to retain sole development and commercialization rights to such product candidate.Risks Related to Healthcare Laws and Other Legal Compliance MattersEnacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our productcandidates and may affect the prices we may set.In the United States, the EU and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatorychanges and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be anumber of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, wasenacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those ofgreatest importance to the pharmaceutical and biotechnology industries include the following: •an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents(other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certaingovernment healthcare programs; •a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated pricesof applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs tobe covered under Medicare Part D;55 •new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value”made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediatefamily members; •an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of theaverage manufacturer price for branded and generic drugs, respectively; •a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that areinhaled, infused, instilled, implanted or injected; •extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed careorganizations; •expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certainindividuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebateliability; •a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,along with funding for such research; and •establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment andservice delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additionalchallenges and amendments to the ACA in the future. For example, on December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, orTexas District Court Judge, ruled that the entire Affordable Care Act is invalid based primarily on the fact that the Tax Cuts and Jobs Act of 2017 repealed thetax-based shared responsibility payment imposed by the Affordable Care Act, on certain individuals who fail to maintain qualifying health coverage for all orpart of a year, which is commonly referred to as the “individual mandate”. While the Texas District Court Judge, as well as the current presidentialadministration and the Centers for Medicare and Medicaid Services, have stated that this ruling will have no immediate effect, it is unclear how this decisionand subsequent appeals will impact the law. Further, the current presidential administration and Congress will likely continue to seek to modify, repeal, orotherwise invalidate all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financialcondition.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, the BudgetControl Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, dueto subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress. In January 2013, theAmerican Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers,including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpaymentsto providers from three to five years. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare andother health care funding, which could negatively affect our customers and accordingly, our financial operations.Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may developnew payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the mannerin which manufacturers set prices for their marketed products. We expect that additional U.S. federal healthcare reform measures will be adopted in the future,any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demandfor our product candidates or additional pricing pressures.Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to controlpharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access andmarketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financialcondition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine whatpharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimatedemand for our product candidates or put pressure on our product pricing.56 In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, ifapproved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result insignificant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment andoperation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy.National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursementof products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricingand reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing todevelop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affectour ability to commercialize our product candidates, if approved.In markets outside of the United States and EU, reimbursement and healthcare payment systems vary significantly by country, and many countrieshave instituted price ceilings on specific products and therapies.We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in theUnited States, the EU or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or theadoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose anyregulatory approval that may have been obtained and we may not achieve or sustain profitability.Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patientorganizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patientorganizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain thebusiness or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute ourproduct candidates, if approved. Such laws include: •the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting,offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly,in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendationof, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programssuch as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it inorder to have committed a violation; •the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act, which, among other things, imposecriminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting,or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making,using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a falsestatement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assertthat a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulentclaim for purposes of the False Claims Act; •the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, amongother things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowinglyand willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of,or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to haveactual knowledge of the statute or specific intent to violate it in order to have committed a violation; •HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations,which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security andtransmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such ashealth plans, healthcare57 clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure ofindividually identifiable health information; •the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; •the U.S. Public Health Service Act, which prohibits, among other things, the introduction into interstate commerce of a biological productunless a biologics license is in effect for that product; •the U.S. federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the ACA, and its implementingregulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare,Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and othertransfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by the physicians described aboveand their immediate family members; •analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices,including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or servicesreimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federalgovernment, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws andregulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts andother remuneration and items of value provided to healthcare professionals and entities; and state laws governing the privacy and security ofhealth information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,thus complicating compliance efforts; and •similar healthcare laws and regulations in the EU and other jurisdictions, including reporting requirements detailing interactions with andpayments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General DataProtection Regulation (“GDPR”), which imposes obligations and restrictions on the collection and use of personal data relating to individualslocated in the European Union (including health data).Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations willinvolve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes,regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be inviolation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties,including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare andMedicaid or similar programs in other countries or jurisdictions, disgorgement, individual imprisonment, contractual damages, reputational harm, diminishedprofits 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 arefound to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from governmentfunded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can becostly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that maybe brought against us, our business may be impaired.We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connectionwith environmental compliance or remediation activities.Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws andregulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registryfor, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compoundsthat have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations,we could be subject to fines or other sanctions.As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities,including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations arebecoming more stringent. We may be required to incur substantial58 expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturersor our development efforts may be interrupted or delayed.Risks Related to CommercializationWe face significant competition in an environment of rapid technological change, and there is a possibility that our competitors may achieve regulatoryapproval before us or develop therapies that are safer or more advanced or effective than ours, which may harm our financial condition and our ability tosuccessfully market or commercialize any product candidates we may develop.The development and commercialization of new genetic medicine products is highly competitive. Moreover, the gene editing field is characterizedby rapidly changing technologies, significant competition, and a strong emphasis on intellectual property. We will face competition with respect to anyproduct candidates that we may seek to develop or commercialize 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 privateresearch organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, andcommercialization.There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development ofproducts for the treatment of the disease indications for which we have research programs, including PKU, metachromatic leukodystrophy,hemoglobinopathies and ophthalmological diseases. Some of these competitive products and therapies are based on scientific approaches that are similar toour approach, and others are based on entirely different approaches.Our platform and product focus is the development of genetic medicines using our proprietary AAVHSCs in vivo either through the gene therapy ornuclease-free gene editing modality. If our current programs are approved for the indications for which we are currently planning clinical trials, they maycompete with other products currently under development, including gene editing and gene therapy products or other types of therapies, such as smallmolecule, antibody or protein therapies. If our PKU treatments are approved, they may compete with therapies from BioMarin, Synlogic, CensaPharmaceuticals, Rubius Therapeutics, Nestle and American Gene Technologies. We believe that only gene therapy or gene editing approaches have thepotential to restore the normal Phe biochemical pathway with a single administration. If our MLD treatment is approved, it may compete with therapies fromOrchard Therapeutics and/or Shire. In vivo gene therapy approaches provide potential advantages over ex vivo approaches. There are a number of companiesdeveloping nuclease-based gene editing technologies using CRISPR/Cas9, TALENs, meganucleases, Mega-TALs and ZFNs, including bluebird bio, CaribouBiosciences, Cellectis, CRISPR Therapeutics, Editas Medicine, Intellia Therapeutics, Poseida Therapeutics, Precision BioSciences and SangamoTherapeutics and non-nuclease-based technology, including LogicBio Therapeutics.Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources andexpertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approvedproducts than we do. Mergers and acquisitions in the pharmaceutical, biotechnology, and gene therapy industries may result in even more resources beingconcentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly throughcollaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific andmanagement 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 aresafer, 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 wouldrender any products that we may develop obsolete or non-competitive. Our competitors also may obtain FDA or other regulatory approval for their productsmore 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 themarket. Additionally, technologies developed by our competitors may render our potential product candidates uneconomic or obsolete, and we may not besuccessful in marketing any product candidates we may develop against competitors.In addition, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validity and/orscope of patents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are able tocharge, for any products that we may develop and commercialize.The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurersestablish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or59 maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease ourability to generate revenue.The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private healthinsurers and other third-party payors are essential for most patients to be able to afford prescription medications such as our product candidates, assumingFDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers andother organizations will have an effect on our ability to successfully commercialize our product candidates. Assuming we obtain coverage for our productcandidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients findunacceptably high. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for our product candidatesor any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse toprovide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. Itis possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product.Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics maylimit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product orestablish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our productcandidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates,and may not be able to obtain a satisfactory financial return on our product candidates.There is significant uncertainty related to the insurance coverage and reimbursement of newly-approved products. In the United States, third-partypayors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to whichnew drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payorsand other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approvalof coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at thistime what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage andreimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costlyprocess that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance thatcoverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regardingreimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, andwe believe the increasing emphasis on cost-containment initiatives in Europe and other countries have and will continue to put pressure on the pricing andusage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national healthsystems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign pricecontrols or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in marketsoutside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generatecommercially-reasonable revenue and profits.Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause suchorganizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequatepayment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend towardmanaged health care, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcarecosts in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly highbarriers are being erected to the entry of new products.60 Even if HMI-102, HMI-103, HMI-202 or any other product candidate receives marketing approval, it may fail to achieve market acceptance byphysicians, patients, third-party payors or others in the medical community necessary for commercial success.If HMI-102, HMI-103, HMI-202 or any other product candidate receives marketing approval, it may nonetheless fail to gain sufficient marketacceptance by physicians, patients, third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we maynot generate significant product revenues or become profitable. The degree of market acceptance of HMI-102, HMI-103, HMI-202 or any other productcandidate, if approved for commercial sale, will depend on a number of factors, including but not limited to: •the efficacy and potential advantages compared to alternative treatments; •effectiveness of sales and marketing efforts; •the cost of treatment in relation to alternative treatments, including any similar generic treatments; •our ability to offer our products for sale at competitive prices; •the convenience and ease of administration compared to alternative treatments; •the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; •the strength of marketing and distribution support; •the timing of market introduction of competitive products; •the availability of third-party coverage and adequate reimbursement; •product labeling or product insert requirements of the FDA, EMA or other regulatory authorities, including any limitations or warningscontained in a product’s approved labeling; •the prevalence and severity of any side effects; and •any restrictions on the use of our product together with other medications.Because we expect sales of HMI-102, HMI-103, HMI-202 or any other product candidate, if approved, to generate substantially all of our productrevenues for a substantial period, the failure of this product to find market acceptance would harm our business and could require us to seek additionalfinancing.If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not besuccessful in commercializing HMI-102, HMI-103, HMI-202 or any other product candidate, if approved.We do not have any infrastructure for the sales, marketing or distribution of our products, and the cost of establishing and maintaining such anorganization may exceed the cost-effectiveness of doing so.We expect to build a focused sales, distribution and marketing infrastructure to market HMI-102, HMI-103, HMI-202 or any other product candidatein the United States and European Union, if approved. There are significant expenses and risks involved with establishing our own sales, marketing anddistribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provideadequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in thedevelopment of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact thecommercialization of HMI-102, HMI-103, HMI-202 or any other product candidate. Additionally, if the commercial launch of HMI-102, HMI-103, HMI-202or any other product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we wouldhave prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain orreposition our sales and marketing personnel.We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of HMI-102, HMI-103, HMI-202 or anyother product candidates in certain markets overseas. Therefore, our future sales in these markets will largely depend on our ability to enter into and maintaincollaborative relationships for such capabilities, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully market andsell the product. We intend to pursue collaborative arrangements regarding the sale and marketing of HMI-102, HMI-103, HMI-202 or any other productcandidate, if approved, for certain markets overseas; however, we cannot assure that we will be able to establish or maintain such collaborative arrangements,or if able to do so, that they will have effective sales forces.61 If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of HMI-102, HMI-103, HMI-202 orany other product candidate, we may be forced to delay the potential commercialization of HMI-102, HMI-103, HMI-202 or any other product candidate orreduce the scope of our sales or marketing activities for HMI-102, HMI-103, HMI-202 or any other product candidate. If we elect to increase our expendituresto fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. Wecould enter into arrangements with collaborative partners at an earlier stage than otherwise would be ideal and we may be required to relinquish rights toHMI-102, HMI-103, HMI-202 or any other product candidate or otherwise agree to terms unfavorable to us, any of which may have an adverse effect on ourbusiness, operating results and prospects.If we are unable to establish adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we willnot be successful in commercializing HMI-102, HMI-103, HMI-202 or any other product candidate, and may not become profitable and may incur significantadditional losses. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without aninternal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these moreestablished companies.If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations couldmaterially adversely affect our business.If HMI-102, HMI-103, HMI-202 or any other product candidate is approved for commercialization, we intend to enter into agreements with thirdparties to market it in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to internationalpharmaceutical operations, including: •different regulatory requirements for drug and biologic approvals and rules governing drug and biologic commercialization in foreigncountries; •reduced protection for intellectual property rights; •foreign reimbursement, pricing and insurance regimes; •potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruptionlaws in other jurisdictions; and •production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad.We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both theEuropean Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biotechnology companies have foundthe process of marketing their own products in Europe to be very challenging.Any product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition andInnovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with anFDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four yearsfollowing the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by theFDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may stillmarket a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own pre-clinical dataand data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still beinginterpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain whensuch processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the futurecommercial prospects for our biological products.There is a risk that any of our product candidates approved as a biological product under a BLA would not qualify for the 12-year period ofexclusivity or that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates tobe reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of theBPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which abiosimilar, once62 approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products isnot yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.Risks Related to Our Dependence on Third PartiesWe currently contract with third parties for the manufacture of materials for our research programs and preclinical studies. This reliance on third partiesincreases the risk that we will not have sufficient quantities of such materials, product candidates, or any medicines that we may develop andcommercialize, or that such supply will not be available to us at an acceptable cost or in compliance with regulatory requirements, which could delay,prevent, or impair our development or commercialization efforts.We currently rely on third-party manufacturers for the manufacture of our materials for preclinical studies. We do not have a long-term supplyagreement with any of the third-party manufacturers, and we purchase our required supply on a purchase order basis. We recently completed the build-out of acGMP manufacturing facility to support our clinical development programs in both gene therapy and gene editing and expect to start manufacturing in thefirst half of 2019. However, if we experience delays or are unable to establish and scale our internal manufacturing capabilities, we will need to contract withmanufacturers that can produce the clinical and commercial supply of our product candidates.We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establishagreements 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.Any medicines that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are alimited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance failure on the partof our existing or future manufacturers could delay clinical development or marketing approval.Our current and anticipated future dependence upon others for the manufacture of any product candidates we may develop or medicines mayadversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.We intend to rely on third parties to conduct, supervise and monitor our clinical trials. If those third parties do not successfully carry out their contractualduties, or if they perform in an unsatisfactory manner, it may harm our business.We intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limitedinfluence over their actual performance.We intend to rely upon CROs to monitor and manage data for our clinical programs, as well as the execution of future nonclinical studies. Ourreliance on CROs for clinical development activities limits our control over these activities, but we will remain responsible for ensuring that each of ourstudies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us ofour regulatory responsibilities.We and our CROs will be required to comply with the GLPs and GCPs, which are regulations and guidelines enforced by the FDA and are alsorequired by the Competent Authorities of the Member States of the European Economic Area and63 comparable foreign regulatory authorities in the form of International Conference on Harmonization guidelines for any of our product candidates that are inpreclinical and clinical development. The Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators andclinical trial sites. If we or our CROs fail to comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA orcomparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assureyou that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCPregulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Accordingly, if our CROs fail to comply withthese regulations or fail to recruit a sufficient number of subjects, we may be required to repeat clinical trials, which would delay the regulatory approvalprocess.Our CROs will not be our employees, and we will not control whether or not they devote sufficient time and resources to our future clinical andnonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also beconducting clinical trials, or other product development activities which could harm our competitive position. We face the risk of potential unauthorizeddisclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors toaccess and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expecteddeadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatoryrequirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, orsuccessfully commercialize any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidatethat we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.If our relationship with any CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commerciallyreasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is a naturaltransition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinicaldevelopment timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounterchallenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects.We may collaborate with third parties for the development and commercialization of HMI-102, HMI-103, HMI-202 or any other product candidate. Wemay not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize HMI-102, HMI-103, HMI-202 or any other product candidate successfully, if at all.We may seek collaborative relationships for the development and commercialization of HMI-102, HMI-103, HMI-202 or any other product candidate.Failure to obtain a collaborative relationship for HMI-102, HMI-103, HMI-202 or any other product candidate may significantly impair the potential for theproduct candidate. We also will need to enter into collaborative relationships to provide funding to support our other research and development programs.The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, such as: •a collaboration partner may shift its priorities and resources away from our product candidates due to a change in business strategies, or amerger, acquisition, sale or downsizing; •a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturingissues, a change in business strategy, a change of control or other reasons; •a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration; •a collaboration partner may not devote sufficient capital or resources towards our product candidates; •a collaboration partner may change the success criteria for a product candidate thereby delaying or ceasing development of such candidate; •a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones tied to suchactivities, thereby impacting our ability to fund our own activities; •a collaboration partner could develop a product that competes, either directly or indirectly, with our product candidate; •a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing,distribution or sale of a product;64 •a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demandrequirements; •a collaboration partner may terminate a strategic alliance; •a dispute may arise between us and a partner concerning the research, development or commercialization of a product candidate resulting in adelay in milestones, royalty payments or termination of an alliance and possibly resulting in costly litigation or arbitration which may divertmanagement attention and resources; and •a partner may use our products or technology in such a way as to invite litigation from a third party.If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing orcommercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses oractivities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships onacceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or moreof our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital. Moreover, anycollaborative partners we enter into agreements with in the future may shift their priorities and resources away from our product candidates or seek torenegotiate or terminate their relationships with us. For example, Novartis can terminate its agreement with us for convenience on a target-by-target basis and,on February 6, 2019, we received notice that Novartis had elected to discontinue the sickle cell disease program under our agreement effective in August2019.We do not have multiple sources of supply for all of the components used in HMI-102 and our other product candidates. If we were to lose a supplier, itcould have a material adverse effect on our ability to complete the development of HMI-102. If we obtain regulatory approval for HMI-102, we wouldneed to expand the supply of its components in order to commercialize them.We do not have multiple sources of supply for all of the components used in the manufacturing of HMI-102. We also do not have long-term supplyagreements with any of our component suppliers. We are currently evaluating manufacturers that will commercially manufacture HMI-102. It is ourexpectation that we will only qualify one initial supplier that will need to be approved by the FDA. If for any reason we are unable to obtain product from themanufacturer we select, we would have to qualify new manufacturers. We may not be able to establish additional sources of supply for our productcandidates, or may be unable to do so on acceptable terms. Manufacturing suppliers are subject to cGMP quality and regulatory requirements, coveringmanufacturing, testing, quality control and record keeping relating to our product candidates and subject to ongoing inspections by the regulatory agencies.Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions in supply. Manufacturing suppliers are alsosubject to local, state and federal regulations and licensing requirements. Failure by any of our suppliers to comply with all applicable regulations andrequirements may result in long delays and interruptions in supply.The number of suppliers of the raw material components of our product candidates is limited. In the event it is necessary or desirable to acquiresupplies from alternative suppliers, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time andexpense to redesign our manufacturing processes to work with another company.As part of any marketing approval, a manufacturer of HMI-102 is required to be licensed by the FDA prior to commercialization. This licensingprocess includes inspections by regulatory authorities that must be successful prior to them being licensed. Failure of manufacturing suppliers to successfullycomplete these regulatory inspections will result in delays. If supply from the approved supplier is interrupted, there could be a significant disruption incommercial supply. An alternative vendor would need to be qualified through a BLA amendment or supplement which could result in further delay. The FDAor other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production.Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our ability tocomplete the development of HMI-102 and our other product candidates or, if we obtain regulatory approval for HMI-102 or our other product candidates, tocommercialize them.65 If we fail to comply with our obligations in the agreements under which we in-license or acquire development or commercialization rights to products,technology or data from third parties, including those for HMI-102, we could lose such rights that are important to our business.We are a party to agreements with Caltech for certain AAV vector-related patents owned by Caltech for human therapeutic applications, or the CaltechLicense, and City of Hope for certain AAV vector-related patents and know-how, and we may enter into additional agreements, including license agreements,with other parties in the future that impose diligence, development and commercialization timelines, milestone payments, royalties, insurance and otherobligations on us.For example, in exchange for the rights granted to us under the Caltech License, we are obligated to pay Caltech up to a total of $7.2 million inmilestone payments for the first licensed product, royalties, in the low single-digit percentages, on net sales of licensed products subject to a certain annualminimum royalty, and mid single- to high single-digit percentages of sublicensing revenues. If we fail to comply with our obligations under the CaltechLicense, or any of our other collaborators, our counterparties may have the right to terminate these agreements, in which event we might not be able todevelop, manufacture or market any product candidate that is covered by these agreements, which could materially adversely affect the value of the productcandidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements mayresult in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including ourrights to important intellectual property or technology.Risks Related to Our Intellectual PropertyIf we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is notsufficiently broad, we may not be able to compete effectively in our markets.We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to ourproprietary technologies, product candidate development programs and product candidates. Our success depends in large part on our ability to secure andmaintain patent protection in the United States and other countries with respect to HMI-102, HMI-103, HMI-202 and any future product candidates. We seekto protect our proprietary position by filing or collaborating with our licensors to file patent applications in the United States and abroad related to ourproprietary technologies, development programs and product candidates. The patent prosecution process is expensive and time-consuming, and we may notbe able to file and prosecute 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 before it is too late to obtain patentprotection. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our proprietary products andtechnology, including HMI-102, HMI-103, HMI-202 or any other product candidate in the United States or in other foreign countries, in whole or in part.Alternately, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or fromdeveloping competing products and technologies. There is no assurance that all potentially relevant prior art relating to our patents and patent applicationshas been found, which can prevent a patent from issuing from a pending patent application or later invalidate or narrow the scope of an issued patent. Even ifpatents do successfully issue and even if such patents cover HMI-102, HMI-103, HMI-202 or any future product candidate, third parties may challenge theirvalidity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful challenge tothese patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any productcandidates or companion diagnostic that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we couldmarket a product candidate and companion diagnostic under patent protection could be reduced.If the patent applications we hold or have in-licensed with respect to our development programs and product candidates fail to issue, if their validity,breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for HMI-102, HMI-103, HMI-202 or any future productcandidate, it could dissuade companies from collaborating with us to develop product candidates, encourage competitors to develop competing products ortechnologies and threaten our ability to commercialize future product candidates. Any such outcome could have a materially adverse effect on our business.The patent position of biotechnology and pharmaceutical companies is highly uncertain, involves complex legal and factual questions, and ischaracterized by the existence of large numbers of patents and frequent litigation based on allegations of patent or other intellectual property infringement orviolation. In addition, the laws of jurisdictions outside the United States may not protect our rights to the same extent as the laws of the United States. Forexample, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Changes in either thepatent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the66 scope of our patent protection. Since patent applications in the United States and other jurisdictions are confidential for a period of time after filing, wecannot be certain that we were the first to file for patents covering our inventions. As a result, the issuance, scope, validity, enforceability and commercialvalue of our patent rights are highly uncertain. Our pending and future patent applications may not result in the issuance of patents, or may result in theissuance of patents which fail to protect our technology or products, in whole or in part, or which fail to effectively prevent others from commercializingcompetitive technologies and products.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may bechallenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patentclaims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializingsimilar or identical technology and products, or limit the duration of the patent protection of our technology and products. Thus, even if our patentapplications issue as patents, they may not issue in a form that will provide us with meaningful protection, prevent competitors from competing with us orotherwise provide us with any competitive advantage. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent isgenerally 20 years after it is filed. Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Without patentprotection for our current or future product candidates, we may be open to competition from generic versions of such products. Given the amount of timerequired for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly aftersuch candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others fromcommercializing products similar or identical to ours.Third parties may assert claims against us alleging infringement of their patents and proprietary rights, or we may need to become involved in lawsuits todefend or enforce our patents, either of which could result in substantial costs or loss of productivity, delay or prevent the development andcommercialization of our product candidates, prohibit our use of proprietary technology or sale of products or put our patents and other proprietary rightsat risk.Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our product candidates without alleged or actualinfringement, misappropriation or other violation of the patents and proprietary rights of third parties. Litigation relating to infringement or misappropriationof patent and other intellectual property rights in the pharmaceutical and biotechnology industries is common, including patent infringement lawsuits,interferences, oppositions and reexamination proceedings before the U.S. Patent and Trademark Office, or USPTO, and corresponding foreign patent offices.The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. Inaddition, many companies in intellectual property-dependent industries, including the biotechnology and pharmaceutical industries, have employedintellectual property litigation as a means to gain an advantage over their competitors. Numerous United States, EU and foreign issued patents and pendingpatent applications, which are owned by third parties, exist in the fields in which we are developing product candidates, and as the biotechnology andpharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of theintellectual property rights of third parties. Some claimants may have substantially greater resources than we do and may be able to sustain the costs ofcomplex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focussolely on extracting royalties and settlements by enforcing patent rights may target us.We may be subject to third-party claims including infringement, interference or derivation proceedings, post-grant review and inter partes reviewbefore the USPTO or similar adversarial proceedings or litigation in other jurisdictions. Even if such claims are without merit, a court of competentjurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our abilityto commercialize the applicable product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finallydetermined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of ourcompositions, formulations, or methods of treatment, prevention or use, the holders of any such patents may be able to prohibit our use of thosecompositions, formulations, methods of treatment, prevention or use or other technologies, effectively blocking our ability to develop and commercialize theapplicable product candidate until such patent expires or is finally determined to be invalid or unenforceable or unless we obtained a license.In addition, defending such claims would cause us to incur substantial expenses and, if successful, could cause us to pay substantial damages if we arefound to be infringing a third party’s patent rights. These damages potentially include increased damages and attorneys’ fees if we are found to haveinfringed such rights willfully. Further, if a patent infringement suit is brought against us or our third-party service providers, our development,manufacturing or sales activities relating to the product or product candidate that is the subject of the suit may be delayed or terminated. As a result of patentinfringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the67 third party, which may require payment of substantial royalties or fees, or require us to grant a cross-license under our intellectual property rights. Theselicenses may not be available on reasonable terms or at all. Even if a license can be obtained on reasonable terms, the rights may be nonexclusive, whichwould give our competitors access to the same intellectual property rights. If we are unable to enter into a license on acceptable terms, we could be preventedfrom commercializing one or more of our product candidates, or forced to modify such product candidates, or to cease some aspect of our business operations,which could harm our business significantly. We might also be forced to redesign or modify our product candidates so that we no longer infringe the third-party intellectual property rights, which may result in significant cost or delay to us, or which redesign or modification could be impossible or technicallyinfeasible. Even if we were ultimately to prevail, any of these events could require us to divert substantial financial and management resources that we wouldotherwise be able to devote to our business. In addition, if the breadth or strength of protection provided the patents and patent applications we own or in-license is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.If we or one of our licensors were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, thedefendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States and in Europe, defendant counterclaimsalleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutoryrequirements, for example, lack of novelty, obviousness or non-enablement. Third parties might allege unenforceability of our patents because duringprosecution of the patent an individual connected with such prosecution withheld relevant information, or made a misleading statement. The outcome ofproceedings involving assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity of patents, forexample, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution, but that anadverse third party may identify and submit in support of such assertions of invalidity. If a defendant were to prevail on a legal assertion of invalidity orunenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Our patents and other intellectual propertyrights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectualproperty rights.Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expensesand could distract our technical and management personnel from their normal responsibilities. In addition, because of the substantial amount of discoveryrequired in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosureduring this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments,and if securities analysts or investors view these announcements in a negative light, the price of our common stock could be adversely affected. Suchlitigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not havesufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of suchlitigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiationand continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which mightadversely affect our ability to develop, manufacture and market our product candidates.We cannot guarantee that any of our or our licensors’ patent searches or analyses, including but not limited to the identification of relevant patents,analysis of the scope of relevant patent claims or determination of the expiration of relevant patents, are complete or thorough, nor can we be certain that wehave identified each and every third-party patent and pending application in the United States, Europe and elsewhere that is relevant to or necessary for thecommercialization of our product candidates in any jurisdiction. For example, in the United States, applications filed before November 29, 2000 and certainapplications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the UnitedStates, EU and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date beingcommonly referred to as the priority date. Therefore, patent applications covering our product candidates could be filed by others without our knowledge.Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover ourproduct candidates or the use of our product candidates. After issuance, the scope of patent claims remains subject to construction as determined by aninterpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent ora pending application may be incorrect, which may negatively impact our ability to market our product candidates. We may incorrectly determine that ourproduct candidates are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims ofrelevant scope. Our determination of the expiration date of any patent in the United States, the EU or elsewhere that we consider relevant may be incorrect,which68 may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents maynegatively impact our ability to develop and market our product candidates.If we fail to correctly identify or interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able tosuccessfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay monetary damages, we maybe temporarily or permanently prohibited from commercializing our product candidates. We might, if possible, also be forced to redesign our productcandidates in a manner that no longer infringes third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, couldrequire us to divert substantial financial and management resources that we would otherwise be able to devote to our business.Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our productcandidates.As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the biotechnology and genetic medicine industries involve both technological complexity and legal complexity. Therefore, obtainingand enforcing biotechnology and genetic medicine patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act, or theAIA, which was passed in September 2011, resulted in significant changes to the U.S. patent system.An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent” to a “first-to-file”system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention.Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitledto a patent on the invention regardless of whether another inventor had made the invention earlier. A third party that files a patent application in the USPTOafter that date but before us could therefore be awarded a patent covering an invention of ours even if we made the invention before it was made by the thirdparty. This will require us to be cognizant going forward of the time from invention to filing of a patent application and diligent in filing patent applications,but circumstances could prevent us from promptly filing patent applications on our inventions.Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providingopportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013.Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patentclaim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the sameevidence would be insufficient to invalidate the claim if first presented in a district court action.Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if firstchallenged by the third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of our business.However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applicationsand the enforcement or defense of our or our licensors’ issued patents.We may become involved in opposition, interference, derivation, inter partes review or other proceedings challenging our or our licensors’ patentrights, and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding could reduce the scope of, or invalidate,our owned or in-licensed 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.Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available incertain circumstances or weakening the rights of patent owners in certain situations, and there are other open questions under patent law that courts have yetto decisively address. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has createduncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws andregulations governing patents could change in unpredictable ways and could weaken our ability to obtain new patents or to enforce our existing patents andpatents that we might obtain in the future. In addition, the European patent system is relatively stringent in the type of amendments that are allowed duringprosecution, but, the complexity and uncertainty of European patent laws has also increased in recent years. Complying with these laws and regulationscould limit our ability to obtain new patents in the future that may be important for our business.69 Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.The USPTO and European and other patent agencies require compliance with a number of procedural, documentary, fee payment and other similarprovisions during the patent application process. In addition, periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTOand European and other patent agencies over the lifetime of a patent. While an inadvertent failure to make payment of such fees or to comply with suchprovisions can in many cases be cured by additional payment of a late fee or by other means in accordance with the applicable rules, there are situations inwhich non-compliance with such provisions will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss ofpatent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure torespond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents within prescribedtime limits. If we or our licensors fail to maintain the patents and patent applications covering our product candidates or if we or our licensors otherwise allowour patents or patent applications to be abandoned or lapse, it can create opportunities for competitors to enter the market, which would hurt our competitiveposition and could impair our ability to successfully commercialize our product candidates in any indication for which they are approved.We enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rightsthroughout the world.Filing, prosecuting and defending patents covering our product candidates in all countries throughout the world would be prohibitively expensive,and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In-licensing patentscovering our product candidates in all countries throughout the world may similarly be prohibitively expensive, if such opportunities are available at all.And in-licensing or filing, prosecuting and defending patents even in only those jurisdictions in which we develop or commercialize our product candidatesmay be prohibitively expensive or impractical. Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patentprotection or licensed patents to develop their own products and, further, may export otherwise infringing products to territories where we and our licensorshave patent protection, but enforcement is not as strong as that in the United States or the EU. These products may compete with our product candidates, andour or our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.In addition, we may decide to abandon national and regional patent applications while they are still pending. The grant proceeding of each nationalor regional patent is an independent proceeding which may lead to situations in which applications may be rejected by the relevant patent office, whilesubstantively similar applications are granted by others. For example, relative to other countries, China has a heightened requirement for patentability andspecifically requires a detailed description of medical uses of a claimed drug. Furthermore, generic drug manufacturers or other competitors may challengethe scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or otherproceedings. Generic drug manufacturers may develop, seek approval for and launch generic versions of our products. It is also quite common that dependingon the country, the scope of patent protection may vary for the same product candidate or technology.The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or regulations in the United States and the EU,and many companies have encountered significant difficulties in protecting and defending proprietary rights in such jurisdictions. Moreover, the legalsystems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets or other forms of intellectualproperty, which could make it difficult for us to prevent competitors in some jurisdictions from marketing competing products in violation of our proprietaryrights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, are likely to result in substantial costs and divertour efforts and attention from other aspects of our business, and additionally could put at risk our or our licensors’ patents of being invalidated or interpretednarrowly, could increase the risk of our or our licensors’ patent applications not issuing, or could provoke third parties to assert claims against us. We may notprevail in any lawsuits that we initiate, while damages or other remedies may be awarded to the adverse party, which may be commercially significant. If weprevail, damages or other remedies awarded to us, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual propertyrights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiateor maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectualproperty rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates inall of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are70 otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights maybe diminished and we may face additional competition in those jurisdictions.In some jurisdictions, compulsory licensing laws compel patent owners to grant licenses to third parties. In addition, some countries limit theenforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, whichcould materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties under patents relevant to ourbusiness, or if we or our licensors are prevented from enforcing patent rights against third parties, our competitive position may be substantially impaired insuch jurisdictions.If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, therebypotentially extending the term of marketing exclusivity for our product candidates, our business may be materially harmed.The term of any individual patent depends on applicable law in the country where the patent is granted. In the United States, provided allmaintenance fees are timely paid, a patent generally has a term of 20 years from its application filing date or earliest claimed non-provisional filing date.Extensions may be available under certain circumstances, but the life of a patent and, correspondingly, the protection it affords is limited. Even if we or ourlicensors obtain patents covering our product candidates, when the terms of all patents covering a product expire, our business may become subject tocompetition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatoryreview and approval of new product candidates, patents protecting such candidates may expire before or shortly after such candidates are commercialized. Asa result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar oridentical to ours.In the United States, a patent that covers an FDA- approved drug or biologic may be eligible for a term extension designed to restore the period of thepatent term that is lost during the premarket regulatory review process conducted by the FDA. Depending upon the timing, duration and conditions of FDAmarketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug PriceCompetition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act , which permits a patent term extension of up to five years for a patentcovering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. In the EU,our product candidates may be eligible for term extensions based on similar legislation. In either jurisdiction, however, we may not receive an extension if wefail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Even if weare granted such extension, the duration of such extension may be less than our request. If we are unable to obtain a patent term extension, or if the term ofany such extension is less than our request, the period during which we can enforce our patent rights for that product will be in effect shortened and ourcompetitors may obtain approval to market competing products sooner. The resulting reduction of years of revenue from applicable products could besubstantial.Our proprietary rights may not adequately protect our technologies and product candidates, and do not necessarily address all potential threats to ourcompetitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and maynot adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative: •others may be able to make products that are the same as or similar to our product candidates but that are not covered by the claims of thepatents that we own or have exclusively licensed; •others, including inventors or developers of our owned or in-licensed patented technologies who may become involved with competitors, mayindependently develop similar technologies that function as alternatives or replacements for any of our technologies without infringing ourintellectual property rights; •we or our licensors or our other collaboration partners might not have been the first to conceive and reduce to practice the inventions coveredby the patents or patent applications that we own, license or will own or license; •we or our licensors or our other collaboration partners might not have been the first to file patent applications covering certain of the patents orpatent applications that we or they own or have obtained a license, or will own or will have obtained a license; •we or our licensors may fail to meet obligations to the U.S. government with respect to in-licensed patents and patent applications funded byU.S. government grants, leading to the loss of patent rights;71 •it is possible that our pending patent applications will not result in issued patents; •it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents; •issued patents that we own or exclusively license may not provide us with any competitive advantage, or may be held invalid orunenforceable, as a result of legal challenges by our competitors; •our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries whereresearch and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products forsale in our major commercial markets; •ownership, validity or enforceability of our or our licensors’ patents or patent applications may be challenged by third parties; and •the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.We depend on proprietary technology licensed from others. If we lose our existing licenses or are unable to acquire or license additional proprietary rightsfrom third parties, we may not be able to continue developing our products.We currently in-license certain intellectual property from COH and Caltech, and we have entered into a collaboration and license agreement withNovartis. In the future we may in-license intellectual property from other licensors. We rely on certain of these licensors to file and prosecute patentapplications and maintain patents and otherwise protect the intellectual property we license from them. We have limited control over these activities or anyother intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by theselicensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and otherintellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-partyinfringer of the intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that the licensors’ infringementproceeding or defense activities may be less vigorous than had we conducted them ourselves. The licensing and acquisition of third-party intellectualproperty rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategiesto license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates.More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development andcommercialization capabilities. There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights tothe intellectual property surrounding the additional product candidates that we may seek to acquire.If we fail to comply with our obligations under our patent licenses with third parties, we could lose license rights that are important to our business.We are a party to license agreements with COH and Caltech, pursuant to which we in-license patents and technology for our product candidates.These existing licenses impose various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with theseobligations or otherwise materially breach a license agreement, our licensors may have the right to terminate the license, in which event we would not be ableto develop or market the products covered by such licensed intellectual property. In addition, any claims asserted against us by our licensors may be costlyand time-consuming, divert the attention of key personnel from business operations or otherwise have a material adverse effect on our business.Our reliance on third parties may require us to share our trade secrets, which increases the possibility that our trade secrets will be misappropriated ordisclosed, and confidentiality agreements with employees and third parties may not adequately prevent disclosure of trade secrets and protect otherproprietary information.We consider proprietary trade secrets, confidential know-how and unpatented know-how to be important to our business. We may rely on trade secretsand confidential know-how to protect our technology, especially where patent protection is believed by us to be of limited value. However, trade secrets andconfidential know-how are difficult to protect, and we have limited control over the protection of trade secrets and confidential know-how used by ourlicensors, collaborators and suppliers. Because we expect to rely on third parties to manufacture HMI-102, HMI-103, HMI-202 and any future productcandidates, and we expect to collaborate with third parties on the development of HMI-102, HMI-103, HMI-202 and any future product candidates, we may,at times, share trade secrets with them. We also conduct joint research and development programs that may require us to share trade secrets under the terms ofour research and development partnerships or similar agreements. Under such circumstances, trade secrets and confidential know-how can be difficult tomaintain as confidential.72 To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractorsand advisors to enter into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements withus prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose ourconfidential information, including our trade secrets. However, current or former employees, consultants, contractors and advisers may unintentionally orwillfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event ofunauthorized disclosure of confidential information. The need to share trade secrets and other confidential information increases the risk that such tradesecrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of theseagreements. Given that our competitive position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or otherunauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations. Enforcing aclaim that a third party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming and unpredictable, and theenforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish datapotentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our tradesecrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication ofinformation by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverseimpact on our business.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and ourbusiness may be adversely affected.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and ourbusiness may be adversely affected. We currently own three pending trademark applications in the United States, as well as 20 registered trademarks and 13pending trademark applications in other countries around the world. We may not be able to protect our rights to these trademarks and trade names, which weneed to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarkssimilar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential tradename or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregisteredtrademarks or trade names. Over the long term, if we are unable to successfully register our trademarks and trade names and establish name recognition basedon our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce orprotect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could resultin substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.We may need to license additional intellectual property from third parties, and such licenses may not be available or may not be available oncommercially reasonable terms.The growth of our business may depend in part on our ability to acquire or in-license additional proprietary rights. For example, our programs mayinvolve product candidates that may require the use of additional proprietary rights held by third parties. Our product candidates may also require specificformulations to work effectively and efficiently. These formulations may be covered by intellectual property rights held by others. We may develop productscontaining our compositions and pre-existing pharmaceutical compositions. These pharmaceutical products may be covered by intellectual property rightsheld by others. We may be required by the FDA or comparable foreign regulatory authorities to provide a companion diagnostic test or tests with our productcandidates. These diagnostic test or tests may be covered by intellectual property rights held by others. We may be unable to acquire or in-license anyrelevant third-party intellectual property rights that we identify as necessary or important to our business operations. We may fail to obtain any of theselicenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or methodscovered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectualproperty rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible.Even if we are able to obtain a license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitorsaccess to the same technologies licensed to us.73 We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information oftheir former employers or other third parties.We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. Although we seek to protect ourownership of intellectual property rights by ensuring that our agreements with our employees, collaborators and other third parties with whom we do businessinclude provisions requiring such parties to assign rights in inventions to us, we may be subject to claims that we or our employees, consultants orindependent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties.We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defendagainst these claims. There is no guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetarydamages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we aresuccessful, litigation could result in substantial cost and reputational loss and be a distraction to our management and other employees.Risks Related to Employee Matters and Managing GrowthOur future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.Our industry has experienced a high rate of turnover of management personnel in recent years. We are highly dependent on the development,regulatory, commercialization and business development expertise of Arthur Tzianabos, Ph.D., our President and Chief Executive Officer and AlbertSeymour, Ph.D. our Chief Scientific Officer, as well as the other principal members of our management, scientific and clinical teams. Although we have formalemployment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time.If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriouslyharmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limitednumber of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize productcandidates successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional keypersonnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We alsoexperience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants andadvisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultantsand advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limittheir availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to develop and commercialize product candidateswill be limited.We expect to grow our organization, 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 productcandidate development, regulatory affairs and sales, marketing and distribution. Our management may need to divert a disproportionate amount of itsattention away from our day-to-day activities to devote time to managing these growth activities. To manage these growth activities, we must continue toimplement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualifiedpersonnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth,we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. Our inability to effectivelymanage the expansion of our operations may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, lossof employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divertfinancial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage ourexpected growth, our expenses may increase more than expected, our potential ability to generate revenue could be reduced and we may not be able toimplement our business strategy.74 We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not beable to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactionsmay be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or otherequity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incurlosses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition,we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely andnondisruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cashavailable for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might haveon our operating results.We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans maynot adequately protect us from a serious disaster.Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial conditionand prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, thatdamaged critical infrastructure, such as our manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossiblefor us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate inthe event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and businesscontinuity plans, which could have a material adverse effect on our business. For example, following Hurricane Maria, shortages in production and delays ina number of medical supplies produced in Puerto Rico resulted, and any similar interruption due to a natural disaster affecting us or any of our third-partymanufacturers could materially delay our operations.Risks Related to Our Common StockThe market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our commonstock.Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular haveexperienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may notbe able to sell your shares of common stock at or above the price at which you purchased them. The market price for our common stock may be influenced bymany factors, including: •the success of competitive products or technologies; •actual or expected changes in our growth rate relative to our competitors; •results of clinical trials of our product candidates or those of our competitors; •developments related to our existing or any future collaborations; •regulatory actions with respect to our product candidates or our competitors’ products and product candidates; •regulatory or legal developments in the United States and other countries; •development of new product candidates that may address our markets and make our product candidates less attractive; •changes in physician, hospital or healthcare provider practices that may make our product candidates less useful; •announcements by us, our partners or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations orcapital commitments; •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 product candidates or clinical development programs;75 •failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; •the results of our efforts to discover, develop, acquire or in-license additional product candidates or products; •actual or expected changes in estimates as to financial results, development timelines or recommendations by securities analysts; •variations in our financial results or those of companies that are perceived to be similar to us; •changes in the structure of healthcare payment systems; •market conditions in the pharmaceutical and biotechnology sectors; •general economic, industry and market conditions; and •the other factors described in this “Risk Factors” section.Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control or significantlyinfluence all matters submitted to stockholders for approval.Our executive officers, directors and stockholders who own more than 5% of our outstanding common stock and their respective affiliates, in theaggregate, hold shares representing approximately 76.1% of our outstanding voting stock as of December 31, 2018. As a result, if these stockholders chooseto act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management andaffairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of ourmanagement and approval of any merger, consolidation or sale of all or substantially all of our assets.A significant portion of our total outstanding shares are eligible to be sold into the market, which could cause the market price of our common stock todrop significantly, even if our business is doing well.Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number ofshares intend to sell shares, could reduce the market price of our common stock. As of September 1, 2018, holders of an aggregate of approximately 24.3million shares of our common stock have rights, subject to specified conditions, to require us to file registration statements covering their shares or to includetheir shares in registration statements that we may file for ourselves or other stockholders, until the rights terminate pursuant to the terms of the investors’rights agreement between us and such holders. We have also registered all shares of common stock that we may issue under our equity compensation plans,which can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements.We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stockless attractive to investors.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerginggrowth company until the last day of the fiscal year following the fifth anniversary of the closing of the initial public offering of our common stock. However,if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed$1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior tothe end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certaindisclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: •not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; •not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regardingmandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financialstatements; •reduced disclosure obligations regarding executive compensation; and •exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any goldenparachute payments not previously approved.76 We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our commonstock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. Inaddition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revisedaccounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply toprivate companies. We have elected to take advantage of this extended transition period.We have incurred and expect to continue to incur increased costs as a result of operating as a public company, and our management will be required todevote substantial time to new compliance initiatives and corporate governance practices.As a public company, we have incurred and expect to continue to incur significant legal, accounting and other expenses that we did not incur as aprivate company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NasdaqGlobal Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment andmaintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote asubstantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs andhave made some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and moreexpensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members ofour board of directors.We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application inpractice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regardingcompliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internalcontrol over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internalcontrol over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribedperiod, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In thisregard, we will need to continue to dedicate internal resources, engage outside consultants, adopt a detailed work plan to assess and document the adequacyof internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls arefunctioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts,there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective asrequired by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss ofconfidence in the reliability of our financial statements.If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding ourstock, our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or ourbusiness. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stockperformance, or if our target animal studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or moreof these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could causeour stock price or trading volume to decline.Provisions in our restated certificate of incorporation and amended and restated bylaws and under Delaware law could make an acquisition of ourcompany, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our currentmanagement.Provisions in our restated certificate of incorporation and our amended and restated bylaws, which became effective upon the closing of the initialpublic offering of our common stock may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders mayconsider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price thatinvestors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, becauseour board of directors is responsible for appointing the members of our management team, these provisions may frustrate or77 prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members ofour board of directors. Among other things, these provisions include those establishing: •a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of amajority of our board of directors; •no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; •the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or theresignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; •the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, includingpreferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; •the ability of our board of directors to alter our bylaws without obtaining stockholder approval; •the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal ourbylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors; •a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of ourstockholders; •the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer,the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action,including the removal of directors; and •advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose mattersto be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies toelect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State ofDelaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three yearsafter the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approvedin a prescribed manner. Furthermore, our restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternativeforum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us bystockholders. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to haveconsented to the provisions of our restated certificate of incorporation described above.We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experiencedin resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens ofmulti-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it maylimit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers,employees or agents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legalproceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions containedin our restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision containedin our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving suchaction in other jurisdictions, which could adversely affect our business, financial condition or results of operations.Because we do not anticipate paying any cash dividends on our common shares in the foreseeable future, capital appreciation, if any, would be your solesource of gain.We have never declared or paid any cash dividends on our common shares. We currently anticipate that we will retain future earnings for thedevelopment, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result,capital appreciation, if any, of our common shares would be your sole source of gain on an investment in our common shares for the foreseeable future.78 We could be subject to securities class action litigation.In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. Thisrisk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face suchlitigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.Recent U.S. tax legislation may materially adversely affect our financial condition, results of operations and cash flows.The Tax Cuts and Jobs Act of 2017, or the TCJA, has significantly changed the U.S. federal income taxation of U.S. corporations, including byreducing the U.S. corporate income tax rate, limiting interest deductions, and revising the rules governing net operating loss carryforwards. Many of thesechanges are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects andcould be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and InternalRevenue Service, any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income taxchanges will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.The reduction of the corporate tax rate under the TCJA may cause a reduction in the economic benefit of our net operating loss carryforwards andother deferred tax assets available to us. Furthermore, under the TCJA, tax losses generated after December 31, 2017 will not be subject to expiration but mayonly be used to offset up to 80% of our taxable income. This change may require us to pay federal income taxes in future years despite generating a loss forfederal income tax purposes in prior years.While some of the changes made by the tax legislation may adversely affect the Company in one or more reporting periods and prospectively, otherchanges may be beneficial on a going forward basis. We continue to work with our tax advisors to determine the full impact that the TCJA will have on us.We urge our investors to consult with their legal and tax advisors with respect to the TCJA.Item 1B. Unresolved Staff Comments.None.Item 2. Properties.We currently occupy approximately 67,000 square feet of office, research and development laboratory and manufacturing space in Bedford,Massachusetts, under a lease that expires in 2027. We are subletting approximately 23,000 square feet of office and laboratory space at our prior facility inBedford, Massachusetts to a single tenant, under a lease that expires in 2021. We believe that our facilities are sufficient to meet our current needs and thatsuitable additional space will be available as and when needed.Item 3. Legal Proceedings.We are not subject to any material legal proceedings.Item 4. Mine Safety Disclosures.Not Applicable.PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationOn March 28, 2018, our common stock began trading on The Nasdaq Global Select Market under the symbol “FIXX.” Prior to that time, there was nopublic market for our common stock.79 HoldersAs of March 1, 2019, there were approximately 37,510,092 shares of our common stock outstanding held by approximately 23 holders of record.Dividend PolicyWe have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation andexpansion of our business and do not expect to pay any cash dividends in the foreseeable future. Any future determination related to our dividend policy willbe made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects andother factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.Stock Performance GraphThis performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities Exchange Commission for purposes of Section18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not bedeemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.The graph set forth below compares the cumulative total stockholder return on our common stock between March 28, 2018 (the date our commonstock commenced trading on the Nasdaq Global Select Market) and December 31, 2018, with the cumulative total return of (a) the Nasdaq BiotechnologyIndex and (b) the Nasdaq Composite Index, over the same period. This graph assumes an initial investment of $100 on March 28, 2018 in our common stock,the Nasdaq Biotechnology Index and the Nasdaq Composite Index and assumes the reinvestment of dividends, if any. The comparisons in the graph are notintended to forecast or be indicative of possible future performance of our common stock. Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated PurchaserWe did not repurchase any of our equity securities or issue any securities that were not registered under Securities Act during the quarter endedDecember 31, 2018.Use of ProceedsNot applicable.80 Item 6. Selected Financial Data.The selected financial data presented below is derived from our audited consolidated financial statements. The selected financial data should be readin conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II to this Annual Report onForm 10-K. The selected financial data in this section are not intended to replace our consolidated financial statements and the related notes. Our historicalresults are not necessarily indicative of our future results. For the Years Ended December 31, (in thousands, except share and per share data) 2018 2017 2016 Consolidated Statements of Operations Data: Collaboration revenue $3,684 $— $— Operating expenses: Research and development 47,948 21,378 5,695 General and administrative 17,300 8,279 4,305 Total operating expenses 65,248 29,657 10,000 Loss from operations (61,564) (29,657) (10,000)Other income (expense): Changes in fair value of convertible preferred stock tranche liability — (876) 1,929 Interest income 4,349 542 24 Total other income (expense) 4,349 (334) 1,953 Net loss and net loss attributable to common stockholders-basic and diluted $(57,215) $(29,991) $(8,047)Net loss per share attributable to common stockholders-basic and diluted (1) $(2.00) $(12.10) $(4.23)Weighted average common shares outstanding-basic and diluted (1) 28,551,807 2,479,432 1,900,531 (1)See Note 14 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for an explanation of the method usedto calculate basic and diluted net loss per common share and the weighted average number of shares used in the computation of the per share amounts. As of December 31, (in thousands) 2018 2017 2016 Consolidated Balance Sheet Data: Cash, cash equivalents and short-term investments $214,737 $129,659 $11,392 Total assets 259,094 137,530 14,219 Total liabilities 64,377 39,222 6,719 Total stockholders’ equity (deficit) 194,717 (39,454) (9,892)Total liabilities, convertible preferred stock and stockholders’ equity (deficit) 259,094 137,530 14,219 81 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 in conjunction with our “SelectedConsolidated Financial Data” and our consolidated financial statements, related notes and other financial information included elsewhere in this AnnualReport on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties such as our plans, objectives, expectationsand intentions. As a result of many important factors, including those set forth in the section captioned “Risk Factors” and elsewhere in this Annual Reporton Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.OverviewWe are a genetic medicines company dedicated to transforming the lives of patients suffering from rare genetic diseases with significant unmetmedical needs by curing the underlying cause of the disease. Our proprietary platform is designed to utilize our AAVHSCs to precisely and efficiently deliversingle administration genetic medicines in vivo either through a gene therapy or nuclease-free gene editing modality across a broad range of geneticdisorders. The unique properties of our proprietary suite of 15 novel AAVHSCs enable us to focus on a method of gene editing called gene correction, eitherthrough the replacement of an entire diseased gene in the genome with a whole functional copy or the precise repair of individual mutated nucleotides, byharnessing the naturally occurring DNA repair process of HR. We believe our HR-driven gene editing approach will allow us to efficiently perform genecorrection at therapeutic levels without unwanted on- and off-target modifications, and to directly measure and confirm those modifications in an unbiasedmanner to ensure only the intended changes are made. By utilizing the body’s natural mechanism of correcting gene defects, we also avoid the need forexogenous nucleases, or bacteria-derived enzymes used in other gene editing approaches to cut DNA, that are known to significantly increase the risk ofunwanted modifications. Our diverse set of AAVHSCs allows us to precisely target, via a single injection, a wide range of disease-relevant tissues, includingthe liver, CNS, bone marrow, lung, muscle and eye, across both modalities—gene editing and gene therapy. We believe these advantages will allow us tosafely provide transformative cures using either modality.We have generated compelling preclinical data for our first and lead product candidate, HMI-102, a gene therapy for the treatment of PKU, and expectto advance HMI-102 into a Phase 1/2 clinical trial in adult PKU patients and report initial clinical data in 2019. We continue to advance our gene editingmodality and have generated in vivo preclinical data demonstrating achievement of gene correction efficiencies in the liver that are significantly greater thanboth nuclease-based and other AAV-based approaches and are at a therapeutic level. We have nominated a lead gene editing product development candidate,HMI-103, for the treatment of PKU in pediatric patients. We have also nominated a lead gene therapy CNS product development candidate, HMI-202, for thetreatment of MLD. We have initiated IND-enabling studies for both programs. We will require additional capital in order to advance HMI-102 and our otherproduct candidates through clinical development and commercialization.Our management team has a successful track record of discovering, developing and commercializing therapeutics with a particular focus on rarediseases. Our genetic medicines platform is based on gene editing and gene therapy technologies resulting from the pioneering work conducted onAAVHSCs in the laboratory of COH. We have a robust intellectual property portfolio with issued composition of matter patents in the United States for oursuite of 15 AAVHSCs and we believe the breadth and depth of our intellectual property is a strategic asset that has the potential to provide us with asignificant competitive advantage. We continue to build on our intellectual property estate through our ongoing product and platform development efforts.We have internal process development and GMP manufacturing capabilities and recently completed the build-out of a cGMP manufacturing facility tosupport our clinical development programs in both gene therapy and gene editing expect to commence manufacturing in the first half of 2019. In November2017, we entered into a collaboration with Novartis to develop new genetic medicines using our HR-based gene correction approach in ophthalmology,which leverages our platform technology into a new therapeutic area. On February 6, 2019, Novartis elected to discontinue our collaboration on the sicklecell disease program under our agreement effective in August 2019.Since our inception in 2015, we have raised approximately $288 million in net proceeds through our initial public offering in April 2018 andpreferred stock financings. We believe that our compelling preclinical data, scientific expertise, product development strategy, manufacturing capabilities,and robust intellectual property position us as a leader in the development of genetic medicines.We were incorporated and commenced operations in 2015. Since our incorporation, we have devoted substantially all of our resources to organizingand staffing our company, business planning, raising capital, developing our technology platform, advancing our lead product candidate, HMI-102 for thetreatment of PKU, researching and identifying additional product candidates, developing manufacturing processes, building out our manufacturing andresearch and development space,82 enhancing our intellectual property portfolio, and providing general and administrative support for these operations. To date, we have financed ouroperations primarily through the sale of common stock in our initial public offering, or the IPO, through the sales of preferred stock, and through fundingfrom our collaboration partner.We are a development stage company and our lead product candidate and our research initiatives are all at a preclinical stage of development. Todate, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future, if atall. We recognized $3.7 million in collaboration revenue for the year ended December 31, 2018. We did not recognize any collaboration revenue for the sameperiod in 2017. Since inception, we have incurred significant operating losses. Our net losses for the years ended December 31, 2018 and 2017 were $57.2million and $30.0 million, respectively. As of December 31, 2018, we had an accumulated deficit of $97.4 million.Our total operating expenses were $65.2 million and $29.7 million for the years ended December 31, 2018 and 2017, respectively. We expect ouroperating expenses to continue to increase substantially in connection with our ongoing development activities related to our product candidates.Specifically, we anticipate that our expenses will increase substantially due to costs associated with preclinical activities for HMI-102, our lead gene therapyproduct candidate for the treatment of PKU and the advancement of this product candidate into a Phase 1/2 clinical trial in the U.S., which we expect tocommence and report initial clinical data for in 2019, development activities including IND-enabling studies associated with our other gene editing and genetherapy product candidates, including HMI-103, our gene editing product candidate for PKU, and HMI-202, our gene therapy product candidate for MLD,research activities in additional therapeutic areas to expand our pipeline, hiring additional personnel in manufacturing, research, clinical and regulatory,quality and other functional areas, increased expenses incurred with CMOs to supply us with product for our preclinical and clinical studies, as well as costsassociated with the qualification of our internal manufacturing facility, costs to manufacture product for preclinical and clinical studies in this facility andother costs including the maintenance and expansion of our intellectual property portfolio. In addition, we expect to incur additional costs associated withoperating as a public company.We have incurred significant capital expenditures for the buildout of a new facility we have leased, including research and development labs, officespace and manufacturing suites and the procurement of equipment and furniture for this new facility and in support of our product development candidatesand research initiatives. We expect to incur additional capital expenditures in 2019 and beyond in support of our research and development activities andour manufacturing facility.Because of the numerous risks and uncertainties associated with the development of our current and any future product candidates and our platformand technology and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates isunknown, we are unable to predict the timing and amount of increased operating expenses and capital expenditures associated with completing the researchand development of our product candidates. Our future capital requirements will depend on many factors, including: •the costs, timing, and results of our ongoing research and development efforts, including clinical trials, on HMI-102; •the costs, timing, and results of our ongoing research and development efforts on HMI-103 and HMI-202, both of which have entered intoIND-enabling studies; •the costs, timing, and results of our research and development efforts on current and future product candidates in our gene editing and genetherapy pipeline; •the costs and timing of process development and manufacturing scale-up activities, supplies of our product candidates for preclinical studiesand clinical trials through CMOs and internal manufacturing; •the costs and timing of capital expenditures for potential additional manufacturing capacity and related equipment and furniture; •the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights anddefending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual propertyrights; •the effect of competitors and market developments; and •our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements for ourproduct candidates.We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our current projected operating expenses andcapital expenditures through the end of 2020. We have based these estimates on assumptions83 that may prove to be imprecise, and we may use our available capital resources sooner than we currently expect. See “Liquidity and Capital Resources.”Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity orconvertible debt securities, the ownership interests of our shareholders will be diluted, and the terms of these securities may include liquidation or otherpreferences that adversely affect rights as a shareholder. Any future debt financing or preferred equity or other financing, if available, may involve agreementsthat include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaringdividends and may require the issuance of warrants, which could potentially dilute the ownership interests of our shareholders.If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquishvaluable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable tous. 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 ourproduct development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwiseprefer to develop and market ourselves.Because of the numerous risks and uncertainties associated with drug development, we are unable to predict when or if we will be able to achieve ormaintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unableto sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate ouroperations.Components of Our Results of OperationsRevenueTo date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeablefuture. We recorded $3.7 million in collaboration revenue for the year ended December 31, 2018 (see Note 16 to our Financial Statements for additionalinformation regarding Novartis revenue recognition discussion).Operating ExpensesOur operating expenses since inception have consisted solely of research and development costs and general and administrative costs.Research and Development ExpensesResearch and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and thedevelopment of our product candidates, and include: •salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and developmentfunctions; •expenses incurred under agreements with third parties, including CROs and other third parties that conduct research, preclinical activities andclinical trials on our behalf as well as CMOs and our internal technical operations team that manufacture our product candidates for use in ourpreclinical and potential future clinical trials; •costs of outside consultants, including their fees and related travel expenses; •the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; and •facility-related expenses, which include direct depreciation costs and other operating costs.We expense research and development costs as incurred.We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs by productcandidate or development program, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs tospecific development programs or product candidates. These costs are included in other research and development expenses in the table below.84 The following table summarizes our research and development expenses by product candidate or development program: For the Years EndedDecember 31, Decrease (in thousands) 2018 2017 (Increase) HMI-102 external development costs $17,555 $3,964 $(13,591)Employee-related costs 14,876 5,518 (9,358)Other research and development costs 15,517 11,896 (3,621)Total research and development expenses $47,948 $21,378 $(26,570) Research and development activities are central to our business model. We expect that our research and development expenses will continue toincrease substantially for the foreseeable future as we initiate clinical trials of HMI-102, including our Phase 1/2 clinical trial, continue to advance both HMI-103 and HMI-202 through IND-enabling studies and into clinical trials and continue to discover and develop additional product candidates.We cannot determine with certainty the duration and costs of future clinical trials of HMI-102 and IND-enabling studies and future clinical trials ofour other product candidates in development or any other future product candidate we may develop or if, when, or to what extent we will generate revenuefrom the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketingapproval for any product candidate. The duration, costs and timing of clinical trials and development of HMI-102, our other product candidates indevelopment and any other future product candidate we may develop will depend on a variety of factors, including: •the scope, rate of progress, expense and results of clinical trials of HMI-102, HMI-103, HMI-202, as well as of any future clinical trials of otherproduct candidates and other research and development activities that we may conduct; •uncertainties in clinical trial design and patient enrollment rates; •the actual probability of success for our product candidates, including the safety and efficacy results, early clinical data, competition,manufacturing capability and commercial viability; •significant and changing government regulation and regulatory guidance; •the timing and receipt of any marketing approvals; and •the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in thecosts and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us toconduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experiencesignificant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resourcesand time on the completion of clinical development.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in ourexecutive, finance, human resources, business development and administrative functions. General and administrative expenses also include legal feesrelating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travelexpenses; and facility-related expenses, which include direct depreciation costs, rent expense, maintenance of facilities and other operating costs.We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support increasedresearch and development activities relating to HMI-102, HMI-103, HMI-202, and any other product candidate we may develop. We also have incurred andexpect to continue to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements; director and officer insurance costs; and investor and publicrelations costs.85 Interest IncomeInterest income consists of interest income earned on our cash, cash equivalents and short-term investments. Our interest income has increased due tohigher investment balances and higher yields on invested funds in 2018 as compared to 2017.Income TaxesSince our inception in 2015, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in any year or forour earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2018, we had federal andstate net operating loss carryforwards of $52.4 million and $46.6 million, respectively, that expire at various dates through 2038. As of December 31, 2018,we also had federal and state research and development tax credit carryforwards of $2.5 million and $3.5 million, respectively, that expire at various datesthrough 2038.Change in Fair Value of Convertible Preferred Stock Tranche LiabilityWe determined that our obligation to issue, and our investors’ obligation to purchase, additional shares of Series A preferred stock in the second oftwo tranches represented a freestanding financial instrument. The freestanding tranche liability was initially recorded at fair value, with gains and lossesarising from changes in fair value recognized in other income in the statements of operations at each period end such instruments were outstanding. Theliability was valued using an income approach, specifically the discounted cash flow method. On February 10, 2017, we issued 28,873,237 shares of ourSeries A preferred stock at $0.71 per share upon the achievement of certain development milestones, resulting in net proceeds of approximately$20.5 million. We adjusted the carrying value of the convertible preferred stock tranche liability to its estimated fair value at each reporting date and uponissuance of the second tranche of Series A preferred stock on February 10, 2017, recognizing the changes in fair value in other income (expense) in theconsolidated statement of operations. During the year ended December 31, 2017, we recognized total other expense of $0.9 million related to changes in thefair value of the convertible preferred stock tranche liability. We had no liability related to the convertible preferred stock as of December 31, 2018.Critical Accounting Policies and Use of EstimatesOur management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, whichhave been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financialstatements and related disclosures requires us to make estimates, assumptions and judgements that affect the reported amount of assets, liabilities, revenue,costs and expenses, and related disclosures. We base our estimates on historical experience, known trends and events and various other factors that we believeare reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this AnnualReport on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of ourfinancial statements.Revenue Recognition—We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery hasoccurred or services have been rendered; our price to the buyer is fixed or determinable; and collectability is reasonably assured. We record as deferredrevenue any amounts received or billed prior to satisfying the revenue recognition criteria. Deferred revenue not expected to be recognized within the nexttwelve months is reported as non-current deferred revenue.In November 2017, we entered into a collaboration and license agreement for research, development, manufacturing and commercialization ofproducts using our gene editing technology for the treatment of certain diseases (see Note 16 to our consolidated financial statements included elsewhere inthis Annual Report on Form 10-K). Consideration we may receive under the collaboration and license agreement includes upfront nonrefundable payments,payments for research and manufacturing activities, payments based upon the achievement of certain milestones and royalties on any resulting net productsales.86 Multiple Element ArrangementsThe terms of the collaboration and license agreement contain multiple deliverables, including licenses, research and development activities,participation on steering committees and manufacturing activities. We evaluate the activities in our collaboration agreements to determine if the activitiesare consistent with a typical vendor-customer relationship, and if so, account for them in accordance with Accounting Standards Codification, or ASC, Topic605-25, Revenue Recognition—Multiple Element Arrangements. If not, we evaluate other applicable guidance.We evaluate multiple element arrangements to determine the deliverables included in the arrangement and whether the individual deliverablesrepresent separate units of accounting, or whether they must be accounted for as a combined unit of accounting. When deliverables are separable,consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognitionprinciples are applied to each unit. This evaluation requires us to make judgments about the individual deliverables and whether such deliverables (1) havevalue to the customer on a standalone basis and (2) if the arrangement includes a general right of return with respect to the delivered item, delivery orperformance of the undelivered item is considered probable and substantially in our control. In assessing whether an item has standalone value, we considerfactors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of theassociated expertise in the general marketplace. In addition, we consider whether the collaboration partner can use any other deliverable for its intendedpurpose without the receipt of the remaining deliverables, whether the value of the deliverable is dependent on any undelivered item, and whether there areother vendors that can provide the undelivered items.The consideration received under the arrangement that is fixed or determinable is then allocated among the separate units of accounting based on therelative selling prices of the separate units of accounting. For arrangements identified with multiple units of accounting, an allocation of the consideration isperformed. We determine the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence, or VSOE, ifavailable; third-party evidence, or TPE, of selling price if VSOE is not available; or best estimate of selling price, or BESP, if neither VSOE nor TPE isavailable. We typically use BESP to estimate the selling price as we generally do not have VSOE or TPE of selling price for the units of accounting.Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, we consider applicable marketconditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.We recognize arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria are satisfied for thatparticular unit of accounting. We recognize revenue from a combined unit of accounting over the contractual or estimated performance period for theundelivered items. If there is no discernible pattern of performance or objectively measurable performance measures do not exist for a unit of accounting, thenwe recognize revenue on a straight-line basis over the period we are expected to complete our performance obligations. Conversely, if the pattern ofperformance over which the service is provided to the customer can be determined and objectively measurable performance measures exist, then we recognizerevenue under the arrangement using the proportional performance method. Amounts received prior to satisfying the associated revenue recognition criteriaare recorded as deferred revenue on the consolidated balance sheets.Significant management judgment is required in determining the level of effort required under an arrangement and the period over which we expect tocomplete our performance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory and that are determinedto be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining thelevel of effort required in an arrangement and the period over which we expect to complete our aggregate performance obligations.Consideration for development and sales milestones are generally not considered fixed or determinable until the milestone is achieved. Considerationdue to or received by us for the achievement of milestones are allocated to the units of accounting, if applicable, and recognized as revenue for the portion ofthe performance obligation that is complete at the time the milestone is achieved. We will defer the remaining portion of the milestone payment andrecognize it as revenue over the remaining term of the performance obligation. If no such performance obligation exists, milestone payments are recognizedas revenue upon achievement, assuming all other revenue recognition criteria are met.Royalties earned on product sales, if any, are recognized based on contractual terms of the agreement when reported sales are reliably measurable andcollectibility is reasonably assured, provided that there are no performance obligations then remaining. To date, none of our product candidates have beenapproved and, therefore, we have not earned any royalty revenue from product sales.87 In the event that the agreement were to be terminated and we had no further performance obligations at that time, we would recognize as revenue anyportion of the upfront payment and other payments that had not previously been recorded as revenue and were classified as deferred revenue at the date ofsuch termination.Accrued Research and Development Expenses—As part of the process of preparing our financial statements, we are required to estimate our accruedresearch and development expenses. This process involves reviewing open contract and purchase orders, communicating with our personnel and vendors toidentify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services whenwe have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on apre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses asof each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research anddevelopment expenses include fees paid to: •CROs and other third parties in connection with performing research activities on our behalf and conducting preclinical studies on our behalfand CMOs in connection with producing product for our preclinical studies; •vendors in connection with preclinical development activities; and •vendors related to product manufacturing and development and distribution of preclinical supplies.We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to quotes and contractswith CROs that conduct and manage preclinical studies and clinical trials and CMOs that manufacture product for our research and development activities onour behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Theremay be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruingfees, 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 theperformance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do notexpect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to theactual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date,we have not made any material adjustments to our prior estimates of accrued research and development expenses.Stock-Based Compensation—We account for stock-based compensation transactions using a grant-date fair-value-based method under FASBCodification Topic 718, Compensation—Stock Compensation.We measure stock options and other stock-based awards granted to employees, directors, consultants or advisors of the company or its affiliates basedon their fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally thevesting period of the respective award. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditionsand apply the graded-vesting method to all awards with performance-based vesting conditions or to awards with both service-based and performance-basedvesting conditions.We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fairvalue of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest ratefor a period that approximates the expected term of our stock options and our expected dividend yield.Emerging Growth Company StatusThe Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company,” which we are, to take advantage of anextended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise applyto private companies. We have elected to take advantage of this extended transition period.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue (Topic 606):Revenue from Contracts with Customers, or ASU 2014-09, which will replace existing revenue recognition standards and significantly expand the disclosurerequirements for revenue arrangements. This new standard requires a company to recognize revenue when it transfers goods or services to customers in anamount that reflects the88 consideration that the company expects to receive for those goods or services. This will require companies to use more judgement and make more estimatesthan under current guidance.We have substantially completed our evaluation of the impact of the adoption of ASU 2014-09 on our consolidated financial statements. Under ASU2014-09, with respect to our collaboration with Novartis, we expect to account for the (1) research, development and commercialization and manufacturinglicenses, (2) the research activities performed by us, (3) service on the joint committees and (4) manufacturing during the research and development terms as asingle performance obligation, which is consistent with our accounting under the existing standard. We expect to recognize revenue from this collaborationusing the cost-to-cost method, whereby the extent of progress towards completion is measured based on the ratio of actual costs incurred to the totalestimated costs expected. Significant judgment is required in making estimates of total expected costs to complete the single performance obligation over theperformance period. Revenue will be recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. Theestimated transaction price will include variable consideration for milestone payments, however such milestone payments will remain fully constrained as ofour adoption date as it is not probable at this time that we will achieve those milestones. The estimate of total costs expected and the estimate of variableconsideration to be included in the transaction price will be updated at each reporting date. The cumulative effect of revisions to these estimates will berecorded in the period in which changes are identified.Under the new standard, we expect to recognize revenue from our collaboration agreement with Novartis earlier during the performance period as aresult of applying the cost-to-cost method, in contrast to recognizing revenue on a straight-line basis over the estimated performance period under theexisting standard.We plan to adopt the new standard using the full retrospective method, and thus will apply the new standard retrospectively to each prior reportingperiod. As a result, we expect an increase to collaboration revenue for the year ended December 31, 2018 of approximately $1.5 to $2.0 million, with acorresponding decrease to deferred revenue. The impact to the year ended December 31, 2017 is insignificant.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which eliminates the current tests for lease classification under U.S. GAAPand requires lessees to recognize the right-to-use assets and related lease liabilities in the balance sheet. ASU No. 2016-02 is effective for us beginningJanuary 1, 2020 with early application permitted. The new standard provides for a modified retrospective application. We are in the process of evaluating theimpact of the adoption of ASU No. 2016-02 on our consolidated financial statements.In December 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB EmergingIssues Task Force), which requires that amounts described as restricted cash or cash equivalents must be included with cash and cash equivalents whenreconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for us beginningJanuary 1, 2019, with early application permitted. The new standard must be applied retrospectively to all periods presented. We do not expect the adoptionof this standard to have a material impact on our consolidated financial statements.In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting, which changes certain aspects of the accounting for share-based payments granted to nonemployees. Under the ASU, most of theguidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 iseffective for us beginning January 1, 2020. Early application of this standard is permitted however companies may not apply this standard earlier than itapplies ASU 2014-09. We are evaluating the impact adoption of this standard will have on our consolidated financial statements.89 Results of OperationsComparison of Years Ended December 31, 2018 and 2017The following table summarizes our results of operations for the years ended December 31, 2018 and 2017, respectively: For the Years EndedDecember 31, Decrease (in thousands) 2018 2017 (Increase) Collaboration revenue $3,684 $— $(3,684)Operating expenses: Research and development 47,948 21,378 (26,570)General and administrative 17,300 8,279 (9,021)Total operating expenses 65,248 29,657 (35,591)Loss from operations $(61,564) $(29,657) $(35,591)Other income (expense): Change in fair value of convertible preferred stock tranche liability — (876) 876 Interest income 4,349 542 3,807 Total other income (expense) 4,349 (334) 4,683 Net loss $(57,215) $(29,991) $(30,908) Collaboration RevenueRevenues for the year ended December 31, 2018 were $3.7 million and consisted solely of collaboration revenue under our Collaboration Agreementwith Novartis that we entered into in November 2017, representing the portion of the $35.0 million upfront payment and research funding payments that wererecognized in the year ended December 31, 2018. We recognize revenues based on a straight-line basis over the estimated period of performance taking intoconsideration all upfront payments and research funding payments, under this arrangement, together as a single unit. We did not recognize any revenue in theyear ended December 31, 2017.Research and Development Expenses For the Years EndedDecember 31, Decrease (in thousands) 2018 2017 (Increase) HMI-102 external development costs $17,555 $3,964 $(13,591)Employee-related costs 14,876 5,518 (9,358)Other research and development costs 15,517 11,896 (3,621)Total research and development expenses $47,948 $21,378 $(26,570) Research and development expenses for the year ended December 31, 2018 were $47.9 million, compared to $21.4 million for the year endedDecember 31, 2017. The increase of $26.6 million was primarily due to an increase of $13.6 million in direct research expenses, primarily CMO costs, relatedto our HMI-102 program, a $9.4 million increase in employee-related costs due to an increase in employee headcount to support our ongoing developmentprograms, research initiatives, technology platform and manufacturing capabilities and a $3.6 million increase in other research and development costsrelated to laboratory supplies, research materials and outside services for the further advancement of our research and development programs.General and Administrative ExpensesGeneral and administrative expenses were $17.3 million for the year ended December 31, 2018, compared to $8.3 million for the year endedDecember 31, 2017. The increase of $9.0 million was primarily due to $4.4 million in increased employee-related costs, $2.8 million in increased facilitycosts, $0.7 million in increased consulting costs and $0.8 million in increased insurance and other public company related expenses.90 Change in Fair Value of Tranche LiabilityFor the year ended December 31, 2017, the changes in fair value of our preferred stock tranche liability resulted in a $0.9 million loss due to the re-measurement and subsequent de-recognition of the tranche liability upon achievement of a development milestone in February 2017 and the issuance ofshares of our Series A preferred stock. There was no impact during the year ended December 31, 2018, due to the de-recognition of the tranche liability inFebruary 2017.Interest IncomeInterest income was $4.3 million for the year ended December 31, 2018 compared to approximately $0.5 million for the year ended December 31,2017. The increase was the result of interest income generated on our higher average cash, cash equivalent and short-term investment balances and higheryields on invested funds for the year ended December 31, 2018 compared to the year ended December 31, 2017, due to the receipt of $83.1 million in netproceeds from our Series B preferred stock financing in July 2017, Novartis’ up-front payment of $35.0 million, additional proceeds of $10.0 million from theissuance of Series B preferred stock to Novartis in November 2017 and the receipt of $150.8 million in net proceeds from the initial public offering of ourcommon stock in April 2018.Net LossNet loss for the year ended December 31, 2018 was $57.2 million, compared to $30.0 million for the year ended December 31, 2017. The increase innet loss was primarily due to the increases in research and development and general and administrative expenses discussed above, partially offset by theincreases in collaboration revenue and interest income discussed above.Liquidity and Capital ResourcesSince our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeablefuture as we advance the preclinical and clinical development of our product candidates. We expect that our research and development and general andadministrative costs and our capital expenditures will increase in connection with conducting preclinical studies and clinical trials for our productcandidates, contracting with CMOs and building out internal capacity to have product manufactured to support preclinical studies and clinical trials,expanding our research and development laboratories, expanding our intellectual property portfolio, and providing general and administrative support forour operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings,collaborations, licensing arrangements, or other sources.We do not currently have any approved products and have never generated any revenue from product sales. To date, we have financed our operationsprimarily through the sale of common stock in our IPO, the sale of preferred stock and through an up-front payment from a collaboration partner. Since ourinception in 2015, we have raised a total of approximately $288 million in net proceeds from our initial public offering in April 2018 and sales of ourpreferred stock. We received an up-front payment of $50.0 million from a collaboration partner, comprised of $35.0 million in cash and a $15.0 millionequity investment, which is included in the proceeds from the sale of preferred stock.Cash FlowsOur cash, cash equivalents and short-term investments totaled $214.7 million and $129.7 million as of December 31, 2018 and 2017, respectively. Wehad no indebtedness as of December 31, 2018 and 2017.The following table summarizes our sources and uses of cash for the period presented: For the Years EndedDecember 31, (in thousands) 2018 2017 Net cash (used in) provided by operating activities $(42,562) $6,479 Net cash used in investing activities (121,787) (81,526)Net cash provided by financing activities 150,994 115,230 Net change in cash and cash equivalents $(13,355) $40,183 91 Cash Flows for the year ended December 31, 2018Operating ActivitiesNet cash used in operating activities for the year ended December 31, 2018 was $42.6 million, primarily due to our net loss of $57.2 million as weincurred expenses associated with research activities on HMI-102 and research activities on other applications for our technology. The funding of our net losswas partially offset by net non-cash expenses of $2.5 million, an increase in long-term deferred rent of $10.0 million which was largely due to the receipt ofcash lease incentives from our landlord during 2018 and an increase in working capital of $2.2 million.Investing ActivitiesNet cash used in investing activities for the year ended December 31, 2018 was $121.8 million, attributable to $245.3 million in purchases of short-term investments and $24.9 million in purchases of property and equipment, partially offset by maturities of short-term investments of $148.5 million.Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2018 was $151.0 million, primarily due to proceeds from the issuance ofcommon stock in our initial public offering, net of discounts and issuance costs, of $150.8 million.Cash Flows for the year ended December 31, 2017Operating ActivitiesNet cash provided by operating activities for the year ended December 31, 2017 was $6.5 million, consisting of a $35.0 million up-front paymentreceived from a collaboration partner recorded as deferred revenue, net of $1.7 million allocated to convertible preferred stock, and changes in our operatingassets and liabilities of $1.3 million. This was partially offset by our net losses of $30.0 million as we incurred expenses associated with research activities onour lead gene therapy program for the treatment of PKU and research activities on other applications for our technology and incurred general andadministrative expenses. In addition, we had non-cash charges totaling $1.8 million including the change in fair value of a convertible preferred stocktranche liability, depreciation and stock-based compensation expense offset by accretion on short-term investments. Net cash provided by changes in ouroperating assets and liabilities was due to increases of $33.4 million in deferred revenue, $1.7 million in accounts payable and $0.9 million in accruedexpenses and other liabilities, partially offset by a decrease of $1.5 million in prepaid expenses and other current assets.Investing ActivitiesNet cash used in investing activities for the year ended December 31, 2017 was $81.5 million, attributable to the purchases of short-term investmentsof $78.1 million, the purchases of property and equipment of $2.0 million, and the change in restricted cash of $1.5 million related to a new facility lease.Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2017 was $115.2 million, consisting of the net proceeds from the secondtranche of the Series A convertible preferred stock financing of $20.5 million and the net proceeds from the issuance of Series B convertible preferred stock of$94.8 million, net of issuance costs.Funding RequirementsOur operating expenses increased substantially in 2018 and are expected to increase substantially in 2019 and future years in connection with ourongoing activities, particularly as we advance our preclinical activities including IND enabling studies, scale-up of manufacturing processes and engagementwith CMOs and initiation of human clinical trials. In addition, we have incurred and expect to continue to incur additional costs associated with operating asa public company. In addition, we expect our capital expenditures to continue to increase as we expand our operations.92 Specifically, our expenses will increase as we: •pursue the preclinical and clinical development of HMI-102, HMI-103 and HMI-202; •pursue the preclinical and clinical development of other product candidates based on our gene editing and gene therapy technology; •further scale up our internal manufacturing processes and capabilities and contract with CMOs to support our preclinical studies and clinicaltrials of our product candidates; •further expand our manufacturing capacity potentially including commercial scale manufacturing; •operate our business in our new larger facility with expanded research and development labs and manufacturing suites and purchase additionalequipment for our operations; •in-license or acquire the rights to other products, product candidates or technologies; •maintain, expand and protect our intellectual property portfolio; •hire additional personnel in research, manufacturing and regulatory and clinical development as well as management personnel; and •expand our operational, financial and management systems and increase personnel, including personnel to support our operations as a publiccompany.We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditurerequirements through the end of 2020. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our availablecapital resources sooner than we expect.Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, it is difficultto estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including: •the progress, costs and results of our preclinical development and initial clinical trials for HMI-102, HMI-103 and HMI-202; •the progress, costs and results of our additional research and preclinical development programs in gene editing and gene therapy; •the costs, scope and timing of internal process development and manufacturing scale-up activities and contract with CMOs associated with ourlead product development programs and other programs we advance through preclinical and clinical development; •our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements; •the scope, progress, results and costs of any product candidates that we may derive from our platform technology or any other productcandidates that we may develop; •the extent to which we in-license or acquire rights to other products, product candidates or technologies; and •the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights anddefending against any intellectual property-related claims.Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through acombination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements andmarketing and distribution arrangements.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders willbe diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders as commonstockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability totake specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquishvaluable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable tous. If we are unable to raise additional funds through equity or debt93 financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rightsto develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.Contractual ObligationsThe following is a summary of our significant contractual obligations as of December 31, 2018: Payments Due by Period Total Less Than1 Year More Than1 Year andLess Than 3 More Than3 years andLess Than 5 More Than5 years Contractual Obligation (in thousands) Operating lease obligation (1) $24,155 $2,537 $5,513 $5,944 $10,161 License obligations (2) $745 $45 $90 $90 $520 Sponsored research agreement (3) $551 $551 $— $— $— (1)Represents future minimum lease payments under our operating leases for office and lab space in Bedford, Massachusetts that expire inOctober 2021 and February 2027. Future minimum lease payments are net of anticipated sublease payments of approximately $2.7 million forthe period of 2019 to 2021. (2)Represents minimum annual license fees under our license agreements with Caltech and COH. These amounts do not include any potentialcontingent payments upon the achievement by us of specified clinical, regulatory and commercial events, as applicable, or patent prosecutionor royalty payments we may be required to make under these license agreements. We have excluded these potential payments in thecontractual obligations table because the timing and likelihood of these contingent payments are not currently known and would be difficultto predict or estimate. See “Business—Strategic Collaborations” for additional information about these license agreements, including withrespect to potential payments thereunder. (3)Represents future minimum payments under our sponsored research agreement with COH. We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing,manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and arecancelable by us upon prior notice of 30 days and, as a result, are not included in the table of contractual obligations above.Off-Balance Sheet ArrangementsWe have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.Item 7A. Quantitative and Qualitative Disclosures About Market Risk.We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our interest-earningassets consist of cash, cash equivalents, and short-term investments of $214.7 million, or 82.9% of our total assets at December 31, 2018, and $129.7 million,or 94.3% of our total assets at December 31, 2017. Interest income earned on these assets was $4.3 million in 2018 and $0.5 million in 2017. Our interestincome is sensitive to changes in the general level of interest rates, primarily U.S. interest rates. At December 31, 2018, our cash equivalents consisted of bankdeposits, money market funds and short-term commercial paper, and our short-term investments included interest-earning securities. Such interest-earninginstruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us. We had no debtoutstanding as of December 31, 2018 and 2017.Item 8. Financial Statements and Supplementary Data.The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item15 of Part IV of this Annual Report on Form 10-K.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.94 Item 9A. Controls and Procedures.Limitations on effectiveness of controls and proceduresIn designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls andprocedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possiblecontrols and procedures relative to their costs.Evaluation of disclosure controls and proceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered bythis Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures wereeffective at the reasonable assurance level as of December 31, 2018.Management’s annual report on internal control over financial reportingThis Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (asdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transitionperiod established by rules of the SEC for newly public companies. Additionally, our independent registered accounting firm will not be required to opine onthe effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined inthe JOBS Act.Changes in internal control over financial reportingThere were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) duringthe quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other Information.None.95 PART IIIItem 10. Directors, Executive Officers and Corporate Governance.Directors and Executive OfficersThe following table sets forth the name, age and position of each of our executive officers and directors. Name Age PositionExecutive Officers: Arthur O. Tzianabos, Ph.D. 55 President and Chief Executive Officer and DirectorW. Bradford Smith 63 Chief Financial Officer, Treasurer and SecretarySiyamak (Sam) Rasty, Ph.D. 55 Chief Operating OfficerAlbert Seymour, Ph.D. 51 Chief Scientific OfficerTim Kelly 50 Chief Technical Operations OfficerDirectors: Steven Gillis, Ph.D. (1) 65 DirectorRichard J. Gregory, Ph.D. (2) 61 DirectorKush M. Parmar, M.D., Ph.D. (2) 38 DirectorMatthew R. Patterson (3) 47 DirectorMahendra G. Shah, Ph.D. (1) 74 DirectorMary Thistle (1) 59 DirectorCameron Wheeler, Ph.D. (3) 40 Director (1)Member of the audit committee.(2)Member of the compensation committee.(3)Member of the nominating and corporate governance committee. Arthur O. Tzianabos, Ph.D. has served as our President, Chief Executive Officer and member of our board of directors since April 2016. Dr. Tzianabosjoined Homology from OvaScience, Inc., a biotechnology company (which has since merged with and into Millendo Therapeutics, Inc.), where he served asPresident and Chief Scientific Officer from September 2013 to March 2016. Prior to OvaScience, Dr. Tzianabos spent eight years at Shire plc, a biotechnologycompany, where he served in positions of increasing responsibility, including Senior Director, Discovery Research, Vice President, Program Management andSenior Vice President and Head, Research and Early Development. From 1992 to 2005, Dr. Tzianabos was a faculty member at Harvard Medical School andmaintained laboratories at the Channing Laboratory, Brigham and Women’s Hospital and the Department of Microbiology and Molecular Genetics atHarvard Medical School. Dr. Tzianabos previously served as a director of BIND Therapeutics, Inc. Dr. Tzianabos holds a B.S. in Biology from Boston Collegeand a Ph.D. in Microbiology from the University of New Hampshire. We believe Dr. Tzianabos’ extensive academic and clinical experience, as well as hisknowledge of the industry, qualifies him to serve on our board of directors.W. Bradford Smith has served as our Chief Financial Officer and Treasurer since April 2017 and our Secretary since July 2017. From March 2014 toApril 2017, Mr. Smith was Chief Financial Officer of Ocular Therapeutix, Inc., a biopharmaceutical platform company. Prior to joining Ocular Therapeutix,Inc., Mr. Smith served as the Chief Financial Officer of OmniGuide, Inc., a medical device company, from July 2008 to March 2014. Mr. Smith holds a B.S. inBiology from Tufts University and an M.B.A. from the Whittemore School of Business and Economics at the University of New Hampshire.Siyamak (Sam) Rasty, Ph.D. has served as our Chief Operating Officer since March 2016. Prior to joining Homology, Dr. Rasty was Vice President andHead of New Products at Shire plc, from August 2011 to January 2016. Dr. Rasty received a B.S. and Ph.D. in Biochemistry from Louisiana State Universityand holds an M.B.A. from Villanova University which he received in 2002.Albert Seymour, Ph.D. has served as our Chief Scientific Officer since April 2016. Prior to joining Homology, Dr. Seymour was Senior Vice President,Head of Global Research and Nonclinical Development at Shire plc, a biotechnology company, from 2011 to 2016. Dr. Seymour received his B.A. in Biologyfrom the University of Delaware, an M.S. from Johns Hopkins University School of Medicine and his Ph.D. in Human Genetics from the University ofPittsburgh.Tim Kelly has served as our Chief Technical Operations Officer since April 2018, and prior to that, he served as our Senior Vice President of TechnicalOperations from May 2017 to April 2018. From January 2017 to May 2017, Mr. Kelly96 served as Head of Technical Operations at Sarepta Therapeutics, Inc., a biopharmaceutical company. Prior to that, Mr. Kelly spent eight years, from 2009 to2017, at Shire plc, a biotechnology company, where he served most recently as Senior Vice President and Head of Biologics Operating Unit from May 2016to January 2017, and prior to that served in roles of increasing responsibility, including Interim Head of Technical Operations from August 2015 to April2016 and Head of Product Strategy & Planning from 2014 to July 2015. He was previously the Head of Technical Operations at UCB S.A. in Belgium. Mr.Kelly also held roles of increasing responsibility at Biogen Idec, including Senior Director of International Operations. Mr. Kelly holds a B.S. with emphasisin Engineering Mechanics from the United States Air Force Academy and an M.B.A. from Troy University.DirectorsSteven Gillis, Ph.D. has served as a member of our board of directors since 2016. Since 2005, Dr. Gillis has been a managing director at ARCH VenturePartners, a venture capital firm. From 1994 to 2005, Dr. Gillis served as chief executive officer and chairman of the board of directors of Corixa Corporation,which he co-founded in October 1994. Previously, Dr. Gillis served as a director, head of research and development, chief scientific officer and acting chiefexecutive officer of Immunex Corporation, which he co-founded, from 1981 until his departure in 1994. As a former director and chairman of TrubionPharmaceuticals, Inc., Dr. Gillis led its acquisition by Emergent BioSolutions in the fall 2010. Dr. Gillis currently serves as a director of Shire plc andPulmatrix, Inc., and serves as a director and chairman of VBI Vaccines Inc. Dr. Gillis also currently serves as a director of several private companies. Dr. Gillispreviously served as a director at PhaseRx, Inc. from 2008 to 2018 and at bluebird bio, Inc. from 2011 to 2015. Dr. Gillis received his B.A. in biology andEnglish from Williams College and his Ph.D. in biological science from Dartmouth College. We believe that Dr. Gillis’s knowledge of immunology andexperience in the venture capital industry, particularly with biotechnology and pharmaceutical companies, qualifies him to serve as a member of our board ofdirectors.Richard J. Gregory, Ph.D. has served as a member of our board of directors since 2015. Dr. Gregory is Executive Vice President and Chief ScientificOfficer of ImmunoGen, Inc., a biotechnology company, where he has been since 2015. Prior to joining ImmunoGen, Inc., he spent 25 years at GenzymeCorporation, a biotechnology company, in roles of increasing responsibility, including Senior Vice President and Head of Research from 2003 untilGenzyme Corporation’s acquisition by Sanofi in 2011, and Head of Research and Development for Genzyme from 2011 through 2014. Dr. Gregory serves asa director of ProMIS Neurosciences, Inc. Dr. Gregory received his B.A. in Science from Virginia Tech and holds a Ph.D. from the University of Massachusetts,Amherst, and completed his post-doctoral work at the Worcester Foundation for Experimental Biology. We believe that Dr. Gregory’s knowledge ofimmunology qualifies him to serve as a member of our board of directors.Kush M. Parmar, M.D., Ph.D. has served as a member of our board of directors since 2015. Dr. Parmar is a Managing Partner at 5AM VentureManagement LLC, an early stage venture capital firm focused on the life sciences, where he has been since 2010. Before joining 5AM, from 2002 to 2010, hewas at Harvard Medical School, where he was an NIH-sponsored M.D./Ph.D. physician scientist fellow in the joint Harvard-MIT Health Sciences andTechnology Program. Dr. Parmar currently serves as a director on the board of public company Arvinas, Inc. and on the boards of private companies Akouos,Inc, Entrada Therapeutics, Inc. and RallyBio, LLC. He previously served as a board member or observer for Envoy Therapeutics, Inc. (acquired by TakedaPharmaceutical Co LTD), Achaogen, Inc., Audentes Therapeutics, Inc., scPharmaceuticals Inc., CycloPorters, Inc. and Mendel Therapeutics, Inc. He is amember of the scientific advisory boards of Penn Medicine, Princeton University’s Department of Molecular Biology, and the Grace Science Foundation, andis a fellow of the Society of Kauffman Fellows. Before joining 5AM, Dr. Parmar completed clinical clerkships at the Massachusetts General & Brigham andWomen’s Hospitals, attended courses at Harvard Business School and consulted for an oncology startup. He also founded a non-profit internationaldevelopment organization, the Cruz Blanca Initiative. He holds an A.B. in Molecular Biology and Medieval Studies from Princeton University, a Ph.D. inExperimental Pathology from Harvard University, and an M.D. from Harvard Medical School. We believe that Dr. Parmar’s experience in the life sciencesindustry, his experience as a venture capitalist and senior executive, as well as his service on the boards of directors of numerous companies provide him withthe qualifications to serve as a director of our company.Matthew R. Patterson has served as a member of our board of directors since 2018. Mr. Patterson is the co-founder of Audentes Therapeutics, Inc., abiotechnology company, and has served as its Chief Executive Officer since November 2012. Mr. Patterson is also Chairman of the Board of Directors andformerly served as President until May 2018. Previously, Mr. Patterson was the Entrepreneur-In-Residence at OrbiMed Advisors LLC, an investment firm,from November 2011 to December 2012. Prior to OrbiMed, Mr. Patterson served in roles at Amicus Therapeutics, Inc., BioMarin Pharmaceutical Inc. andGenzyme Corporation. Mr. Patterson is a member of the board of directors of Gilda’s Club of New York City, which provides social and emotional support forpeople living with cancer. Mr. Patterson holds a B.A. from Bowdoin College. We97 believe that Mr. Patterson’s experience in the biotechnology and biopharmaceutical industries, as well as his service on the board of directors of a publiccompany provide him with the qualifications to serve as a director of our company.Mahendra G. Shah, Ph.D. has served as a member of our board of directors since 2017. Dr. Shah has been with Vivo Capital, LLC, a healthcarefocused investment firm, since March 2010, and is currently serving as its managing director. Dr. Shah is the founder and executive chairman of SemnurPharmaceuticals. Dr. Shah previously served as chairman of the board of Essentialis, and currently serves as a board member of Soleno Therapeutics, VeronaPharma plc and several other privately held companies in the biopharmaceutical and biotechnology industries. Dr. Shaw is also a member of the board oftrustees of St. John’s University. From September 2005 to December 2009, he was the founder, chairman and CEO of NextWave Pharmaceuticals, a pediatricfocused specialty pharmaceutical company, which was acquired by Pfizer. From 1993 to May 2003, he was the chairman and CEO of First HorizonPharmaceuticals, a publicly traded specialty pharmaceutical company before it was sold to Shionogi Pharmaceuticals. From 1991 to October 1999, he wasvice president of E. J. Financial Enterprises, Inc., a healthcare fund management company. He previously served on the boards of Biotie Therapies, UnimedPharmaceuticals (UMED), Introgen Therapeutics, Inpharmakon, Protomed, Structural Bioinformatics and Zarix. From 1987 to 1991 he was the senior directorof new business development with Fujisawa USA (now part of Astellas Pharma US, Inc.). Prior to that time, he worked in various scientific and managementpositions with Schering-Plough and Bristol Myers-Squibb. Dr. Shah received his Ph.D. in industrial pharmacy from St. John’s University and his Bachelor’sand Master’s Degree in Pharmacy from L.M. College of Pharmacy in Gujarat, India. We believe Dr. Shah is able to make a valuable contribution to our boardof directors due to his vast experience as a finance professional in the biomedical and pharmaceutical industries.Mary Thistle has served as a member of our board of directors since March 2018. Ms. Thistle has served as the Chief of Staff of the Bill & MelindaGates Medical Research Institute, a non-profit biotech organization, since January 2018. Prior to that, she held senior leadership positions at DimensionTherapeutics, Inc., a gene therapy company, including Chief Operating Officer from 2016 to 2017 and Chief Business Officer from 2015 to 2016. Prior tojoining Dimension Therapeutics, Inc., she spent six years at Cubist Pharmaceuticals, Inc., a biopharmaceutical company, where she held various leadershippositions, including Senior Vice President, Business Development from 2014 to 2015, Vice President, Business Development from 2012 to 2013 and SeniorDirector, Business Development from 2009 to 2012. Prior to that, she held various positions at ViaCell, Inc. and PerkinElmer Inc. Ms. Thistle serves as adirector of Enterome SA, a pharmaceutical and diagnostics company based in Paris, France and Cocoon Biotech Inc. Ms. Thistle holds a B.S. in accountingfrom the University of Massachusetts, Boston. We believe that Ms. Thistle is qualified to serve on our board of directors due to her finance background andindustry experience.Cameron Wheeler, Ph.D. has served as a member of our board of directors since 2017. Dr. Wheeler serves as a Principal at Deerfield ManagementCompany, L.P., a healthcare investment firm. Prior to joining Deerfield in 2014, Cameron was at Eleven Biotherapeutics, Inc., an oncology biotechnologycompany, for more than five years, where he was responsible for corporate development and commercial strategy. Prior to Eleven, Cameron was at Third RockVentures, a Boston-based venture capital firm focused on launching and building life science companies. While at Third Rock, Cameron gained businessdevelopment and operating experience as a member of the founding team of Constellation Pharmaceuticals. Cameron holds a Ph.D. and S.M. in BiologicalEngineering and an S.B. in Mechanical Engineering from the Massachusetts Institute of Technology. We believe Dr. Wheeler’s extensive businessexperience in the biotechnology and biopharmaceutical industries qualifies him to serve on our board of directors.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our directors, executive officers and stockholders who beneficially own more than 10% of any class of ourequity securities registered pursuant to Section 12 of the Exchange Act (collectively, the “Reporting Persons”) to file initial statements of beneficialownership of securities and statements of changes in beneficial ownership of securities with respect to our equity securities with the SEC. All ReportingPersons are required by SEC regulation to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Basedsolely on our review of the copies of such forms received by us and upon written representations of the Reporting Persons received by us, we believe thatthere has been compliance with all Section 16(a) filing requirements applicable to such Reporting Persons with respect to the year ended December 31, 2018.Code of EthicsWe have a written Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executiveofficer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of thecode on our website, www.homologymedicines.com. In addition, we98 intend to post on our website all disclosures that are required by law or the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) concerning anyamendments to, or waivers from, any provision of the code.Audit Committee and Audit Committee Financial ExpertWe have a separately-designated standing audit committee (“Audit Committee”). The members of the Audit Committee are Steven Gillis, Ph.D.,Mahendra Shah, Ph.D. and Mary Thistle. Ms. Thistle serves as the Chairperson of the committee. The members of our Audit Committee meet the requirementsfor financial literacy under the applicable rules of the SEC and Nasdaq. Our Board of Directors has determined that Ms. Thistle is an “audit committeefinancial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K.Item 11. Executive Compensation.This section discusses the material components of our 2018 compensation program for our principal executive officer and next two most highlycompensated executive officers who are named in the 2018 Summary Compensation Table below. These “named executive officers” and their positions are: •Arthur O. Tzianabos, Ph.D., President and Chief Executive Officer; •Albert Seymour, Ph.D., Chief Scientific Officer; and •Tim Kelly, Chief Technical Operations Officer.This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinationsregarding future compensation programs. Actual compensation programs that we adopt following the completion of this offering may differ materially fromthe currently planned programs summarized in this discussion.2018 Summary Compensation TableThe following table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2017 and2018: Name and principal position FiscalYear Salary$ Bonus$ OptionAwards$ (1) Non-EquityIncentive PlanCompensation$ All OtherCompensation$ (2) Total$ Arthur O. Tzianabos, Ph.D. 2018 490,500 — 3,562,722 250,000 9,893 4,313,115 President and Chief Executive Officer 2017 422,300 — 1,815,320 168,920 — 2,406,540 Albert Seymour, Ph.D. 2018 386,948 — 1,574,473 156,760 5,576 2,123,757 Chief Scientific Officer 2017 360,500 — 269,545 126,175 — 756,220 Tim Kelly 2018 353,600 — 1,704,058 123,760 3,978 2,185,396 Chief Technical Operations Officer (1)Amounts reflect the full grant date fair value of stock options granted during the applicable year computed in accordance with ASC Topic 718, ratherthan the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of alloption awards in Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K.(2)Amount shown represents 401(k) matching contributions. For additional information, refer to the discussion below under the heading “NarrativeDisclosure to Summary Compensation Table —Other Elements of Compensation—Retirement Plans.”Narrative Disclosure to Summary Compensation TableThe primary elements of compensation for our named executive officers are base salary, annual performance bonuses and long term equity basedcompensation awards. The named executive officers also generally participate in employee benefit plans and programs that we offer to our other full timeemployees on the same basis.99 2018 SalariesThe named executive officers receive a base salary to provide a fixed component of compensation reflecting the executive’s skill set, experience, roleand responsibilities. The following table shows the annual base salaries for 2018 and 2019 of our named executive officers. Dr. Tzianabos’s 2018 annual basesalary was $462,000 from January 1, 2018 until the completion of our IPO in March 2018, when his annual base salary increased to $500,000. Dr. Seymour’s2018 annual base salary was $374,920 from January 1, 2018 until April 16, 2018, when it increased to $391,900. Mr. Kelly’s 2018 annual base salary waseffective January 1, 2018. The 2019 annual base salaries became effective January 1, 2019. Name 2018 AnnualBase Salary($) 2019 AnnualBase Salary($) Arthur O. Tzianabos, Ph.D. 500,000 537,600 Albert Seymour, Ph.D. 391,900 405,600 Tim Kelly 353,600 375,000 2018 BonusesWe offer our named executive officers the opportunity to earn annual cash bonuses to compensate them for attaining short-term company andindividual goals as approved by our board of directors. For 2018, bonuses were based on attaining corporate goals relating to product development,establishment of manufacturing processes, overall business development and fund raising and individual goals related to each named executive officer’s areaof responsibility within the Company. The 2018 target bonus amounts, expressed as a percentage of annual base salary, of our named executive officers were50% for Dr. Tzianabos, 40% for Dr. Seymour, and 35% for Mr. Kelly.In December 2018, our board of directors met to review performance against the 2018 bonus goals and approved cash bonuses for the namedexecutive officers in the amounts set forth in the Non-Equity Incentive Plan Compensation column of the 2018 “Summary Compensation Table” above.In December 2018, our board of directors approved the target bonus amounts, expressed as a percentage of annual base salary, for 2019 for our namedexecutive officers as follows: 55% for Dr. Tzianabos, 40% for Dr. Seymour, and 40% for Mr. Kelly.Equity CompensationWe generally offer stock options to our employees, including our named executive officers, as the long-term incentive component of ourcompensation program. Stock options allow our employees to purchase shares of our common stock at a price equal to the fair market value of our commonstock on the date of grant, as determined by the board of directors. Initial stock option grants to newly hired employees generally vest as to 25% of theunderlying shares on either the first anniversary of the date of grant or a specified vesting commencement date and in equal monthly installments over thefollowing 36 months, subject to the holder’s continued service with us. Since 2017, stock options granted from time to time as periodic awards to existingemployees generally vest in 48 equal monthly installments on the first day of each calendar month following the vesting commencement date, subject to theholder’s continued service with us through the applicable vesting dates. Historically, our stock options have been intended to qualify as “incentive stockoptions” to the extent permitted under Internal Revenue Code of 1986, as amended, or the Code, and, prior to the completion of our IPO, allowed “earlyexercise” of an unvested option in exchange for shares or restricted stock subject to the same vesting schedule as the underlying stock option.Prior to our IPO, we issued stock options under our 2015 Equity Incentive Plan, or the 2015 Plan. Effective on the effective date of the registrationstatement for our IPO, our board of directors adopted, and our stockholders approved, the 2018 Incentive Award Plan, referred to below as the 2018 Plan, tofacilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and toenable our company to obtain and retain services of these individuals. Following effectiveness of the 2018 Plan, we ceased making grants under our 2015Plan. However, the 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it.100 In March 2018, in connection with our IPO, our named executive officers were granted the stock options under our 2018 Plan set forth in the tablebelow. These stock options have exercise prices equal to the initial price to the public in our IPO and are subject to the standard vesting schedule for periodicawards described above. Named Executive Officer March 27, 2018Stock Options Granted Arthur O. Tzianabos, Ph.D. 92,376 Albert Seymour, Ph.D. 66,501 Tim Kelly 95,002In December 2018, our named executive officers were granted the stock options set forth in the table below under our 2018 Plan. These stock optionswere granted with exercise prices equal to the fair market value of our common stock on the date of grant, as determined under the terms of our 2018 Plan, andare subject to the standard vesting schedule for periodic awards described above. Named Executive Officer December 14, 2018Stock Options Granted Arthur O. Tzianabos, Ph.D. 203,000 Albert Seymour, Ph.D. 74,000 Tim Kelly 66,000Please refer to our Outstanding Equity Awards at 2018 Fiscal Year End table below for additional information regarding the stock options held by ournamed executive officers.Retirement PlansWe maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements.Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full time employees. We provide matching contributionsunder the plan of 50% of the first 6% of each participant’s eligible compensation contributed. Employee contributions are allocated to each participant’sindividual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fullyvested in their own contributions. Employer contributions vest over three years according to the employees’ years of service. We believe that providing avehicle for tax deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and furtherincentivizes our employees, including our named executive officers, in accordance with our compensation policies.Employee Benefits and PerquisitesOur named executive officers are eligible to participate in our employee benefit plans and programs, which include medical, dental, and visionbenefits, health spending accounts, and short- and long-term disability, accidental death and dismemberment, and life insurance, to the same extent as ourother full-time employees generally, subject to the terms and eligibility requirements of those plans.101 Outstanding Equity Awards at 2018 Fiscal Year-EndThe following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each namedexecutive officer as of December 31, 2018. Option Awards Stock AwardsName VestingCommencementDate Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable Per ShareOptionExercisePrice ($) OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested (#)(2) MarketValue ofShares orUnits ofStock ThatHave NotVested ($)(3) Arthur O. Tzianabos, Ph.D. 4/1/2016 244,751 (1),(4) 217,384 (1),(4) 0.47 4/22/2026 — — 1/1/2018 117,925 (4),(5) 396,728 (4),(5) 6.63 12/7/2027 — — 3/27/2018 17,316 (5) 75,060 (5) 16.00 3/27/2028 — — 1/1/2019 — 203,000 (5) 24.28 12/14/2028 — — Albert Seymour, Ph.D. — — — — — 71,330 1,594,939 1/1/2018 17,502 (4),(5) 58,915 (4),(5) 6.63 12/7/2027 — — 3/27/2018 12,465 (5) 54,036 (5) 16.00 3/27/2028 — — 1/1/2019 — 74,000 (5) 24.28 12/14/2028 — — Tim Kelly 5/30/2017 15,037 (1),(4) 22,964 (1),(4) 2.89 9/8/2027 — — 1/1/2018 10,879 (1),(4) 36,621 (1),(4) 6.63 12/7/2027 — — 3/27/2018 17,812 (5) 77,190 (5) 16.00 3/27/2028 — — 1/1/2019 — 66,000 (5) 24.28 12/14/2028 — — (1)Except as otherwise described below, stock options have a term of ten years from the grant date and vest and become exercisable as to 25% of theunderlying shares on the first anniversary of the specified vesting commencement date and in equal monthly installments over the following 36months, subject to the named executive officer’s continued employment with the Company through each applicable vesting date and potentialaccelerated vesting as described under the heading “Employment Agreements” below.(2)Represents shares of unvested restricted stock acquired by the named executive officer upon exercise of an unvested stock option. The remainingshares of restricted stock vest in equal monthly installments ending March 28, 2020, subject to the named executive officer’s continued employmentwith the Company through each applicable vesting date and potential accelerated vesting as described under the heading “Employment Agreements”below.(3)Market value calculated using the closing price per share of our common stock on December 31, 2018 of $22.36.(4)Stock options granted to our named executive officers prior to 2018 permitted early exercise in exchange for restricted stock. As a result, all of suchoptions were exercisable as of December 31, 2018. The number of shares for which each option is shown as being exercisable and unexercisablerepresent, respectively, the numbers shares for which each option was vested and unvested as of December 31, 2018.(5)Awards vest in 48 equal monthly installments based upon the executive's completion of each full month of service following the vestingcommencement date, subject to the named executive officer’s continued employment with the Company through each applicable vesting date andpotential accelerated vesting as described under the heading “Employment Agreements” below.Employment AgreementsWe have entered into employment agreements with each of our named executive officers. The employment agreements are for unspecified terms.Under their respective employment agreements, if we terminate Dr. Tzianabos, Dr. Seymour or Mr. Kelly without “cause” or he resigns for “good reason”,subject to his timely executing a release of claims and continued compliance with a separate restrictive covenant agreement, he is entitled to receive (i) basesalary continuation for a period of nine months (or, for Dr. Tzianabos, 12 months), (ii) payment of all bonuses earned but unpaid as of the date of terminationand (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to nine months (or, for Dr.Tzianabos, 12 months), less the amount he would have had to pay to receive such coverage as an active employee based on the cost sharing levels in effecton his termination date.If we terminate Dr. Tzianabos, Dr. Seymour or Mr. Kelly without “cause” or he resigns for “good reason,” in either case, on or within 12 monthsfollowing a change in control, then, in lieu of the severance benefits described above, subject to his timely executing a release of claims, he is entitled toreceive (i) an amount equal in cash equal to 1.0 times (or, for Dr. Tzianabos, 1.5 times) the sum of his base salary plus target annual bonus for the year oftermination, (ii) payment of all bonuses102 earned but unpaid as of the date of termination, (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRAfor up to 12 months (or, for Dr. Tzianabos, 18 months), less the amount he would have had to pay to receive such coverage as an active employee based onthe cost sharing levels in effect on his termination date, and (iv) accelerated vesting of all unvested equity or equity-based awards that vest solely based onthe passage of time, with any such awards that vest based on the attainment of performance-vesting conditions being governed by the terms of the applicableaward agreement.Each of our named executive officers has agreed to refrain from competing with us or soliciting our employees, in each case, while employed andfollowing his termination of employment for any reason for a period of 12 months.For purposes of the employment agreements, “cause” generally means the named executive officer’s refusal to substantially perform the dutiesassociated with his position with our company or to carry out the reasonable and lawful instructions of the board of directors concerning duties or actionsconsistent with his position, his breach of a material provision of the employment agreement which remains uncured (to the extent capable of cure) for aperiod of 30 days following written notice from our company, his conviction, plea of no contest or nolo contedere or imposition of unadjudicated probationfor any felony or crime involving moral turpitude, his unlawful use (including being under the influence) or possession of illegal drugs on our premises orwhile performing his duties and responsibilities under the employment agreement, or his commission of any act of fraud, embezzlement, misappropriation,willful misconduct, or breach of fiduciary duty against us.For purposes of the employment agreements, “good reason” generally means, subject to certain cure rights, the named executive officer’s terminationof employment due to a reduction in salary or target bonus, a material decrease in authority or areas of responsibility, our company’s breach of any one ormore of the material provisions of the employment agreement, or a relocation by our company of the named executive officer’s primary office to a locationmore than 25 miles from the named executive officer’s primary office on the date of the agreement.Director CompensationThe following table sets forth in summary form information concerning the compensation that was earned by or paid to each of our non-employeedirectors during the year that ended December 31, 2018:2018 Director Compensation Table Name Fees Earnedor Paid inCash ($) OptionAwards($)(1) Total ($) Steven Gillis, Ph.D. 34,250 252,162 286,412 Richard J. Gregory, Ph.D. 38,597 252,162 290,759 Kush M. Parmar, M.D., Ph.D. 62,792 252,162 314,954 Matthew R. Patterson 31,586 158,903 190,489 Mahendra G. Shah, Ph.D. 34,250 252,162 286,412 Mary Thistle 39,958 252,162 292,120 Cameron Wheeler, Ph.D. 34,250 252,162 286,412 (1)Amounts reflect the full grant date fair value of stock options granted during the applicable year computed in accordance with ASC Topic718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculatethe value of all option awards in Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K.103 The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2018 by each non-employeedirector. None of our non-employee directors held unvested stock awards as of December 31, 2018. Name OptionsOutstanding Steven Gillis, Ph.D. 31,160 Richard J. Gregory, Ph.D. 41,966 Kush M. Parmar, M.D., Ph.D. 31,160 Matthew R. Patterson 32,110 Mahendra G. Shah, Ph.D. 31,160 Mary Thistle 31,160 Cameron Wheeler, Ph.D. 31,160 Directors who are also our employees do not receive compensation for their service as directors. Historically, our directors other than Dr. Gregory havenot received compensation for their service on our board of directors. For the portion of 2018 preceding our IPO, we paid Dr. Gregory a prorated retainer forhis services on our board of directors at the rate of $25,000 annually. In March 2018, in connection with of our IPO, our board of directors approved thefollowing grants of options to purchase shares of our common stock for our non-employee directors, effective March 27, 2018: Dr. Gillis: 31,160 shares; Dr.Gregory: 31,160 shares; Dr. Parmar, 31,160 shares; Dr. Shah, 31,160 shares; Ms. Thistle, 31,160 shares; Dr. Wheeler, 31,160 shares; and Mr. Patterson, 8,360shares. The options have an exercise price equal to $16.00, the initial price to the public in our IPO, and vest in three equal installments beginning on the firstanniversary of the effective date of grant.In addition, as of our IPO, we maintain a compensation program for our non-employee directors under which each non-employee director receives thefollowing amounts for their service on our board of directors: •an option to purchase 31,160 shares of our common stock upon the director’s initial election or appointment to our board of directors thatoccurs after our IPO, •if the director has served on our board of directors for at least six months as of the date of an annual meeting of stockholders, an option topurchase 15,580 shares of our common stock on the date of the annual meeting, •an annual director fee of $37,500, and •if the director serves on a committee of our board of directors or in the other capacities stated below, an additional annual fee as follows: •chairman of the board or lead independent director, $35,000, •chairman of the audit committee, $15,000, •audit committee member other than the chairman, $7,500, •chairman of the compensation committee, $10,000, •compensation committee member other than the chairman, $5,000, •chairman of the nominating and corporate governance committee, $7,500, and •nominating and corporate governance committee member other than the chairman, $4,000.Stock options granted to our non-employee directors under the program have an exercise price equal to the fair market value of our common stock onthe date of grant and expire not later than ten years after the date of grant. Stock options granted upon a director’s initial election or appointment vest in threeequal installments on each of the first three anniversaries of the date of grant. Stock options granted annually to directors vest in a single installment on theearlier of the day before the next annual meeting or the first anniversary of the date of grant. In addition, all unvested stock options vest in full upon theoccurrence of a change in control.Director fees under the program are payable in arrears in four equal quarterly installments not later than the fifteenth day following the final day ofeach calendar quarter, provided that the amount of each payment is prorated for any portion of a quarter that a director is not serving on our board and no feeis payable in respect of any period prior to our IPO.104 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.Equity Compensation Plan InformationThe following table provides information on our equity compensation plans as of December 31, 2018. Plan Category Number ofSecurities to beIssued UponExercise ofOutstandingOptions, Warrantsand Rights Weighted-Average ExercisePrice ofOutstandingOptions, Warrantsand Rights Number ofSecurities RemainingAvailable for FutureIssuance Under EquityCompensation Plans(4) Equity compensation plans approved by security holders (1) 3,203,122 (2)$10.47 (3) 2,250,906 Equity compensation plans not approved by security holders — — — Total 3,203,122 $10.47 2,250,906 (1)Consists of the 2015 Incentive Plan, as amended (the “2015 Plan”), the 2018 Incentive Plan (the “2018 Plan”) and the 2018 Employee Stock PurchasePlan (the “2018 ESPP”).(2)Includes 1,819,985 outstanding options to purchase stock under the 2015 Plan and 1,383,137 outstanding options to purchase stock under the 2018Plan. As of March 26, 2018, in connection with our initial public offering, no further grants are made under the 2015 Plan.(3)As of December 31, 2018, the weighted-average exercise price of outstanding options under the 2015 Plan was $3.78 and the weighted-averageexercise price of outstanding options under the 2018 Plan was $19.27.(4)Includes 1,896,926 shares available for future issuance under the 2018 Plan and 353,980 shares available for issuance under the 2018 ESPP (of which28,311 shares were issued with respect to the purchase period in effect as of December 31, 2018, which purchase period ended on February 28, 2019).The 2018 Plan provides for an annual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and includingJanuary 1, 2028 equal to the lesser of (i) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediatelypreceding calendar year and (ii) such smaller number of shares of common stock as determined by the Company’s board of directors (but no more than20,887,347 shares may be issued upon the exercise of incentive stock options), plus any shares that were subject to awards outstanding under the2015 Plan as of the effective date of the 2018 Plan which are forfeited, expire, lapse for any reason or are settled for cash without the issuance ofshares. The number of shares available for issuance under the 2018 ESPP will be annually increased on January 1 of each calendar year beginning in2019 and ending in and including 2028, by an amount equal to the lesser of (A) 1% of the shares outstanding on the final day of the immediatelypreceding calendar year and (B) such smaller number of shares as is determined by our board of directors, provided that no more than 4,778,738 sharesof our common stock may be issued under the 2018 ESPP.Security Ownership of Certain Beneficial Owners and ManagementThe following table sets forth certain information with respect to holdings of our Common Stock by (i) stockholders who beneficially owned morethan 5% of the outstanding shares of our Common Stock, and (ii) each of our directors (which includes all nominees), each of our named executive officersand all directors and executive officers as a group as of March 1, 2019, unless otherwise indicated. The number of shares beneficially owned by eachstockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or sharedvoting power or investment power. Applicable percentage ownership is based on 37,510,092 shares of Common Stock outstanding as of March 1, 2019. Incomputing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options,warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of March 1, 2019 are consideredoutstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.105 Unless otherwise indicated, the address of each beneficial owner listed below is One Patriots Park, Bedford, MA 01730. We believe, based oninformation provided to us that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned bythe stockholder unless noted otherwise, subject to community property laws where applicable. Name of Beneficial Owner Number ofSharesBeneficiallyOwned Percentage 5% or Greater Stockholders Entities affiliated with 5AM Ventures (1) 6,150,919 16.4%Entities affiliated with ARCH Venture Fund (2) 6,068,695 16.2%Entities affiliated with Deerfield (3) 5,227,035 13.9%Novartis Institutes for BioMedical Research, Inc. (4) 1,979,226 5.3%TLS Beta Pte. Ltd. (5) 3,220,293 8.6%FMR LLC (6) 2,110,756 5.6%JPMorgan Chase & Co. (7) 2,229,280 5.9%Named Executive Officers and Directors Arthur O. Tzianabos, Ph.D. (8) 687,605 1.8%Tim Kelly (9) 62,891 * Albert Seymour, Ph.D. (10) 274,746 * Steven Gillis, Ph.D. (2)(11) 6,078,977 16.2%Richard J. Gregory, Ph.D. (12) 20,866 * Kush M. Parmar, M.D., Ph.D. (1)(13) 6,161,201 16.4%Matthew R. Patterson (14) 10,177 * Mahendra G. Shah, Ph.D. (15) 920,024 2.5%Mary Thistle (16) 10,282 * Cameron Wheeler, Ph.D. (17) 10,282 * All executive officers and directors as a group (12 persons) (18) 14,604,576 38.1% *Less than 1% (1)Based on a Schedule 13G filed with the SEC on February 13, 2019 and the Company's records. Consists of 5,904,884 shares of common stock held by5AM Ventures IV, L.P. (“Ventures IV”), as to which Ventures IV has shared voting and dispositive power, and 246,035 shares of common stock heldby 5AM Co-Investors IV, L.P. (“Co-Investors IV”), as to which Co-Investors IV has shared voting and dispositive power. 5AM Partners IV, LLC(“Partners IV”) is the sole general partner of Ventures IV and Co-Investors IV. Dr. John Diekman, Andrew J. Schwab and Dr. Scott M. Rocklage, are themanaging members of Partners IV and, along with Partners IV, have shared voting and investment power over the shares beneficially owned byVentures IV and Co-Investors IV. Kush M. Parmar, M.D., Ph.D., one of our directors, is an affiliate of Ventures IV. Each of Partners IV, Dr. Diekman,Mr. Schwab and Dr. Rocklage disclaim beneficial ownership of such shares except to the extent of its or their recurring interest therein. The address ofall entities affiliated with 5AM Ventures is 501 2nd Street, Suite 350, San Francisco, CA 94107.(2)Based on a Schedule 13G filed with the SEC on February 14, 2019 and the Company's records. Consists of 4,871,868 shares of common stock held byARCH Venture Fund VIII, L.P. (“ARCH Fund VIII”) and 1,196,827 shares of common stock held by ARCH Venture Fund VIII Overage, L.P. (“ARCHFund Overage”). The sole general partner of ARCH Fund VIII is ARCH Venture Partners VIII, L.P. (“ARCH Partners VIII”), which may be deemed tobeneficially own the shares held by ARCH Fund VIII. The sole general partner of ARCH Partners VIII and ARCH Fund Overage is ARCH VenturePartners VIII, LLC (“ARCH VIII LLC”), which has shared voting and dispositive power over the shares of common stock held by each of ARCH FundVIII and ARCH Fund Overage. ARCH Partners VIII and ARCH VIII LLC disclaim beneficial ownership of such shares, except to the extent of anypecuniary interest therein. The managing directors of ARCH VIII LLC are Keith L. Crandell, Clinton Bybee and Robert Nelsen, and they may bedeemed to have shared voting and dispositive power over the shares of common stock held by ARCH Fund VIII and ARCH Fund Overage. Messrs.Crandell, Bybee and Nelsen disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. Steven Gillis, M.D.,Ph.D., one of our directors, is a managing director at ARCH Venture Partners. Director Steven Gillis owns an interest in ARCH Partners VIII but doesnot have voting or investment control over the shares held by ARCH Fund VIII, and disclaims beneficial ownership of such shares, except to theextent of any pecuniary interest therein. The address of ARCH Fund VIII and ARCH Fund Overage is 8755 West Higgins Road, Suite 1025, Chicago,Illinois 60631.106 (3)Based solely on a Schedule 13D filed with the SEC on April 6, 2018, Deerfield Mgmt III, L.P. and Deerfield Private Design Fund III, L.P. each hasshared voting and dispositive power over 2,613,517 shares of common stock, Deerfield Mgmt, L.P. and Deerfield Partners, L.P. each has shared votingand dispositive power over 625,000 shares of common stock, Deerfield Healthcare Innovations Fund, L.P. and Deerfield Mgmt HIF, L.P. each hasshared voting and dispositive power over 1,988,518, shares of common stock, and Deerfield Management Company, L.P. and James E. Flynn each hasshared voting and dispositive power over 5,227,035 shares of common stock. Deerfield Mgmt III, L.P. is the general partner of Deerfield PrivateDesign Fund III, L.P., and Deerfield Mgmt HIF, L.P. is the general partner of Deerfield Healthcare Innovations Fund, L.P. Deerfield ManagementCompany, L.P. is the investment manager of each of Deerfield Private Design Fund III, L.P. and Deerfield Healthcare Innovations Fund, L.P. Mr. JamesE. Flynn is the sole member of the general partner of each of Deerfield Mgmt III, L.P., Deerfield Mgmt HIF, L.P., and Deerfield Management Company,L.P. The address of Deerfield Healthcare Innovations Fund, L.P., Deerfield Private Design Fund III, L.P., Deerfield Mgmt III, L.P., Deerfield Partners,L.P., Deerfield Mgmt, L.P., Deerfield Mgmt HIF, L.P., Deerfield Management Company, L.P. and Mr. James E. Flynn is 780 Third Avenue, 37th Floor,New York, New York.(4)Based solely on a Schedule 13G filed with the SEC on February 4, 2019. Consists of 1,979,226 shares of common stock held by Novartis Institutes forBioMedical Research, Inc. (“Novartis”). Novartis is an indirect wholly-owned subsidiary of, and controlled by, Novartis AG. Novartis and NovartisAG each have shared voting and dispositive power over all shares of common stock beneficially owned. The address for Novartis is 250Massachusetts Avenue, Cambridge, MA 02139.(5)Based solely on a Schedule 13G filed with the SEC on April 11, 2018, Temasek Holdings (Private) Limited, Fullerton Management Pte Ltd andTemasek Life Sciences Private Limited each has shared voting and dispositive power over 3,220,293 shares of common stock, V-Sciences InvestmentsPte Ltd has shared voting and dispositive power over 625,000 shares of common stock, and TLS Beta Pte. Ltd. has shared voting and dispositivepower over 2,595,293 shares of common stock. The principal business address of Temasek Holdings (Private) Limited, Fullerton Management Pte Ltd,Temasek Life Sciences Private Limited, V-Sciences Investments Pte Ltd and TLS Beta Pte. Ltd. is 60B Orchard Road #06-18 Tower 2, TheAtrium@Orchard, Singapore 238891.(6)Based solely on a Schedule 13G filed with the SEC on February 13, 2019, FMR LLC has sole voting power over 707,286 shares of common stock andsole dispositive power over 2,110,756 shares of common stock. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer ofFMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B votingcommon shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders haveentered into a shareholders' voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote ofSeries B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders' votingagreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect toFMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the variousinvestment companies registered under the Investment Company Act ("Fidelity Funds") advised by Fidelity Management & Research Company("FMR Co"), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds' Boards of Trustees. FMR Co carries out the votingof the shares under written guidelines established by the Fidelity Funds' Boards of Trustees. The address of FMR LLC is 245 Summer Street, Boston,MA 02210.(7)Based solely on a Schedule 13G filed with the SEC on January 10, 2019, JPMorgan Chase & Co. has sole voting power over 1,889,576 shares ofcommon stock and sole dispositive power over 2,229,280 shares of common stock. The report was filed by JPMorgan Chase & Co. on behalf of itselfand its wholly owned subsidiaries, J.P. Morgan Investment Management Inc. and JPMorgan Chase Bank, National Association. The address ofJPMorgan Chase & Co. is 270 Park Avenue, New York, NY 10017.(8)Includes options to purchase 497,600 shares of common stock that are or will be immediately exercisable by Dr. Tzianabos within 60 days of March 1,2019.(9)Consists of options to purchase 62,891 shares of common stock that are or will be immediately exercisable by Mr. Kelly within 60 days of March 1,2019.(10)Includes options to purchase 46,496 shares of common stock that are or will be immediately exercisable by Dr. Seymour within 60 days of March 1,2019.(11)Includes options to purchase 10,282 shares of common stock that are or will be immediately exercisable by Dr. Gillis within 60 days of March 1,2019.(12)Consists of options to purchase 20,866 shares of common stock that are or will be immediately exercisable by Dr. Gregory within 60 days of March 1,2019.(13)Includes options to purchase 10,282 shares of common stock that are or will be immediately exercisable by Dr. Parmar within 60 days of March 1,2019.(14)Consists of options to purchase 10,177 shares of common stock that are or will be immediately exercisable by Mr. Patterson within 60 days of March1, 2019.107 (15)Based solely on a Form 4/A filed with the SEC on May 16, 2018, and consists of 909,742 shares of common stock held by Vivo Panda Fund, L.P.(“Vivo LP”). Vivo Panda, LLC (“Vivo LLC”) is the sole general partner of Vivo LP. Mahendra G. Shah, Ph.D., one of our directors, is a managingmember of Vivo LLC and has shared voting and investment power over the shares beneficially owned by Vivo LP. Each of Vivo LLC and Dr. Shahdisclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. The address of all entities affiliated with Vivo LPis 505 Hamilton Street, Suite 207, Palo Alto, CA 94301. Includes options to purchase 10,282 shares of common stock that are or will be immediatelyexercisable within 60 days of March 1, 2019.(16)Includes options to purchase 10,282 shares of common stock that are or will be immediately exercisable by Ms. Thistle within 60 days of March 1,2019.(17)Includes options to purchase 10,282 shares of common stock that are or will be immediately exercisable by Dr. Wheeler within 60 days of March 1,2019.(18)Includes options to purchase 818,258 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2019.Item 13. Certain Relationships and Related Transactions, and Director Independence.Policies and Procedures for Related Person TransactionsOur Board of Directors has adopted a written Related Person Transaction Policy, setting forth the policies and procedures for the review and approvalor ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangementor relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involvedexceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest. In reviewing and approving any suchtransactions, our Audit Committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on termscomparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. The followingincludes a summary of transactions since January 1, 2018, or any currently proposed transaction, in which we were or are to be a participant, in which theamount involved exceeds $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of ourcapital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.Novartis Collaboration and License AgreementIn November 2017, we entered into a collaboration and license agreement with Novartis, which beneficially owns approximately 5.3% of our commonstock. The Company recognized revenue of $3.7 million for the year ended December 31, 2018 under the agreement with Novartis. For more informationregarding the agreement with Novartis, see Note 16 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Employment AgreementsWe have entered into employment agreements with our named executive officers. For more information regarding these agreements, see Item 11.Executive Compensation—Narrative Disclosure to Compensation Tables—Employment Agreements.Indemnification AgreementsWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require usor will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted byDelaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executiveofficer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executiveofficer.Director IndependenceSteven Gillis, Ph.D., Richard J. Gregory, Ph.D., Kush M. Parmar, M.D., Ph.D., Matthew R. Patterson, Mahendra G. Shah, Ph.D., Mary Thistle andCameron Wheeler, Ph.D. each qualify as “independent” in accordance with the listing requirements of Nasdaq. The Nasdaq independence definition includesa series of objective tests, including that the director is not, and has not been for at least three years, one of our employees and that neither the director norany of his family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our Board of Directors hasmade a subjective determination as to each independent director that no relationships exist, which, in the opinion of our Board108 of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, ourBoard of Directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities andrelationships as they may relate to us and our management, including that Dr. Gillis, Dr. Parmar and Dr. Wheeler are affiliated with certain of our significantstockholders. Arthur O. Tzianabos, Ph.D. is not independent because he is the President and Chief Executive Officer of Homology. There are no familyrelationships among any of our directors or executive officers.Item 14. Principal Accountant Fees and Services.The following table summarizes the fees of Deloitte & Touche LLP, our independent registered public accounting firm, billed to us in each of the lasttwo fiscal years for audit services and billed to us in each of the last two fiscal years for other services: Fee Category 2018 2017 Audit Fees $395 $204 Audit-Related Fees 802 — Tax Fees 12 12 All Other Fees 2 — Total $1,211 $216 Audit FeesAudit fees consist of fees for the audit of our consolidated financial statements, the review of the unaudited interim financial statements included inour quarterly reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements.Audit-Related FeesAudit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of theregistrant's financial statements, including for assurance reporting on our historical financial information included in our SEC registration statement inconnection with our initial public offering.Tax FeesTax fees consist of fees for tax compliance, tax advice, and tax planning services.Audit Committee Pre-Approval Policy and Procedures​The Audit Committee has adopted a policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by the independent auditor may be pre-approved. The Pre-Approval Policy generally provides that we will notengage Deloitte & Touche LLP to render any audit, audit-related, tax or permissible non-audit service unless the service is either (i) explicitly approved bythe Audit Committee (“specific pre-approval”) or (ii) entered into pursuant to the pre-approval policies and procedures described in the Pre-Approval Policy(“general pre-approval”). Unless a type of service to be provided by Deloitte & Touche LLP has received general pre-approval under the Pre-Approval Policy,it requires specific pre-approval by the Audit Committee or by a designated member of the Audit Committee to whom the committee has delegated theauthority to grant pre-approvals. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval. Forboth types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC’s rules on auditor independence. The AuditCommittee will also consider whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as itsfamiliarity with the Company’s business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance theCompany’s ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily bedeterminative. On an annual basis, the Audit Committee reviews and generally pre-approves the services (and related fee levels or budgeted amounts) thatmay be provided by Deloitte & Touche LLP without first obtaining specific pre-approval from the Audit Committee. The Audit Committee may revise the listof general pre-approved services from time to time, based on subsequent determinations. 109 PART IVItem 15. Exhibits and Financial Statement Schedules(a)(1) Financial Statements.The following documents are included on pages F-1 through F-40 attached hereto and are filed as part of this Annual Report on Form 10-K.Index to Consolidated Financial Statements Report of Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Comprehensive LossF-5Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)F-6Consolidated Statements of Cash FlowsF-7Notes to Consolidated Financial StatementsF-8 (a)(2) Financial Statement Schedules.All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in thefinancial statements or the notes thereto.(a)(3) Exhibits.The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Incorporated by ReferenceExhibitNumber Description of Exhibit Form FileNo. Exhibit Filingdate FiledHerewith3.1 Restated Certificate of Incorporation of Homology Medicines, Inc. 8-K 001-38433 3.1 4/3/18 3.2 Amended and Restated Bylaws of Homology Medicines, Inc. 8-K 001-38433 3.2 4/3/18 4.1 Amended and Restated Investors’ Rights Agreement, dated July 28, 2017, byand among Homology Medicines, Inc. and the investors named therein S-1 333-223409 4.1 3/2/18 4.2 Specimen Stock Certificate evidencing the shares of common stock S-1/A 333-223409 4.2 3/19/18 10.1# 2015 Stock Incentive Plan, as amended, and forms of agreements thereunder S-1/A 333-223409 10.1 3/19/18 10.2# 2018 Incentive Award Plan, and forms of awards thereunder S-1/A 333-223409 10.2 3/19/18 10.3# 2018 Employee Stock Purchase Plan S-1/A 333-223409 10.3 3/19/18 10.4# 2018 Employee Stock Purchase Plan – Offering Document 10-Q 001-38433 10.1 11/13/18 10.5# Non-Employee Director Compensation Program S-1/A 333-223409 10.4 3/19/18 10.6# Form of Indemnification Agreement for Directors and Officers S-1/A 333-223409 10.5 3/19/18 10.7 Lease Agreement, dated August 31, 2016, between Homology Medicines, Inc.and ARE-MA Region No. 24, LLC S-1 333-223409 10.5 3/2/18 10.8 Lease Agreement, dated December 21, 2017, between Homology Medicines, Inc.and Bedford Patriots Park, LLC S-1 333-223409 10.6 3/2/18 10.9# Employment Agreement, dated March 18, 2018, by and between HomologyMedicines, Inc. and Siyamak (Sam) Rasty S-1/A 333-223409 10.11 3/19/18 10.10# Employment Agreement, dated March 18, 2018, by and between HomologyMedicines, Inc. and Albert Seymour S-1/A 333-223409 10.12 3/19/18 10.11# Employment Agreement, dated March 18, 2018, by and between HomologyMedicines, Inc. and Bradford Smith S-1/A 333-223409 10.13 3/19/18 110 10.12# Employment Agreement, dated March 18, 2018, by and between HomologyMedicines, Inc. and Arthur Tzianabos, Ph.D. S-1/A 333-223409 10.14 3/19/18 10.13# Employment Agreement, dated April 2, 2018, by and between HomologyMedicines, Inc. and Tim Kelly *10.14† Collaboration and License Agreement, dated November 6, 2017, betweenHomology Medicines, Inc. and Novartis Institutes for BioMedical Research,Inc. S-1/A 333-223409 10.15 3/23/18 10.15† Exclusive License Agreement, dated April 28, 2016, between HomologyMedicines, Inc. and City of Hope S-1/A 333-223409 10.16 3/19/18 10.16.1† License Agreement, dated September 14, 2016, between Homology Medicines,Inc. and California Institute of Technology S-1/A 333-223409 10.17.1 3/19/18 10.16.2† First Amendment to License Agreement, dated May 16, 2017, betweenHomology Medicines, Inc. and California Institute of Technology S-1 333-223409 10.16.2 3/2/18 10.16.3† Letter Agreement, dated November 14, 2017, between Homology Medicines,Inc. and California Institute of Technology S-1 333-223409 10.16.3 3/2/18 21.1 Subsidiaries of Homology Medicines, Inc. S-1 333-223409 21.1 3/2/18 23.1 Consent of Deloitte & Touche LLP *31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 *31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 *32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **101.INS XBRL Instance Document *101.SCH XBRL Taxonomy Extension Schema Document *101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *101.DEF XBRL Taxonomy Extension Definition Linkbase Document *101.LAB XBRL Taxonomy Extension Label Linkbase Document *101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * *Filed herewith**Furnished herewith#Indicates management contract or compensatory plan.†Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Item 16. Form 10-K Summary.None.111 SIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized. Company Name Date: March 12, 2019 By:/s/ Arthur O. Tzianabos, Ph.D. Arthur O. Tzianabos, Ph.D. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of theRegistrant in the capacities and on the dates indicated. Name Title Date /s/ Arthur O. Tzianabos, Ph.D. President, Chief Executive Officer and Director(principal executive officer) March 12, 2019Arthur O. Tzianabos, Ph.D. /s/ W. Bradford Smith Chief Financial Officer, Treasurer and Secretary(principal financial and accounting officer) March 12, 2019W. Bradford Smith /s/ Kush M. Parmar, M.D., Ph.D. Chairman of the Board of Directors March 12, 2019Kush M. Parmar, M.D., Ph.D. /s/ Steven Gillis, Ph.D. Director March 12, 2019Steven Gillis, Ph.D. /s/ Richard J. Gregory, Ph.D. Director March 12, 2019Richard J. Gregory, Ph.D. /s/ Matthew R. Patterson Director March 12, 2019Matthew R. Patterson /s/ Mahendra G. Shah, Ph.D. Director March 12, 2019Mahendra G. Shah, Ph.D. /s/ Mary Thistle Director March 12, 2019Mary Thistle /s/ Cameron Wheeler, Ph.D. Director March 12, 2019Cameron Wheeler, Ph.D. 112 HOMOLOGY MEDICINES, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Comprehensive LossF-5Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)F-6Consolidated Statements of Cash FlowsF-7Notes to Consolidated Financial StatementsF-8F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the stockholders and the Board of Directors of Homology Medicines, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Homology Medicines, Inc. and its subsidiary (the "Company") as of December 31, 2018and 2017, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit), and cashflows, for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements presentfairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows forthe years then ended, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 ofthe 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 reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLP Boston, MassachusettsMarch 12, 2019 We have served as the Company's auditor since 2017. F-2 HOMOLOGY MEDICINES, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share amounts) December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $38,220 $51,575 Short-term investments 176,517 78,084 Prepaid expenses and other current assets 6,948 1,945 Total current assets 221,685 131,604 Property and equipment, net 35,637 3,154 Deferred offering costs — 1,000 Restricted cash 1,772 1,772 Total assets $259,094 $137,530 Liabilities, convertible preferred stock and stockholders' equity (deficit) Current liabilities: Accounts payable $15,732 $2,538 Accrued expenses and other liabilities 5,040 2,860 Deferred rent 977 123 Deferred revenue 3,684 3,341 Total current liabilities 25,433 8,862 Non-current liabilities: Deferred rent, net of current portion 9,470 291 Deferred revenue, net of current portion 29,474 30,069 Total liabilities 64,377 39,222 Commitments and contingencies (Note 8) Convertible preferred stock: Series A convertible preferred stock, $0.0001 par value; 62,304,354 shares authorized; 62,269,144 shares issued and outstanding and aggregate liquidation preference of $44,211 as of December 31, 2017 — 42,994 Series B convertible preferred stock, $0.0001 par value; 64,930,561 shares authorized, issued and outstanding and aggregate liquidation preference of $93,500 as of December 31, 2017 — 94,768 Total convertible preferred stock — 137,762 Stockholders’ equity (deficit): Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of December 31, 2018 and no shares authorized as of December 31, 2017; no shares issued and outstanding at December 31, 2018 and December 31, 2017 — — Common stock, $0.0001 par value; 200,000,000 and 170,000,000 shares authorized as of December 31, 2018 and 2017, respectively; 37,509,815 and 2,902,109 shares issued as of December 31, 2018 and 2017, respectively; and 37,358,526 and 2,637,011 shares outstanding as of December 31, 2018 and 2017, respectively 3 — Additional paid-in capital 292,187 800 Accumulated other comprehensive loss (77) (73)Accumulated deficit (97,396) (40,181)Total stockholders’ equity (deficit) 194,717 (39,454)Total liabilities, convertible preferred stock and stockholders' equity (deficit) $259,094 $137,530 See notes to consolidated financial statements.F-3 HOMOLOGY MEDICINES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share and per share amounts) For the Years Ended December 31, 2018 2017 Collaboration revenue $3,684 $— Operating expenses: Research and development 47,948 21,378 General and administrative 17,300 8,279 Total operating expenses 65,248 29,657 Loss from operations (61,564) (29,657)Other income (expense): Changes in fair value of convertible preferred stock tranche liability — (876)Interest income 4,349 542 Total other income (expense) 4,349 (334)Net loss and net loss attributable to common stockholders-basic and diluted $(57,215) $(29,991)Net loss per share attributable to common stockholders-basic and diluted $(2.00) $(12.10)Weighted average common shares outstanding-basic and diluted 28,551,807 2,479,432 See notes to consolidated financial statements.F-4 HOMOLOGY MEDICINES, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in thousands, except share and per share amounts) For the Years Ended December 31, 2018 2017 Net loss $(57,215) $(29,991)Other comprehensive loss: Change in unrealized gain (loss) on available for sale securities, net (4) (73)Total other comprehensive loss (4) (73)Comprehensive loss $(57,219) $(30,064) See notes to consolidated financial statements. F-5 HOMOLOGY MEDICINES, INC.CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK ANDSTOCKHOLDERS’ EQUITY (DEFICIT)(in thousands, except share and per share amounts) Convertible Preferred Stock$0.0001 Par Value Series A Convertible Preferred Stock$0.0001 Par Value Series B Common Stock$0.0001 Par Value AdditionalPaid-in AccumulatedOtherComprehensive Accumulated TotalStockholders’Equity Shares Amount Shares Amount Shares Amount Capital Loss Deficit (Deficit) Balance at December 31,2016 33,395,907 17,392 — — 2,121,156 $— $298 $— $(10,190) $(9,892)Issuance of Series Aconvertible preferred stock, net of issuance costs 28,873,237 20,479 — — — — — — — — Reclassification oftranche liability upon issuanceof convertible preferredstock — 5,123 — — — — — — — — Issuance of Series Bconvertible preferred stock, net ofissuance costs — — 64,930,561 93,101 — — — — — — Allocation ofcollaboration proceeds to carryingvalue of Series B convertible preferred stock — — — 1,667 — — — — — — Vesting of common stock from option exercise — — — — 483,200 — 225 — — 225 Vesting of foundersrestricted common stock — — — — 32,655 — 21 — — 21 Stock-basedcompensation — — — — — — 256 — — 256 Other comprehensive loss — — — — — (73) — (73)Net loss — — — — — — — — (29,991) (29,991)Balance at December 31,2017 62,269,144 42,994 64,930,561 94,768 2,637,011 — 800 (73) (40,181) (39,454)Conversion ofconvertible preferred stock into commonstock upon initial public offering (62,269,144) (42,994) (64,930,561) (94,768) 24,168,656 2 137,760 — — 137,762 Issuance of commonstock in initial public offering, net ofdiscounts and issuance costs — — — — 10,350,000 1 150,842 — — 150,843 Vesting of common stockfrom option exercises — — — — 129,959 — 75 — — 75 Issuance of commonstock from option exercises — — — — 72,900 — 87 — — 87 Stock-basedcompensation — — — — — — 2,623 — — 2,623 Other comprehensive loss — — — — — — — (4) — (4)Net loss — — — — — — — — (57,215) (57,215)Balance at December 31,2018 — $— — $— 37,358,526 $3 $292,187 $(77) $(97,396) $194,717 See notes to consolidated financial statements. F-6 HOMOLOGY MEDICINES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) For the Years Ended December 31, 2018 2017 Cash flows from operating activities: Net loss $(57,215) $(29,991)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 1,289 684 Stock-based compensation expense 2,623 277 Accretion on short-term investments (1,589) (85)Loss on disposal of property and equipment 127 — Change in fair value associated with convertible preferred stock tranche liability — 876 Changes in operating assets and liabilities: Prepaid expense and other current assets (5,003) (1,463)Accounts payable 4,383 1,720 Accrued expenses and other liabilities 3,042 864 Deferred revenue (252) 33,411 Deferred rent 10,033 186 Net cash (used in) provided by operating activities (42,562) 6,479 Cash flows from investing activities: Purchases of short-term investments (245,328) (78,071)Maturities of short-term investments 148,480 — Purchases of property and equipment (24,939) (1,958)Changes in restricted cash — (1,497)Net cash used in investing activities (121,787) (81,526)Cash flows from financing activities: Proceeds from issuance of common stock in initial public offering, net of discounts and issuance costs 150,843 — Proceeds from issuance of common stock from option exercises 87 — Proceeds from issuance of restricted common stock 64 — Repurchase of unvested common stock — (17)Proceeds from issuance of Series A convertible preferred stock, net of issuance costs — 20,479 Proceeds from issuance of Series B convertible preferred stock, net of issuance costs — 94,768 Net cash provided by financing activities 150,994 115,230 Net change in cash and cash equivalents (13,355) 40,183 Cash and cash equivalents, beginning of period 51,575 11,392 Cash and cash equivalents, end of period $38,220 $51,575 Supplemental disclosures of noncash investing and financing activities: Conversion of Series A convertible preferred stock into common stock upon initial public offering $42,994 $— Conversion of Series B convertible preferred stock into common stock upon initial public offering $94,768 $— Reclassification of liability for common stock vested $75 $225 Property and equipment additions included in accounts payable $9,127 $167 Deferred offering costs included in accrued expenses $— $1,000 Reclassification of tranche liability upon issuance of convertible preferred stock $— $5,123 See notes to consolidated financial statements.F-7 HOMOLOGY MEDICINES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)1. NATURE OF BUSINESS AND BASIS OF PRESENTATIONNature of Business—Homology Medicines, Inc. (the “Company”) is a pre-clinical stage biopharmaceutical company dedicated to translatingproprietary gene editing and gene therapy technology into novel treatments for patients with rare genetic diseases with significant unmet medical needs bycuring the underlying cause of the disease. The Company was founded in March 2015 as a Delaware corporation. Its principal offices are in Bedford,Massachusetts.Since its inception, the Company has devoted substantially all of its resources to recruiting personnel, developing its technology platform andadvancing its pipeline of product candidates, developing manufacturing processes, building out manufacturing and research and development space, andmaintaining and building its intellectual property portfolio. The Company is subject to a number of risks similar to those of other companies conductinghigh-risk, early-stage research and development of product candidates. Principal among these risks are dependency on key individuals and intellectualproperty, competition from other products and companies, and the technical risks associated with the successful research, development and clinicalmanufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoingresearch and development, obtain regulatory approval of its products, successfully commercialize its products, generate revenue, meet its obligations, and,ultimately, attain profitable operations.To date, the Company has not generated any revenue from product sales and does not expect to generate any revenue from the sale of product in theforeseeable future. Through December 31, 2018, the Company has financed its operations primarily through the public offering of its common stock, theissuance of convertible preferred stock, and with proceeds from its collaboration and license agreement with Novartis (see Note 16). During the year endedDecember 31, 2018, the Company incurred a net loss of $57.2 million and as of December 31, 2018, has $97.4 million in accumulated deficit. The Companyexpects to incur additional operating losses and negative operating cash flows for the foreseeable future.On April 2, 2018, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 10,350,000 shares of its commonstock at a public offering price of $16.00 per share, for aggregate gross proceeds of $165.6 million before fees and expenses. In connection with the IPO, theCompany effected a one-for-5.263 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the conversionratios for the Company’s Series A and Series B preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanyingfinancial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of the preferredstock conversion ratios. The reverse stock split became effective on March 16, 2018.Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 24,168,656 shares of commonstock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding.Management believes that existing cash, cash equivalents and short-term investments will allow the Company to continue its operations through theend of 2020. In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its abilityto continue to raise additional capital to finance its operations. There can be no assurance that the Company will be able to obtain sufficient capital to coverits costs on acceptable terms, if at all.Basis of Presentation—The accompanying consolidated financial statements have been prepared in conformity with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets andthe satisfaction of liabilities in the normal course of business.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation—The Company’s consolidated financial statements include the accounts of the Company and Homology MedicinesSecurities Corporation, a wholly owned Massachusetts corporation, for the sole purpose of buying, selling, and holding securities on the Company’s behalf.All intercompany balances and transactions have been eliminated in the consolidated financial statements.F-8 Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptionsthat affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during thereporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to bereasonable under the circumstances. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to,revenue recognition, accrued research and development expenses, useful lives assigned to property and equipment, as well as the fair values of commonstock, convertible preferred stock and convertible preferred stock tranche liability. The Company assesses estimates on an ongoing basis; however, actualresults could materially differ from those estimates.Comprehensive Income (Loss) —Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period fromtransactions and other events and circumstances from non-owner sources. The Company’s only element of other comprehensive income (loss) is unrealizedgains and losses on available-for-sale investments.Cash and Cash Equivalents—Cash and cash equivalents consist of standard checking accounts, money market accounts and certain investments. TheCompany considers all highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less to be cash equivalents.Short-Term Investments—Short-term investments represent holdings of available-for-sale marketable securities in accordance with the Company’sinvestment policy and cash management strategy. Short-term investments mature within one-year from the balance sheet date. Investments in marketablesecurities are recorded at fair value, with any unrealized gains and losses, reported within accumulated other comprehensive income as a separate componentof stockholders’ equity (deficit) until realized or until a determination is made that an other-than-temporary decline in market value has occurred. Theamortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, togetherwith interest on securities, are included in interest income on the Company’s consolidated statements of operations. The cost of marketable securities sold isdetermined based on the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of otherincome (expense), net.Restricted Cash—The Company had restricted cash of $1.8 million as of December 31, 2018 and 2017, which represents cash serving as collateral forletters of credit issued for security deposits for the Company’s facility leases in Bedford, Massachusetts.Concentrations of Credit Risk—Financial instruments that potentially subject the Company to significant concentration of credit risk consistprimarily of cash, cash equivalents, short-term investments and restricted cash. Periodically, the Company may maintain deposits in financial institutions inexcess of government insured limits. We believe that we are not exposed to significant credit risk as our deposits are held at financial institutions thatmanagement believes to be of high credit quality and the Company has not experienced any losses on these deposits. We regularly invest excess cash withmajor financial institutions in money market funds, U.S. government and corporate debt securities and commercial paper, all of which can be readilypurchased and sold using established markets. As of December 31, 2018, the Company’s cash and cash equivalents were held with two financial institutions.We believe that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are eithergovernment backed or of high credit rating.Deferred Offering Costs—The Company capitalized incremental legal, professional accounting and other third-party fees that were directlyassociated with its planned IPO as other non-current assets until the IPO was consummated. After consummation of the IPO, these costs were recorded instockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.Guarantees and Indemnifications—As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees forcertain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through December 31, 2018, the Companyhad not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significantclaims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no relatedliabilities have been established.F-9 Property and Equipment—Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. Whenassets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and any resulting gain or loss isincluded in the determination of net loss. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets.Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. Computer equipment and software 3 yearsLaboratory equipment and office furniture 5 yearsLeasehold improvements Shorter of the lease termor estimated useful life Impairment of Long-Lived Assets—The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairmentwhenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If suchassets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fairvalue of the asset. To date, no impairments have been recognized for these assets.Derivative Instruments—The Company determined that its obligation to issue, and the Company’s investors’ obligation to purchase, additionalshares of Series A convertible preferred stock in the second of two tranches represented a freestanding financial instrument. The freestanding tranche liabilitywas initially recorded at fair value, with gains and losses arising from changes in fair value recognized in other income (expense) in the statements ofoperations at each period end while such instruments were outstanding. The liability was valued using an income approach, specifically the discounted cashflow method. On February 10, 2017, the Company issued 28,873,237 shares of Series A Preferred Stock at $0.71 per share upon the achievement of certaindevelopment milestones, resulting in net proceeds of $20.5 million. Accordingly, the convertible preferred stock tranche liability was re-measured at fairvalue on February 10, 2017 using an income approach and then derecognized with a corresponding amount recorded to Series A Preferred Stock. TheCompany had no liability related to the convertible preferred stock as of December 31, 2017 or December 31, 2018.Research and Development Costs—Research and development costs are charged to expense as incurred. Research and development expense consistsof expenses incurred in performing research and development activities, including salaries and benefits, materials and supplies, preclinical expenses, stock-based compensation expense, depreciation of equipment, contract services, and other outside expenses.Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using informationprovided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements,which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid expense or accrued research anddevelopment expense.Income Taxes—The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have beenincluded in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differencesbetween the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted taxrates expected to be in effect in the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is morelikely than not that these assets may not be realized. The Company determines whether it is more likely than not that a tax position will be sustained uponexamination. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit tobe recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likelyof being realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of itsprovision for income taxes. Since inception, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as therealization of the net deferred tax assets has not been determined to be more likely than not.Segment Information—Operating segments are identified as components of an enterprise about which separate discrete financial information is madeavailable for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. TheCODM is the Company’s Chief Executive Officer. The Company manages its operations as a single segment for the purposes of assessing performance andmaking operating decisions. The Company’s singular focus is dedicated to translating proprietary gene editing and gene therapy technology into noveltreatments for patients with rare genetic diseases. All of the Company’s tangible assets are held in the United States.F-10 Revenue Recognition— The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists;delivery has occurred or services have been rendered; the Company’s price to the buyer is fixed or determinable; and collectability is reasonably assured. TheCompany records as deferred revenue any amounts received or billed prior to satisfying the revenue recognition criteria. Deferred revenue not expected to berecognized within the next twelve months is reported as non-current deferred revenue.In November 2017, the Company entered into a collaboration and license agreement for research, development, manufacturing and commercializationof products using the Company’s gene editing technology for the treatment of certain diseases (see Note 16). Consideration the Company may receive underthe collaboration and license agreement include upfront nonrefundable payments, payments for research and manufacturing activities, payments based uponthe achievement of certain milestones and royalties on any resulting net product sales.Multiple Element ArrangementsThe terms of the collaboration and license agreement contain multiple deliverables, including licenses, research and development activities,participation on steering committees and manufacturing activities. The Company evaluates the activities in its collaboration agreements to determine if theactivities are consistent with a typical vendor-customer relationship, and if so, accounts for them in accordance with Accounting Standards Codification(“ASC”) Topic 605-25, Revenue Recognition – Multiple Element Arrangements. If not, the Company evaluates other applicable guidance.The Company evaluates multiple element arrangements to determine the deliverables included in the arrangement and whether the individualdeliverables represent separate units of accounting, or whether they must be accounted for as a combined unit of accounting. When deliverables areseparable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenuerecognition principles are applied to each unit. This evaluation requires the Company to make judgments about the individual deliverables and whether suchdeliverables (1) have value to the customer on a standalone basis and (2) if the arrangement includes a general right of return with respect to the delivereditem, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control. In assessing whether an item hasstandalone value, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaborationpartner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner canuse any other deliverable for its intended purpose without the receipt of the remaining deliverables, whether the value of the deliverable is dependent on anyundelivered item, and whether there are other vendors that can provide the undelivered items.The consideration received under the arrangement that is fixed or determinable is then allocated among the separate units of accounting based on therelative selling prices of the separate units of accounting. The Company determines the estimated selling price for units of accounting within eacharrangement using vendor-specific objective evidence (“VSOE”), if available; third-party evidence (“TPE”) of selling price if VSOE is not available; or bestestimate of selling price (“BESP”), if neither VSOE nor TPE is available. The Company typically uses BESP to estimate the selling price as it generally doesnot have VSOE or TPE of selling price for its units of accounting. Determining the BESP for a unit of accounting requires significant judgment. Indeveloping the BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors, including factorsthat were contemplated in negotiating the agreement with the customer and estimated costs.The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria are satisfied forthat particular unit of accounting. The Company recognizes revenue from a combined unit of accounting over the contractual or estimated performanceperiod for the undelivered items. If there is no discernible pattern of performance or objectively measurable performance measures do not exist for a unit ofaccounting, then the Company recognizes revenue on a straight-line basis over the period the Company is expected to complete its performance obligations.Conversely, if the pattern of performance over which the service is provided to the customer can be determined and objectively measurable performancemeasures exist, then the Company recognizes revenue under the arrangement using the proportional performance method. Amounts received prior tosatisfying the associated revenue recognition criteria are recorded as deferred revenue on the consolidated balance sheets. Amounts not expected to berecognized within one year following the balance sheet date are classified as non-current deferred revenue.F-11 Significant management judgment is required in determining the level of effort required under an arrangement and the period over which theCompany expects to complete its performance obligations under an arrangement. Steering committee services that are not inconsequential or perfunctory andthat are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, ifany, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performanceobligations.Consideration for development and sales milestones are generally not considered fixed or determinable until the milestone is achieved. Considerationdue to or received by the Company for the achievement of milestones are allocated to the units of accounting, if applicable, and recognized as revenue for theportion of the performance obligation that is complete at the time the milestone is achieved. The Company will defer the remaining portion of the milestonepayment and recognize it as revenue over the remaining term of the performance obligation. If no such performance obligation exists, milestone payments arerecognized as revenue upon achievement, assuming all other revenue recognition criteria are met.Royalties earned on product sales, if any, are recognized based on contractual terms of the agreement when reported sales are reliably measurable andcollectibility is reasonably assured, provided that there are no performance obligations then remaining. To date, none of the Company’s product candidateshave been approved and, therefore, the Company has not earned any royalty revenue from product sales.In the event that the agreement was to be terminated and the Company had no further performance obligations at that time, the Company wouldrecognize as revenue any portion of the upfront payment and other payments that had not previously been recorded as revenue and were classified as deferredrevenue at the date of such termination.Stock-based Compensation—The Company recognizes compensation expense for awards to employees based on the grant date fair value of stock-based awards on a straight-line basis over the period during which an award holder provides service in exchange for the award. The fair value of options onthe date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expectedterm. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data andjudgment regarding future trends and factors. Stock-based awards granted to nonemployees are initially recorded at fair value and are re-measured at eachreporting period as the awards vest and expense is recognized over the period the services are provided.The purchase price of common stock under the Company’s employee stock purchase plan (“ESPP”) is equal to 85% of the lesser of (i) the fair marketvalue per share of the common stock on the first business day of an offering period and (ii) the fair market value per share of the common stock on thepurchase date. The fair value of the look-back provision under the ESPP is calculated using the Black-Scholes option pricing model. The fair value of thelook-back provision plus the 15% discount is recognized as compensation expense over the 180-day purchase period.Fair Value Measurements—Certain assets and liabilities are reported on a recurring basis at fair value. Fair value is defined as the exchange pricethat would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in anorderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use ofobservable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one ofthe following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: •Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quotedprices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated byobservable market data. •Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of theassets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.Net Loss per Share—Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstandingduring the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, ifdilutive, the weighted-average number of potential shares of common stock. Net loss per share was calculated using the two-class method, which is anearnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’sconvertible preferred stock contained participation rights in any dividend paid by the Company and was deemed to be a participating security. Net lossattributable to common stockholders and participating preferred shares was allocated to each share on an as-F-12 converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share inlosses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded.Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if converted method. The Company allocatesearnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weightedaverage number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares,including outstanding stock options, unvested shares of common stock and convertible preferred stock.Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which theCompany reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same asbasic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.Recent Accounting Pronouncements—The Jumpstart Our Business Startups Act of 2012 permits an emerging growth company to take advantage ofan extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwiseapply to private companies. As an emerging growth company, the Company has elected to take advantage of this extended transition period.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue (Topic 606):Revenue from Contracts with Customers (“ASU 2014-09”), which will replace existing revenue recognition standards and significantly expand the disclosurerequirements for revenue arrangements. This new standard requires a company to recognize revenue when it transfers goods or services to customers in anamount that reflects the consideration that the company expects to receive for those goods or services. This will require companies to use more judgementand make more estimates than under current guidance. The new standard and the subsequent amendments will be effective for the Company beginning onJanuary 1, 2019.The Company has substantially completed its evaluation of the impact of the adoption of ASU 2014-09 on the consolidated financial statements.Under ASU 2014-09, with respect to the Company’s collaboration with Novartis, the Company expects to account for the (1) research, development andcommercialization and manufacturing licenses, (2) the research activities performed by us, (3) service on the joint committees and (4) manufacturing duringthe research and development terms as a single performance obligation, which is consistent with the accounting under the existing standard. The Companyexpects to recognize revenue from this collaboration using the cost-to-cost method, whereby the extent of progress towards completion is measured based onthe ratio of actual costs incurred to the total estimated costs expected. Significant judgment is required in making estimates of total expected costs tocomplete the single performance obligation over the performance period. Revenue will be recorded as a percentage of the estimated transaction price basedon the extent of progress towards completion. The estimated transaction price will include variable consideration for milestone payments, however suchmilestone payments will remain fully constrained as of the adoption date as it is not probable at this time that the Company will achieve those milestones.The estimate of total costs expected and the estimate of variable consideration to be included in the transaction price will be updated at each reporting date.The cumulative effect of revisions to these estimates will be recorded in the period in which changes are identified.Under the new standard, the Company expects to recognize revenue from its collaboration agreement with Novartis earlier during the performanceperiod as a result of applying the cost-to-cost method, in contrast to recognizing revenue on a straight-line basis over the estimated performance period underthe existing standard.The Company plans to adopt the new standard using the full retrospective method, and thus will apply the new standard retrospectively to each priorreporting period. As a result, the Company expects an increase to collaboration revenue for the year ended December 31, 2018 of approximately $1.5 to $2.0million, with a corresponding decrease to deferred revenue. The impact to the year ended December 31, 2017 is insignificant.In December 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB EmergingIssues Task Force), which requires that amounts described as restricted cash or cash equivalents must be included with cash and cash equivalents whenreconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for the Companybeginning January 1, 2019, with early application permitted. The new Standard must be applied retrospectively to all periods presented. The Company doesnot expect the adoption of this standard will have a material impact on its consolidated financial statements.F-13 In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which eliminates the current tests for lease classification under U.S. GAAPand requires lessees to recognize the right-to-use assets and related lease liabilities in the balance sheet. ASU No. 2016-02 is effective for the Companybeginning January 1, 2020 with early application permitted. The new standard provides for a modified retrospective application. The Company is evaluatingthe impact adoption of this standard will have on its consolidated financial statements.In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting, which changes certain aspects of the accounting for share-based payments granted to nonemployees. Under the ASU, most of theguidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 iseffective for the Company beginning January 1, 2020. Early application of this standard is permitted however companies may not apply this standard earlierthan the application of ASU 2014-09. The Company is evaluating the impact adoption of this standard will have on its consolidated financial statements.3. CASH AND CASH EQUIVALENTSFrom time to time, the Company may have cash balances in financial institutions in excess of federal deposit insurance limits. The Company hasnever experienced any losses related to these balances. The Company considers only those investments that are highly liquid, readily convertible to cash,and that mature within three months from date of purchase to be cash equivalents.The following table summarizes the Company’s cash and cash equivalents: December 31, 2018 2017 (in thousands) U.S. Treasury securities $35 $— Cash 471 7,393 Commercial paper 5,974 — Money market funds 31,740 44,182 Total cash and cash equivalents $38,220 $51,575 4. SHORT-TERM INVESTMENTSThe Company invests its excess cash in fixed income instruments denominated and payable in U.S. dollars including U.S. treasury securities,commercial paper, corporate debt securities and assets-backed securities in accordance with the Company’s investment policy that primarily seeks tomaintain adequate liquidity and preserve capital.The Company has designated all investments as available-for-sale and therefore such investments are reported at fair value. Unrealized gains or losseson investments are recorded in accumulated other comprehensive income or loss, a component of stockholders’ equity (deficit), on the Company’sconsolidated balance sheets.F-14 The following table summarizes the Company’s investments, which are included in cash equivalents and short-term investments: December 31, 2018 AmortizedCost UnrealizedGains UnrealizedLosses Fair Value (in thousands) Money market mutual funds $31,740 $— $— $31,740 Asset-backed securities 19,541 — (21) 19,520 Commercial paper 78,571 — — 78,571 Corporate debt securities 54,511 — (50) 54,461 U.S. Treasury securities 29,980 — (6) 29,974 Total $214,343 $— $(77) $214,266 December 31, 2017 AmortizedCost UnrealizedGains UnrealizedLosses Fair Value (in thousands) Money market mutual funds $44,182 $— $— $44,182 Asset-backed securities 7,428 — (6) 7,422 Commercial paper 34,882 — — 34,882 Corporate debt securities 26,906 — (50) 26,856 U.S. Treasury securities 8,941 — (17) 8,924 Total $122,339 $— $(73) $122,266 As of December 31, 2018, the Company does not consider those securities that are in an unrealized loss position to be other-than-temporarilyimpaired, as it has the ability to hold such investments until recovery of the fair value. The Company utilizes the specific identification method in computingrealized gains and losses. The Company had no realized gains and losses on its available-for-sale securities for the years ended December 31, 2018 and 2017.The contractual maturity dates of all of the Company’s investments are less than one year.5. PROPERTY AND EQUIPMENTProperty and equipment, net consists of the following: December 31, 2018 2017 (in thousands) Laboratory equipment $9,309 $3,714 Computers and purchased software 248 253 Furniture and fixtures 1,066 51 Leasehold improvements 24,520 34 Assets not yet in service 2,602 — Property and equipment, at cost 37,745 4,052 Less accumulated depreciation and amortization (2,108) (898)Property and equipment—net $35,637 $3,154 Depreciation expense for the years ended December 31, 2018 and 2017 was approximately $1.3 million and $0.7 million, respectively. The Companydisposed of approximately $0.1 million of property and equipment, net during the year ended December 31, 2018, primarily related to laboratory equipmentno longer in use. There were no disposals during the year ended December 31, 2017. Leasehold improvements as of December 31, 2018 consist primarily ofcosts associated with the buildout of the Company’s new research and development, manufacturing and general office space in Bedford, Massachusetts,which the Company occupied as of December 31, 2018. Assets not yet in service consists of manufacturing equipment and furniture purchased for the newspace that was not in service as of December 31, 2018.6. FAIR VALUE MEASUREMENTSThe Company’s financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and accounts payable. The carryingamount of cash, restricted cash and accounts payable are each considered a reasonable estimate of fair value due to the short-term maturity.F-15 Assets measured at fair value on a recurring basis were as follows: Description December 31, 2018 Quoted Prices(Unadjusted) inActive Marketsfor IdenticalAssets(Level 1) Significant OtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) (in thousands) Cash equivalents: Money market mutual funds $31,740 $31,740 $— $— Commercial paper 5,974 — 5,974 — U.S. Treasury securities 35 35 — — Total cash equivalents $37,749 $31,775 $5,974 $— Short-term investments: Asset-backed securities $19,520 $— $19,520 $— Commercial paper 72,597 — 72,597 — Corporate debt securities 54,461 — 54,461 — U.S. Treasury securities 29,939 — 29,939 — Total short-term investments $176,517 $— $176,517 $— Total financial assets $214,266 $31,775 $182,491 $— Description December 31, 2017 Quoted Prices(Unadjusted) inActive Marketsfor IdenticalAssets(Level 1) Significant OtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) (in thousands) Cash equivalents: Money market mutual funds $44,182 $44,182 $— $— Total cash equivalents $44,182 $44,182 $— $— Short-term investments: Asset-backed securities $7,422 $— $7,422 $— Commercial paper 34,882 — 34,882 — Corporate debt securities 26,856 — 26,856 — U.S. Treasury securities 8,924 — 8,924 — Total short-term investments $78,084 $— $78,084 $— Total financial assets $122,266 $44,182 $78,084 $— Short-term securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standardmodels that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for theunderlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, canbe derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The convertible preferred stock tranche liability, which was derecognized in February 2017 (see Note 11), was stated at fair value and was measuredusing a Level 3 input because the fair value measurement was based, in part, on significant inputs not observed in the market.F-16 The reconciliations of changes in the fair value of financial instruments based on Level 3 inputs for the year ended December 31, 2017 consisted of: (in thousands) Fair value as of January 1, 2017 $4,247 Change in fair value of convertible preferred stock tranche liability 876 Reduction in tranche liability due to preferred stock issuance (5,123)Fair value as of December 31, 2017 $— The Company had no liability related to the convertible preferred stock as of December 31, 2018. There were no transfers between fair value measurelevels during the years ended December 31, 2018 and 2017.7. ACCRUED EXPENSES AND OTHER LIABILITIESAccrued expenses and other liabilities consist of the following: December 31, 2018 2017 (in thousands) Accrued compensation and benefits $3,370 $1,435 Accrued research and development expenses 1,059 182 Accrued professional fees 195 1,120 Accrued unvested common stock subject to repurchase 112 123 Accrued other 304 — Total accrued expenses and other liabilities $5,040 $2,860 8. COMMITMENTS AND CONTINGENCIESOperating Leases—In September 2016, the Company entered into a noncancelable operating lease beginning in November 2016 for office,laboratory and manufacturing space in Bedford, Massachusetts, that expires in October 2021, with an option for an additional three-year term. In addition tothe leased space, the Company has certain rights to expand the lease to include certain adjacent property. As of December 31, 2018, no expansion rights hadbeen exercised. On August 13, 2018, the Company entered into a sublease agreement for the entire leased premises, with a related party. The rentcommencement date of the sublease was December 2018, and the sublease will terminate on the scheduled termination date of the original lease. Under theterms of the sublease, the subtenant is obligated to pay the Company aggregate base rent of approximately $2.7 million over the term of the sublease inaddition to a passthrough of operating expenses and real estate taxes charged by the landlord. The Company did not record a loss on the sublease as futurepayments to its landlord were not materially different from future rent payments expected from the subtenant over the term of the sublease.In December 2017, the Company entered into a noncancelable operating lease for approximately 67,000 square feet of research and development,manufacturing and general office space in Bedford, Massachusetts. The lease expires in February 2027 with an option for an additional five-year term. Rent isdue under the lease in two phases; rent on the first 46,000 square feet started in September 2018 and rent on the remaining 21,000 square feet will start inMarch 2019. The initial annual base rent is $39.50 per square foot and will increase by three percent annually. The Company is obligated to pay, on a pro-rata basis, real estate taxes and operating costs related to the premises.F-17 Future minimum lease payments, net of anticipated sublease payments, as of December 31, 2018 are as follows: Amount For the Years Ending December 31, (in thousands) 2019 $2,537 2020 2,755 2021 2,758 2022 2,928 2023 3,016 Thereafter 10,161 Total future minimum lease payments $24,155 The lease agreement entered into in December 2017 allows for a tenant improvement allowance not to exceed $10.9 million to be applied to the totalcost of tenant improvements to the leased premises. The tenant improvement allowance must be used on or before August 31, 2019 or it will be deemedforfeited with no further obligation by the landlord. Tenant improvement allowances due or received are recorded as deferred rent incentives on theCompany’s consolidated balance sheets and are recognized as a reduction to rent expense over the term of the lease. As of December 31, 2018, deferred rentincentives totaled $8.0 million.Rent expense, net of amortization of the deferred rent incentive, for the years ended December 31, 2018 and 2017 was $2.7 million and $0.9 million,respectively. The Company maintains letters of credit, secured by restricted cash, for security deposits totaling $1.8 million as of December 31, 2018 and2017, in conjunction with its current leases.9. LICENSE AGREEMENTSCity of HopeIn April 2016, the Company entered into a license agreement with City of Hope (“COH”), an academic research and medical center. The license termextends until the last to expire patent, unless terminated earlier by either party under certain provisions. The Company is required to pay an annual licensefee of $25,000, reimburse COH for patent costs incurred, pay amounts up to $3.2 million upon the achievement of certain development andcommercialization milestones for each product under the license, pay royalties on future sales in the low single- digits and royalties on sublicense revenue inthe low double-digits, if any.As a result of the execution of the Collaboration Agreement with Novartis (see Note 16), the Company paid $4.5 million to COH in December 2017,under the terms of the license agreement.In May 2015, the Company entered into a sponsored research agreement with COH with a goal to identify potential treatments for diseases in humans.The agreed upon commitment for research and development services is for up to $1.1 million which continues through 2019. Under this agreement, theCompany has recorded $0.1 million in research and development expense for each of the years ended December 31, 2018 and 2017.The Company’s future contractual obligation under the sponsored research agreement is $0.6 million as of December 31, 2018.California Institute of TechnologyIn September 2016, the Company entered into a co-exclusive license agreement with the California Institute of Technology (“Caltech”), an academicresearch institute. The license term extends until the expiration, revocation, invalidation or unenforceability of the licensed patent rights. The Company isrequired to pay an annual minimal royalty fee of $20,000, reimburse for patent costs incurred, pay an amount up to $7.2 million upon the achievement ofcertain development and regulatory milestones and pay royalties on future sales in the low single-digits and royalties on sublicense revenue in the mid tohigh single-digits, if any.As a result of the execution of the Collaboration Agreement with Novartis (see Note 16), the Company paid $0.1 million to Caltech in December2017, under the terms of the license agreement.F-18 10. INCOME TAXESA reconciliation between the U.S. federal statutory tax rate and the Company’s effective tax rate is summarized as follows: For the Years Ended December 31, 2018 2017 Federal statutory rate 21.0% 34.0%Tax credits 17.7% 4.8%State taxes, net of federal tax benefit 5.5% 5.0%Change in tranche liability —% (1.0%)Non-deductible expenses (0.3%) (1.8%)Impact of federal rate change —% (15.2%)Change in valuation allowance (43.9%) (25.8%)Effective income tax rate —% —% The principal components of the Company’s deferred tax assets and liabilities consist of the following: December 31, 2018 2017 (in thousands) Deferred tax assets: Net operating losses $14,848 $9,180 R&D credits 12,506 1,776 Deferred revenue 8,159 — Deferred rent 2,854 113 Capitalized R&D costs 1,375 1,362 Equity compensation 443 27 Accrued expense and other 115 196 Total deferred tax assets 40,300 12,654 Deferred tax liabilities: Depreciation (2,680) (166)Total deferred tax liabilities (2,680) (166)Valuation allowance (37,620) (12,488)Net deferred taxes $— $— On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”) tax reform legislation. This legislationmakes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and arepeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 34% down to 21% starting onJanuary 1, 2018. As a result of the enacted law, the Company was required to revalue its deferred tax assets and liabilities at the 21% rate as of December 22,2017.The Company has no income tax expense due to the operating loss incurred for the years ended December 31, 2018 and 2017. The Company hasprovided a valuation allowance for the full amount of the net deferred tax assets as the realization of the net deferred tax assets is not determined to be morelikely than not.At December 31, 2018, the Company has $52.4 million and $46.6 million of federal and state net operating loss carryforwards, respectively, thatexpire at various dates through 2038. Included in the federal net operating loss of $52.4 million is $21.3 million that can be carried forward indefinitely. AtDecember 31, 2018, the Company has $2.5 million and $3.5 million of federal and state research and development credit carryforwards, respectively, thatexpire at various dates through 2038. At December 31, 2018, the Company has $7.3 million of orphan drug credit carryforwards that expire at various datesthrough 2038. The valuation allowance increased in 2018 and 2017 by $25.1 million and $7.7 million, respectively, due to the increase in the deferred taxassets by the same amounts, primarily due to the net operating loss carryforwards and research and development tax credits not utilized.For all years through December 31, 2018, the Company generated research credits but has not conducted a study to document the qualified activities.This study may result in an adjustment to the Company’s research and development creditF-19 carryforwards. Since a full valuation allowance has been provided against the Company’s research and development credits, any reduction in the grossdeferred tax asset established for the research and development credit carryforwards would not result in any net impact to the Company’s consolidatedfinancial statements.Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the netoperating loss carryforward period. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including asale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating losscarryforwards that could be used annually to offset future taxable income. The Company has not completed a study to assess whether a change of control hasoccurred or whether there have been multiple changes of control since the Company’s formation due to the significant complexity and cost associated withsuch study and because there could be additional changes in control in the future. As a result, the Company is not able to estimate the effect a change incontrol would have, if any, on the Company’s ability to utilize its net operating loss and research and development credit carryforwards in the future.The Company files tax returns in the United States and Massachusetts. All tax years since inception remain open to examination by the major taxingjurisdictions to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the InternalRevenue Service (“IRS”) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS orany other jurisdictions for any tax years.As of December 31, 2018, the Company had no uncertain tax positions. The Company has elected to recognize interest and penalties related toincome tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2018 and 2017.11. CONVERTIBLE PREFERRED STOCKOn April 2, 2018, the Company closed its initial public offering with the sale of 10,350,000 shares of common stock, including shares issued upon theexercise in full of the underwriters’ over-allotment option, at a public offering price of $16.00 per share, resulting in net proceeds of $150.8 million, afterdeducting underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all of the Company’s outstanding shares ofconvertible preferred stock automatically converted into 24,168,656 shares of common stock at the applicable conversion ratio then in effect.Prior to the IPO, the Company had financed its operations primarily through the sales of preferred stock and through funding from a collaborationpartner. In December 2015, the Company authorized the sale and issuance of up to 62,269,145 shares of Series A preferred stock. The Series A preferredfinancing was structured to close in two tranches. The first tranche closed on December 22, 2015 with the issuance of 28,873,237 shares at $0.71 per shareresulting in gross cash proceeds of $20.5 million. Issuance costs totaled $0.1 million. As part of the closing on December 22, 2015, the Company also issued4,522,670 shares of Series A in connection with the conversion of notes payable to investors that were originally issued in 2015.The investors in the first tranche were granted the right to purchase an additional 28,873,237 shares of Series A preferred stock to be offered in thesecond tranche at $0.71 per share. The Company determined that the right of the investors to purchase Series A preferred stock in the second tranche met thedefinition of a freestanding financial instrument and therefore was recognized as a liability at fair value until the tranche right was exercised in February2017.Upon the first tranche closing, the Company recognized a liability of $6.2 million for the fair value of the convertible preferred stock tranche liabilityrepresenting the future obligation. The convertible preferred stock tranche liability was re-measured with a fair value of $5.1 million as of February 9, 2017.The fair value of the convertible preferred stock tranche liability was determined using an option pricing model with the following assumptions: February 9,2017 Probability of milestone closing 99.9%Expected years closing 0.0 Discount rate 1.0%Risk-free interest rate 0.84%Expected dividend yield 0.0%F-20 The Company adjusted the carrying value of the convertible preferred stock tranche liability to its estimated fair value at each reporting date andupon issuance of the second tranche of Series A preferred stock on February 10, 2017, recognizing the changes in fair value in other income (expense) in theconsolidated statement of operations. During the year ended December 31, 2017, the Company recognized total other income (expense) of $(0.9) millionrelated to changes in the fair value of the convertible preferred stock tranche liability.On February 10, 2017, the Company issued 28,873,237 shares of Series A preferred stock at $0.71 per share for gross proceeds of $20.5 million.Issuance costs were less than $0.1 million. Accordingly, the convertible preferred stock tranche liability was re-measured at fair value and then derecognizedwith a corresponding amount of $5.1 million reclassified to Series A preferred stock.On July 28, 2017, the Company authorized the sale of 64,930,561 shares of Series B convertible preferred stock and issued 57,986,116 shares ofSeries B convertible preferred stock at $1.44 per share, for gross proceeds of $83.5 million upon closing. Total issuance costs were $0.4 million. All holders ofSeries A convertible preferred stock participated in the Series B issuance along with new investors.On November 6, 2017, the Company entered into a Collaboration and License Agreement with Novartis for the development and commercializationof products using the Company’s gene editing technology for the treatment of certain ophthalmic targets and sickle cell disease (see Note 16). Under theterms of the Collaboration Agreement, Novartis invested $10.0 million to purchase 6,944,445 shares of Series B convertible preferred stock. The differencebetween the cash proceeds received from Novartis for the purchase of Series B preferred stock and the $11.7 million estimated fair value of the Series B at thetime of purchase was allocated from the collaboration proceeds to Series B preferred stock.12. STOCKHOLDERS’ EQUITYCommon Stock—Voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers andpreferences of the holders of the preferred stock.Voting—Each holder of outstanding shares of common stock are entitled to one vote in respect of each share. The holders of outstanding shares ofcommon stock, voting together as a single class, shall be entitled to elect one director. The number of authorized shares of common stock may be increased ordecreased by the affirmative vote of a majority of the outstanding shares of common stock and preferred stock voting together as a single class.Dividends—Subject to the payment in full of any preferential dividends to which the holders of preferred stock are entitled, the holders of commonstock shall be entitled to receive dividends out of funds legally available therefore at such times and in such amounts as the Board of Directors maydetermine in its sole discretion.Liquidation Rights—In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, after the payment orprovision for payment of all debts and liabilities of the Company and any preferential amounts to which the holders of preferred stock are entitled withrespect to the distribution of assets in liquidation, the holders of common stock shall be entitled to share ratably in the remaining assets of the Companyavailable for distribution. 13. STOCK OPTION PLAN2015 Stock Incentive PlanIn December 2015, the Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which provided for the grant of qualifiedincentive and nonqualified stock options or restricted stock awards to the Company’s employees, officers, directors, advisors, and outside consultants. InFebruary 2017 and July 2017, the Board of Directors amended the 2015 Plan to increase the number of shares available for issue under the 2015 Plan to2,446,323 and 3,225,346, respectively.Stock options generally vest over a four-year period and expire ten years from the date of grant. Certain options provide for accelerated vesting ifthere is a change in control, as defined in the 2015 Plan. At December 31, 2018, there were no shares available for future grant under the 2015 Plan.2018 Incentive Award PlanF-21 In March 2018, the Company’s Board of Directors adopted and the Company’s stockholders approved the Homology Medicines, Inc. 2018 IncentiveAward Plan (the “2018 Plan” and, together with the 2015 Plan, the “Plans”), which became effective on the day prior to the first public trading date of theCompany’s common stock. Upon effectiveness of the 2018 Plan, the Company ceased granting new awards under the 2015 Plan.The 2018 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, stockappreciation rights and other stock or cash based awards to employees and consultants of the Company and certain affiliates and directors of the Company.The number of shares of common stock initially available for issuance under the 2018 Plan was 3,186,205 shares of common stock plus the number of sharessubject to awards outstanding under the 2015 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company onor after the effective date of the 2018 Plan. In addition, the number of shares of common stock available for issuance under the 2018 Plan is subject to anannual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028 equal to the lesser of (i) 4%of the Company’s outstanding shares of common stock on the final day of the immediately preceding calendar year and (ii) such smaller number of shares ofcommon stock as determined by the Company’s Board of Directors, provided that not more than 20,887,347 shares of common stock may be issued under the2018 Plan upon the exercise of incentive stock options. Therefore, on January 1, 2019, an additional 1,494,341 shares were added to the 2018 Plan,representing 4% of total common shares outstanding at December 31, 2018. As of December 31, 2018, there were 1,896,926 shares available for future grantunder the 2018 Plan.2018 Employee Stock Purchase PlanIn March 2018, the Company’s Board of Directors adopted and the Company’s stockholders approved the Homology Medicines, Inc. 2018 EmployeeStock Purchase Plan (the “2018 ESPP”). The 2018 ESPP allows employees to buy Company stock through after-tax payroll deductions at a discount frommarket value. The number of shares of common stock initially available for issuance under the 2018 ESPP was 353,980 shares of common stock plus anannual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028 equal to the lesser of (i) 1%of the Company’s outstanding shares of common stock on the final day of the immediately preceding calendar year and (ii) such smaller number of shares ofcommon stock as determined by the Company’s Board of Directors, provided that not more than 4,778,738 shares of common stock may be issued under the2018 ESPP. Therefore, on January 1, 2019, an additional 373,585 shares were added to the 2018 ESPP, representing 1% of total common shares outstandingat December 31, 2018. The 2018 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.The Company commenced offerings under the 2018 ESPP on September 1, 2018. Under the 2018 ESPP, employees may purchase common stockthrough after-tax payroll deductions at a price equal to 85% of the lower of the fair market value on the first trading day of an offering period or the lasttrading day of an offering period. The 2018 ESPP generally provides for offering periods of six months in duration with purchase periods ending on the finaltrading day of each February and August. In accordance with the Internal Revenue Code, no employee will be permitted to accrue the right to purchase stockunder the ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fairmarket value per share of our common stock as of the first day of the offering period).The Company recorded $0.1 million of stock-based compensation pursuant to the 2018 ESPP during the year ended December 31, 2018.Stock-based compensation expenseThe Company recorded stock-based compensation expense related to stock options and shares purchased under the 2018 ESPP as follows: For the Years Ended December 31, 2018 2017 (in thousands) Research and development $1,117 $115 General and administrative 1,506 141 $2,623 $256 As of December 31, 2018, there was $15.7 million of unrecognized compensation expense related to unvested employee and non-employee share-based compensation arrangements granted under the Plans. The unrecognized compensation expense is estimated to be recognized over a period of 2.9 yearsat December 31, 2018.F-22 The Company recognizes compensation expense for awards to employees based on the grant date fair value of stock-based awards on a straight-linebasis over the period during which an award holder provides service in exchange for the award, which is generally the vesting period. The fair value of eachoption award is estimated on the date of grant using the Black-Scholes option- pricing model, with the assumptions noted in the table below. Expectedvolatility for the Company’s common stock was determined based on an average of the historical volatility of a peer group of publicly traded companies thatare similar to the Company. The expected term of options granted to employees was calculated using the simplified method, which represents the average ofthe contractual term of the option and the weighted-average vesting period of the option. The Company uses the simplified method because it does not havesufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The contractual life of the options was used forthe expected term of options granted to non-employees. The assumed dividend yield is based upon the Company’s expectation of not paying dividends inthe foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods commensurate with the expectedterm of the award. The Company recognizes forfeitures as they occur.In determining the exercise prices for options granted, the Company’s Board of Directors considered the fair value of the common stock as of themeasurement date. For awards granted prior the Company’s IPO, the Board of Directors determined the fair value of the common stock at each award grantdate based upon a variety of factors, including the results obtained from an independent third-party valuation, the Company’s financial position andhistorical financial performance, the status of technological developments within the Company’s proposed products, an evaluation or benchmark of theCompany’s competition, the current business climate in the marketplace, the illiquid nature of the common stock, arm’s length sales of the Company’scapital stock, including convertible preferred stock, the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidityevent, among others. For awards granted after the Company’s IPO, the exercise price is equal to the closing price as quoted by Nasdaq on the grant date of theawards.The assumptions used in the Black-Scholes option pricing model are as follows: For the Years Ended December 31, 2018 2017Expected volatility 52.80% - 60.12% 52.73% - 59.40%Weighted-average risk-free interest rate 2.33% - 3.08% 2.04% - 2.37%Expected dividend yield — % — %Expected term (in years) 5.5 - 7.6 5.9 - 8.6Underlying common stock fair value $6.63 - $24.28 $0.63 - $6.63 A summary of option activity under the Plans during the year ended December 31, 2018 is as follows: Number ofOptions Weighted-Average ExercisePrice per Share Weighted-AverageRemainingContractualTerm (in Years) AggregateIntrinsic Value (in thousands) Outstanding as of January 1, 2018 1,971,711 $3.61 9.3 $5,977 Granted 1,392,259 $19.05 Exercised (89,050) $1.70 Cancelled/Forfeited (71,798) $2.72 Outstanding at December 31, 2018 3,203,122 $10.47 8.9 $39,018 Vested and expected to vest at December 31, 2018 3,203,122 $10.47 8.9 $39,018 Exercisable at December 31, 2018 716,531 $3.82 8.1 $13,287 The total intrinsic value of options exercised during the year ended December 31, 2018 was $1.8 million. There were no option exercises in 2017. Theweighted-average grant date fair value of options granted during the years ended December 31, 2018 and 2017 was $10.41 and $2.78, respectively.Stock options granted pursuant to the 2015 Plan permit option holders to elect to exercise unvested options in exchange for unvested common stock.Options granted under the 2015 Plan that are exercised prior to vesting will continue to vest according to the respective option agreement, and such unvestedshares are subject to repurchase by the Company at the optionee’s original exercise price in the event the optionee’s service with the Company voluntarily orinvoluntarily terminates.F-23 A summary of the Company’s unvested common stock from early exercises that is subject to repurchase by the Company is as follows: Shares Unvested shares—January 1, 2018 265,098 Vested (129,959)Issued 16,150 Repurchased — Unvested shares—December 31, 2018 151,289 As of December 31, 2018 and 2017, 151,289 shares and 265,098 shares, respectively, remained subject to a repurchase right by the Company, with arelated liability included in accrued expenses and other liabilities in the consolidated balance sheets of $0.1 million as of each date.14. NET LOSS PER SHAREThe Company’s potential dilutive securities, which include unvested common stock from the early-exercise of stock options and outstandingcommon stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to commonstockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at December 31, 2018and 2017, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutiveeffect: As of December 31, 2018 2017 Convertible preferred shares (as converted to common stock) — 24,168,656 Unvested common stock from early exercise of options 151,289 265,098 Stock options to purchase common stock 3,203,122 1,971,711 Total 3,354,411 26,405,465 15. DEFINED CONTRIBUTION PLANThe Company has a 401(k) defined contribution plan (the “401(k) Plan”) for all of its employees. Eligible employees may make pretax contributionsto the 401(k) Plan up to statutory limits, while the Company contributes to the plan at the discretion of the Board of Directors. The Company’s discretionarymatch made under the 401(k) Plan for the year ended December 31, 2018 was $0.3 million. There was no discretionary match made under the 401(k) Plan forthe year ended December 31, 2017.16. COLLABORATION AND LICENSE AGREEMENTIn November 2017, the Company entered into a collaboration and license agreement (the “Collaboration Agreement”) with Novartis Institutes ofBioMedical Research, Inc. (“Novartis”) for the research, development, manufacturing and commercialization of products using the Company’s gene-editingtechnology for the treatment of certain ophthalmic targets and sickle cell disease. In February 2019, Novartis elected to discontinue the sickle cell diseaseprogram under the Collaboration Agreement effective in August 2019. The Company continues to work with Novartis to identify new targets for thepartnership based on the existing exploratory research component of the agreement, and the collaboration on two ophthalmic programs also continues. TheCompany has assumed all worldwide rights to the sickle cell disease program, and its efforts to develop an in vivo gene editing approach are ongoing.Under the terms of the Collaboration Agreement, taking into account Novartis’ election to discontinue the sickle cell disease program, the Companygranted Novartis a research license, a development and commercialization license, and a manufacturing license, under certain of its intellectual propertyrights to research, develop, manufacture and commercialize the ophthalmic targets. Upon entering into the Collaboration Agreement, the Company receivedan upfront, nonrefundable payment of $35.0 million and issued additional shares of its Series B preferred stock to Novartis for consideration of $10.0 million.F-24 The Collaboration Agreement consists of a research term, where the Company and Novartis are collaborating to perform research and conductpreclinical development to identify candidates that modulate the ophthalmic targets. The Collaboration Agreement also includes exploratory work on theapplicability of the gene-editing technology with respect to other gene targets. The Company’s obligation to perform such exploratory research concludes inNovember 2020. Novartis may select up to four targets, with limited substitution rights. The Company is responsible for the manufacturing of proprietaryresearch grade human hematopoietic stem cell derived adeno-associated virus vectors (“AAVHSCs”) during the research term. Research activities performedby the Company are being reimbursed at a full-time equivalent rate (“FTE”) and manufacturing activities will be reimbursed at cost, as specified and definedin the Collaboration Agreement. Novartis is required to pay the Company a target fee of $5.0 million for each target that meets certain success criteria duringthe research term (the “target fee trigger date”), up to a maximum of four targets. The research term will continue for five years from the effective date of theCollaboration Agreement. Pursuant to the Collaboration Agreement, the Company will also participate on a joint steering committee and a jointmanufacturing subcommittee, with equal representation from both the Company and Novartis.Novartis has the exclusive right to develop and commercialize up to four candidates or products arising from the research activities. Subject to certainlimitations pursuant to the terms of the Collaboration Agreement, Novartis will fund all development and commercialization costs. The Company will beresponsible for manufacturing candidates and products for Novartis during the development and commercialization terms. The Company’s manufacturingactivities will be reimbursed at cost during the development term and at cost plus a margin during the commercialization term, as defined in theCollaboration Agreement. If the Company is not able to manufacture candidates or products that meet the quality or quantity requirements of Novartis, thenNovartis shall have the right to designate a third-party contract manufacturer or manufacture such candidates or products itself.In accordance with the Collaboration Agreement, taking into consideration Novartis’ election to discontinue the sickle cell disease program, theCompany is also eligible to receive up to a total of $530.0 million in milestone payments, including up to $180.0 million in development milestonepayments, up to $170.0 million in regulatory milestone payments and up to $180.0 million in commercial milestone payments, with respect to the licensedproducts. The Company is also eligible to earn tiered royalties on net sales of licensed products by Novartis, its affiliates or sublicensees, ranging from midsingle-digit, to sub-teen double-digit percentages, and such royalties are potentially subject to various reductions and offsets. If any of the exploratoryresearch efforts are advanced into formal research and development programs, the parties will negotiate the economics including potential milestonepayments for such programs.Unless earlier terminated, the Collaboration Agreement will continue on a target-by-target basis until the expiration of all applicable royalty termswith respect to all products that modulate such target on a country-by-country-basis. Either party may terminate the agreement on a target-by-target basis forthe other party’s material breach with respect to such target, or in the event of the other party’s bankruptcy. Novartis may terminate the agreement forconvenience on a target-by-target basis. The Company may terminate the agreement if Novartis files, or joins a third party in filing or maintaining, a patentchallenge against certain of the patent rights licensed to Novartis under the terms of the agreement. There are no performance, cancellation, termination orrefund provisions in the arrangement that contain material financial consequences to the Company.Revenue RecognitionThe Company has identified the following deliverables in the Collaboration Agreement in accordance with the provisions of ASC Topic 605-25, Revenue Recognition—Multiple Element Arrangements: (1) the research license, (2) the development and commercialization license, (3) themanufacturing license, (4) research activities performed by the Company, (5) service on the joint committees, (6) manufacturing during the research anddevelopment terms, and (7) manufacturing during the commercialization term. Except for manufacturing during the commercialization term, none of theother deliverables have standalone value to the customer. Since separability criteria have not been met for these deliverables, the deliverables are beingaccounted for as a single combined unit of accounting at the outset of the Collaboration Agreement (the “combined unit of accounting”). The manufacturingservices during the commercialization term will be accounted for as a separate unit of accounting.Upon entering into the Collaboration Agreement, the Company received a nonrefundable upfront payment of $35.0 million and a $10.0 millioninvestment in its Series B preferred stock by Novartis. The Company recorded the Series B preferred stock at its estimated fair value of $11.7 million,including $1.7 million of the upfront payment, and allocated the remaining $33.3 million of the upfront payment to the Collaboration Agreement. TheCompany believes the consideration it will receive for the manufacturing services during the commercialization term, when and if it provides such services, isrepresentative of the best estimate of selling price of the services. Therefore, the entire $33.3 million of upfront nonrefundable consideration was allocated tothe combined unit of accounting.F-25 At the inception of the Collaboration Agreement, the Company could not objectively measure the level of effort required to fulfill its obligations forthe combined unit of accounting. Therefore, revenue is being recognized on a straight-line basis over the estimated period of performance for the combinedunit of accounting, which the Company estimates to be approximately ten years from the inception of the Collaboration Agreement. The Companycommenced revenue recognition upon delivery of the final deliverable included in the combined unit of accounting which occurred in January 2018.Accordingly, no amounts of revenue were recognized for the year ended December 31, 2017. All payments due or received from Novartis as of December 31,2017, including amounts due for research activities performed, were recorded as deferred revenue as of December 31, 2017.The Company recognized revenue of $3.7 million for the year ended December 31, 2018, based on a straight-line basis over the estimated period ofperformance taking into consideration all upfront payments and research funding payments together as a single unit. The Company had a $0.8 millionreceivable from Novartis as of December 31, 2018, which was included in prepaid expenses and other current assets on the Company’s consolidated balancesheet. The amount recorded as deferred revenue under this agreement totaled $33.2 million as of December 31, 2018.* * * * * *F-26 Exhibit 10.13Employment AgreementThis Employment Agreement (this “Agreement”), dated as of April 2, 2018, is made by and between Homology Medicines,Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Tim Kelly (“Executive”) (collectively referredto herein as the “Parties” or individually referred to as a “Party”). RECITALSA.It is the desire of the Company to assure itself of the services of Executive as of the Effective Date (as defined below) andthereafter by entering into this Agreement.B.Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.AGREEMENTNOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, theParties hereto agree as follows:1.Employment.(a)General. Effective on the consummation of the Company’s initial public offering of stock pursuant to an effectiveregistration statement filed under the Securities Act of 1933, as amended (the “Effective Date”), the Company shall employ Executive,and Executive shall remain in the employ of the Company, for the period and in the positions set forth in this Section 1, and subject tothe other terms and conditions herein provided. (b)At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shallcontinue to be at-will, as defined under applicable law, and that Executive’s employment with the Company may be terminated byeither Party at any time for any or no reason (subject to the notice requirements of Section 3(b)). This “at-will” nature of Executive’semployment shall remain unchanged during Executive’s tenure as an employee and may not be changed, except in an express writingsigned by Executive and a duly authorized officer of the Company. If Executive’s employment terminates for any reason, Executiveshall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwiseagreed to in writing by the Company or as provided by applicable law. The term of this Agreement (the “Term”) shall commence onthe Effective Date and end on the date this Agreement is terminated under Section 3.(c)Positions and Duties. During the Term, Executive shall serve as Chief Technical Operations Officer of theCompany, with such responsibilities, duties and authority normally associated with such position and as may from time to time beassigned to Executive by the Chief Executive Officer of the Company. Executive shall devote substantially all of Executive’s workingtime and efforts to the business and affairs of the Company (which shall include service to its affiliates, if applicable) and shall notengage in outside business activities (including serving on outside boards or committees) without the consent of the Board (in eithercase, the “Board”), provided that Executive shall be permitted to (i) manage Executive’s personal, financial and legal affairs, (ii)participate in trade associations, and (iii) serve on the board of directors of not-for-profit or tax-exempt charitable organizations, in eachcase, subject to compliance with this Agreement and provided that such activities do not materially interfere  with Executive’s performance of Executive’s duties and responsibilities hereunder. Executive agrees to observe and comply with therules and policies of the Company as adopted by the Company from time to time, in each case, as amended from time to time, and asdelivered or made available to Executive (each, a “Policy”).2.Compensation and Related Matters.(a)Annual Base Salary. During the Term, Executive shall receive a base salary at a rate of $353,600 per annum,which shall be paid in accordance with the customary payroll practices of the Company and shall be pro-rated for partial years ofemployment. Such annual base salary shall be reviewed (and may be adjusted) from time to time by the Board (such annual basesalary, as it may be adjusted from time to time, the “Annual Base Salary”).(b)Annual Cash Bonus Opportunity. During the Term, Executive will be eligible to participate in an annual incentiveprogram established by the Board. Executive’s annual incentive compensation under such incentive program (the “Annual Bonus”)shall be targeted at 35% of Executive’s Annual Base Salary (such target, as may be increased by the Board from time to time, the“Target Annual Bonus”). The Annual Bonus payable under the incentive program shall be based on the achievement of performancegoals to be determined by the Board. The payment of any Annual Bonus pursuant to the incentive program shall be subject toExecutive’s continued employment with the Company through the date of payment, except as otherwise provided in Section 4(b).(c)Benefits. During the Term, Executive shall be eligible to participate in employee benefit plans, programs andarrangements of the Company (including medical, dental and 401(k) plans), subject to the terms and eligibility requirements thereof andas such plans, programs and arrangements may be amended from time to time. In no event shall Executive be eligible to participate inany severance plan or program of the Company, except as set forth in Section 4 of this Agreement.(d)Vacation. During the Term, Executive shall be entitled to paid personal leave in accordance with the Company’sPolicies. Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.(e)Business Expenses. During the Term, the Company shall reimburse Executive for all reasonable travel and otherbusiness expenses incurred by Executive in the performance of Executive’s duties to the Company in accordance with the Company’sexpense reimbursement Policy.(f)Key Person Insurance. At any time during the Term, the Company shall have the right (but not the obligation) toinsure the life of Executive for the Company’s sole benefit. The Company shall have the right to determine the amount of insuranceand the type of policy. Executive shall reasonably cooperate with the Company in obtaining such insurance by submitting to physicalexaminations, by supplying all information reasonably required by any insurance carrier, and by executing all necessary documentsreasonably required by any insurance carrier, provided that any information provided to an insurance company or broker shall not beprovided to the Company without the prior written authorization of Executive. Executive shall incur no financial obligation byexecuting any required document, and shall have no interest in any such policy. 2 3.Termination.Executive’s employment hereunder and the Term may be terminated by the Company or Executive, as applicable, withoutany breach of this Agreement under the following circumstances and the Term will end on the Date of Termination:(a)Circumstances.(i)Death. Executive’s employment hereunder shall terminate upon Executive’s death.(ii)Disability. If Executive has incurred a Disability, as defined below, the Company may terminateExecutive’s employment.(iii)Termination for Cause. The Company may terminate Executive’s employment for Cause, as definedbelow.(iv)Termination without Cause. The Company may terminate Executive’s employment without Cause.(v)Resignation from the Company with Good Reason. Executive may resign Executive’s employment withthe Company with Good Reason, as defined below.(vi)Resignation from the Company without Good Reason. Executive may resign Executive’s employmentwith the Company for any reason other than Good Reason or for no reason.(b)Notice of Termination. Any termination of Executive’s employment by the Company or by Executive under thisSection 3 (other than termination pursuant to Section 3(a)(i)) shall be communicated by a written notice to the other Party hereto (i)indicating the specific termination provision in this Agreement relied upon, (ii) setting forth in reasonable detail the facts andcircumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, if applicable, and(iii) specifying a Date of Termination which, if submitted by Executive, shall be at least thirty (30) days following the date of suchnotice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to theCompany, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date ofCompany’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination, but the terminationwill still be considered a resignation by Executive. A Notice of Termination submitted by the Company may provide for a Date ofTermination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company. The failure byeither Party to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reasonshall not waive any right of the Party hereunder or preclude the Party from asserting such fact or circumstance in enforcing the Party’srights hereunder. (c)Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to any of thecircumstances listed in this Section 3, Executive (or Executive’s estate) shall be entitled to receive the sum of: (i) the portion ofExecutive’s Annual Base Salary earned through the Date of Termination, but not yet paid to Executive; (ii) any expensereimbursements owed to Executive pursuant to Section 2(e); and (iii) any amount accrued and arising from Executive’s participation in,or benefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance withthe terms and conditions of such employee benefit plans, programs or3 arrangements (collectively, the “Company Arrangements”). Except as otherwise expressly required by law (e.g., COBRA) or asspecifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amountshereunder (if any) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment isterminated by the Company for any reason, Executive’s sole and exclusive remedy shall be to receive the payments and benefitsdescribed in this Section 3(c) or Section 4, as applicable. (d)Deemed Resignation. Upon termination of Executive’s employment for any reason, Executive shall be deemed tohave resigned from all offices and directorships, if any, then held with the Company or any of its subsidiaries.4.Severance Payments.(a)Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without GoodReason. If Executive’s employment shall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant toSection 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, or pursuant to Section 3(a)(iv) for Executive’s resignation from the Companywithout Good Reason, then Executive shall not be entitled to any severance payments or benefits, except as provided in Section 3(c).(b)Termination without Cause, or Resignation from the Company with Good Reason. If Executive’s employmentterminates without Cause pursuant to Section 3(a)(iv), or pursuant to Section 3(a)(v) due to Executive’s resignation with Good Reason,then, subject to Executive signing on or before the 21st day following Executive’s Separation from Service (as defined below), and notrevoking, a release of claims substantially in the form attached as Exhibit A to this Agreement (the “Release”), and Executive’scontinued compliance with Section 5, Executive shall receive, in addition to payments and benefits set forth in Section 3(c), thefollowing:(i)an amount in cash equal to 0.75 times the Annual Base Salary, payable in the form of salary continuationin regular installments over the 9 month period following the date of Executive’s Separation from Service (the “SeverancePeriod”) in accordance with the Company’s normal payroll practices;(ii)to the extent unpaid as of the Date of Termination, an amount of cash equal to any Annual Bonusearned by Executive for the Company’s fiscal year prior to the fiscal year in which the Date of Termination occurs, asdetermined by the Board in its discretion based upon actual performance achieved, which Annual Bonus, if any, shall be paidto Executive in the fiscal year in which the Date of Termination occurs when bonuses for such prior fiscal year are paid in theordinary course to actively employed senior executives of the Company; and(iii)if Executive timely elects to receive continued medical, dental or vision coverage under one or more ofthe Company’s group medical, dental or vision plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of1985, as amended (“COBRA”), then the Company shall directly pay, or reimburse Executive for, the COBRA premiums forExecutive and Executive’s covered dependents under such plans, less the amount Executive would have had to pay toreceive such coverage as an active employee based on the cost sharing levels in effect on the Date of Termination, during theperiod commencing on Executive’s Separation from Service and ending upon the earliest of (X) the last day of the SeverancePeriod, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (Z) thedate Executive becomes eligible to receive medical, dental or vision coverage, as applicable, from a subsequent employer(and Executive agrees to promptly notify the Company of such4 eligibility). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide theforegoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the PublicHealth Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive a taxable monthlypayment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continueExecutive’s and Executive’s covered dependents’ group health coverage in effect on the Date of Termination (which amountshall be based on the premium for the first month of COBRA coverage), less the amount Executive would have had to pay toreceive group health coverage as an active employee for Executive and his or her covered dependents based on the costsharing levels in effect on the Date of Termination, which payments shall be made regardless of whether Executive electsCOBRA continuation coverage and shall commence in the month following the month in which the Date of Terminationoccurs and shall end on the earliest of (X) the last day of the Severance Period, (Y) the date that Executive and/or Executive’scovered dependents become no longer eligible for COBRA or (Z) the date Executive becomes eligible to receive healthcarecoverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility).(c)Change in Control. In lieu of the payments and benefits set forth in Section 4(b), in the event Executive’semployment terminates without Cause pursuant to Section 3(a)(iv), or pursuant to Section 3(a)(v) due to Executive’s resignation withGood Reason, in either case, on or within twelve (12) months following the date of a Change in Control, subject to Executive signingon or before the 21st day following Executive’s Separation from Service, and not revoking, the Release, Executive shall receive, inaddition to payments and benefits set forth in Section 3(c), the following:(i)an amount in cash equal to 1.0 times the sum of (A) the Annual Base Salary plus (B) the Target AnnualBonus, payable in equal installments over the 12-month period following the date of Executive’s Separation from Service(the “CIC Severance Period”) in accordance with the Company’s normal payroll practices;(ii)the payment set forth in Section 4(b)(ii);(iii)the benefits set forth in Section 4(b)(iii), provided that the “Severance Period” will mean the CICSeverance Period; and(iv)all unvested equity or equity-based awards held by Executive under any Company equity compensationplans that vest solely based on the passage of time shall immediately become 100% vested (for the avoidance of doubt, withany such awards that vest in whole or in part based on the attainment of performance-vesting conditions being governed bythe terms of the applicable award agreement).(d)Survival. Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 9 willsurvive the termination of Executive’s employment and the termination of the Term.5 5.Restrictive Covenants. As a condition to the effectiveness of this Agreement, Executive will have executed and delivered tothe Company no later than contemporaneously herewith the Employee Proprietary Information and Inventions Assignment Agreementattached as Exhibit B (the “Restrictive Covenant Agreement”). Executive agrees to abide by the terms of the Restrictive CovenantAgreement, which are hereby incorporated by reference into this Agreement. Executive acknowledges that the provisions of theRestrictive Covenant Agreement will survive the termination of Executive’s employment and the termination of the Term for theperiods set forth in the Restrictive Covenant Agreement.6.Assignment and Successors.The Company may assign its rights and obligations under this Agreement to any of its affiliates or to any successor to all orsubstantially all of the business or the assets of the Company (by merger or otherwise), and may assign or encumber this Agreementand its rights hereunder as security for indebtedness of the Company and its affiliates. This Agreement shall be binding upon and inureto the benefit of the Company, Executive and their respective successors, assigns, personnel and legal representatives, executors,administrators, heirs, distributees, devisees, and legatees, as applicable. None of Executive’s rights or obligations may be assigned ortransferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation oflaw. Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable CompanyArrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death bygiving written notice thereof to the Company. 7.Certain Definitions.(a)Cause. The Company shall have “Cause” to terminate Executive’s employment hereunder upon:(i)The Board’s reasonable, good faith determination that Executive has refused to (A) substantially performthe duties associated with Executive’s position with the Company or (B) carry out the reasonable and lawful instructions ofthe Board concerning duties or actions consistent with the Executive’s position with the Company;(ii)Executive’s breach of a material provision of this Agreement that, to the extent capable of cure, hasremained uncured for a period of thirty (30) days following written notice from the Company;(iii)Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicatedprobation for any felony or crime involving moral turpitude;(iv)Executive’s unlawful use (including being under the influence) or possession of illegal drugs on theCompany’s (or any of its affiliate’s) premises or while performing Executive’s duties and responsibilities under thisAgreement; or(v)Executive’s commission of any act of fraud, embezzlement, misappropriation, willful misconduct, orbreach of fiduciary duty against the Company or any of its affiliates.(b)Change in Control. “Change in Control” shall have the meaning set forth in the Homology Medicines, Inc. 2018Incentive Award Plan.(c)Code. “Code” shall mean the Internal Revenue Code of 1986, as amended, and the6 regulations and guidance promulgated thereunder.(d)Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated byExecutive’s death, the date of Executive’s death; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (vi) eitherthe date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 3(b), whichever is earlier.(e)Disability. “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disabilityplan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining aparticipant’s eligibility for benefits, provided, however, if the long-term disability plan contains multiple definitions of disability,“Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coveragefor the longest period of time. The determination of whether Executive has a Disability shall be made by the person or persons requiredto make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-term disabilityplan for its employees, “Disability” shall mean Executive’s inability to perform, with or without reasonable accommodation, theessential functions of Executive’s positions hereunder for a total of three months during any six-month period as a result of incapacitydue to mental or physical illness as determined by a physician selected by the Company or its insurers and acceptable to Executive orExecutive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed. Any refusal byExecutive to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusiveevidence of Executive’s Disability.(f)Good Reason. For the sole purpose of determining Executive’s right to severance payments and benefits asdescribed above, Executive’s resignation will be with “Good Reason” if Executive resigns within ninety (90) days after any of thefollowing events, unless Executive consents in writing to the applicable event: (i) a reduction in Executive’s Annual Base Salary orTarget Annual Bonus, (ii) a material decrease in Executive’s authority or areas of responsibility as are commensurate with Executive’stitle or position with the Company, (iii) the relocation of Executive’s primary office to a location more than twenty-five (25) miles fromthe Executive’s primary office as of the date of this Agreement or (iv) the Company’s breach of a material provision of thisAgreement. Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has: (a) provided theCompany, within sixty (60) days of Executive’s knowledge of the occurrence of the facts and circumstances underlying the GoodReason event, written notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason;(b) provided the Company with an opportunity to cure the same within thirty (30) days after the receipt of such notice; and (c) theCompany shall have failed to so cure within such period.8.Parachute Payments.(a)Notwithstanding any other provisions of this Agreement or any Company equity plan or agreement, in the eventthat any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed ordistributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefitsunder Section 4 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise taximposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (in the order provided inSection 8(b)) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (i) the netamount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employmenttaxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptionsattributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of7 such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employmenttaxes on such Total Payments and the amount of the Excise Tax to which Executive would be subject in respect of such unreducedTotal Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to suchunreduced Total Payments).(b)The Total Payments shall be reduced in the following order: (i) reduction on a pro-rata basis of any cashseverance payments that are exempt from Section 409A of the Code (“Section 409A”), (ii) reduction on a pro-rata basis of any non-cash severance payments or benefits that are exempt from Section 409A, (iii) reduction on a pro-rata basis of any other payments orbenefits that are exempt from Section 409A, and (iv) reduction of any payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A; provided, in case of clauses (ii), (iii) and (iv), that reduction of anypayments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards thatwould otherwise vest last in time.(c)All determinations regarding the application of this Section 8 shall be made by an accounting firm or consultinggroup with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selectedby the Company (the “Independent Advisors”). For purposes of determinations, no portion of the Total Payments shall be taken intoaccount which, in the opinion of the Independent Advisors, (i) does not constitute a “parachute payment” within the meaning of Section280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (ii) constitutes reasonable compensation forservices actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined inSection 280G(b)(3) of the Code) allocable to such reasonable compensation. The costs of obtaining such determination and all relatedfees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company.(d)In the event it is later determined that a greater reduction in the Total Payments should have been made toimplement the objective and intent of this Section 8, the excess amount shall be returned promptly by Executive to the Company.9.Miscellaneous Provisions.(a)Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with itsexpress terms, and otherwise in accordance with the substantive laws of the Commonwealth of Massachusetts without reference to theprinciples of conflicts of law of the Commonwealth of Massachusetts or any other jurisdiction that would result in the application of thelaws of a jurisdiction other than the Commonwealth of Massachusetts, and where applicable, the laws of the United States. (b)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect thevalidity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (c)Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall beeffective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified orregistered mail, postage prepaid, as follows:(i)If to the Company, to the [Chief Executive Officer][Chief Financial Officer] of the Company at theCompany’s headquarters,8 (ii)If to Executive, to the last address that the Company has in its personnel records for Executive, or(iii)At any other address as any Party shall have specified by notice in writing to the other Party.(d)Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be anoriginal, but all of which together will constitute one and the same Agreement. Signatures delivered by facsimile or PDF shall bedeemed effective for all purposes.(e)Entire Agreement. The terms of this Agreement, and the Restrictive Covenant Agreement incorporated herein byreference as set forth in Section 5, are intended by the Parties to be the final expression of their agreement with respect to the subjectmatter hereof and supersede all prior understandings and agreements, whether written or oral, including any prior employment offerletter or employment agreement between Executive and the Company. The Parties further intend that this Agreement shall constitutethe complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial,administrative, or other legal proceeding to vary the terms of this Agreement.(f)Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument inwriting, signed by Executive and a duly authorized officer of Company. By an instrument in writing similarly executed, Executive or aduly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of thisAgreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate asa waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right,remedy, or power hereunder will preclude any other or further exercise of any other right, remedy, or power provided herein or by lawor in equity. (g)Construction. This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construedas a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any Party shallnot apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Anyreferences to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearlyindicates to the contrary. Also, unless the context clearly indicates to the contrary, (i) the plural includes the singular and the singularincludes the plural; (ii) “and” and “or” are each used both conjunctively and disjunctively; (iii) “any,” “all,” “each,” or “every” means“any and all,” and “each and every”; (iv) “includes” and “including” are each “without limitation”; (v) “herein,” “hereof,” “hereunder”and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph,section or subsection; and (vi) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter,singular or plural as the identity of the entities or persons referred to may require.(h)Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solelyand exclusively by a binding arbitration process administered by JAMS/Endispute in Boston, Massachusetts. Such arbitration shall beconducted in accordance with the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if inconflict: (i) one arbitrator who is a retired judge shall be chosen by JAMS/Endispute; (ii) each Party to the arbitration will pay one-halfof the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (iii)arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rules and regulations) of theproceedings has been given to such Party. Each Party shall bear its own attorney’s fees and expenses; provided that the9 arbitrator may assess the prevailing Party’s fees and costs against the non-prevailing Party as part of the arbitrator’s award. The Partiesagree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall befinal and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity;provided, however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief orspecific performance as provided in this Agreement or the Restrictive Covenant Agreement. This dispute resolution process and anyarbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or resultsof such process without the prior written consent of all Parties, except where necessary or compelled in a court to enforce thisarbitration provision or an award from such arbitration or otherwise in a legal proceeding. If JAMS/Endispute no longer exists or isotherwise unavailable, the Parties agree that the American Arbitration Association (“AAA”) shall administer the arbitration inaccordance with its then-existing rules as modified by this subsection. In such event, all references herein to JAMS/Endispute shallmean AAA. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute overintellectual property rights by court action instead of arbitration.(i)Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present orfuture laws effective during the Term, such provision shall be fully severable; this Agreement shall be construed and enforced as if suchillegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of thisAgreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by itsseverance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be addedautomatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may bepossible and be legal, valid and enforceable.(j)Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement anyfederal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall beentitled to rely on the advice of counsel if any questions as to the amount or requirement of withholding shall arise.(k)Section 409A.(i)General. The intent of the Parties is that the payments and benefits under this Agreement comply with orbe exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to bein compliance therewith. (ii)Separation from Service. Notwithstanding anything in this Agreement to the contrary, anycompensation or benefits payable under this Agreement that is designated under this Agreement as payable upon Executive’stermination of employment shall be payable only upon Executive’s “separation from service” with the Company within themeaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefitsdescribed in Section 4 shall not be paid, or, in the case of installments, shall not commence payment, until the thirtieth (30th)day following Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would havebeen made to Executive during the thirty (30) day period immediately following Executive’s Separation from Service but forthe preceding sentence shall be paid to Executive on the First Payment Date and the remaining payments shall be made asprovided in this Agreement.(iii)Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive isdeemed by the Company at the time of Executive’s Separation from10 Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion ofthe benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution underSection 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expirationof the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date ofExecutive’s death. Upon the first business day following the expiration of the applicable Section 409A period, all paymentsdeferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries),and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein. (iv)Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject toSection 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of theyear following the year in which the expense was incurred; provided, that Executive submits Executive’s reimbursementrequest promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affectthe amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) ofthe Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange foranother benefit.(v)Installments. Executive’s right to receive any installment payments under this Agreement, includingwithout limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right toreceive a series of separate payments and, accordingly, each such installment payment shall at all times be considered aseparate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, nopayment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax orinterest pursuant to Section 409A.10.Executive Acknowledgement.Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has notacted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and hasentered into this Agreement freely based on Executive’s own judgment.[Signature Page Follows] 11 IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written. HOMOLOGY MEDICINES, INC. By:/s/ Arthur O. Tzianabos, Ph.D Name: Arthur O. Tzianabos, Ph.D Title: President and Chief Executive Officer EXECUTIVE /s/ Timothy P. Kelly Timothy P. Kelly [Signature Page to Employment Agreement] US-DOCS\99701461.1 EXHIBIT ASeparation Agreement and ReleaseThis Separation Agreement and Release (“Agreement”) is made by and between ________________ (“Executive”) andHomology Medicines, Inc. (the “Company”) (collectively referred to as the “Parties” or individually referred to as a“Party”). Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Employment Agreement (asdefined below).WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of _____, 2018 (the“Employment Agreement”); andWHEREAS, in connection with Executive’s termination of employment with the Company or a subsidiary or affiliate of theCompany effective ________, 20__, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions,petitions, and demands that Executive may have against the Company and any of the Releasees as defined below, including, but notlimited to, any and all claims arising out of or in any way related to Executive’s employment with or separation from the Company orits subsidiaries or affiliates but, for the avoidance of doubt, nothing herein will be deemed to release any rights or remedies inconnection with Executive’s ownership of vested equity securities of the Company or Executive’s right to indemnification by theCompany or any of its affiliates pursuant to contract or applicable law (collectively, the “Retained Claims”). NOW, THEREFORE, in consideration of the severance payments and benefits described in Section 4 of the EmploymentAgreement, which, pursuant to the Employment Agreement, are conditioned on Executive’s execution and non-revocation of thisAgreement, and in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:1.Severance Payments and Benefits; Salary and Benefits. The Company agrees to provide Executive with theseverance payments and benefits described in Section 4 of the Employment Agreement, payable at the times set forth in, and subject tothe terms and conditions of, the Employment Agreement. In addition, to the extent not already paid, and subject to the terms andconditions of the Employment Agreement, the Company shall pay or provide to Executive all other payments or benefits described inSection 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.2.Release of Claims. Executive agrees that, other than with respect to the Retained Claims, the foregoingconsideration represents settlement in full of all outstanding obligations owed to Executive by the Company, any of its direct or indirectsubsidiaries and affiliates, and any of its or their current and former officers, directors, equityholders, managers, employees, agents,investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, andsubsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”). Executive, on Executive’s ownbehalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members, executors,agents, and assigns, other than with respect to the Retained Claims, hereby and forever releases the Releasees from, and agrees not tosue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of actionrelating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possessagainst any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the EffectiveDate of this Agreement (as defined in Section 7 below), including, without limitation: US-DOCS\99701461.1 (a)any and all claims relating to or arising from Executive’s employment or service relationship with theCompany or any of its direct or indirect subsidiaries or affiliates and the termination of that relationship;(b)any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of anyshares of stock or other equity interests of the Company or any of its affiliates, including, without limitation, any claims for fraud,misrepresentation, breach of fiduciary duty, breach of duty under applicable state law, and securities fraud under any state or federallaw;(c)any and all claims for wrongful discharge of employment; termination in violation of public policy;discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing,both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentionalmisrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices;defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; anddisability benefits;(d)any and all claims for violation of any federal, state, or municipal statute, including, but not limited to,Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with DisabilitiesAct of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Actof 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment andRetraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;(e)any and all claims for violation of the federal or any state constitution;(f) any and all claims arising out of any other laws and regulations relating to employment or employmentdiscrimination;(g)any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding orother tax treatment of any of the proceeds received by Executive as a result of this Agreement; and(h)any and all claims for attorneys’ fees and costs.Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as tothe matters released. This release does not release claims that cannot be released as a matter of law, including, but not limited to,Executive’s right to report possible violations of federal law or regulation to any governmental agency or entity in accordance with theprovisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-OxleyAct of 2002, or any other whistleblower protection provisions of state or federal law or regulation and any right to receive an award forinformation provided thereunder, Executive’s right to file a charge with or participate in a charge by the Equal EmploymentOpportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce oradminister laws related to employment, against the Company for discrimination (with the understanding that Executive’s release ofclaims herein bars Executive from recovering such monetary relief from the Company or any Releasee for any alleged discriminatorytreatment), claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable statelaw,A-2 US-DOCS\99701461.1 claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA,claims to any benefit entitlements vested as the date of separation of Executive’s employment, pursuant to written terms of anyemployee benefit plan of the Company or its affiliates and Executive’s right under applicable law and any Retained Claims. Thisrelease further does not release claims for breach of Section 3(c) or Section 4 of the Employment Agreement.3.Acknowledgment of Waiver of Claims under ADEA. Executive understands and acknowledges that Executive iswaiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and thatthis waiver and release is knowing and voluntary. Executive understands and agrees that this waiver and release does not apply to anyrights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive understands and acknowledgesthat the consideration given for this waiver and release is in addition to anything of value to which Executive was alreadyentitled. Executive further understands and acknowledges that Executive has been advised by this writing that: (a) Executive shouldconsult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c)Executive has 7 days following Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to theGeneral Counsel of the Company; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothingin this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of thiswaiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized byfederal law. In the event Executive signs this Agreement and returns it to the Company in less than the 21 day period identified above,Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering thisAgreement.4.Severability. In the event that any provision or any portion of any provision hereof or any surviving agreementmade a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, thisAgreement shall continue in full force and effect without said provision or portion of provision.5.No Oral Modification. This Agreement may only be amended in a writing signed by Executive and a dulyauthorized officer of the Company.6.Governing Law; Dispute Resolution. This Agreement shall be subject to the provisions of Sections 9(a), 9(c), and9(h) of the Employment Agreement.7.Effective Date. If Executive has attained or is over the age of 40 as of the date of Executive’s termination ofemployment, then each Party has seven days after that Party signs this Agreement to revoke it and this Agreement will become effectiveon the eighth day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by eitherParty before that date (the “Effective Date”). If Executive has not attained the age of 40 as of the date of Executive’s termination ofemployment, then the “Effective Date” shall be the date on which Executive signs this Agreement.8.Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreementvoluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent ofreleasing all of Executive’s claims against the Company and any of the other Releasees. Executive acknowledges that: (a) Executivehas read this Agreement; (b) Executive has not relied upon any representations or statements made by the CompanyA-3 US-DOCS\99701461.1 that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, and execution ofthis Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel; (d) Executive understands theterms and consequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and bindingeffect of this Agreement.IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. EXECUTIVE Dated: [_____________] HOMOLOGY MEDICINES, INC. Dated: By: Name: Title: A-4 US-DOCS\99701461.1 EXHIBIT BRestrictive Covenant Agreement[attached] US-DOCS\99701461.1 Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-224030 on Form S-8 of our report dated March 12, 2019, relating to theconsolidated financial statements of Homology Medicines, Inc. appearing in this Annual Report on Form 10-K of Homology Medicines, Inc. for the yearended December 31, 2018./s/ Deloitte & Touche LLPBoston, MassachusettsMarch 12, 2019 Exhibit 31.1 CERTIFICATIONI, Arthur O. Tzianabos, Ph.D., certify that:1.I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of Homology Medicines, 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange Act Rules 13a-15(e) and 15d-15(e)) 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)[intentionally omitted]; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 controlover financial reporting. Date: March 12, 2019 By:/s/ Arthur O. Tzianabos, Ph.D. Arthur O. Tzianabos, Ph.D. President and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2 CERTIFICATIONI, W. Bradford Smith, certify that:1.I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2018 of Homology Medicines, 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange Act Rules 13a-15(e) and 15d-15(e)) 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)[intentionally omitted]; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 controlover financial reporting. Date: March 12, 2019 By:/s/ W. Bradford Smith W. Bradford Smith Chief Financial Officer(Principal Financial Officer) Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Arthur O. Tzianabos, Ph.D., President and Chief Executive Officer of Homology Medicines, Inc. (the “Company”) hereby certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1)The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Report”) fully complies with the requirementsof Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 12, 2019 By:/s/ Arthur O. Tzianabos, Ph.D. Arthur O. Tzianabos, Ph.D. President and Chief Executive Officer(Principal Executive Officer) Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, W. Bradford Smith, Chief Financial Officer of Homology Medicines, Inc. (the “Company”) hereby certify, pursuant to 18 U.S.C. § 1350, as adoptedpursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1)The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Report”) fully complies with the requirementsof Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 12, 2019 By:/s/ W. Bradford Smith W. Bradford Smith Chief Financial Officer(Principal Financial Officer) 

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