Regenxbio
Annual Report 2015

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015orooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number: 001-37553 REGENXBIO Inc.(Exact name of registrant as specified in its charter) Delaware 47-1851754 (State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification Number) 9712 Medical Center Drive, Suite 100Rockville, MD 20850 (Address of principal executive offices) (Zip Code) (240) 552-8181(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.0001 par value per share The NASDAQ Stock Market LLC (Title of each class) (Name of each exchange on which registered)Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate 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 preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filero Accelerated filero Non-accelerated filerx(Do not check if a smaller reporting company)Smaller reporting companyoIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No xAs of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s common stock was not listed on any exchange orover-the-counter market. The registrant’s common stock began trading on The NASDAQ Global Select Market on September 17, 2015. As of December 31, 2015, the aggregatemarket value of shares of common stock held by non-affiliates of the registrant was $331.8 million based on the number of shares held by non-affiliates as of December 31, 2015 andbased on the last reported sale price of the registrant’s common stock on December 31, 2015. For purposes of this disclosure, shares of common stock held by each executive officer,director and stockholder known by the registrant to be affiliated with such individuals based on public filings and other information known to the registrant have been excluded sincesuch persons may be deemed affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.As of March 1, 2016 there were 26,328,584 shares of the registrant’s Common Stock issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCESpecified portions of the registrant’s proxy statement with respect to the registrant’s 2016 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14Awithin 120 days after the end of the registrant’s fiscal year ended December 31, 2015, are incorporated by reference into Part III of this Annual Report on Form 10-K.  REGENXBIO INC.Form 10-KTable of Contents Page Part I Special Note Regarding Forward-Looking Statements 1 Industry and Market Data 2Item 1. Business 3Item 1A. Risk Factors 46Item 1B. Unresolved Staff Comments 86Item 2. Properties 86Item 3. Legal Proceedings 86Item 4. Mine Safety Disclosures 86 Part II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 87Item 6. Selected Financial Data 90Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 91Item 7A. Qualitative and Quantitative Disclosures about Market Risk 106Item 8. Financial Statements and Supplementary Data 106Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 106Item 9A. Controls and Procedures 106Item 9B. Other Information 108 Part III Item 10. Directors, Executive Officers and Corporate Governance 109Item 11. Executive Compensation 109Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 109Item 13. Certain Relationships and Related Transactions, and Director Independence 109Item 14. Principal Accountant Fees and Services 109 Part IV Item 15. Exhibits and Financial Statements Schedules 110Signatures 111Index to Financial Statements 112Exhibit Index 148 NAV® is our registered trademark and REGENXBIO Inc. and REGENXBIO are our trademarks. Any other trademarks appearing in this Annual Reporton Form 10-K are the property of their respective holders.  PART ISPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains “forward-looking statements” that involve substantial risks and uncertainties. All statements other thanstatements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financialposition, strategy and plans, and our expectations for future operations, are forward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “may,” “will,” “estimate,” “continue,”“anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would” or the negative version of these words andsimilar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations andprojections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term businessoperations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, assumptions and otherimportant factors, including those described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition andResults of Operations” included in this Annual Report on Form 10-K. In light of these risks, uncertainties, assumptions and other factors, the forward-lookingevents and circumstances discussed in this Annual Report on Form 10-K may not occur, and actual results could differ materially and adversely from thoseanticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-lookingstatements.Forward-looking statements include, but are not limited to, statements about: ·the timing and success of preclinical studies and clinical trials conducted by us and our development partners; ·the ability to obtain and maintain regulatory approval of our product candidates, and the labeling for any approved products; ·the scope, progress, expansion and costs of developing and commercializing our product candidates; ·our ability to obtain and maintain intellectual property protection for our product candidates; ·our anticipated growth strategies; ·our expectations regarding competition; ·the anticipated trends and challenges in our business and the market in which we operate; ·our ability to attract or retain key personnel; ·the size and growth of the potential markets for our product candidates and the ability to serve those markets; ·the rate and degree of market acceptance of any of our product candidates; ·our ability to establish and maintain development partnerships; ·our expectations regarding federal, state and foreign regulatory requirements; ·regulatory developments in the United States and foreign countries; and ·our plans for the use of our cash and cash equivalents.Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level ofactivity, performance or achievements. Any forward-looking statement made by us in this Annual Report on Form 10-K speaks only as of the date of thisreport. Except as required by law, we disclaim any duty to update any of these forward-looking statements after the date of such statements are made, or toupdate the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomesavailable in the future.We encourage you to read the discussion and analysis of our financial condition and our financial statements contained in this Annual Report onForm 10-K. We also encourage you to read Item 1A of Part I of this Annual Report on Form 10-K, entitled “Risk Factors,” which contains a more completediscussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of Part I of this report, otherunknown or unpredictable factors also could affect our results. There can be no assurance that the actual results or developments anticipated by us will berealized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Therefore no assurance can be given that theoutcomes stated in such forward-looking statements and estimates will be achieved.1 As used in this Annual Report on Form 10-K, the terms “REGENXBIO,” “Registrant,” “we,” “us,” and “our” mean REGENXBIO Inc. unless thecontext indicates otherwise.INDUSTRY AND MARKET DATAWe obtained the industry, market and competitive position data used throughout this Annual Report on Form 10-K from our own internal estimatesand research, as well as from industry and general publications, in addition to research, surveys and studies conducted by third parties. Internal estimates arederived from publicly-available information released by industry analysts and third-party sources, our internal research and our industry experience, and arebased on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In addition, whilewe believe the industry, market and competitive position data included in this Annual Report on Form 10-K is reliable and is based on reasonableassumptions, such data involves risks and uncertainties and are subject to change based on various factors, including those discussed in “Risk Factors.”These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. 2 ITEM 1.BUSINESS OverviewWe are a leading biotechnology company focused on the development, commercialization and licensing of recombinant adeno-associated virus(AAV) gene therapy. In AAV gene therapy, the viral genes are removed from the AAV, a small, non-pathogenic virus, creating a biological delivery vehiclecalled a vector. A therapeutic gene sequence is then inserted, creating a recombinant vector. Our proprietary AAV gene delivery platform (our NAVTechnology Platform) consists of exclusive rights to over 100 novel AAV vectors, including AAV7, AAV8, AAV9 and AAVrh10 (NAV Vectors). Our missionis to transform the lives of patients suffering from severe diseases with significant unmet medical needs by developing and commercializing gene therapyproducts administered directly into the body, or in vivo, based on our NAV Technology Platform. We seek to accomplish our mission through a combinationof our internal development efforts and the efforts of our third-party licensees (NAV Technology Licensees). As of December 31, 2015, our NAV TechnologyPlatform was being applied in the development of 28 product candidates for a variety of diseases, including five internally developed product candidates and23 partnered product candidates developed by our NAV Technology Licensees. Most of our NAV Technology Licensees have licensed specific NAV Vectorsfor the indications they are pursuing. We maintain rights to all unlicensed indications as well as retaining the right to our NAV Technology Platform forunlicensed vectors in disease indications for which we have granted licenses.We are applying our NAV Technology Platform in an effort to generate a broad pipeline of best-in-class and often first-in-class AAV gene therapytreatments. Our NAV Technology Platform is covered by more than 100 licensed patents and patent applications worldwide. Our product candidates, whichare designed for a variety of diseases, incorporate proprietary advances in AAV gene therapy that significantly enhance their profiles as potentialtherapeutics. The benefits of our NAV Technology Platform have been observed across several clinical trials and studies conducted by our developmentpartners and third-party investigators. Approximately 70% of all AAV gene therapy clinical trials relating to new treatment Investigational New Drugapplications (INDs) posted on the United States (U.S.) government clinical trials database from 2012 through 2014 used NAV Vectors.The foundation of our NAV Technology Platform was discovered in an effort to identify next generation AAV vectors that could overcome thelimitations of earlier generation AAV vectors (AAV1 through AAV6). We believe the key benefits of NAV Vectors over earlier generation AAV vectorsinclude: ·higher gene expression; ·longer-term gene expression; ·broad and novel tissue selectivity; ·lower immune response; and ·improved manufacturability.We believe that gene therapies using our NAV Technology Platform (NAV Gene Therapy) have the potential to transform the treatment paradigm forpatients with a wide range of severe diseases with significant unmet medical needs. NAV Vectors have demonstrated stable expression in animals for overeight years. Moreover, AAV8 vectors have demonstrated stable expression for over four years in a clinical trial for the treatment of hemophilia B.In certain monogenic, recessive diseases, NAV Gene Therapy may provide clinical benefits for patients that are substantially greater than currentlyavailable therapies. In other types of diseases, such as hemophilia, NAV Gene Therapy has the potential to replace a lifetime of continuous treatment ofstandard protein replacement therapy and other treatment approaches with a single treatment, which could reduce health care system costs while alsoimproving patients’ quality of life. We believe that the potential efficiency and broad applicability of our NAV Technology Platform may allow us todevelop NAV Gene Therapy treatments that are injected or infused into the bloodstream, spinal fluid or directly into the target tissue to treat a wide range ofdiseases.3 Our internal and partnered product development program pipeline is shown below. We currently plan to build internal gene therapy franchises in the metabolic, neurodegenerative and retinal therapeutic areas, and develop multipleproduct candidates in each area. Our most advanced programs are for the treatment of two severe genetic diseases, homozygous familial hypercholesterolemia(HoFH) and Mucopolysaccharidosis Type I (MPS I). An IND to support a Phase4 I/II clinical trial to evaluate the effect of RGX-501 for the treatment of HoFH is active. We expect a Phase I/II clinical trial for RGX-501 to be initiated in thefirst half of 2016. We expect to file an IND with the U.S. Food and Drug Administration (the FDA) for RGX-111, our program for MPS I, in the first half of2016 to support a Phase I/II clinical trial, which we expect to initiate in mid-2016. We also have a preclinical program for wet age-related maculardegeneration (wet AMD) for which we expect to file an IND with the FDA in the second half of 2016 and a preclinical program for MucopolysaccharidosisType II (MPS II) for which we expect to file an IND with the FDA in the first half of 2017.Our partnered development pipeline benefits from the disease-specific expertise of our NAV Technology Licensees. Our partnering strategy providesus the flexibility to sublicense development of treatments designed to address significant unmet medical needs, while remaining focused on our coreprograms and therapeutic areas internally, which we believe enables us to achieve maximum value. We believe that the broad applicability of our NAVTechnology Platform and any clinical successes of the treatments utilizing NAV Vectors will create new internal and partnered pipeline opportunities.As an innovator in AAV gene therapy development, our intellectual property strategy is designed to provide us with extensive protection for ourproduct candidates and our NAV Technology Platform. We currently have exclusive rights to over 100 patents and patent applications worldwide coveringour NAV Vectors, including composition of matter claims for AAV7, AAV8, AAV9 and AAVrh10, as well as methods for their manufacture and therapeuticuses. We believe this patent portfolio forms a strong foundation for our current programs and with our ongoing research and development, we expect tocontinue to expand this substantial patent portfolio. Our licensed patents not only seek to protect our key assets - our NAV Technology Platform and ourinternal product candidates - they also form the basis for licensing and partnering arrangements.Our company was formed from a successful collaboration that began in February 2009 between FoxKiser LLP, the University of Pennsylvania(together with The Trustees of the University of Pennsylvania, Penn) and gene therapy pioneer James Wilson, M.D., Ph.D. We have built on the foundation ofthis collaboration to produce what we believe to be compelling NAV Gene Therapy product candidates derived from discoveries and research in Dr. Wilson’slab. As our team has grown, we have continued to build on our scientific foundation, adding depth in gene therapy and biotechnology leadership. Ourmanagement team includes leaders who are experienced in building and operating innovative healthcare ventures and have expert knowledge in thedevelopment of AAV gene therapy. We believe the strength of our team coupled with the depth of knowledge of our scientific founder and advisors positionus to succeed in developing and bringing to market, independently or with our development partners, unique, best-in-class gene therapy treatments for arange of severe diseases with significant unmet medical needs.Our StrategyOur mission is to transform the lives of patients suffering from severe diseases with significant unmet medical needs by developing andcommercializing in vivo gene therapy products based on our NAV Technology Platform. We are seeking to develop, manufacture, commercialize and licenseproduct candidates across multiple therapeutic areas while continuing to expand our NAV Technology Platform. To achieve our mission, we are pursuing thefollowing strategies: ·Apply our proprietary, next generation AAV vector technology to develop in vivo gene therapies for patients. We believe in vivo genetherapy is an ideal treatment paradigm for many diseases with sub-optimal or non-existent therapies because of its potential to correct anunderlying genetic defect, rather than just treating a patient’s symptoms. We believe our NAV Technology Platform will prove to be asignificant advancement over earlier AAV vectors. Based on data derived from third-party clinical studies using our NAV Vectors, we believeour NAV Technology Platform possesses unique, beneficial properties that are not seen in earlier generation AAVs. We believe that our NAVTechnology Platform, which underpins our internal development programs and the programs of our NAV Technology Licensees, will enable usand our partners to develop best-in-class gene therapy candidates for a wide range of disease targets due to these unique properties. ·Focus on rapidly advancing our internal lead proprietary development programs in metabolic, neurodegenerative and retinal diseases.Both HoFH and MPS I are diseases with high unmet clinical need and current treatments that are sub-optimal or non-existent. An IND tosupport a Phase I/II clinical trial to evaluate the effect of RGX-501 for the treatment of HoFH is active. We expect a Phase I/II clinical trial forRGX-501 to be initiated in the first half of 2016. We expect to file an IND for MPS I in the first half of 2016 and expect to initiate a Phase I/IIclinical trial for MPS I in mid-2016. If we are successful in achieving proof-of-concept in the Phase I/II clinical trials for these diseases, we willpursue registration trials and commercialization of such product candidates. In addition, we plan to progress our product developmentprograms for wet AMD and MPS II toward clinical trials and expect to file INDs for these programs in the second half of 2016 and the first halfof 2017, respectively.5 ·Establish gene therapy franchises in our current core therapeutic areas of metabolic, neurodegenerative and retinal diseases. After humanproof-of-concept is achieved in a disease, we believe we will be able to apply what we have learned and use our NAV Technology Platform tomore rapidly develop new product candidates for many similar diseases. Once an appropriate vector and route of administration for a particulardisease type have been established, a new gene can be inserted into the appropriate vector and the established route of administration can beused for other similar diseases. We expect to use this approach to further build the foundation for our neurodegenerative disease franchise byfiling an IND in the first half of 2017 for our MPS II program and moving to clinical trials thereafter if we are able to demonstrate human proof-of-concept in MPS I. We believe that this approach is also applicable to metabolic and retinal diseases, as well as many other therapeutic areas,and will allow us to efficiently generate product candidates for diseases in and beyond our current areas of therapeutic focus. ·Further grow the pipeline of products based on our NAV Technology Platform through strategic in-licensing and sublicensing of newprograms. We also plan to grow the pipeline of commercial product development programs using our NAV Technology Platform throughlicensing. For example, we plan to pursue in-licensing for programs we deem to be the most promising research programs using our NAVVectors. We intend to continue to selectively sublicense our NAV Technology Platform for specific vector and indication combinations toadditional NAV Technology Licensees. Strategic sublicensing allows us to maintain our internal product development focus in our coredisease indications and therapeutic areas while still expanding the NAV Gene Therapy pipeline, developing a greater breadth of treatments forpatients, providing additional technological and potential clinical proof-of-concept for our NAV Technology Platform, and creating potentialadditional revenue. ·Maintain and grow our extensive intellectual property portfolio. We plan to leverage our intellectual property rights and substantialexpertise in AAV gene therapy in order to develop and commercialize NAV Gene Therapy treatments. We have licensed exclusive rights to abroad portfolio of certain fundamental AAV gene therapy patents and patent applications. In securing these rights, we have focused onobtaining robust rights for those intellectual property assets we believe will be most important in providing us with a competitive advantagewith respect to AAV gene therapy treatments. We plan to continue to seek to protect and enhance the proprietary technology, inventions, andimprovements that are commercially important to the development of our business.Our StrengthsWe believe our technology, expertise and know-how will allow us to maintain our leadership position in the gene therapy field. Our strengths includethe following: ·Our NAV Technology Platform, for which we have an exclusive worldwide license. ·Strong clinical data supporting proof-of-concept of our NAV Technology Platform from three separate reported Phase I/II third-party clinicaltrials using AAV8 for the treatment of hemophilia B and a clinical trial using AAV9 for the treatment of spinal muscular atrophy type I (SMAType I). ·The largest pipeline of programs in AAV gene therapy with 28 total product candidates that use our NAV Technology Platform as of December31, 2015, consisting of our five internal programs and 23 partnered product candidates being developed by our NAV Technology Licensees. ·Two internal programs, RGX-501 for the treatment of HoFH and RGX-111 for the treatment of MPS I, which we expect to advance into clinicaltrials in the first half of 2016 and mid-2016, respectively. ·Three ongoing clinical trials being conducted by our NAV Technology Licensees targeting diseases with significant unmet needs: SMA TypeI, Mucopolysaccharidosis Type IIIA (MPS IIIA) and hemophilia B. There are no currently approved treatments for SMA Type I or MPS IIIA. ·Our NAV Technology Platform expertise, which allows us to apply what we may learn in a specific disease program to similar diseases,enabling us to rapidly develop additional product candidates for related disease indications. ·Our long-standing relationships with academics, leading research institutions, scientists and scientific advisors who have vast experience in thefield of gene therapy and contribute key insights and significant developments to the field.The Broad Potential and Application of Gene TherapyThe concept of developing human therapies involving the delivery of external genes has existed for decades, driven by the arrival of recombinanttechnology and the early demonstrations by scientists of the ability to deliver and drive expression of external gene sequences in mammalian cells.6 We believe that gene therapy has the potential to become a new and important class of treatment because it may offer the following benefits: ·Ability to treat a broad range of diseases. Given the availability of the sequence of the entire human genome, it could be possible to designgene therapy to express or effect expression of any human protein whose presence, absence or activity causes disease. ·Ability to target mechanisms that cannot be targeted effectively by existing drug classes. Many proteins that play roles in disease cannot betargeted effectively with small molecules and therapeutic proteins. These limitations on small molecule and protein drugs may not apply togene therapy, which we believe can be designed to target any gene in the genome. ·Inherently specific, natural and therefore potent mechanism of action. Gene therapy is designed to result in proteins specifically targetingthe underlying cause of a disease and that are produced naturally in humans. This mechanism has the inherent theoretical benefit of creatingmore potent treatments with a reduced risk of inactivation. ·Simplified discovery of treatment candidates. Identification of small molecule and protein drug candidates typically requires screening of alarge number of potential candidates to find prospective leads. Identification of gene therapy candidates has the potential to be simpler andtake considerably less time because it can involve relatively standard processes that can be applied in a similar fashion to many successiveproduct candidates. ·Ability to create convenient treatment profiles. Because gene therapies are designed to deliver a long-term effect with a single administration,a single gene delivered via gene therapy could potentially do the same work of administering conventional drugs for many years.Historically, the primary challenge for gene therapy has been the delivery of genes into cells. Genes are made of deoxyribonucleic acid (DNA), whichis a large, highly charged molecule that is difficult to transport across a cell membrane and deliver to the nucleus, where it can be transcribed and translatedinto protein. The genetic material needs to be delivered efficiently and to the desired target tissues and cell types, which will vary depending on the diseaseto be treated. Based on this need, scientists have designed and developed a variety of gene vectors in order to facilitate gene delivery in cells.To date, the study of gene vectors as treatments in humans has involved approaches with in vivo and ex vivo techniques using a variety of differentgene vectors. Each approach presents different features and benefits for the treatment of a particular disease. Ex vivo gene therapy approaches generally areemployed to target correction in blood and bone marrow. These methods typically involve harvesting and isolating a patient’s own cells. Both the patientand cells undergo several preparatory steps to allow for modification of the cells by gene vectors. Ultimately, the modified cells are re-administered to thepatient. In vivo gene therapy approaches involve directly administering (e.g., by infusion or injection) gene vectors into patients in order to reach desiredcells in target tissues (e.g., liver, brain, eye, muscle, heart). These methods rely on a combination of the route of administration and the gene vectorsthemselves to facilitate the correction in the target tissues. We focus on in vivo gene therapy.Among vectors available for in vivo gene therapy, viral vectors have been adopted with the greatest frequency because they have demonstrated thegreatest efficiency in gene delivery to date. This efficiency exists because viral vectors are derived from naturally occurring viruses whose normal life-cyclerelies on gene delivery of their own genomes. In other words, they are naturally optimized to deliver genes to cells. Many viral vectors have presented sub-optimal safety profiles for in vivo treatment in humans because the viruses from which they are derived are pathogenic (causing disease), immunogenic(causing immune response) or create genomic toxicity (delivering a gene to a place where it interrupts normal function). Vectors derived from adenovirus,herpes virus and retroviruses have been tested as in vivo viral vectors.Vectors derived from AAV have among the best safety profiles for gene therapy given that AAVs are not known to be associated with disease inhumans. The earlier generation AAV vectors were designed by scientists in the mid-1980s and the first clinical trials using AAV began in the mid-1990s.There were only a handful of AAV vectors available to scientists at the time of the first clinical trials because AAV vectors were designed based on the capsid(the protein shell of a virus that encloses the genetic material of the virus) of AAV viruses known to be in existence and only six distinct serotypes (groupswithin a single species of microorganisms, such as bacteria or viruses, which share distinctive surface structures) had been discovered at that time. Theseearlier generation AAV vectors were shown to be limited in their application due to a variety of limitations and challenges, including: ·low or unmeasurable gene expression, meaning the delivered gene was enabling production of low or unmeasurable amounts of the therapeuticprotein; ·short-term gene expression, meaning if gene expression was measurable, it was transient;7 ·limited tissue selectivity, meaning concentrated gene expression was not observed in the target organ; and ·high levels of immune response, meaning the body may neutralize the gene delivery vector with pre-existing antibodies or generate T-cells thatinhibit the therapeutic effect.Discovery of Next Generation AAVIn recognition of the limitations and challenges of earlier generation AAV vectors, an effort was undertaken in the early 2000s at Penn to discoverother naturally occurring AAV sequences. The identification of such sequences was based on the observation that wild-type AAV (in contrast to recombinantAAV) can undergo a latent cycle in which the AAV genome stays within the cell, meaning the virus, including its capsid gene sequence, remains intactwithin the cell but does not reproduce. This allowed for identification of new sequences not by purifying viruses from tissues, but by searching for capsidgene sequences in a variety of tissues isolated from non-human primates and from humans, based on regions of the AAV capsid gene that did not varybetween the known AAV vectors. By searching for capsid gene sequences in this manner, many more capsid protein sequences were discovered than wouldhave been found by purifying viruses from tissues.More than 100 new capsid sequences were identified by the process. The first few were initially designated AAV7, AAV8 and AAV9, after which, othersequences were identified by species from which it was isolated (e.g., “rh” indicating rhesus macaque) followed by a number (e.g., 10, for rh10). Earlycharacterization of the initial discoveries of AAV7, AAV8, AAV9 and AAVrh10 suggested that these vectors may be significantly more efficient in variousapplications important for clinical translation than other previously known AAVs.After patenting the next generation AAV vectors, Penn initiated a distribution program through a material-transfer process that enabled researchers toaccess the next generation AAV vectors for research use only, under specific restrictions. Thousands of custom reagents were sent to independent researchers,who began to characterize and validate the beneficial features of AAV vectors in animal models of disease. In 2010, the first clinical trials were conductedusing the next generation AAV vectors and initial proof-of-concept and safety in humans was established from these trials. These clinical trials also producedlonger-term efficacy results which reinforced our belief that these next generation vectors have beneficial properties not seen in the earlier generation AAVvectors.We believe the next generation AAV vectors, which form the basis of our NAV Technology Platform, have many improved properties relative toearlier generation AAV vectors for development and commercialization of AAV treatments, including: ·higher gene expression; ·longer-term gene expression; ·broad and novel tissue selectivity; ·lower immune response; and ·improved manufacturability.Our Proprietary NAV Technology Platform for Gene DeliveryOur NAV Technology Platform has been used in several clinical trials conducted by our partners and third-party investigators. In 2009, we licensedrights to the next generation AAV vectors discovered at Penn. Our NAV Vectors form the foundation of our NAV Technology Platform.We are developing therapeutics using NAV Vectors that contain genes which are synthesized to code for the expression of therapeutic proteins intarget cells to correct the underlying causes of the diseases we seek to treat. Each product candidate is designed with a NAV Vector for a specific cell targetand to express a specific protein. We incorporate proprietary modifications to both the AAV and the gene which enhance properties such as potency, stabilityand tissue distribution. Our proprietary modifications, including the use of vectors derived from novel sequences of AAV such as AAV7, AAV8, AAV9 andAAVrh10, are protected by over 100 licensed patents and patent applications. The rights to our NAV Technology Platform provide our product candidateswith what we believe to be a competitive advantage over product candidates developed with earlier generation AAV vectors due to the novel and beneficialproperties of our NAV Vectors.8 Clinical Validation of Our NAV Technology PlatformHistory of the Development of AAV8 in the Treatment of Hemophilia BHemophilia is a genetic bleeding disorder that prevents the blood from clotting normally. The main symptom is uncontrolled, often spontaneousbleeding. Internal bleeding into the joints can result in pain, swelling and, if left untreated, can cause permanent damage. Hemophilia B is caused bymutations in the gene encoding the clotting factor, Factor IX (FIX).A collaboration among scientists and clinicians at St. Jude Children’s Research Hospital and University College London established the first humanproof-of-concept using AAV8 to deliver and express a gene in the liver. The results of these translational studies and clinical trial present an informativetranslational road map. ·Mice studies demonstrate correction of bleeding episodes. In 2006, preclinical studies were reported involving a single intravenousadministration of an AAV8 vector encoding the human Factor IX (hFIX) gene that resulted in greater than normal levels of hFIX and correctionof the bleeding diathesis in FIX knock-out mice. ·Non-human primate studies demonstrate long-term hFIX expression. In 2011, preclinical studies were reported involving a singleintravenous administration of an AAV8 vector encoding the hFIX gene that resulted in peak levels of hFIX of approximately 420% of normal. ·Human clinical trial demonstrates reduction in disease severity. In 2011, the New England Journal of Medicine published results from aclinical trial involving a single, intravenous administration of an AAV8 vector encoding the hFIX gene to six subjects with severe hemophiliaB. This trial resulted in increased levels of hFIX sufficient to improve severe hemophilia B to a mild or moderate disease state.Researchers at St. Jude Children’s Research Hospital, studying hemophilia B patients, used AAV8 encoding the FIX protein delivered intravenouslyto target the liver, and used the liver as a depot for producing and secreting the needed FIX. In the study, six patients with FIX levels of less than one percentof normal were treated in an ascending dose study and then the highest dose was extended to another four patients. Reports indicate that the treatment waswell-tolerated and demonstrated therapeutic, sustained levels of FIX expression in all patients. All patients were expressing levels of FIX post-treatment atlevels at or above two percent of normal, converting them to patients with moderate disease. Several high dose patients have sustained levels at eight percentof normal, placing them in the mild disease group. Most patients have been able to stop prophylactic FIX infusions. The main vector-related adverse eventwas an elevated serum alanine aminotransferase level, which we believe may be attenuated by a short, tapering course of steroid.The clinical trial described above was the strongest example of efficacy evidence in any AAV vector clinical trial. Expression has been stable, with theearliest dosed patient showing expression and long-lasting amelioration of bleeding episodes for over four years. A previous clinical trial in hemophilia Busing AAV2 did not have observed evidence of efficacy, so the St. Jude clinical trial was notable for reporting evidence of preliminary efficacy in this diseaseand in suggesting the importance of NAV Vectors.Subsequently, two additional groups have reported human proof-of-concept using AAV8-mediated gene therapy to deliver and express a gene in theliver for the treatment of hemophilia B. NAV Vectors have been further validated in a more recent clinical trial by Baxalta US Inc. (formerly BaxterHealthcare) (Baxalta) in hemophilia B. Baxalta employs an AAV8 vector which differs by encoding a gene for a naturally occurring mutant of FIX which hashigher activity. Baxalta has recently reported that two patients in the mid-dose cohort have experienced no bleeds without regular infusions of FIX and oneof these patients has had sustained FIX expression levels of 20% to 25% of normal FIX levels for 12 months. In the highest dose cohort, FIX expression levelshave peaked above 50%, though the two patients in this cohort experienced an immune response which has led to decreased FIX expression, with one patientresuming regular FIX infusions. Baxalta has exclusive rights to use AAV8 for the treatment of hemophilia B from a license executed directly with GSK whichpredates our licensing of the NAV Technology Platform.Development of AAV9 in the Treatment of SMA Type ISMA Type 1 is a lethal genetic disorder caused by a defect in the survival of motor neuron 1, telomeric (SMN1) gene that codes the survival motorneuron (SMN) protein, which is necessary for survival of motor neurons. Motor neurons are a critical component of the pathway that carries signals from thebrain to muscle cells and SMA Type I is characterized by motor neuron loss and associated muscle deterioration. SMA Type I is the leading genetic cause ofinfant mortality and results in mortality or the need for permanent ventilation support before the age of two for greater than 90% of patients. There iscurrently no FDA-approved treatment for SMA Type 1.Our NAV Technology Licensee, AveXis, Inc. (AveXis), is developing AAV9 encoding the SMN protein administered intravenously to target the lowermotor neurons for the treatment of SMA Type I. AveXis has fully enrolled a Phase I clinical trial9 with 15 patients, three in the low-dose cohort who completed dosing in September 2014 and 12 in the high-dose cohort who completed dosing in January2016. Patients must have been no older than nine months of age (for the first nine patients) and six months of age (for the last six patients) whendosed. Recently, AveXis reported preliminary results in the study, which we believe has the potential to demonstrate strong efficacy evidence and proof-of-concept for treatment of a severe genetic CNS disease using AAV9.Clinical Use of NAV TechnologyOur NAV Technology has been used by our NAV Technology Licensees in clinical trials. In 2010, major milestones were achieved with the initiationof two investigator-sponsored studies using NAV Vectors. As noted above, clinical trials for hemophilia B using AAV8 have met safety and efficacyendpoints. Additionally, we believe preliminary clinical trial results for SMA Type I using AAV9 may demonstrate efficacy evidence and proof-of-concept.The hemophilia B study has generated evidence of durable gene expression in patients for over four years. Since the initial investigator-sponsored trialsbegan in 2010, we believe 13 additional clinical trials have been initiated using NAV Vectors by our NAV Technology Licensees or other third parties. Inaddition, an IND for RGX-501 is active. All diseases targeted in 16 clinical trials using NAV Vectors of which we are aware as of December 31, 2015 are setforth in the graphic below. Key Potential Benefits of NAV TechnologyThe properties that make NAV Vectors unique from and potentially an improvement to earlier generation AAV vectors, as well as provide support thatthey are potentially best-in-class for development and commercialization of AAV treatments, are set forth in the pages that follow.10 Higher Gene ExpressionNAV Vectors have been shown to generate higher levels of gene expression in animals than earlier generation AAV vectors such as AAV2. In micelivers, one of our NAV Vectors, AAV8, produced levels of gene expression that were 10- to 100-fold higher than was achieved with AAV2. The figure belowshows the contrast in the amount of gene expressed using the two vectors.AAV Transduction in Mouse Liver In this experiment, the reporter gene LacZ, a gene which encodes a protein that turns a clear substrate blue in a specific medium, was included in thetransgene sequence delivered by the vector so that cells expressing the transgene are stained blue, visually denoting expression level. It was possible totransduce the entire mouse liver and achieve long-term expression with AAV8. Higher gene expression creates the possibility of achieving therapeuticbenefit in more diseases than was possible using earlier AAV vectors, as more therapeutic protein is generated with vectors that enable higher expression.Longer-Term Gene ExpressionWe believe the longer-term gene expression seen using NAV Vectors is due to more stable genomic persistence and reduced cellular immunity, whichare a function of novel capsid structure and lower dosing required using NAV Vectors due to the greater gene expression discussed earlier. NAV Vectors havedemonstrated stable expression in animals for over eight years. Moreover, AAV8 vectors have demonstrated stable expression for over four years in clinicaltrials for hemophilia B patients.Broad and Novel Tissue SelectivityNAV Vectors also display high levels of tissue specificity. This property is important because it allows for development of therapeutics to target cellsthat earlier generation AAV vectors do not target or do not target well. In the CNS, AAV9 has emerged as a vector that enables efficient gene delivery whendirectly injected into the brain. This was aided by the ability of AAV9 to be transported throughout the brain, enabling broader delivery with a singleinjection.NAV Gene Therapy has demonstrated novel tissue selectivity for the CNS when delivered intravenously. Intravenous delivery of AAV9 resulted inefficient gene expression in the brain and spinal cord, and this route of administration produced results in both small and large animals, including non-humanprimates. This was the first time a gene therapy vector was demonstrated to cross the blood-brain barrier. This route of administration has recently been usedclinically by one of our NAV Technology Licensees to treat SMA Type I.11 NAV Vectors have also shown novel properties in the eye when investigated for the treatment of acquired disease and inherited retinal degenerations.AAV8 expressing a fluorescent protein was administered by subretinal injection in the non-human primate eye in order to show gene expression in the retinaitself, which contains the cell types to be treated. As is depicted in the graphic below, a cross-section of the non-human primate retina below showed moreefficient gene delivery (as demonstrated by the much greater amount of the fluorescent protein expressed) with AAV8 as compared to AAV2 in the retinalpigment epithelium (RPE) and to the photoreceptor (PR) layer. The majority of genes associated with retinal degeneration are located in the RPE and PRlayer. These genes influence the cell’s development or function and are therefore critical to most inherited retinal degenerations.AAV Transduction of Layers in the Non-Human Primate Eye(1) (1)Science Translational Medicine: Dosage Thresholds for AAV2 and AAV8 Photoreceptor Gene Therapy in Monkey, Luk H. Vandenberghe, et al.(2011). Reprinted with permission from the American Association for the Advancement of Science.Lower Immune ResponseLower immune response to the gene therapy vector used to deliver the transgene is important for longer-term gene expression, higher expression andhigher potency. Data indicate that more than 50% of certain human populations have a high level of neutralizing antibodies (NAbs) for the earlier generationvector AAV2. This represents a major obstacle to the effective use of these earlier generation AAV vectors due to the inhibition of gene delivery via particleneutralization in circulation, meaning pre-existing antibodies neutralize the vector with the transgene before it can reach the target cells. By contrast,frequency of neutralizing antibodies for AAV8 is consistently lower than for AAV2. In a French study, for example, AAV2 NAbs occurred at a frequency of59% compared to 19% for AAV8. Thus, AAV8 is a candidate for liver-directed gene delivery in a higher proportion of the population than AAV2.Additionally, reduced effect from the generation and reactivity of T-cells to NAV Vectors has been demonstrated, relative to earlier generation AAVvectors. Activation of T-cells to the capsid of AAV2 vectors has been implicated in liver toxicity in a clinical trial for the treatment of hemophilia B. Apatient in this clinical trial developed an elevation of liver enzymes and subsequently lost expression. This led to a hypothesis that capsid protein antigensand memory T-cell activation may lead to clearance of AAV-transduced cells. To further investigate this kind of toxicity, scientists reported a study thatevaluated T-cell responses to AAV vectors after administration to mice and nonhuman primates. In this study, high levels of T-cells specific to capsids ofAAV2 were detected. AAV8, however, did not lead to activation of capsid-specific T-cells. In a more recent clinical trial for the treatment of hemophilia B,using AAV8, there was less of an effect from T-cells generated and reactive with AAV8. We believe this is likely a function of the lower doses that can beused as well as the structure of the vector itself.Improved ManufacturabilityThe manufacturing process for NAV Vectors can be designed to reduce the number of difficult processing steps required for the earlier AAV vectors,improving overall yield at larger scale. NAV Vectors are derived from naturally “fit” viruses, which are stable structures that efficiently assemble, in contrastto the earlier generation AAV vectors. During production, NAV Vectors are secreted by AAV producer cells, eliminating the need for lysing (breaking downof the membrane of a cell, often by viral, enzymic or osmotic mechanisms that compromise the cells integrity) of cells, which can complicate purification andimpact yield. This is a novel aspect of NAV Vectors that increases yield and efficiency in production.12 Our NAV Gene Therapy Product CandidatesWe have developed an internal pipeline of product candidates across the therapeutic areas of metabolic, neurodegenerative and retinal diseases.Below is a table summarizing our current internal development programs. Metabolic DiseasesOur product development pipeline includes treatment candidates for liver-targeted expression of genes. The selected candidates for our programs seekto leverage lessons learned from previous reports of preclinical and human proof-of-concept studies conducted by third-party investigators and our partnersusing our NAV Technology Platform. Based on these studies and our own research, we believe our NAV Technology Platform demonstrates promisingproperties for applications that involve gene delivery to liver cells that may result in long-term, high-level expression of protein.Historically, a clinical trial for the treatment of hemophilia B using AAV2 vectors that were administered to achieve expression of genes in the liverdid not produce evidence of efficacy. Reported data from this study generally did not show any measureable levels of expression sufficient to correct diseasesymptoms. In subjects where measureable expression levels were reported, gene expression faded over a short period of time. We believe selecting differentAAV vectors will increase the levels and duration of expression.The first clinical milestone of AAV-mediated liver gene therapy occurred in 2011 in the trial described previously for the treatment of hemophilia Busing AAV8 in which some patients were able to discontinue prophylactic FIX injections. In 2014, the same group reported in a study update that thetreatment was shown to be durable for over four years and that long-lasting efficacy results were reported in the patients treated. Subsequently, two additionalgroups have reported human proof-of-concept using AAV8-mediated gene therapy to deliver and express a gene in the liver for the treatment of hemophiliaB.Recently, our academic collaborators demonstrated in a MPS I feline model that liver directed α-l-iduronidase (IDUA) gene delivery using AAV8resulted in persistent, normal levels of IDUA in the blood. In most cases, the treatment also resulted in cross-correction (cells that are transduced with vectorcan release enzyme, which is taken up by non-transduced cells) in most tissues including complete resolution of disease pathology in some tissues normallynot responsive to enzyme replacement therapy (ERT).We intend to advance a pipeline of programs in certain metabolic diseases that will be enhanced by the benefits of NAV-mediated liver gene therapy.Our initial focus will be on a severe lipid disorder, HoFH.13 RGX-501 for the Treatment of HoFH Caused by LDLR MutationsOverview of HoFHHoFH is a monogenic disorder caused by abnormalities in the function or expression of the low-density lipoprotein receptor (LDLR) gene. LDLRplays an important role in the regulation of cholesterol by facilitating uptake and degradation of low-density lipoprotein (LDL) in the liver. LDL is theprimary carrier of cholesterol in the blood and has been implicated in the development of plaque buildup in the arteries. HoFH patients have very low levelsor are completely deficient of LDLR, resulting in very high total blood cholesterol levels which are typically greater than 500 milligrams per deciliter(mg/dl). This leads to premature and aggressive plaque buildup, life threatening coronary artery disease (CAD) and aortic valve disease. Over time, patientswith HoFH develop atherosclerosis, or narrowing and blockage of the arteries, which leads to a high incidence of heart attacks in children and teenagers,among other severe symptoms. If untreated, HoFH patients usually die of causes related to CAD or aortic valve disease before the age of 30.Recently published medical literature suggests that the worldwide prevalence of HoFH is estimated to be as high as 1 in 200,000. Based on diseaseseverity and molecular characteristics, we estimate there are approximately 11,000 individuals globally who are primary candidates for gene therapytreatment of HoFH. Multiple studies have compared HoFH patients based on LDLR activity and have shown small differences in residual activity can lead tosignificant reductions in cholesterol levels and better long-term outcomes.Current Therapies for HoFHThe current standard of care in HoFH focuses on early initiation of aggressive treatment because of the severe clinical effects of elevated LDL-C.Unfortunately, available treatment options are limited. Lipoprotein apheresis, a physical method of purging the plasma of LDL-C, requires weekly orbiweekly treatment in order to maintain effect. The procedure is laborious, requiring frequent intravenous access that can be challenging, expensive and notreadily available. Other available treatments include statins, a class of pharmaceuticals commonly used to lower cholesterol levels, cholesterol absorptioninhibitors and other cholesterol lowering medications. Recently, two new drugs have been approved by the FDA as add-on therapy specifically for HoFH:lomitapide and mipomersen. Both result in a reduction of LDL-C, but their use is associated with an array of adverse events that may affect tolerance andlong-term adherence. These therapies do not provide a cure for the disease and their use is limited due to tolerability and drug availability. Despite theimplementation of an aggressive multi-drug therapy approach, the LDL-C levels of HoFH patients remain elevated and mean life expectancy remains atapproximately 32 years. With all current therapies, even in combination, providing sub-optimal treatment for patients, a better solution is needed. We believeHoFH is a promising target for gene therapy.In July and August 2015, respectively, the European Commission and the FDA approved Repatha (Amgen) for the treatment of high cholesterol andHoFH, among other indications. In July 2015, the FDA also approved Praluent (Sanofi-Aventis) for the treatment of high cholesterol. In September 2015, theEuropean Commission approved Praluent for adults with primary hypercholesterolemia (heterozygous familial and non-familial) or mixed dyslipidaemia.Repatha and Praluent represent the first drug approvals in a new class of drug called PCSK9 inhibitors. PCSK9 inhibitors are designed to bind to a proteincalled PCSK9 and inhibit PCSK9 from binding to LDLR on the liver surface. In the absence of PCSK9, there is more LDLR on the surface of the liver toremove LDL-C from the blood. We believe that the emergence of PCSK9 inhibitors as therapy will increase the opportunity and awareness for the profile ofRGX-501 by helping to identify more patients who may benefit from its product profile. A clinical trial evaluating a PCSK9 inhibitor demonstrated that itseffectiveness relies on patients having functional LDLR. We believe that a substantial unmet medical need remains for the population of HoFH patients whoare LDLR negative or severely deficient in LDLR function. We believe that RGX-501, by restoring or increasing LDLR function, may enhance the impact ofPCSK9 inhibitors in the treatment of many patients with high cholesterol and as prescribers explore combination therapies.RGX-501RGX-501 is our product candidate for the treatment of HoFH, which uses the AAV8 vector to deliver the human LDLR gene to liver cells. We believethat the liver is the preferred target organ for gene therapy of HoFH since LDLRs produced in the liver contribute to greater than 90% of the capture andbreakdown of LDL, making the liver by far the most important LDLR producing organ. Additionally, the liver is also the only organ capable of excretingcholesterol from the body, a function that is critical to the maintenance of cholesterol balance. Finally, studies have shown that liver transplantation in HoFHpatients corrects the disease, providing strong support that correction of hepatic LDL receptor activity by gene therapy is sufficient for metabolic correctionof the disease.14 Preclinical Proof of Concept for RGX-501In order to evaluate the potential for RGX-501 for the treatment of HoFH, mouse LDLR liver-directed gene therapy with AAV8 was evaluated inmouse models of HoFH by our scientific collaborators at Penn. Mice were injected intravenously with the vector and followed for metabolic correction andreversal of pre-existing atherosclerotic lesions. Animals were also evaluated for gross clinical toxicity and abnormalities in serum transaminases, an indicatorof liver damage. Animals in the Penn study receiving the vector showed a near complete normalization of hypercholesterolemia that remained stable foralmost a year, as well as a substantial regression of atherosclerosis over two months as assessed by two independent methods of quantification at two differentsites within the aorta. There was no vector induced toxicity of the liver based on histopathology and clinical chemistry. (1)PLOS One: Gene Therapy in a Humanized Mouse Model of Familial Hypercholesterolemia Leads to Marked Regression of Atherosclerosis, Sadik H.Kassim and Hui Li, et al. (October 2010).Planned Clinical Development of RGX-501An IND to support the initiation of a dose-escalation Phase I/II clinical trial of intravenously administered RGX-501 in the U.S. in patients with HoFHbecame active in November 2015 (ClinicalTrials.gov Identifier: NCT02651675). We expect a Phase I/II clinical trial for RGX-501 to be initiated in the firsthalf of 2016. The trial is a single ascending dose design with a formal safety assessment of the lower dose group prior to dose escalation. The trial design callsfor enrollment of up to 12 subjects and is intended to be a single center study. The primary endpoint will be a safety assessment. The secondary endpointswill be reduction in LDL-C and other outcome measures. Based on previous clinical trials and recent approvals in HoFH, we believe reduction in LDL-C is anendpoint that is an acceptable measure on which regulatory approval could be based.The U.S. National Institutes of Health (NIH) Office of Biotechnology Activities’ Recombinant DNA Advisory Committee (the RAC) reviewed the draftprotocol for our HoFH Phase I/II clinical trial which we submitted in January 2012. In March 2012, we presented the protocol to the RAC and receivedsubsequent communication from the RAC in March 2012 endorsing the protocol with comments. We have incorporated the RAC’s recommendations into thefinal protocol. Results from this Phase I/II clinical trial will guide us in finalizing the design of a pivotal Phase III clinical trial. If successful, we believe theresults of this Phase III clinical trial could support submission of a Biologics License Application (BLA) to the FDA in the U.S. and a MarketingAuthorization Application (MAA) to the European Medicines Agency (EMA) in the European Union for RGX-501.We have received orphan drug product designation from the FDA for RGX-501.Neurodegenerative DiseasesWe are focused on developing NAV Gene Therapy for treatments for diseases with significant unmet medical need that involve neurodegeneration inthe brain and spinal cord—which together comprise the CNS. We believe our NAV Technology Platform has optimal features for gene delivery to the CNS. Inaddition, our programs involve novel strategies for improved delivery of NAV Gene Therapy treatments to the CNS that enhance our candidate profiles.For neurodegenerative disease, AAV2 vectors were historically applied via focal delivery in the brain by adopting existing direct injectiontechniques. In certain cases, investigators have attempted to use direct injection of vector into multiple sites of the15 brain to address neurodegenerative disorders that require gene delivery to larger areas. Although there are some examples in animal models in which focaldelivery can be therapeutic, these techniques have not produced efficacy in humans.For most neurodegenerative diseases, we believe that global delivery to the CNS will achieve optimal therapeutic efficacy. Widespread transductionof the CNS in animal models has been achieved by administration of NAV Vectors into the ventricles, cisterna magna, as well as lumbar puncture, whichallows the vector to circulate through the cerebrospinal fluid (CSF). We are progressing similar delivery approaches through the CSF in humans to achieveglobal delivery to the CNS.Additionally, as described above, one of our NAV Vectors, AAV9, has produced early evidence of potentially unique and beneficial properties forgene delivery in the CNS by having the ability to cross the blood-brain barrier. As a result, treatments may be delivered via intravenous injection to target theCNS. One of our NAV Technology Licensees is currently using this approach in a clinical trial for the treatment of SMA Type I, which has shown preliminaryevidence of lower motor neuron transduction.Based on these studies and our own research, we believe our NAV Technology Platform demonstrates promising properties for applications thatinvolve gene delivery to the CNS that we believe will result in long-term, high-level expression of protein. We intend to advance a pipeline of programs inneurodegenerative diseases that will be enhanced by the benefits of using our NAV Technology Platform.RGX-111 for the Treatment of MPS I Caused by Autosomal Recessive IDUA MutationsOverview of MPS IMPS I is a rare autosomal recessive, or non-sex-linked, genetic disease caused by deficiency of IDUA, an enzyme required for the breakdown ofpolysaccharides heparan sulfate and dermatan sulfate in lysosomes, which are intracellular structures that dispose of waste products inside cells. Thesepolysaccharides, called glycosaminoglycans (GAGs), accumulate in tissues of MPS I patients, resulting in characteristic storage lesions and diverse clinicalsigns and symptoms. MPS I patients may exhibit short stature, bone and joint deformities, coarsened facial features, enlargement of both the liver and spleen(hepatosplenomegaly), cardiac valve disease, obstructive sleep apnea, recurrent upper respiratory infections, hearing impairment, carpal tunnel syndrome andvision impairment due to corneal clouding. In addition, many patients develop symptoms related to GAG storage in the CNS, which can include excessiveaccumulation of fluid in the brain, spinal cord compression and cognitive impairment. MPS I patients span a broad spectrum of disease severity and extent ofCNS involvement. We believe this variability in severity correlates with residual IDUA expression. The severe form of MPS I is also referred to as Hurlersyndrome. Hurler patients have two mutations of the IDUA gene, resulting in no active enzyme expression. These patients typically present with symptomsbefore two years of age and universally exhibit severe cognitive decline after an initial period of normal development. Patients with at least one mutation ofthe IDUA gene who are able to produce a small amount of active IDUA exhibit an attenuated, or less severe, phenotype. These phenotypes are referred to asHurler-Scheie or Scheie syndrome. Hurler-Scheie represents an intermediate phenotype, with patients exhibiting some or all of the physical features of Hurlersyndrome. Some Hurler-Scheie patients also experience neurological complications and cognitive decline.MPS I is estimated to occur in 1 in 100,000 births. Based on global population, this equates to over 1,000 MPS I patients born each year worldwide.Studies suggest that severe forms of MPS I represent between one-half and two-thirds of all MPS I patients.Current Therapies for MPS IThe current standard of care for patients with an attenuated form of MPS I is a recombinant form of human IDUA (Aldurazyme). Given as a weeklyintravenous infusion, this ERT has demonstrated improvement in hepatosplenomegaly, growth, mobility and respiratory function. However, as the enzymecannot cross the blood-brain barrier, ERT does not treat the CNS manifestations of MPS I.The first disease modifying therapy developed for severe MPS I was bone marrow transplant (BMT). Though BMT has demonstrated improvements insurvival, growth, cardiac and respiratory function, mobility and intellect, it is also associated with substantial morbidity and an estimated 15% to 25%mortality. Accordingly, the procedure is reserved for patients with severe disease before two years of age because the risk-benefit ratio is thought to be morefavorable in younger patients who have not yet experienced advanced cognitive decline. Another critical limitation of BMT is that cognitive declinecontinues for up to a year after transplant before stabilizing, leaving permanent cognitive deficits. In an effort to find approaches that treat the CNSmanifestations of neurodegenerative diseases, clinical trials to evaluate direct administration of ERT into the spinal fluid (intrathecal administration) for thetreatment of MPS I and direct administration of ERT into the brain (intracerebroventricular administration) for Batten’s Disease (a neurodegenerative disease)have been initiated. These approaches, however, do not address the underlying cause of these neurodegenerative diseases. Furthermore, we believe the needfor frequent (bi-weekly or monthly) intrathecal or intracerebroventricular administration is likely to lead to patient compliance issues, further reducing thetreatment potential of this method of ERT.16 Overall, the limitations of BMT and ERT leave a significant unmet need for a method to safely achieve long-term IDUA reconstitution in the CNS forMPS I patients experiencing neurological complications.RGX-111RGX-111 is our product candidate for the treatment of MPS I which uses the AAV9 vector to deliver the human IDUA gene to the CNS. Delivery of theenzyme that is deficient within cells in the CNS could provide a permanent source of secreted IDUA beyond the blood-brain barrier, allowing for long-termcross-correction of cells throughout the CNS. This strategy could also provide rapid IDUA delivery to the brain, potentially preventing the progression ofcognitive deficits that otherwise occurs in MPS I patients.Preclinical Proof of Concept of RGX-111To assess the feasibility of achieving widespread IDUA expression and correction of storage pathology throughout the brain of MPS I patients, wecarried out proof-of-concept studies of intrathecal AAV9 delivery of IDUA using large animal models of MPS I. These studies demonstrated that AAV9delivery can safely restore IDUA expression to levels equivalent to or greater than non-affected animals. As can be seen in the diagram below, animals treatedwith an intracisternal injection of an AAV9 vector expressing feline IDUA from a CB promoter (gray symbols) or CMV promoter (black symbols) showedIDUA expression levels above those of untreated animals and in some cases above those of wild-type animals (the dotted line represents mean CSF IDUAexpression for two wild-type animals). Storage correction was observed throughout the CNS. Some animals had IDUA activity at lower levels than wild-typeanimals post-treatment but also achieved significant correction relative to diseased animals. The extent of CNS correction in our studies was substantiallygreater than that observed in a previous study of MPS I cats treated with BMT at similar ages, thus demonstrating that gene delivery can achieve rapid onsetand high levels of IDUA delivery. These findings provide proof of concept of AAV9 delivery of IDUA for treating the CNS pathology associated with MPS I.IDUA Expression in Feline CSF Following IT AAV9 Delivery(1) (1)Molecular Therapy: Intrathecal gene therapy corrects CNS pathology in a feline model of mucopolysaccharidosis I, Peter Bell, et al. (July 2014).Planned Clinical Development of RGX-111We intend to file an IND in the first half of 2016 to support the initiation of an early phase dose-escalation clinical trial of RGX-111 based genedelivery via CNS administration in mid-2016 in subjects with MPS I. The Phase I/II clinical trial currently being considered is expected to be a singleascending dose design with a formal safety assessment of the lower dose group prior to dose escalation. The trial design is expected to call for enrollment ofapproximately 10 adult subjects. The primary endpoint will be a safety assessment. The secondary and exploratory endpoints will be evaluation ofbiomarkers and clinical outcomes.In September 2015, we received endorsement from the RAC for our RGX-111 protocol. We have received orphan drug product designation and rarepediatric disease designation from the FDA for RGX-111.17 RGX-121 for the Treatment of MPS II Caused by X-Linked Recessive IDS MutationsOverview of MPS IIMPS II, also known as Hunter syndrome, is a rare, X-linked recessive, or sex-linked, disease caused by a deficiency in the lysosomal enzyme iduronate-2-sulfatase (IDS). IDS is another enzyme responsible for the breakdown of polysaccharides heparan sulfate and dermatan sulfate in the lysosomes of cellsresulting in a progressive, multisystem disorder with a similar phenotype to MPS I. In severe forms of the disease, early developmental milestones may bemet, but developmental delay is readily apparent by 18 to 24 months. Developmental progression begins to plateau between three and five years of age, withregression reported to begin around six and a half years. By the time of death, most patients with CNS involvement are severely mentally handicapped andrequire constant care.MPS II is estimated to occur in approximately 1 in 200,000 births. Based on global population, this equates to approximately 500 to 1,000 MPS IIpatients born each year worldwide.Current Therapies for MPS IIIn 2006, recombinant IDS (Elaprase), an ERT, was approved by the FDA for the treatment of Hunter syndrome and has subsequently been approved foruse internationally. ERT in MPS II patients is not expected to result in improvement of CNS dysfunction since IDS is not expected to cross the blood-brainbarrier. Specific treatment to address the neurological manifestations of MPS II and prevent or stabilize cognitive decline remains a significant unmet medicalneed. Overall, the limitations of ERT leave a significant unmet need for a method to safely achieve long-term IDS reconstitution in the CNS.RGX-121RGX-121 is our product candidate for the treatment of MPS II, which uses the AAV9 vector to deliver the human IDS gene to the CNS. Delivery of thegene encoding the enzyme that is deficient within cells in the CNS could provide a permanent source of secreted IDS beyond the blood-brain barrier,allowing for long-term cross-correction of cells throughout the CNS. We believe this strategy could also provide rapid IDS delivery to the brain, potentiallypreventing the progression of cognitive deficits that otherwise occur in Hunter syndrome patients.As noted above, this approach has been successfully used in the treatment of animal models of monogenic CNS diseases. Previously conducted studiesof AAV9 directed gene therapy in the CNS with MPS I animal models have shown that AAV9 can successfully be used to achieve wide biodistribution withinthe CNS, robust expression of transgene product that benefits from cross-correction and overall acceptable safety profile. We believe these studies havevalidated the use of AAV9 in the development of CNS directed gene therapy products and that by using AAV9 for the development of both RGX-111 andRGX-121, we will be able build upon the learnings and experience generated in our RGX-111 program to rapidly and efficiently focus our developmentefforts for RGX-121.18 Preclinical Development of RGX-121To assess the feasibility of achieving widespread IDS expression and correction of storage pathology throughout the brain of MPS II patients, wecarried out proof-of-concept studies of CNS AAV9 delivery using a mouse model of MPS II. There are no known large animal models of MPS II. MPS II micewere administered with AAV9 vector encoding a gene for IDS in the CNS, which resulted in higher levels of IDS enzyme activity in the brain. As shown in thediagram below, these higher levels of IDS enzyme activity resulted in a statistically significant reduction of neuronal storage lesions in the brains of treatedmice as measured by cells positive for GM3, a ganglioside which accumulates in cells as a result of IDS deficiency. These results show the potentialtherapeutic benefit of AAV9-mediated IDS gene delivery to the CNS through the CSF to address neurological manifestations of MPS II.GM3 Positive Cells in Mouse Tissue Following IT AAV9 Delivery(1) (1)Penn and REGENXBIO internal dataPlanned Development of RGX-121We intend to file an IND in the first half of 2017 to support the initiation of an early phase dose-escalation clinical trial of RGX-121 based genedelivery via CNS administration in subjects with MPS II. The Phase I/II clinical trial currently being considered is expected to be a single ascending dosedesign with a formal safety assessment of the lower dose group prior to dose escalation. The trial design is expected to include approximately 10 subjects.The primary endpoint will be a safety assessment. The secondary and exploratory endpoints will be evaluation of biomarkers and clinical outcomes.We have received orphan drug product designation from the FDA for RGX-121.Retinal DiseasesWe are developing applications of our NAV Technology Platform to treat inherited and acquired forms of retinal disease that can result in visual lossor complete blindness. The retina is the light-sensitive layer of cells that lines the inside of the eye and sends visual messages to the brain. The effects ofretinal diseases are isolated to the eye, which is an ideal target for gene therapy due to its immunoprivileged state, small size and relative physical isolationfrom the rest of the body. The molecular basis of many retinal diseases is becoming well-understood and many retinal diseases are monogenic diseases whosecomplementary DNA has already been successfully cloned. Also, diagnosis with many forms of inherited blindness is becoming quicker and simpler, due toimproved research and application of technology to characterize the variable, unique patterns of different retinal diseases. We believe our NAV Gene Therapywill have improved profiles for achieving therapeutic efficacy where highly efficient gene delivery to the retina is required.Third party studies reported early evidence of the safety and efficacy of subretinal injection of AAV2 in clinical trials for a retinal disease called Lebercongenital amaurosis type 2 (LCA2). Other programs are studying the safety and efficacy profile of AAV2 to treat neovascularization in wet AMD. For LCA2,retinal function was restored by reconstituting gene function in the retinal pigment epithelium (RPE). However, for most retinal degeneration disorders,photoreceptor cells are the primary cell type involved and have19 historically been a more difficult cellular target in the retina for AAV gene therapy. We believe our NAV Technology Platform will be more efficient at genedelivery into many retinal cell types, particularly photoreceptor cells, than earlier generation AAV vectors such as AAV2. Data from mice, dogs and non-human primates suggests that, compared to other AAVs, NAV Vectors can safely and more effectively target a diverse set of retinal cells, including RPE cellsand photoreceptors, when compared to other AAVs. For instance, in most retinal cells, NAV-mediated gene delivery reaches maximal levels of expressionmuch sooner than AAV2-mediated delivery. Furthermore, in the same set of retinal cells, NAV Vectors achieve equivalent expression to AAV2 at a dose thatis ten times less. Our NAV Technology Platform has been used successfully in a gene therapy approach in animal models of achromatopsia, LCA2, autosomalrecessive retinitis pigmentosa, retinoschisis and wet AMD.We believe that retinal diseases are an ideal target for NAV Gene Therapy due to early evidence indicating efficiency at achieving gene delivery in awide-array of cell types in the retina. We believe the first use of our NAV Technology Platform in a clinical trial for retinal diseases could result in robustsafety and efficacy data but could also serve as a stepping stone for using NAV Gene Therapy in other human retinal diseases.RGX-314 for the Treatment of Wet AMDOverview of Wet AMDAge-related macular degeneration (AMD) is a disease that results in diminution and eventual loss of central vision due to progressive damage to themacula. A subset of AMD patients have wet AMD which is characterized by loss of vision due to the formation of new blood vessels into space between twolayers of cells in the retina. This excess blood vessel formation results in fluid leakage that can result in physical changes in the structure of the retina andchanges in vision. As this process becomes more severe, blindness can result from scar formation due to hemorrhaging.Wet AMD is a leading cause of total and partial vision loss in the U.S., Europe and Japan. Wet AMD consists of approximately 10% of all cases ofAMD, but accounts for approximately 90% of the vision loss associated with AMD. As indicated by the name, the risk for developing AMD increases withage and we anticipate the diagnosis rate will continue to increase as the population continues to trend towards an aging population. In the U.S., theprevalence of wet AMD is estimated to be nearly 600,000 individuals. Globally, the prevalence of wet AMD may exceed three million individuals based onextrapolations using global population figures. In developed countries, an estimated two-thirds of people with AMD have been diagnosed, of whom abouttwo-thirds are treated.Current Therapies for Wet AMDAnti-vascular endothelial growth factor (VEGF) therapies have significantly changed the landscape for treatment of wet AMD. They have quicklybecome the standard of care due to their ability to either halt or significantly impede the loss of vision in the majority of patients with wet AMD. Currentlythere are three VEGF inhibitors that are commonly used for the treatment of wet AMD. All of these therapies require repetitive intravitreal injections typicallyranging from every four to eight weeks in frequency to maintain efficacy, and patients often experience vision loss with reduced frequency of treatment. Dueto a variety of factors, including inconvenience and discomfort associated with frequent injections in the eye, patient compliance is a significant concernwith anti-VEGF therapies.We are aware of multiple gene therapy product candidates currently in development to address the unmet medical need described above for wet AMDby targeting VEGF inhibition using AAV2 as the gene therapy vector. Recently, an ongoing clinical trial using one of these AAV2 gene therapy vectorsreported data that indicated there may be patients who benefited with reduced injection frequency. We believe these data may also indicate that somepatients may benefit from greater inhibition of VEGF activity and that utilizing NAV Technology could allow us to achieve better VEGF inhibition than ourcompetitors using AAV2 to treat wet AMD.RGX-314RGX-314 is our product candidate for the treatment of wet AMD, which acts by neutralizing the activity of VEGF and modifying the pathway forformation of new, leaky blood vessels and retinal fluid accumulation. We plan on delivering RGX-314 subretinally using an AAV8 vector encoding a genefor a monoclonal antibody fragment which binds to VEGF and neutralizes VEGF activity. Ranibizumab is an FDA-approved monoclonal antibody fragmentthat binds to VEGF and has been extensively shown to be both efficacious and safe in wet AMD patients when delivered repeatedly through intraocularinjections.Planned Development of RGX-314We expect to file an IND for RGX-314 in the second half of 2016.20 X-linked Retinitis Pigmentosa (XLRP)Retinitis pigmentosa (RP) is the most common inherited form of blindness, with an estimated 100,000 patients in the U.S. XLRP accounts forapproximately 10% of RP, with 75% to 80% of XLRP cases due to mutations in the gene for retinitis pigmentosa GTPase regulator (RPGR). Mutations inRPGR are associated with a more severe form of the disease, causing early onset of disease, and a relatively fast progression. No therapies exist for RP beyondvitamin supplementation and sun protection, which may or may not slow disease progression. We currently have a preclinical program in development, RGX-321, for the treatment of XLRP.License Agreements and Commercial LicensesPlatform LicensesWe have exclusively licensed many of our rights in our NAV Technology Platform from Penn and GlaxoSmithKline LLC (GSK), which together werefer to as our Platform Licenses. We currently use our NAV Technology Platform to develop treatments for metabolic, neurodegenerative, and retinaldiseases. We also sublicense our NAV Technology Platform to third parties in order to develop and bring to market NAV Gene Therapy for a range of severediseases with significant unmet medical needs outside of our core disease indications and therapeutic areas. For further information regarding our commercialsublicenses, please see “License Agreements and Commercial Licenses—Commercial Licenses to NAV Technology Licensees” located elsewhere in thisAnnual Report on Form 10-K.The Trustees of the University of Pennsylvania. In February 2009, we entered into an exclusive, worldwide license agreement with Penn for patent andother intellectual property rights relating to a gene therapy technology platform based on AAVs discovered at Penn in the laboratory of our Chief ScientificAdvisor, James M. Wilson, M.D., Ph.D. This license was amended in September 2014. In February 2009, we also entered into a sponsored research agreement(SRA) with Penn (2009 SRA) under which we funded the nonclinical research of Dr. Wilson relating to AAV gene therapy and obtained an option to acquirean exclusive worldwide license in certain intellectual property created pursuant to such 2009 SRA. In December 2014, we entered into another sponsoredresearch agreement with Penn funding related nonclinical research of Dr. Wilson (2014 SRA). We entered into an additional sponsored research agreement(2013 SRA) with Penn in November 2013 which was funded entirely by our NAV Technology Licensee, Dimension Therapeutics, Inc. (Dimension).Our license agreement with Penn, as amended, provides us with an exclusive, worldwide license under certain patents and patent applications in orderto make, have made, use, import, offer for sale and sell products covered by the claims of the licensed patents and patent applications as well as all patentableinventions (to the extent they are or become available for license) that: ·were discovered by Dr. Wilson or other Penn researchers working under his direct supervision at Penn prior to September 2014; ·are related to the AAV technology platform discovered by Dr. Wilson at Penn prior to February 2009 or pursuant to a sponsored researchagreement or subsequent amendment to a sponsored research agreement; and ·are owned by Penn and available for licensing.Prior to entering into the license agreement with us, Penn had previously entered into two license agreements with third parties with respect to certainof the licensed patents and patent applications. Our license from Penn is subject to those preexisting license grants. With respect to the first third party licensegranted by Penn, our license is non-exclusive with respect to the patents and patent applications licensed to the third party for so long as that preexistinglicense grant remains in effect and will become exclusive upon the expiration or termination of that existing license agreement. The pre-existing licenses alsoinclude a license agreement Penn entered into with GSK in May 2002 granting a license to certain patents and patent applications, of which we subsequentlysublicensed certain rights to from GSK in March 2009. For further information regarding our GSK sublicense, please see “License Agreements andCommercial Agreements—Platform Licenses—GlaxoSmithKline LLC” located elsewhere in this Annual Report on Form 10-K. Our license agreement withPenn provides that should the rights Penn licensed to GSK ever revert to Penn, such rights shall automatically be included in our license agreement withPenn.The Penn license agreement, as amended, also provides us with a non-exclusive, worldwide license to use all know-how that: ·was developed by Dr. Wilson, or other Penn researchers working under his direct supervision at Penn; and ·is related to the AAV technology platform discovered by Dr. Wilson prior to February 2009; or ·is related to the AAV technology platform discovered by Dr. Wilson at Penn after February 2009 pursuant to the 2009 SRA, the 2013SRA or subsequent amendment to a sponsored research agreement; and21 ·is owned by Penn and available for licensing; and ·is necessary or useful for the practice of the licensed patent rights.Under the terms of the Penn license agreement, we issued equity to Penn now represented by 213,150 shares of our common stock. We are alsoobligated to pay Penn: ·low- to mid-single digit royalties on net sales of licensed pharmaceutical products sold by us or our affiliates; ·low-single digit to low-double digit royalty percentages of net sales on products intended for research purposes only; ·low- to mid-double digit royalty percentage on royalties received from third parties on net sales of licensed pharmaceutical products by suchthird parties; ·low-double digit to mid-teen digit percentages of sublicense fees we receive for the licensed intellectual property rights from sublicensees; and ·reimbursements for ongoing patent prosecution and maintenance expenses.As of December 31, 2015, we have incurred expenses of $2.3 million to Penn under the license agreement. There are no future potential milestones tobe paid under the license agreement. Our Penn license agreement, as amended, will terminate on a product-by-product and country-by-country basis on thedate each particular licensed product ceases to be covered by at least one valid claim, issued or pending, under the licensed patent rights. We can terminatethis license agreement by giving Penn prior written notice. Penn has the right to terminate: ·with notice if we are late in paying money due under the license agreement; ·with notice if we fail to achieve a diligence event on or before the applicable completion date or otherwise breach the license agreement; ·if we or our affiliates experience insolvency; or ·if we commence any action against Penn to declare or render any claim of the licensed patent rights invalid or unenforceable.Under the current 2014 SRA, we fund research at Penn and pay certain intellectual property legal and filing expenses and receive the rights to theresearch results, if any. Under the Penn license agreement, as amended, and the 2014 SRA, all patentable inventions conceived, created, or conceived andreduced to practice pursuant to the 2014 SRA, together with patent rights represented by or issuing from the U.S. patents and patent applications, includingprovisional patent applications, automatically become exclusively licensed to us and all research results are automatically licensed to us as know-how. Our2014 SRA with Penn will expire on December 31, 2016. We expect to seek to amend the SRA in order to continue to fund work and receive rights to theresults of the research we fund at Penn.GlaxoSmithKline LLC. In March 2009, we entered into a license agreement with GSK in order to secure the exclusive rights to patents and patentapplications covering NAV Technology that GSK had previously licensed from Penn (subject to certain rights retained by GSK and Penn). Under this GSKlicense agreement, we receive an exclusive, worldwide sublicense under the licensed patent rights to make, have made, use, import, sell and offer for saleproducts covered by the licensed patent rights anywhere in the world. Our rights under this GSK license agreement are subject to certain rights retained byGSK for the benefit of itself and other third parties, including rights relating to: domain antibodies; RNA interference and antisense drugs; internal researchpurposes and GSK’s discovery research efforts with non-profit organizations and GSK collaborators; AAV8 for the treatment of hemophilia B; AAV9 for thetreatment of Muscular Dystrophy, congestive heart failure suffered by Muscular Dystrophy patients and cardiovascular diseases by delivery of certain genes;and non-commercial research in the areas of Muscular Dystrophy, hemophilia B, congestive heart failure suffered by Muscular Dystrophy patients, and othercardiovascular disease. Under the terms of the license agreement, we issued to GSK 1,085,824 shares of our common stock. We are obligated to pay GSK: ·up to $1.5 million in aggregate milestone payments; ·low- to mid-single digit royalty percentages on net sales of licensed products; ·low- to mid-double digit percentages of any sublicense fees we receive from sublicensees for the licensed intellectual property rights; and ·reimbursements for certain patent prosecution and maintenance expenses.22 As of December 31, 2015, we have incurred expenses of $4.0 million to GSK under the license agreement and no milestone payments have been made.Under our GSK license agreement, we are required to use commercially reasonable efforts to develop and commercialize licensed products. Our GSK licenseagreement will terminate upon the expiration, lapse, abandonment or invalidation of the last licensed claim to expire, lapse, become abandoned orunenforceable in all the countries of the world where the licensed patent rights existed. However, if no patent ever issues from patent rights licensed fromGSK, this license agreement will terminate a specified number of years after the first commercial sale of the first licensed product in any country. We mayterminate this license agreement for any reason upon a specified number of days’ written notice. GSK can terminate this license agreement if: ·we are late in paying GSK any money due under the agreement and do not pay in full within a specified number of days of GSK’s writtendemand; ·we materially breach the agreement and fail to cure within a specified number of days; or ·we file for bankruptcy.Commercial Licenses to NAV Technology LicenseesWe sublicense our NAV Technology Platform to third parties in order to develop and bring to market NAV Gene Therapy for a range of severe diseaseswith significant unmet medical needs. Sublicensing allows us to maintain our internal product development focus on our core disease indications andtherapeutic areas while still expanding the NAV Gene Therapy pipeline, developing a greater breadth of treatments for patients, providing additionaltechnological and potential clinical proof-of-concept for our NAV Technology Platform, and creating potential additional revenue. Each sublicense specifiesthe vector or vectors and disease indication or indications as well as whether the sublicense is exclusive or non-exclusive. In determining whether tosublicense, we first evaluate whether the disease indication is of interest to us in which case we may develop a therapeutic for the disease indicationinternally using our NAV Technology Platform. If it is not, we consider the size of the potential market and unmet need, competition, licensee developmenthistory and licensee’s ability to pay in evaluating whether to enter into a license agreement. As of December 31, 2015, we have granted 12 commerciallicenses covering 23 partnered product candidates in development by our NAV Technology Licensees, most under a license to specific NAV Vectors. Ourlicense agreements include upfront fees, annual maintenance fees, milestone fees based on licensee candidate progression, and low-single to low-double digitroyalties on sales. Such royalties are subject to customary reductions, such as if the licensee must obtain a license from a third party to avoid infringement ofsuch third party’s rights in order to exercise its rights under the license granted by us. We are obligated to make payments to our licensors with respect to therevenues we receive from our licensees for these sublicenses, in accordance with the terms of our agreements with our licensors.23 As of December 31, 2015, our NAV Technology Licensees had three on-going clinical trials using NAV Vectors. The chart below provides anoverview of the development status of the programs of our NAV Technology Licensees. Annapurna Therapeutics Limited. In April 2014, we entered into an exclusive license agreement with Annapurna Therapeutics Limited (formerlyknown as AAVLife) (Annapurna) for the development and commercialization of products to treat Friedreich’s Ataxia using NAV Vectors. Under this licenseagreement, we granted Annapurna an exclusive worldwide license under the licensed intellectual property to make, have made, use, import, sell and offer forsale licensed products using AAVrh10 for Friedreich’s Ataxia where the vector is administered by any route except directly to the central nervous system(Friedreich’s Ataxia Systemic). Under the terms of this license agreement, we also granted Annapurna an option (the “commercial option”) to obtain a non-exclusive worldwide license to make, have made, use, import, sell and offer for sale licensed products using a single vector for each of Friedreich’s Ataxiawhere the vector is administered directly to the central nervous system (Friedreich’s Ataxia CNS) and Friedreich’s Ataxia Systemic.Under the terms of this license agreement, we received or are eligible to receive: ·an initial fee of $600,000 and an additional fee of $300,000 if the commercial option to Friedreich’s Ataxia CNS is exercised; ·an annual maintenance fee per disease indication licensed; ·up to $13.85 million in combined milestone fees;24 ·mid- to high-single digit royalty percentages on net sales of licensed products; and ·mid-single to lower mid-double digit royalty percentages of any sublicense fees Annapurna receives from sublicensees for the licensedintellectual property rights.Annapurna is obligated to achieve certain development milestones with respect to each licensed disease indication, including the filing of an IND foreach licensed disease indication within a specified time period, which Annapurna may extend for additional time for a specified number of extensions uponthe payment of a fee.As of December 31, 2015, we have received $650,000 under the license agreement and have not received any milestone payments. This licenseagreement expires upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire, lapse, or becomeabandoned or unenforceable in all the countries of the world. The option to obtain a non-exclusive license for Friedreich’s Ataxia CNS expires in April 2016and the option to obtain a non-exclusive license to Friedreich’s Ataxia Systemic expired in April 2015. Annapurna may terminate this license agreementupon six months’ prior written notice. We may terminate this license agreement if Annapurna is a specified number of days late in paying money due underthe license agreement, or if Annapurna, its affiliates, or any sublicensees become insolvent or, effective immediately, if they commence any action against usor our licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement formaterial breach if such breach is not cured within a specified number of days.Audentes Therapeutics, Inc. In July 2013, we entered into an exclusive license agreement with Audentes Therapeutics, Inc. (Audentes) for thedevelopment and commercialization of products to treat X-Linked Myotubular Myopathy (XLMTM) and Pompe disease using AAV8 and AAV9. Under thislicense agreement, we granted Audentes an exclusive worldwide license under the licensed intellectual property to make, have made, use, import, sell, andoffer for sale licensed products in the treatment of XLMTM and Pompe disease using AAV8 or AAV9.Under the terms of this license agreement, we received or are eligible to receive: ·an initial fee of $600,000, half of which was paid in the form of 111,999 shares of Audentes’ common stock; ·an annual maintenance fee; ·up to $17.7 million in combined milestone fees, a small portion of which may be paid in the form of shares of Audentes’ common stock; ·mid- to high-single digit royalty percentages on net sales of licensed products; and ·mid-single to lower mid-double digit percentages of any sublicense fees Audentes receives from sublicensees for the licensed intellectualproperty rights.Audentes is obligated to achieve certain development milestones with respect to each licensed disease indication, including the filing of an IND forthe licensed indication within a specified time period, which Audentes may extend for additional time for a specified number of extensions upon the paymentof a fee.As of December 31, 2015, we have received $430,000 in cash payments under the license agreement and have not received any milestone payments.Our license agreement with Audentes will expire upon the expiration, lapse, abandonment or invalidation of the last claim of the licensed intellectualproperty to expire, lapse or become abandoned or unenforceable in all the countries of the world. Audentes may terminate this license agreement upon priorwritten notice. We may terminate this license agreement immediately if Audentes or its affiliates become insolvent, if Audentes is late by a specified numberof days in paying money due under the license agreement, or, effective immediately, if Audentes or its affiliates commence any action against us or ourlicensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement for materialbreach that is not cured within a specified number of days.AveXis, Inc. In March 2014, we entered into an exclusive license agreement with AveXis, Inc. (AveXis) for the development and commercialization ofproducts to treat spinal muscular atrophy using AAV9. Under this license agreement, we granted AveXis an exclusive, sublicensable worldwide license underthe licensed intellectual property to make, have made, use, import, sell and offer for sale licensed products in the field of spinal muscular atrophy usingAAV9.Under the terms of this license agreement, we received or are eligible to receive: ·an initial fee of $2.0 million; ·an annual maintenance fee;25 ·up to $12.25 million in milestone fees for all licensed products; ·mid-single to low-double digit royalty percentages on net sales of licensed products; and ·lower mid-double digit percentages of any sublicense fees AveXis receives from sublicensees for the licensed intellectual property rights.Under the agreement, AveXis is obligated to achieve certain development milestones with respect to the licensed disease indication.As of December 31, 2015, we have received $2.3 million under the license agreement which includes $250,000 in aggregate milestone payments. Ourlicense agreement with AveXis will expire upon the expiration, lapse, abandonment or invalidation of the last claim of the licensed intellectual property toexpire, lapse or become abandoned or unenforceable in all the countries of the world. AveXis may terminate this license agreement upon a specified period ofprior written notice. We may terminate this license agreement if AveXis or its affiliates become insolvent, if AveXis is greater than a specified number of dayslate in paying money due under the license agreement, or, effective immediately, if AveXis, its affiliates, or sublicensees commence any action against us orour licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement formaterial breach if such breach is not cured within a specified number of days.Baxalta US Inc. In November 2010, we entered into a non-exclusive license agreement with Chatham Therapeutics, LLC (Chatham) for the researchand development of, and an option to obtain an exclusive worldwide license to commercialize, products to treat hemophilia A using AAV8. In December2012, Chatham exercised the commercial option. In May 2014, Baxter Healthcare Corporation (Baxter) acquired Chatham and assumed the licenseagreement. In June 2015, Baxter assigned, transferred and conveyed all of its rights and obligations under the license agreement to Baxalta US Inc. (Baxalta).Under this license agreement, we granted Baxalta an exclusive worldwide license under the licensed intellectual property to make, have made, use, import,sell, and offer for sale licensed products in the treatment of hemophilia A using AAV8.Under the terms of this license agreement, we received or are eligible to receive: ·an initial fee of $100,000; ·an annual maintenance fee in the mid-five digits, until Chatham exercised the commercial option, which required the additional payment of$2.0 million, and increased the annual maintenance fee up to a number in the lower mid-six digits; ·up to $7.5 million in milestone fees per each licensed product in the field; ·single digit royalty percentages on net sales of licensed products; and ·low- to mid-double digit percentages of any sublicense fees Baxalta receives from sublicensees for the licensed intellectual property rights.As of December 31, 2015, we have received $2.6 million under the license agreement and have not received any milestone payments. Our licenseagreement with Baxalta will expire upon the expiration, lapse, abandonment or invalidation of the last claim of the licensed intellectual property to expire,lapse, become abandoned or unenforceable. The license granted to Baxalta pursuant to the exercise of the commercial option will become a fully paid-up,non-exclusive, royalty-free license, on a country-by-country basis, upon the expiration, lapse, abandonment or invalidation of the last claim of the licensedintellectual property to expire, lapse, become abandoned or unenforceable in the applicable country. Baxalta may terminate this license agreement uponprior written notice. We may terminate this agreement if Baxalta is greater than a specified number of days late in paying money due under the licenseagreement or if Baxalta, its affiliates, or sublicensees commence any action against Penn to declare or render any claim of the licensed patent rights invalid orunenforceable. Either party may terminate this license agreement if the other party becomes insolvent or materially breaches the license agreement and doesnot cure the breach within a specified number of days.26 Dimension Therapeutics, Inc.2013 License Agreement. In October 2013, we entered into an exclusive license agreement with Dimension which, as amended, granted Dimension theright to develop and commercialize products using our NAV Technology to treat hemophilia A and hemophilia B and an option to include up to twoadditional indications in the scope of the license, which were to be selected by Dimension on or before April 2015. This license agreement was amended inJune 2014 and September 2014. Dimension selected ornithine transcarbamylase (OTC) deficiency and glycogen storage disease type Ia (GSDIa) as theadditional licensed disease indications in September 2014 and January 2015, respectively. Under the license agreement, we granted Dimension an exclusiveworldwide license under our NAV Technology to make, have made, use, import, sell, and offer to sell licensed products for the treatment of hemophilia A,hemophilia B, OTC and GSDIa. The rights granted to Dimension under this license are subject to certain terms and conditions, including the exclusion ofrights to use AAV8 for the treatment of hemophilia A and hemophilia B, as well as the addition of any intellectual property in the licensed indicationsresulting from the 2013 SRA.Under the terms of the agreement, we received or are eligible to receive: ·10,000 shares of Dimension’s common stock; ·an annual maintenance fee per disease indication licensed; and ·low- to mid-single digit royalty percentages on net sales of licensed products.In addition, Dimension will pay any milestone fees owed by us to GSK or sublicense fees owed by us to Penn or GSK as a result of Dimension’sactivities under this license agreement.The royalty payments owed to us by Dimension are subject to reduction if our royalty obligations under the Platform Licenses are reduced undercertain circumstances, including if certain competitive products are launched by a third party or if the Platform Licenses are amended.Dimension is required to develop licensed products in accordance with certain performance milestones, which include the receipt of certain financingand development milestones, and the filing of an IND for each of the two additional disease indications optioned by Dimension. In the event that Dimensionfails to meet a particular development performance milestone, Dimension may extend the deadline to achieve such milestone for additional time for aspecified number of extensions in exchange for separate payments to us.As of December 31, 2015, we have received $360,000 in cash payments under the license agreement and have not received any milestone payments.Our license agreement with Dimension will expire upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectualproperty to expire, lapse, or become abandoned or unenforceable in all the countries of the world. Upon expiration, Dimension’s know-how license willbecome non-exclusive, perpetual, irrevocable and royalty-free with respect to licensed know-how in the field that we own and will continue with respect toall of our other know-how in the field under our GSK and/or Penn licenses for so long as our rights from these licensors continue. Dimension may terminatethis license agreement upon a specified period of written notice. We may terminate the license agreement if Dimension or its affiliates become insolvent, ifDimension is greater than a specified number of days late in paying money due under the license agreement, or, effective immediately, if Dimension or itsaffiliates commence any action against us or our licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either partymay terminate this license agreement for a material breach that is not cured within a specified number of days.2015 Option and License Agreement. In March 2015, we entered into an option and license agreement with Dimension that grants Dimension theoption to exclusively license NAV Technology for the development and commercialization of products to treat up to four additional disease indications.Under this agreement, we granted Dimension four distinct options to obtain an exclusive worldwide license under the licensed intellectual property to make,have made, use, import, sell, and offer for sale licensed products with respect to a single disease indication. Dimension exercised options to exclusivelylicense three disease indications, one in each of May 2015, August 2015 and December 2015.When Dimension exercises any or all of the commercial options, we received or are eligible to receive: ·an upfront fee of $1.0 million per commercial option; ·an annual maintenance fee per commercial option; ·up to $36.0 million in milestone fees for all disease indications;27 ·mid- to high-single digit royalty percentages on net sales of licensed products; and ·mid-single to low-double digit percentages of any sublicense fees Dimension receives from sublicensees for the licensed intellectual propertyrights.Dimension is obligated to use diligent efforts to meet certain development and regulatory milestones for each optioned disease indication, which maybe extended for additional time for a specified number of extensions upon the payment of an additional sum per licensed indication.As of December 31, 2015, we have received $3.0 million under the license agreement and have not received any milestone payments. Our option andlicense agreement with Dimension will expire upon the expiration of the royalty obligations with respect to all licensed products for all licensed indicationsunder all licenses granted under all exercised commercial options. Upon expiration, Dimension’s know-how license will become non-exclusive, perpetual,irrevocable and royalty-free with respect to licensed know-how in the field that we own and will continue with respect to all of our other know-how in thefield under our GSK and/or Penn licenses for so long as our rights from these licensors continue. Dimension may terminate this option and license agreementupon a specified period of prior written notice. We may terminate the option and license agreement if Dimension or its controlling affiliates becomeinsolvent, if Dimension is greater than a specified number of days late in paying money due under the option and license agreement, or, effectiveimmediately, if Dimension or its affiliates commence any action against us or our licensors to declare or render any claim of the licensed patent rights invalidor unenforceable. Either party may terminate this option and license agreement for a material breach that is not cured within a specified number of days.Laboratorios Del Dr. Esteve. In March 2014, we entered into a non-exclusive license agreement with Laboratorios Del Dr. Esteve, S.A. (Esteve) for thedevelopment and commercialization of products to treat MPS IIIA using AAV9. Under the agreement, we granted Esteve a non-exclusive, sublicensableworldwide license under the licensed intellectual property to develop, make, have made, use, import, sell, and offer for sale licensed products in the MPS IIIAfield using AAV9 and a non-exclusive license under the licensed intellectual property to practice the licensed patents for internal research and preclinicaldevelopment of AAV9 agents, including the right to make and use research reagents for such internal research purposes, which research license is onlysublicensable to the Universidad Autonoma de Barcelona and Esteve’s affiliates.Under the terms of this license agreement, we received or are eligible to receive: ·an initial fee of $500,000; ·an annual maintenance fee; ·up to $8.5 million in milestone fees per licensed product; ·mid-single digit to low double-digit royalty percentages on net sales of licensed products; and ·low-double digit percentages of any sublicense fees Esteve receives from sublicensees for the licensed intellectual property rights.As of December 31, 2015, we have received $550,000 under the license agreement and have not received any milestone payments. Our licenseagreement with Esteve will expire upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire,lapse or become abandoned or unenforceable in all the countries of the world. Esteve may terminate this license agreement upon a specified number of days’prior written notice. We may terminate the license agreement if Esteve, its affiliates, or sublicensees becomes insolvent, if Esteve is more than a specifiednumber of days late in paying money due under the license agreement, or if Esteve or its affiliates commence any action against us or our licensors to declareor render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement for a material breach uncured formore than a specified number of days.Lysogene Société Anonyme. In December 2013, we entered into an exclusive license agreement with Lysogene Société Anonyme (formerly known asLysogene Société par Actions Simplifiée) (Lysogene) for the development and commercialization of products to treat MPS IIIA using AAVrh10. Under thislicense agreement, we granted Lysogene an exclusive worldwide license under the licensed intellectual property to make, have made, use, import, sell, andoffer for sale licensed products in the field of MPS IIIA using AAVrh10.Under the terms of the license agreement, we received or are eligible to receive: ·an initial fee of $500,000; ·an annual maintenance fee;28 ·up to $7.75 million in milestone fees for the first licensed product to achieve the specified milestone events; ·mid-single to high-single digit royalty percentages on net sales of licensed products; and ·mid-teen to low-double digit percentages of any sublicense fees Lysogene receives from sublicensees for the licensed intellectual propertyrights.Lysogene is obligated to achieve certain development milestones, including the first treatment in a Phase III clinical trial within a specified timeperiod, which Lysogene may extend for additional time for a specified number of extensions upon the payment of a fee.As of December 31, 2015, we have received $600,000 under the license agreement and have not received any milestone payments. Our licenseagreement with Lysogene will expire upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire,lapse, or become abandoned or unenforceable in all the countries of the world. Lysogene may terminate this license agreement upon a specified number ofdays’ prior written notice. We may terminate this license agreement if Lysogene or its affiliates or sublicensees become insolvent, if Lysogene is greater thana specified number of days late in paying money due under the license agreement, or if Lysogene or its affiliates commence any action against us or ourlicensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement if a materialbreach remains uncured for greater than a specified number of days.Voyager Therapeutics, Inc. In May 2014, we entered into a license agreement with Voyager Therapeutics, Inc. (Voyager) for the development andcommercialization of gene therapies to treat Amyotrophic Lateral Sclerosis (ALS), Friedreich’s Ataxia CNS, Friedreich’s Ataxia Systemic and Huntington’sdisease (HD). Under this license agreement, we granted Voyager a non-exclusive worldwide license to make, have made and use NAV Technology solely forinternal research and pre-clinical development for the identification of specific vectors which could be commercialized pursuant to an option to obtain a non-exclusive worldwide license under the licensed intellectual property to make, have made, use, import, sell, and offer for sale licensed products using aspecified vector which can be exercised for each of ALS, Friedreich’s Ataxia CNS, Friedreich’s Ataxia Systemic, and/or HD indication(s) which we granted toVoyager. The rights granted to Voyager under this option are subject to certain limitations, such as the exclusion of rights to use AAVrh10 for the treatmentof Friedreich’s Ataxia Systemic.Under the terms of this license agreement, we received or are eligible to receive: ·an upfront fee of $500,000; ·an annual maintenance fee; ·should Voyager exercise any or all of the commercial options by a specified date, we will receive an upfront fee ranging from $650,000 to$1.45 million and an annual maintenance fee ranging from low-five digits to low-six digits depending on the number of disease indicationoptions exercised; ·up to $5.0 million in milestone fees per disease indication; ·mid- to high-single digit royalty percentages on net sales of licensed products; and ·mid-single digit percentages of any sublicense fees Voyager receives from sublicensees for the licensed intellectual property rights.As of December 31, 2015, we have received $630,000 under the license agreement and have not received any milestone payments. Our licenseagreement with Voyager will expire upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire,lapse, or become abandoned or unenforceable in all the countries of the world. The license agreement will automatically terminate with respect to allunexercised disease indications if Voyager does not exercise all of its commercial options under the agreement within a specified time period after enteringinto the license agreement, which has been extended for a fee. Voyager may terminate this license agreement upon a specified number of days prior writtennotice. We may terminate the license agreement if Voyager, its affiliates, or sublicensees experience insolvency, if Voyager is more than a specified numberof days late in paying money due under the license agreement, or, effective immediately, if Voyager or its affiliates commence any action against us or ourlicensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement for materialbreach that is not cured within a specified number of days.29 Other NAV Licenses. In addition to the agreements with the NAV Technology Licensees described above, we have also entered into licenses with theNAV Technology Licensees for the NAV Vectors and indications set forth below.Other LicensesRegents of the University of Minnesota. In November 2014, we entered into a license agreement with Regents of the University of Minnesota(Minnesota) for the exclusive rights to Minnesota’s undivided interest in intellectual property jointly owned by Minnesota and us relating to the delivery ofAAV vectors to the central nervous system for MPS I and MPS II. Under this Minnesota license agreement, we receive an exclusive license under the licensedpatent rights to make, have made, use, offer to sell or sell, offer to lease or lease, import or otherwise offer to dispose or dispose of products covered by thelicensed patent rights in all fields of use in any country or territory in which a licensed patent has been issued and is unexpired or a licensed patentapplication is pending.Under the terms of the Minnesota license agreement, we are obligated to pay Minnesota: ·an upfront payment of $25,000; ·up to $125,000 in aggregate milestone payments per licensed product; ·low-single digit royalty percentages on net sales of licensed products; ·mid-single to low-double digit percentages of sublicense fees; ·annual maintenance fees; and ·patent-related maintenance expenses and fees.We are obligated to achieve certain development performance milestones, each of which may be extended upon the payment of specified fees, relatedto our efforts to develop and commercialize products incorporating the licensed intellectual property.As of December 31, 2015, we have incurred expenses of $52,646 paid to Minnesota under the license agreement. This license agreement expires whenthere is no licensed patent or pending patent application in any country. Upon expiration, our license becomes a royalty-free, fully-paid up, perpetual, andirrevocable license. Minnesota may terminate the license agreement if we materially breach or materially fail to perform one or more of our obligations underthe license agreement and we have not cured in full within a specified number of days after delivery of notice of default for payment or a specified number ofdays if the default relates to any other matter. Minnesota may terminate the license agreement if we become bankrupt or if we commence or maintain anaction challenging any patent or patent application licensed under the license agreement. We may terminate the agreement if Minnesota materially breachesor materially fails to perform one or more of its duties under this agreement. We may terminate for any reason upon a specified number of days’ prior writtennotice but must pay an early termination fee.30 ARIAD Pharmaceuticals, Inc. In November 2010, we entered into a license agreement with ARIAD Pharmaceuticals, Inc. (ARIAD) in order to securethe exclusive rights for certain gene expression regulation technology. Under this ARIAD license agreement, we receive an exclusive worldwide licenseunder the licensed intellectual property to develop, make, have made, use, sell, offer for sale and import licensed products and perform licensed services inthe field of human gene therapy and a non-exclusive license to conduct internal research using related technology. In exchange, we granted to ARIAD a non-exclusive, royalty free, worldwide license to certain improvements and inventions based on the licensed intellectual property for any and all uses outside ofthe field of human gene therapy. We also issued ARIAD 687,139 shares of our common stock. Under the terms of the ARIAD license agreement, we areobligated to pay ARIAD: ·up to $2.3 million in milestone payments; ·low-single digit royalty percentages on net sales of licensed products; ·an additional low- to mid-single digit royalty percentages on net sales of licensed products to reimburse ARIAD for royalty payments payableto ARIAD’s licensors; ·low-double digit percentages of royalties received from our sublicensees; ·following achievement of a milestone event, annual maintenance fees to ARIAD for remittance to one of ARIAD’s licensors; and ·reimbursement for ongoing patent prosecution and maintenance costs.As of December 31, 2015, we have made no cash payments to ARIAD under the license agreement.Our ARIAD license agreement will expire on a country-by-country, licensed product-by-licensed product, licensed service-by-licensed service basison the later of ten years from the first commercial sale of the applicable licensed product or licensed service in such country or the date when there is nolonger any valid claim covering such licensed product or licensed service in such country. Either party may terminate the ARIAD license agreement formaterial breach, effective a specified number of days after written notice in the event of nonpayment or a specified number of days for any other breach. Wemay terminate this license agreement upon a specified number of days’ notice to ARIAD. Either party may terminate this license agreement if the other partyfiles for bankruptcy.Process Development and ManufacturingWe believe that we have access to the resources necessary to enable us to successfully commercialize NAV Gene Therapy products followingregulatory approval, if any, by developing scalable processes to manufacture such products efficiently and at commercial quantity.AAV Vector ExpertiseWe believe that Dr. Wilson’s lab at Penn is among the leading centers in the world for the cloning, production and characterization of AAV vectors.Since our inception we have funded the research of Dr. Wilson relating to the development of manufacturing processes and the analytical characterization ofNAV Vectors. We believe that our significant investments in process development and characterization at Penn will help us develop a scalable, proprietarymanufacturing process for NAV Gene Therapy products.We have also entered into two agreements with WuXi Apptec, Inc. (WuXi), a leading technology platform company, with expertise in characterizationof biologics. In May 2015, we entered into a collaboration agreement with WuXi in order to establish a proprietary production process for our NAV GeneTherapy. The proprietary production process is designed to enable the manufacturing for our, as well as our NAV Technology Licensees’, therapeuticprograms from clinical trials through commercialization. Under the terms of the collaboration agreement, WuXi will work with us to establish standardprocesses applicable to our NAV Technology Platform which may be applied for the development, testing and manufacture of our products or those of ourNAV Technology Licensees. WuXi will provide us and our NAV Technology Licensees substantially the same access to process development, testing andmanufacturing resources to that received by WuXi’s key commercial clients. WuXi will provide us with preferred scheduling and performance of servicessupporting our gene therapy programs and those of our NAV Technology Licensees. The collaboration agreement with WuXi will remain in force unlessterminated in accordance with its terms. Either party may terminate the collaboration agreement upon a specified number of days’ prior written notice, for amaterial breach uncured for more than a specified number of days or if the other party becomes insolvent.We also entered into an agreement with WuXi in April 2015 setting forth the terms and conditions that would govern future work orders with WuXi.Under this agreement, WuXi would carry out services set forth in future work orders as agreed to by the31 parties. All work product developed as a result of WuXi’s performance of the services under these future work orders would be our sole and exclusiveproperty. This agreement will expire on the later of April 2017 or the completion of all services under the last work order executed by the parties prior toApril 2017. Either party may terminate this agreement or future work order upon a specified number of days’ prior written notice, for a material breachuncured for more than a specified number of days or if the other party becomes insolvent.As part of our collaboration with WuXi, we have initiated production of NAV Vectors for use in our planned clinical trial for RGX-111 and have beeninvoiced $1.0 million by WuXi as of December 31, 2015.Proprietary MethodsWe have obtained rights to all of the proprietary technology underlying our NAV Technology Platform through our Platform Licenses and our SRAs,under which we have exclusively licensed rights to certain manufacturing-related patents and non-exclusively licensed rights to certain know-how owned ordeveloped by Penn. This intellectual property encompasses areas including scalable AAV production methods, methods of increasing the packaging yield ofAAV and methods of purification of AAV vectors.Through our SRAs with Penn, we have examined several methods of larger-scale manufacturing of AAV which have been optimized to yield high titerand quality vectors. However, further improvements to the efficiency and simplicity of the process remain important to address future needs for commercialapplications. We have paid particular attention to how the scale-up of AAV vector production occurs during downstream processing of the vector. Manyproduction protocols have vector particles purified from a cell lysate, necessitating extensive downstream purification. These methods were largelydeveloped using AAV2 vectors.Scientists at Penn discovered that in contrast to earlier generation AAV2, most NAV Vectors were released primarily into the medium of productioncultures and not retained in the cell. Because this distribution occurs in the absence of cell lysis, the production culture medium represents a relatively puresource of NAV Vectors and a lower level of cellular contaminants reduces the need for complicated purification steps. This method, for which we havelicensed from Penn the exclusive patent rights, is high-yielding and versatile for the production of different NAV Vectors.Other CapabilitiesWe have prepared and characterized a proprietary HEK293 master cell bank and other components (plasmid DNA banks) required for clinical vectorproduction. Our master cell bank and other components are being used by us and certain of our NAV Technology Licensees for the production of NAVVectors under cGMP for use in clinical trials that we expect will begin in 2015 and 2016. For example, as part of a European Union grant consortium, we wereselected to manage the production of NAV Vectors for use in a clinical trial to be initiated in Italy for the treatment of MPS VI, a severe lysosomal storagedisorder, expected to begin in 2016.Intellectual PropertyOur commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our productcandidates, our core technologies, and other know-how, to operate without infringing on the proprietary rights of others and to prevent others from infringingour proprietary or intellectual property rights. We strive to protect and enhance the proprietary technology, inventions, and improvements that arecommercially important to the development of our business, including by seeking, maintaining and defending patent rights, whether developed internally orlicensed from third parties. We also rely on trade secrets relating to our proprietary technology platform and on know-how, continuing technologicalinnovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene therapy. Additionally, we intendto rely on regulatory protection afforded through orphan drug designations, data exclusivity and market exclusivity as well as patent term extensions, whereavailable.We have exclusively licensed rights relevant to our NAV Technology which includes novel recombinant AAV vectors AAV7, AAV8, AAV9, andAAVrh10, among others. Our licensed patent portfolio includes exclusive rights to more than 100 patents and patent applications worldwide relating tocomposition of matter patents and/or patent applications for our novel AAV vectors, as well as methods for their manufacture and therapeutic uses. We alsopossess substantial know-how and trade secrets relating to NAV Technology.32 As of December 31, 2015, our patent portfolio included the following licensed patents and patent applications relating to our novel AAV vectors: ·One issued U.S. patent relating to AAV7 vectors and uses thereof, currently scheduled to expire in 2026, including patent term adjustment; ·One granted European patent relating to AAV7 vectors and uses thereof, currently scheduled to expire in 2022; ·Five issued U.S. patents relating to AAV8 vectors and uses thereof, which are currently scheduled to expire in 2022 to 2026, including patentterm adjustment; ·Two pending European patent applications relating to AAV8 vectors - any European patent that issues from these pending patent applicationswould currently be expected to expire in 2022; ·One issued U.S. patent relating to AAV9 vectors and uses thereof, currently scheduled to expire in 2026, including patent term adjustment; ·One granted European patent relating to AAV9 vectors and uses thereof, currently scheduled to expire in 2024; ·One pending U.S. patent application relating to AAVrh10 vectors - any U.S. patent that issues from this pending patent application is currentlyscheduled to expire in 2022; and ·One granted European patent relating to AAVrh10 vectors is currently scheduled to expire in 2022.As of December 31, 2015, our licensed patent portfolio also included patents and patent applications relating to the following product candidates: ·A U.S. patent relating to RGX-501 that is currently scheduled to expire in 2026, including patent term adjustment; ·Two pending U.S. provisional patent applications relating to RGX-501; upon conversion to a U.S. non-provisional application and/orInternational patent application, the expected expiration date of any U.S. patent and European patent that issues from these applications wouldbe 2036; and ·Two International Patent applications filed pursuant to the Patent Cooperation Treaty (PCT) and pending U.S. patent applications relating toRGX-111 and RGX-121 - any U.S. patent and European patent that issues from these pending PCT applications relating to RGX-111 and RGX-121 is currently scheduled to expire in 2034.Except as indicated above, the anticipated expiration dates referred to above are without regard to potential patent term extension, patent termadjustment or other market exclusivity that may be available to us.In addition to our licensed patents and patent applications relating to composition of matter protection for novel AAV vectors having AAV7 capsid,AAV8 capsid, AAV9 capsid, and AAVrh10 capsid, our licensed patent portfolio includes composition of matter claims for novel AAV vectors having AAV11and AAV12 capsids; Rh.1 to Rh.38, Rh.40, Rh.43, Rh.48 to Rh.62, and Rh.64; Cy.1 to Cy.6 capsids; bb.1 and bb.2 capsids; Ch.1 to Ch.4 capsids; hu.1 tohu.4, hu.6, hu.7, hu.9 to hu.25, hu.27 to hu.29, hu.31, hu.32, hu.34, hu.35, hu.37, hu.39 to hu.49, hu.51 to hu.58, hu.60 to hu.64, hu.66, and hu.67 capsids;pi.1 to pi.3 capsids; and AAV vectors that have amino acid sequences that are at least 95% identical to these capsids.Our licensed patent portfolio also includes exclusive rights to patents and patent applications relating to: ·therapeutic compositions and methods involving the foregoing AAV vectors further comprising certain transgenes that encode therapeuticproducts, and their use in treating specified diseases; ·specific formulations or methods of delivery of the recombinant AAV vectors of interest for our in-house development programs; ·technology related to engineering AAV therapeutics including recombinant AAV vectors engineered to target conducting airway cells,methods of altering the targeting and cellular uptake efficiency of an AAV viral vector having a capsid containing an AAV9 cell surfacebinding domain, the design of recombinant AAV viral vectors that confer passive immunization to airborne pathogens (the aforementionedgene therapy systems can include the use of certain gene expression regulation technology; we have exclusively licensed the patents andpatent applications relating to this technology);33 ·methods of detecting an AAV nucleotide sequence useful in diagnostics; and ·methods of manufacture of AAV, including patents and applications directed to scalable AAV production methods; methods of increasing thepackaging yield, transduction efficiency, and gene transfer efficiency of an AAV, and methods of purification of viral vectors, such as AAVvectors.We anticipate that our patent portfolio will continue to expand as a result of our sponsored research agreements with academic institutions, includingthe 2014 SRA with Penn where all patentable inventions conceived, created, or conceived and reduced to practice pursuant to the 2014 SRA, together withpatent rights represented by or issuing from the U.S. patents and patent applications (including provisional patent applications) related thereto automaticallybecome exclusively licensed to us under our existing licensing agreement with Penn and all research results are automatically non-exclusively licensed to usas know-how under that existing license agreement. We also anticipate further expansion of our patent portfolio through our commercial licenses to NAVTechnology Licensees which grant us non-exclusive, worldwide, royalty-free, perpetual licenses to use and practice, subject to certain limitations, anypatentable modifications or improvements developed by our licensees, their affiliates, or sublicensees to any vector that is the subject of a claim within thelicensed patents. For further information regarding our commercial sublicenses, please see “License Agreements and Commercial Licenses—CommercialLicenses to NAV Technology Licensees” located elsewhere in this Annual Report on Form 10-K.CustomersOur revenue for the fiscal years ended December 31, 2015, 2014 and 2013 consisted of license revenue, reagent sales and grant revenue. Threecustomers, two of which were based in the U.S. and one of which was based in Ireland, accounted for approximately 79% of our total revenue for the yearended December 31, 2015. No other customer accounted for more than 15% of revenue in 2015. Two customers, one of which was based in the U.S. andanother which was based in the European Union, accounted for approximately 47% of our total revenue for the year ended December 31, 2014. No othercustomer accounted for more than 15% of revenue in 2014. Three customers, two of which were based in the U.S. and one of which was based in the EuropeanUnion, accounted for approximately 76% of our total revenue for the year ended December 31, 2013. No other customer accounted for more than 15% ofrevenue in 2013. Future license revenue is uncertain due to the contingent nature of our licenses granted to third-parties. We expect grant revenue to decreasein the future as we are not currently seeking any further grant awards. Future revenue is uncertain and may fluctuate significantly from period to period.Research and DevelopmentWe are in the process of building a research and development organization that includes extensive expertise in AAV gene therapy and relatedscientific disciplines. We operate cross-functionally and are led by an experienced research and development management team. We use rigorous projectmanagement techniques to assist us in making disciplined strategic research and development program decisions and to help limit the risk profile of ourproduct pipeline. We also access relevant market information and key opinion leaders in creating target product profiles when appropriate, as we advance ourprograms towards commercialization. We engage third parties to conduct portions of our preclinical research. In addition, we plan to utilize multiple clinicalsites to conduct our clinical trials; however, we are not substantially dependent upon any one of these sites for our clinical trials nor do any of them conduct amajor portion of our clinical trials.We incurred $17.3 million, $5.0 million and $5.1 million in research and development expenses in the years ended December 31, 2015, 2014 and2013, respectively.CompetitionThe biotechnology and pharmaceutical industries, including in the field of gene therapy, are characterized by rapidly advancing technologies, intensecompetition and a strong emphasis on intellectual property. While we believe that our NAV Technology Platform, strong intellectual property portfolio andscientific expertise in the gene therapy field provide us with competitive advantages, we face potential competition from many different sources, includinglarger and better-funded pharmaceutical and biotechnology companies, new market entrants and new technologies.We are aware of several companies focused on developing gene therapies in various disease indications, including Applied Genetic TechnologiesCorporation, Avalanche Biotechnologies, Inc., BioMarin Pharmaceutical Inc., bluebird bio, Inc., Genzyme Corporation (Genzyme), Sangamo BioSciences,Inc., Spark Therapeutics, Inc. and uniQure N.V. as well as several companies addressing other methods for modifying genes and regulating gene expression.Additionally, we have sublicensed our NAV Technology Platform for developing gene therapies in various disease indications to our NAV TechnologyLicensees. Not only must we compete with other companies that are focused on gene therapy products using earlier generation AAV technology and othergene34 therapy platforms, but any products that we may commercialize will have to compete with existing therapies and new therapies that may become available inthe future.There are other organizations working to improve existing therapies or to develop new therapies for our initially selected disease indications.Depending on how successful these efforts are, it is possible they may increase the barriers to adoption and success for our product candidates, if approved.These efforts include the following: ·HoFH. There are several companies with marketed products for the treatment of HoFH, including Aegerion (Juxtapid), Genzyme (Kynamro)and Amgen (Repatha). ·MPS I. There is one principal competitor with a marketed product for the treatment of MPS I, Sanofi (Aldurazyme). ·MPS II. The principal marketed competition for MPS II is a systemic enzyme replacement therapy, Elaprase (idursulfase), which is marketed byShire. ·Wet AMD. Marketed competition for wet AMD largely consists of anti-VEGF therapies developed by Roche/Genentech (Lucentis, Avastin)and Regeneron (Eylea).Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do.Our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance. Our competitors’treatments may be more effective, or more effectively marketed and sold, than any treatment we may commercialize and may render our treatments obsolete ornon-competitive before we can recover the expenses of developing and commercializing any of our treatments.Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smallernumber of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel andestablishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, ourprograms. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large andestablished companies.We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Weexpect any treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience of administration anddelivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.Government RegulationIn the U.S., biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act (FD&CAct) and the Public Health Service Act (PHS Act) and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act andtheir corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping,distribution, reporting, advertising and other promotional practices involving biological products. Applications to the FDA are required before conductingclinical testing of biological products, and each clinical study protocol for a gene therapy product is reviewed by the FDA and, in some instances, the NIH,through its RAC. FDA approval also must be obtained before marketing of biological products. The process of obtaining regulatory approvals and thesubsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financialresources and we may not be able to obtain the required regulatory approvals.Within the FDA, the Center for Biologics Evaluation and Research (CBER) regulates gene therapy products. The CBER works closely with the NIHand its RAC, which makes recommendations to the NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societalissues related to proposed and ongoing gene therapy protocols. The FDA and the NIH have published guidance documents with respect to the developmentand submission of gene therapy protocols. The FDA also has published guidance documents related to, among other things, gene therapy products in general,their preclinical assessment, observing subjects involved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturingand control information in gene therapy INDs.Ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restricting orprohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in furtherregulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing anyproducts. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. Itis impossible to predict whether legislative changes will35 be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.U.S. Biological Products Development ProcessThe process required by the FDA before a biological product may be marketed in the U.S. generally involves the following: ·completion of nonclinical laboratory tests, including evaluations of product chemistry, toxicity and formulation, and animal studies accordingto good laboratory practice (GLP) and applicable requirements for the humane use of laboratory animals or other applicable regulations; ·submission to the FDA of an IND, which must become effective before human clinical studies may begin; ·performance of adequate and well-controlled human clinical studies according to the FDA’s regulations on good clinical practice (GCP) andany additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy ofthe proposed biological product for its intended use; ·submission to the FDA of a Biologics License Application (BLA) for marketing approval that includes substantive evidence of safety, purity,and potency from results of nonclinical testing and clinical studies; ·satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with current Good Manufacturing Practices (cGMP), to assure that the facilities, methods and controls are adequate to preserve thebiological product’s identity, strength, quality and purity and, if applicable, the FDA’s current good tissue practice (GTP), for the use of humancellular and tissue products; ·potential FDA inspection 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.Where a gene therapy study is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to thesubmission of an IND to the FDA, a protocol and related documentation is submitted to and the study is registered with the NIH Office of BiotechnologyActivities (OBA) pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules (NIH Guidelines). Compliance with the NIHGuidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA, however many companies and otherinstitutions not otherwise subject to the NIH Guidelines voluntarily follow them. The NIH is responsible for convening the RAC, a federal advisorycommittee, which discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly publicmeetings. The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedingsand reports are posted to the OBA web site and may be accessed by the public.The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any availableclinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND issubmitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. With genetherapy protocols, if the FDA allows the IND to proceed, but the RAC decides that full public review of the protocol is warranted, the FDA will request at thecompletion of its IND review that sponsors delay initiation of the protocol until after completion of the RAC review process. The FDA may also imposeclinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes aclinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure thatsubmission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate suchstudies.36 Clinical studies 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 studies are conducted under protocols detailing, amongother things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subjectsafety, including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol and any amendments to theprotocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted and monitored in accordance with the FDA’s regulationsimposing the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical study must be reviewedand approved by an independent institutional review board (IRB) at or servicing each institution at which the clinical study will be conducted. An IRB ischarged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinicalstudies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must besigned by each clinical study subject or his or her legal representative and must monitor the clinical study until completed. Clinical studies also must bereviewed by an institutional biosafety committee (IBC), a local institutional committee that reviews and oversees basic and clinical research conducted atthat institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.Human clinical studies are typically conducted in three sequential phases that may overlap or be combined: ·Phase I. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severeor life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initialhuman testing is often conducted in patients. ·Phase II. The biological product 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 studies are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population atgeographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product andprovide an adequate basis for product labeling. Post-approval clinical studies, sometimes referred to as Phase IV clinical studies, may beconducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patients in theintended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends that sponsors observe subjects for potentialgene therapy-related delayed adverse events for a 15-year period, including a minimum of five years of annual examinations followed by tenyears of annual queries, either in person or by questionnaire, of study subjects.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 studies must be submitted to the FDA. Written IND safety reports mustbe promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, tests inlaboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspectedadverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after thesponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspectedadverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase I, Phase II and Phase III clinical studies may not becompleted successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at anytime on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB cansuspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or ifthe biological product has been associated with unexpected serious harm to patients.Human gene therapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeuticinterventions, there can be no assurance as to the length of the study period, the number of patients the FDA will require to be enrolled in the studies in orderto establish the safety, efficacy, purity and potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDAto support marketing approval. The NIH and the FDA have a publicly accessible database, the Genetic Modification Clinical Research Information System,which includes information on gene transfer studies and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these studies.Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about thephysical characteristics of the biological product 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,37 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 be selected and tested and stability studies must be conducted to demonstrate that the biological productcandidate does not undergo unacceptable deterioration over its shelf life.U.S. Review and Approval ProcessesAfter the completion of clinical studies of a biological product, FDA approval of a BLA must be obtained before commercial marketing of thebiological product. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufactureand composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act (PREA) a BLA orsupplement to a BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatricsubpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grantdeferrals for submission of pediatric data or full or partial waivers of pediatric requirements. Unless otherwise required by regulation, PREA does not apply toany biological product for an indication for which orphan designation has been granted. The testing and approval processes require substantial time andeffort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.Within 60 days following submission of the application, the FDA reviews a BLA submitted 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. The FDAreviews the BLA to determine, among other things, whether the proposed product is safe and potent, including whether it is effective, for its intended use, andhas an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity,strength, quality, potency and purity as those factors relate to the safety or effectiveness of the product. The FDA may refer applications for novel biologicalproducts or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians andother experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is notbound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biologicalproduct approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy (REMS) is necessary to assure the safe use of thebiological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLAwithout a REMS, if required.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. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance withGTP. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellularand tissue based products (HCT/Ps) which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. Theprimary intent of the GTP requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent the introduction,transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and,when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or moreclinical sites to assure that the clinical studies were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP, GTP andGCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and qualitycontrol.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 studies are not always conclusive and the FDA may interpret data differently than we interpretthe same 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 studies. 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 a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings orprecautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in theform of a risk management plan, or otherwise limit the scope of38 any approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase IV clinical studies, designed to further assess abiological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have beencommercialized.One of the performance goals agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA) is to review 90% of standard BLAs in 10months of the 60-day filing date and 90% of priority BLAs in six months of the 60-day filing date, whereupon a review decision is to be made. The FDA doesnot always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and thePDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information, or clarificationregarding information already provided in the submission, constituting a major amendment to the BLA.Orphan Drug DesignationUnder the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, whichis defined under the FD&C Act as a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S.and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the U.S. for this type ofdisease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting a BLA. After the FDAgrants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan productdesignation does not convey any advantage in or shorten the duration of the regulatory review and approval process.If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation,the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug orbiological product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product withorphan exclusivity. 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 as anorphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphandrug status in the European Union has similar, but not identical, benefits.Expedited Development and Review ProgramsThe FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biological products that meetcertain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threateningcondition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the productand the specific indication for which it is being studied. The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as aFast Track product at any time during the clinical development of the product. Also under the Fast Track program, the FDA may consider for review sectionsof the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of thesections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays anyrequired user fees upon 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 Breakthrough Therapy designation, priority review, and accelerated approval. Under the Breakthrough Therapyprogram, products intended to treat a serious or life-threatening disease or condition may be eligible for the benefits of the Fast Track program whenpreliminary clinical evidence demonstrates that such product may have substantial improvement on one or more clinically significant endpoints overexisting therapies. Additionally, FDA will seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactivecommunications to help the sponsor design and conduct a development program as efficiently as possible. Any product is eligible for priority review if it hasthe potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis orprevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drugor biological product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Drugor biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeuticbenefit over existing treatments may receive accelerated approval, which means that they may be approved on the basis of adequate and well-controlledclinical studies establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of aneffect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a39 drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies. In addition, the FDAcurrently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commerciallaunch of the product. Fast Track designation, Breakthrough Therapy designation, priority review and accelerated approval do not change the standards forapproval. Rather, these programs are intended to expedite the development and approval process, but do not necessarily accomplish that intent.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. 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 may commercialize.Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assuranceand maintenance of records and documentation. Other post-approval requirements applicable to biological products, include reporting of cGMP deviationsthat may affect the identity, strength, quality, potency, or purity of a distributed product in a manner that may impact the safety or effectiveness of theproduct, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic recordand signature requirements. After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, themanufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release bythe FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history ofmanufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots ofsome products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research relatedto the regulatory standards on the safety, purity, potency, and effectiveness of biological products.We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibitionon promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failureto comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the marketas 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 to administrative or judicial civil or criminal sanctions and adverse publicity.FDA sanctions could include refusal to approve pending applications, withdrawal of 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 correctiveadvertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicialenforcement 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 and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of productionand 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 or facility generallyrequire prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additionallabeling 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 patent restoration term of up to five years as compensation for patent term lost during productdevelopment and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and thesubmission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to anapproved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. TheU.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In thefuture, we may intend to apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expirationdate, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant BLA.40 A biological product can obtain pediatric market exclusivity in the U.S. Pediatric exclusivity, if granted, adds six months to existing exclusivityperiods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on thevoluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.The Patient Protection and Affordable Care Act (Affordable Care Act) signed into law on March 23, 2010, includes a subtitle called the BiologicsPrice Competition and Innovation Act of 2009, which created an abbreviated approval pathway for biological products shown to be similar to, orinterchangeable with, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize duplicative testing. Biosimilarity,which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, andpotency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar tothe reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for productsadministered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safetyrisks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often morecomplex, structure of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation thatare still being worked out by the FDA.A reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference product. The first biologic product submittedunder the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologicssubmitting under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) 18 months after approval if there isno legal challenge, (iii) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has beensubmitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.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. Equivalent laws have been adopted in other countries thatimpose similar obligations.Other U.S. Healthcare Laws and RegulationsHealthcare providers, physicians and third-party payors play a primary role in the recommendation and use of pharmaceutical products that aregranted marketing approval. Arrangements with third-party payors, existing or potential customers and referral sources are subject to broadly applicable fraudand abuse and other healthcare laws and regulations, and these laws and regulations may constrain the business or financial arrangements and relationshipsthrough which manufacturers market, sell and distribute the products for which they obtain marketing approval. Such restrictions under applicable federaland state healthcare laws and regulations include the following: ·the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering orpaying remuneration, directly or indirectly, in cash or kind, in exchange for, or to induce, either the referral of an individual for, or thepurchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as theMedicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers, on theone hand, and prescribers, purchasers and formulary managers on the other. The PPACA amends the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it; ·the federal False Claims Act (FCA), which prohibits, among other things, individuals or entities from knowingly presenting, or causing to bepresented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent. Federal Anti-Kickback Statuteviolations and certain marketing practices, including off-label promotion, also may implicate the FCA: ·federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating tohealthcare matters;41 ·the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to reportannually to CMS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals,and ownership and investment interests held by physicians and other healthcare providers and their immediate family members; ·the Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civil liability for executing a scheme to defraudany healthcare benefit program or making false statements relating to healthcare matters; ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certainelectronic healthcare transactions and protects the security and privacy of protected health information; and ·state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to: items orservices reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply withthe pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal governmentor otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drugmanufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketingexpenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from eachother in significant ways and may not have the same effect, thus complicating compliance efforts.Violation of any of the laws described above or any other governmental laws and regulations may result in penalties, including civil and criminalpenalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare programs andimprisonment. Furthermore, efforts to ensure that business activities and business arrangements comply with applicable healthcare laws and regulations canbe costly for manufacturers of branded prescription products.Coverage and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the U.S.and markets in other countries, sales of any product candidates for which regulatory approval for commercial sale is obtained will depend in part on theavailability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, privatehealth insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from theprocess for setting the reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products on anapproved list, or formulary, which might not include all of FDA-approved drugs for a particular indication. Moreover, a payor’s decision to provide coveragefor a drug product does not imply that an adequate reimbursement rate will be approved.Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products andservices, in addition to their safety and efficacy. New metrics frequently are used as the basis for reimbursement rates, such as average sales price, averagemanufacturer price and actual acquisition cost. In order to obtain coverage and reimbursement for any product that might be approved for sale, it may benecessary to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the products, in additionto the costs required to obtain regulatory approvals. If third-party payors do not consider a product to be cost-effective compared to other available therapies,they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company tosell its products at a profit. Health Technology Assessment which is intended to take account of medical, social, economic and ethical issues whendetermining the suitability of a medicinal product for reimbursement has increasingly become an element of the pricing and reimbursement decisions of thecompetent authorities in European Union Member States.The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limitthe growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of genericproducts for branded prescription drugs. By way of example, the PPACA contains provisions that may reduce the profitability of drug products, including, forexample, increasing the minimum rebates owed by manufacturers under the Medicaid Drug Rebate Program, extending the rebate program to individualsenrolled in Medicaid managed care plans, addressing a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Programare calculated for drugs that are inhaled, infused, instilled, implanted or injected and establishing annual fees based on pharmaceutical companies’ share ofsales to federal health care programs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existingcontrols and measures, could limit payments for pharmaceuticals.42 U.S. Foreign Corrupt Practices ActThe U.S. Foreign Corrupt Practices Act, to which we are subject, prohibits corporations and individuals from engaging in certain activities to obtain orretain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to anyforeign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwiseinfluence a person working in an official capacity. Equivalent laws have been adopted in other countries that impose similar obligations.Government Regulation Outside of the U.S.In addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinicalstudies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks,their use may be restricted in some countries.Whether or not we obtain FDA approval for 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. Many countries outside of the U.S. have a similar process that requiresthe submission of a clinical study application much like the IND prior to the commencement of human clinical studies. In the European Union, for example,an application for authorization of a clinical trial must be submitted to the competent regulatory authorities and a request for a related positive opinion mustbe submitted to the competent Ethics Committees in the European Union Member States in which the clinical trial takes place, much like the FDA and theIRB, respectively. Once the clinical trial has been approved by the competent regulatory authorities and a positive opinion has been provided by thecompetent Ethics Committees in accordance with the European Union and the European Union Member State requirements, the corresponding clinical studymay proceed.To obtain regulatory approval of a biological medicinal product under European Union regulatory systems, we must submit a marketing authorizationapplication. The grant of marketing authorization in the European Union for products containing viable human tissues or cells such as gene therapymedicinal products is governed by Regulation 1394/2007/EC on advanced therapy medicinal products, read in combination with Directive 2001/83/EC ofthe European Parliament and of the Council, commonly known as the Community code on medicinal products and Regulation (EC) No 726/2004 of theEuropean Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorization and supervision of medicinal productsfor human and veterinary use and establishing the EMA, commonly referred to as the EMA Regulation. Regulation 1394/2007/EC lays down specific rulesconcerning the authorization, supervision and pharmacovigilance of gene therapy medicinal products, somatic cell therapy medicinal products and tissueengineered products. Manufacturers of advanced therapy medicinal products must demonstrate the quality, safety and efficacy of their products to the EMAwhich provides an opinion regarding the application for marketing authorization. The European Commission grants or refuses marketing authorization afterthe EMA has delivered its opinion.Innovative medicinal products are authorized in the European Union on the basis of a full marketing authorization application (as opposed to anapplication for marketing authorization that relies, in whole or in part, on data in the marketing authorization dossier for another, previously approvedmedicinal product). Applications for marketing authorization for innovative medicinal products must contain the results of pharmaceutical tests, pre-clinicaltests and clinical trials conducted with the medicinal product for which marketing authorization is sought. Innovative medicinal products for whichmarketing authorization is granted are entitled to eight years of data exclusivity. During this period, applicants for approval of generics or biosimilars ofthese innovative products cannot rely on data contained in the marketing authorization dossier submitted for the innovative medicinal product to supporttheir application. Innovative medicinal products for which marketing authorization is granted are also entitled to ten years of market exclusivity. Duringthese ten years’ of market exclusivity, no generic or biosimilar medicinal product may be placed on the European Union market even if a marketingauthorization for approval of a generic or biosimilar of the innovative product has been submitted to the EMA or to the competent regulatory authorities inthe European Union Member States and marketing authorization has been granted. The ten years of market exclusivity will be extended to a maximum ofeleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeuticindications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existingtherapies. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be an innovative medicinalproduct which is eligible for the relevant periods of data and market exclusivity.Products authorized as “orphan medicinal products” in the European Union are entitled to benefits additional to those granted in relation toinnovative medicinal products. In accordance with Article 3 of Regulation (EC) No. 141/2000 of the European Parliament and of the Council of 16 December1999 on orphan medicinal products, a medicinal product may be designated as an orphan medicinal product if (1) it is intended for the diagnosis, preventionor treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in theEuropean Union when the application is made, or (b) the product, without the incentives derived from orphan medicinal product status, would not generatesufficient return in43 the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized formarketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition. Further guidance onsuch criteria is provided in European Commission Regulation (EC) No. 847/2000 of 27 April 2000 laying down the provisions for implementation of thecriteria for designation of a medicinal product as an orphan medicinal product and definitions of the concepts “similar medicinal product” and “clinicalsuperiority”. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and following grant of a marketingauthorization, the EMA and the European Union Member States’ competent authorities are not permitted to accept another application for a marketingauthorization, or grant a marketing authorization or accept an application to extend an existing marketing authorization, for the same therapeutic indicationof a similar medicinal product for ten years following grant or authorization. The application for orphan drug designation must be submitted before theapplication for marketing authorization. The applicant may 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.Products authorized in the European Union as orphan medicinal products are entitled to 10 years of data exclusivity. The products are, in parallel,entitled to 10 years of market exclusivity. The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that theproduct no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of marketexclusivity. Additionally, marketing authorization may be granted to a similar product during the 10-year period of market exclusivity for the sametherapeutic indication at any time if: ·The second applicant can establish in its application that its product, although similar to the orphan medicinal product already authorized, issafer, more effective or otherwise clinically superior; ·The holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal productapplication; or ·The holder of the marketing authorization for the original orphan medicinal product cannot supply enough orphan medicinal product.Similar to obligations imposed in the U.S., medicinal products authorized in the European Union may be subject to post-authorization obligations,including the obligation to conduct Phase IV trials.Moreover, in the European Union, the sole legal instrument at the European Union level governing the pricing and reimbursement of medicinalproducts is Council Directive 89/105/EEC (the Price Transparency Directive). The aim of the Price Transparency Directive is to ensure that pricing andreimbursement mechanisms established in European Union Member States are transparent and objective, do not hinder the free movement and trade ofmedicinal products in the European Union and do not hinder, prevent or distort competition on the market. The Price Transparency Directive does not,however, provide any guidance concerning the specific criteria on the basis of which pricing and reimbursement decisions are to be made in individualEuropean Union Member States. Neither does it have any direct consequence for pricing or levels of reimbursement in individual European Union MemberStates. The national authorities of the individual European Union Member States are free to restrict the range of medicinal products for which their nationalhealth insurance systems provide reimbursement and to control the prices and/or reimbursement of medicinal products for human use. Individual EuropeanUnion Member States adopt policies according to which a specific price or level of reimbursement is approved for the medicinal product. Other EuropeanUnion Member States adopt a system of reference pricing, basing the price or reimbursement level in their territory either, on the pricing and reimbursementlevels in other countries, or on the pricing and reimbursement levels of medicinal products intended for the same therapeutic indication. Furthermore, someEuropean Union Member States impose direct or indirect controls on the profitability of the company placing the medicinal product on the market.Health Technology Assessment (HTA) of medicinal products is becoming an increasingly common part of the pricing and reimbursement proceduresin some European Union Member States. These countries include the United Kingdom, France, Germany, Ireland, Italy, and Sweden. The HTA process in theEuropean Union Member States is governed by the national laws of these countries. HTA is the procedure according to which the assessment of the publichealth impact, therapeutic impact and the economic and societal impact of the use of a given medicinal product in the national healthcare systems of theindividual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost-effectiveness of individual medicinalproducts as well as their potential implications for the national healthcare system. Those elements of medicinal products are compared with other treatmentoptions available on the market.The outcome of HTA may influence the pricing and reimbursement status for specific medicinal products within individual European Union memberstates. The extent to which pricing and reimbursement decisions are influenced by the HTA of a specific medicinal product vary between the European UnionMember States.44 In 2011, Directive 2011/24/EU was adopted at the European Union level. This Directive concerns the application of patients' rights in cross-borderhealthcare. The Directive is intended to establish rules for facilitating access to safe and high-quality cross-border healthcare in the European Union. It alsoprovides for the establishment of a voluntary network of national authorities or bodies responsible for HTA in the individual European Union Member States.The purpose of the network is to facilitate and support the exchange of scientific information concerning HTAs. This could lead to harmonization of thecriteria taken into account in the conduct of HTA between European Union Member States and in pricing and reimbursement decisions and negativelyimpact price in at least some European Union Member States.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 March 1, 2016, we employed 56 full-time employees, including 27 in research and development and 29 in executive, general and administrativefunctions. We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective bargainingarrangements. We consider our relationship with our employees to be good.Corporate InformationWe were originally formed on July 16, 2008 as ReGenX, LLC, a Delaware limited liability company, and we were subsequently renamed ReGenXBiosciences, LLC on December 22, 2009. On September 16, 2014, we underwent a corporate reorganization pursuant to which we were converted into aDelaware corporation under the name REGENXBIO Inc. Our principal offices are located at 9712 Medical Center Drive, Suite 100, Rockville, MD 20850,and our telephone number is (240) 552-8181. Our website address is www.regenxbio.com. Our website and the information contained on, or that can beaccessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Youshould not rely on any such information in making your decision whether to purchase our common stock.Available InformationWe file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under theSecurities Exchange Act of 1934, as amended (the Exchange Act). The public may read and copy any materials that we file with the SEC at the SEC’s PublicReference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by callingthe SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other informationregarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov.Copies of each of our filings with the SEC on Form 10-K, Form 10-Q and Form 8-K and all amendments to those reports, can be viewed anddownloaded free of charge at our website, www.regenxbio.com after the reports and amendments are electronically filed with or furnished to the SEC.Our code of ethics, corporate governance guidelines, other corporate policies and procedures, and the charters of our Audit Committee, CompensationCommittee and Nominating and Corporate Governance Committee are available through our website at www.regenxbio.com. 45 ITEM 1A.RISK FACTORS Investing in our common stock involves risk. You should carefully consider the risks described below as well as all the other information in this AnnualReport on Form 10-K, including the financial statements and the related notes appearing at the end of this Annual Report on Form 10-K, before making aninvestment decision. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties notpresently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, ourbusiness, results of operations and financial condition could suffer. In that event the trading price of our common stock could decline, and you may lose allor part of your investment. The risks discussed below also include forward-looking statements and our actual results may differ substantially from thosediscussed in these forward-looking statements.Risks Related to our NAV Technology Platform and the Development of Our Product CandidatesOur gene therapy product candidates are based on a novel technology that makes it difficult to predict the time and cost of development and ofsubsequently obtaining regulatory approval. No gene therapy product has been approved in the United States and only one such product has beenapproved in the European Union.We have concentrated our research and development efforts on our proprietary adeno-associated virus (AAV) gene delivery platform (our NAVTechnology Platform), and our future success depends on our and our licensees’ successful development and commercialization of viable gene therapyproduct candidates. There can be no assurance that we or our licensees will not experience problems or delays in developing current or future productcandidates or that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved. We also may experienceunanticipated problems or delays in expanding our manufacturing capacity, and this may prevent us from completing our clinical trials, meeting theobligations of our collaborations or commercializing our products on a timely or profitable basis, if at all. For example, we, a partner or another group mayuncover one or more previously unknown risks associated with AAV or our NAV Technology Platform, and this may prolong the period of observationrequired for obtaining regulatory approval, necessitate additional clinical testing or invalidate our NAV Technology.In addition, the clinical trial requirements of the United States (U.S.) Food and Drug Administration (the FDA), the European Medicines Agency (theEMA) and other regulatory authorities and the criteria these regulators use to determine the quality, safety and efficacy of a product candidate varysubstantially according to the type, complexity, novelty and intended use and market of such product candidates. The regulatory approval process for novelproduct candidates such as ours can be significantly more expensive and take longer than for other, better known or more extensively studied productcandidates. No gene therapy product has been approved in the U.S., and only one gene therapy product, uniQure N.V.’s Glybera, has received marketingauthorization from the European Commission. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for ourproduct candidates in either the U.S. or the European Union or how long it will take to commercialize our product candidates. Furthermore, approvals by theEuropean Commission may not be indicative of what the FDA may require for approval.Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. The FDA hasestablished the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research (CBER), to consolidate the review ofgene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER in its review. Genetherapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health (NIH), also arepotentially subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee (the RAC). However, NIH announcedin 2014 that the RAC will soon only publicly review clinical trials if the trials cannot be evaluated by standard oversight bodies and pose unusual risks.Although the FDA decides whether individual gene therapy protocols may proceed, the RAC public review process, if undertaken, can delay the initiation ofa clinical trial, even if the FDA has reviewed the trial design and details and approved its initiation. Conversely, the FDA can put an investigational new drug(IND) application on a clinical hold even if the RAC has provided a favorable review or an exemption from in-depth, public review. If we were to engage anNIH-funded institution to conduct a clinical trial, that institution’s institutional biosafety committee as well as its institutional review board (IRB) wouldneed to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy productsconducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, in theEuropean Union, the EMA’s Committee for Advanced Therapies (CAT) is responsible for assessing the quality, safety and efficacy of advanced-therapymedicinal products. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for a gene therapy medicinal candidatethat is submitted to the EMA. In the European Union, the development and evaluation of a gene therapy medicinal product must be considered in the contextof the relevant European Union guidelines. This includes the Note for guidance on the quality, preclinical and clinical aspects of gene therapy medicinalproducts. This guidance document (CPMP/BWP/3088/99) is currently under review in the European Union. A related draft guideline was released by theEMA for consultation on March 23, 2015. The EMA may issue new guidelines concerning the development and marketing authorization for gene therapymedicinal products and require that we comply with these new guidelines.46 These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, requireus to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval andcommercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will berequired to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay ordiscontinue development of certain of our product candidates. These additional processes may result in a review and approval process that is longer than weotherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product tomarket could decrease our ability to generate product revenue, and our business, financial condition, results of operations and prospects would be materiallyharmed.Our business depends substantially on the success of RGX-111, RGX-121, RGX-314, RGX-321 and RGX-501 (collectively, our Lead Product Candidates),which are all still in preclinical development. If we are unable to obtain regulatory approval for, or successfully commercialize, our Lead ProductCandidates or other future product candidates, our business will be materially harmed.Our Lead Product Candidates are in the early stage of development and will require preclinical studies, substantial clinical development and testing,manufacturing bridging studies and process validation and regulatory approval prior to commercialization. Successful continued development and ultimateregulatory approval of our Lead Product Candidates is critical for our future business success and our ability to generate product revenue. We have invested,and will continue to invest, a significant portion of our financial resources in the development of our Lead Product Candidates. We will need to raisesufficient funds for, and successfully complete, our planned preclinical and future clinical trials of our Lead Product Candidates in appropriate subjects. Thefuture regulatory and commercial success of these product candidates is subject to a number of risks, including the following: ·we may not have sufficient financial and other resources to complete the necessary preclinical studies and clinical trials for our Lead ProductCandidates; ·we may not be able to provide evidence of quality, efficacy and safety for our Lead Product Candidates; ·we do not know the degree to which our Lead Product Candidates will be accepted by patients, the medical community and third-party payorsas a therapy for the respective diseases to which they relate, even if approved; ·the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA, EMA or comparable foreignregulatory bodies for marketing approval; ·subjects in our clinical trials, if any, may die or suffer other adverse effects for reasons that may or may not be related to our Lead ProductCandidates; ·subjects in clinical trials, if any, undertaken by licensees under a license we grant of certain intellectual property related to our NAVTechnology Platform (our NAV Technology Licensees) may die or suffer adverse effects, that may or may not be related to our NAVTechnology Platform; ·certain patients’ immune systems might prohibit the successful delivery of certain gene therapy products to the target tissue, thereby limitingthe treatment outcomes; ·we may not successfully establish commercial manufacturing capabilities; ·if approved for treatment of Mucopolysaccharidosis Type I (MPS I), Mucopolysaccharidosis Type II (MPS II), wet age-related maculardegeneration (wet AMD), X-linked retinitis pigmentosa (XLRP) and homozygous familial hypercholesterolemia (HoFH), our Lead ProductCandidates will likely compete with other treatments then available, including the off-label use of products already approved for marketingand other therapies currently available or which may be developed; ·our products and products developed by our NAV Technology Licensees, if any, may not maintain a continued acceptable safety profilefollowing regulatory approval; ·we may not maintain compliance with post-approval regulation and other requirements; and ·we may not be able to obtain, maintain or enforce our rights under our licensed patents and other intellectual property rights.Of the large number of biologics and drugs in development in the pharmaceutical industry, only a small percentage result in the submission of aBiologics License Application (BLA) to the FDA or marketing authorization application (MAA) to the EMA and even fewer are approved forcommercialization. Furthermore, even if we do receive regulatory approval to market our Lead Product Candidates, any such approval may be subject tolimitations on the indicated uses for which we may market the product. Accordingly,47 even if we are able to obtain the requisite financing to continue to fund our development programs, we cannot assure you that our Lead Product Candidateswill be successfully developed or commercialized. If we or any of our future development partners are unable to develop, or obtain regulatory approval for,or, if approved, successfully commercialize, our Lead Product Candidates, we may not be able to generate sufficient revenue to continue our business.We may not be successful in our efforts to identify or discover additional product candidates.The success of our business depends in large part upon our ability to identify, develop and commercialize products based on our NAV TechnologyPlatform. Although our Lead Product Candidates are currently in preclinical development, our research programs may fail to identify other potential productcandidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifying potential product candidates orour potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable orunlikely to receive marketing approval.If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would materially harm ourbusiness and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financialand human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.We have not tested any of our viral vectors, or product candidates internally derived from these viral vectors, in our own clinical trials.Gene therapy development has inherent risks. None of our internal product candidates have ever been evaluated in clinical studies and our LeadProduct Candidates have limited preclinical results, if any, and we may experience unexpected results in the future. We or any of our future developmentpartners will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates containing our proprietary vectorsare safe and effective, with a favorable benefit-risk profile, for use in their target indications before we can seek regulatory approvals for their commercial sale.Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement ofany of our clinical trials.The results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our futuredevelopment partners advance into clinical trials, including our Lead Product Candidates, may not have favorable results in later clinical trials, if any, orreceive regulatory approval. There is a high failure rate for drugs and biologic products proceeding through clinical trials. Data obtained from preclinical andclinical activities are subject to varying interpretations that may delay, limit or prevent regulatory approval. In addition, we may experience regulatorydelays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development. Anysuch delays could materially harm our business, financial condition, results of operations and prospects.If our NAV vectors are not shown to be safe and effective, we may not realize the value of our investment in our technology. In addition, success inearly clinical trials does not mean that later clinical trials will be successful, because product candidates in later-stage clinical trials may fail to demonstratesufficient safety or efficacy despite having progressed through initial clinical testing. Furthermore, our future trials will need to demonstrate sufficient safetyand efficacy for approval by regulatory authorities in larger patient populations. Companies frequently suffer significant setbacks in advanced clinical trials,even after earlier clinical trials have shown promising results. In addition, only a small percentage of drugs under development result in the submission of aBLA to the FDA or MAA to the EMA and even fewer are approved for commercialization.We cannot be certain that any of our planned clinical trials will be successful, and any safety concerns observed in any one of our planned clinicaltrials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications. In addition, failureof one or more of our viral vectors, whether in our internally developed product candidates or those of our licensees, would impact the licensing of our NAVTechnology Platform. Any such failure could materially harm our business, financial condition, results of operations and prospects.Because we are developing product candidates for the treatment of diseases in which there is little clinical experience using new endpoints ormethodologies, there is increased risk that the FDA, EMA or other comparable foreign regulatory authorities may not consider the endpoints of ourclinical trials to provide clinically meaningful results and that these results may be difficult to analyze.During the FDA review process, we will need to identify success criteria and endpoints such that the FDA will be able to determine the clinicalefficacy and safety profile of our product candidates. As we are developing novel treatments for diseases in which there is little clinical experience with newendpoints and methodologies, there is heightened risk that the FDA, the EMA or48 comparable foreign regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results (reflecting a tangible benefit topatients). In addition, the resulting clinical data and results may be difficult to analyze. Even if the FDA does find our success criteria to be sufficientlyvalidated and clinically meaningful, we may not achieve the pre-specified endpoints to a degree of statistical significance. Further, even if we do achieve thepre-specified criteria, we may produce results that are unpredictable or inconsistent with the results of the non-primary endpoints or other relevant data. TheFDA also weighs the benefits of a product against its risks, and the FDA may view the efficacy results in the context of safety as not being supportive ofregulatory approval. Other regulatory authorities in the European Union and other countries, such as the EMA’s CAT, may make similar comments withrespect to these endpoints and data. As discussed above, our gene therapy product candidates are based on a novel technology that makes it difficult topredict the time and cost of development and of subsequently obtaining regulatory approval. No gene therapy product has been approved in the U.S. Onlyone gene therapy product has received marketing authorization from the European Commission.The results from our preclinical studies or clinical trials for our Lead Product Candidates may not support as broad a marketing approval as we seek, andthe FDA and the EMA or other regulatory authorities may require us to conduct additional clinical trials or evaluate subjects for an additional follow-upperiod.While we believe our Lead Product Candidates should be applicable for the treatment of patients with MPS I, MPS II, wet AMD, XLRP and HoFH, theresults from our preclinical and planned clinical trials may not support as broad of a marketing approval as we seek. Even if we obtain regulatory approval forour Lead Product Candidates, we may be required by the FDA, the EMA or comparable foreign regulatory bodies to conduct additional clinical trials tosupport approval of our Lead Product Candidates for patients diagnosed with different mutations of MPS I, MPS II, wet AMD, XLRP and HoFH. This couldresult in our experiencing significant increases in costs and substantial delays in obtaining, or never obtaining, marketing approval for our Lead ProductCandidates to treat patients diagnosed with MPS I, MPS II, wet AMD, XLRP and HoFH, respectively. The inability to market our Lead Product Candidates totreat patients with MPS I, MPS II, wet AMD, XLRP and HoFH, would materially harm our business, financial condition, results of operations and prospects.We may find it difficult to enroll patients in clinical trials, and this could delay or prevent us from proceeding with clinical trials of our productcandidates.Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our plannedclinical trials depends on our ability to recruit patients to participate as well as completion of required follow-up periods. If patients are unwilling toparticipate in our gene therapy studies because of negative publicity from adverse events related to the biotechnology or gene therapy fields, competitiveclinical trials for similar patient populations, clinical trials in products employing our vectors or our platform or for other reasons, the timeline for recruitingpatients, conducting studies and obtaining regulatory approval of our product candidates may be delayed. These delays could result in increased costs,delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether.We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete ourplanned clinical trials in a timely manner. Patient enrollment and trial completion is affected by factors including: ·size of the patient population and process for identifying subjects; ·design of the trial protocol; ·eligibility and exclusion criteria; ·perceived risks and benefits of the product candidate under study; ·perceived risks and benefits of gene therapy-based approaches to treatment of diseases; ·availability of competing therapies and clinical trials; ·severity of the disease under investigation; ·availability of genetic testing for potential patients; ·proximity and availability of clinical trial sites for prospective subjects; ·ability to obtain and maintain subject consent; ·risk that enrolled subjects will drop out before completion of the trial;49 ·patient referral practices of physicians; and ·ability to monitor subjects adequately during and after treatment.Our current product candidates are being developed to treat a variety of conditions, many of which are rare. We plan to seek initial marketingapprovals in the U.S. and the European Union. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligiblepatients to participate in the clinical trials required by the FDA, the EMA or other comparable foreign regulatory authorities. Our ability to successfullyinitiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including: ·difficulty in establishing or managing relationships with contract research organizations (CROs) and physicians; ·different standards for the conduct of clinical trials; ·absence in some countries of established groups with sufficient regulatory expertise for review of gene therapy protocols; ·our inability to locate qualified local consultants, physicians and partners; and ·the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation ofpharmaceutical and biotechnology products and treatments.If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate thenongoing or planned clinical trials, any of which would harm our business, financial condition, results of operations and prospects.We may encounter substantial delays in our planned clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicableregulatory authorities.Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials todemonstrate the safety and efficacy of the product candidates. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannotguarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at anystage of testing. Events that may prevent successful or timely completion of preclinical and clinical development include: ·delays in reaching a consensus with regulatory authorities on trial design; ·delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites; ·delays in opening clinical trial sites or obtaining required IRB or independent Ethics Committee approval at each clinical trial site; ·delays in recruiting suitable subjects to participate in our clinical trials; ·imposition of a clinical hold by regulatory authorities as a result of a serious adverse event or after an inspection of our clinical trial operationsor trial sites; ·failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements; ·failure to perform in accordance with the FDA good clinical practice (GCP), or applicable regulatory guidelines in the European Union andother countries; ·delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites, including delays by third partieswith whom we have contracted to perform certain of those functions; ·delays in having subjects complete participation in a trial or return for post-treatment follow-up; ·clinical trial sites or subjects dropping out of a trial; ·selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; ·occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; ·occurrence of serious adverse events in trials of the same class of agents conducted by other sponsors; or ·changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.50 Any inability to successfully complete research studies, preclinical and clinical development could result in additional costs to us or impair ourability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing orformulation changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions.Clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow ourcompetitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm ourbusiness, financial condition, results of operations and prospects.Additionally, if the results of our planned clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with ourproduct candidates, we may: ·be delayed in obtaining marketing approval for our product candidates, if at all; ·obtain approval for indications or patient populations that are not as broad as intended or desired; ·obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; ·be subject to changes in the way the product is administered; ·be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing or other requirements; ·have regulatory authorities withdraw, vary or suspend, their approval of the product or impose restrictions on its distribution in the form of amodified risk evaluation and mitigation strategy; ·be subject to the addition of labeling statements, such as warnings or contraindications; ·be sued; or ·experience damage to our reputation.Our NAV Technology Platform, our Lead Product Candidates and future product candidates, if any, or NAV Technology Licensees’ product candidates,and the process for administering such product candidates may cause undesirable side effects or have other properties that could delay or preventregulatory approval of product candidates, limit the commercial potential or result in significant negative consequences following any potentialmarketing approval.There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia in trials usinglentivirus vectors and death seen in other trials using adenovirus vectors. For example, in 1999, a gene therapy trial of research subjects with ornithinetranscarbamylase (OTC) deficiency, a rare disorder in which the liver lacks a functional copy of the OTC gene, resulted in the death of a trial subject due tocomplications of adenovirus vector administration. James M. Wilson, M.D., Ph.D. was a co-investigator of the 1999 trial while he was Director of the Institutefor Human Gene Therapy of the University of Pennsylvania. While new recombinant vectors have been designed to reduce these side effects, gene therapy isstill a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of delayed adverseevents following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carrythe genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early afteradministration which could substantially limit the effectiveness of the treatment. In previous clinical trials involving AAV vectors for gene therapy, somesubjects experienced the development of a T-cell response, whereby after the vector is within the target cell, the cellular immune response system triggers theremoval of transduced cells by activated T-cells. If our vectors demonstrate a similar effect, we may decide or be required to halt or delay preclinicaldevelopment or clinical development of our product candidates.In addition to side effects caused by the product candidate, the administration process or related procedures also can cause adverse side effects. If anysuch adverse events occur in our or third party trials, our clinical trials could be suspended or terminated.As a result of these concerns, the FDA, the European Commission, the EMA or other comparable foreign regulatory authorities could order us to ceasefurther development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that all futureserious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial.Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of suchproduct candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any ofthese occurrences may harm our ability to develop other product candidates and may harm our business, financial condition and prospects significantly.51 Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and MitigationStrategy (REMS) to ensure that the benefits outweigh its risks. A REMS may include, among other things, a medication guide outlining the risks of theproduct for distribution to patients; a communication plan to health care practitioners; and elements to assure safe use, which can severely restrict thedistribution of a product by, for example, requiring that health care providers receive particular training and obtain special certification prior to prescribingand dispensing the product, limiting the healthcare settings in which the product may be dispensed, and subjecting patients to monitoring and enrollment ina registry. If FDA requires us to adopt a REMS for our products and we are unable to comply with its requirements, FDA may deem our products to bemisbranded and we may be subject to civil money penalties. The European Commission and other comparable foreign regulatory authorities may, followinggrant of marketing authorization in their territory, impose similar obligations.Furthermore, if we or others later identify undesirable side effects caused by one of our product candidates, several potentially significant negativeconsequences could result, including: ·regulatory authorities may suspend, vary or withdraw approvals of such product candidate; ·regulatory authorities may require additional warnings on the label; ·we may be required to change the way a product candidate is administered or conduct additional clinical trials; ·we could be sued and held liable for harm caused to patients; and ·our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of our NAV Technology Platform and our product candidatesand could materially harm our business, prospects, financial condition and results of operations.We may be unable to obtain orphan drug designation or exclusivity. If our competitors are able to obtain orphan drug exclusivity for products thatconstitute the same drug and treat the same indications as our product candidates, we may not be able to have competing products approved by theapplicable regulatory authority for a significant period of time.Regulatory authorities in some jurisdictions, including the U.S. and the European Union, may designate drugs for relatively small patient populationsas orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease orcondition, which is defined under the Food, Drug and Cosmetic Act as having a patient population of fewer than 200,000 individuals in the U.S., or a patientpopulation greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in theU.S. In the European Union, following the opinion of the EMA’s Committee for Orphan Medicinal Products, the European Commission grants orphan drugdesignation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronicallydebilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, orphan designation is granted for productsintended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives,it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has suchdesignation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the European Commission from approving anothermarketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limitedcircumstances. If another sponsor receives such approval before we do (regardless of our orphan drug designation), we will be precluded from receivingmarketing approval for our product for the applicable exclusivity period. The applicable period is seven years in the U.S. and 10 years in the EuropeanUnion. The exclusivity period in the U.S. can be extended by six months if the BLA sponsor submits pediatric data that fairly respond to a written requestfrom the FDA for such data. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drugdesignation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be revoked if anyregulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of theproduct to meet the needs of patients with the rare disease or condition.If we request orphan drug designation for any of our product candidates, there can be no assurances that the FDA or the European Commission willgrant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an orphan product does notguarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of anyregulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates priorto our product candidates receiving exclusive marketing approval.52 Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate fromcompetition because different drugs can be approved for the same condition. In the U.S., even after an orphan drug is approved, the FDA may subsequentlyapprove another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to besafer, more effective or makes a major contribution to patient care. In the European Union, marketing authorization may be granted to a similar medicinalproduct for the same orphan indication if: ·the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product alreadyauthorized, is safer, more effective or otherwise clinically superior; ·the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal productapplication; or ·the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of orphan medicinalproduct.Even if we complete the necessary preclinical and clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize aproduct candidate and the approval may be for a more narrow indication than we seek.We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even ifour product candidates meet their safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in atimely manner or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatoryauthority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based on additional governmentregulation from future legislation or administrative action or based on changes in regulatory authority policy during the period of product development,clinical trials and the review process.Regulatory authorities also may approve a product candidate for more limited indications than requested (such as approving RGX-111 only forpatients with Hurler syndrome, a severe subset of MPS I patients) or they may impose significant limitations in the form of narrow indications, warnings or aREMS. These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to theperformance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable forthe successful commercialization of our product candidates. Any of the foregoing scenarios could materially harm the commercial prospects for our productcandidates and materially harm our business, financial condition, results of operations and prospects.Further, the regulatory authorities may require concurrent approval or the CE mark (a mandatory conformity assessment marking for certain productssold within the European Economic Area (EEA)) of a companion diagnostic device, since it may be necessary to use FDA- cleared or FDA-approved, or CE-marked, diagnostic tests or diagnostic tests approved by other comparable foreign regulatory authorities to diagnose patients or to assure the safe andeffective use of our product candidates in trial subjects. FDA refers to such tests as in vitro companion diagnostic devices. On July 31, 2014, the FDAannounced the publication of a final guidance document describing the agency’s current thinking about the development and regulation of in vitrocompanion diagnostic devices. The final guidance articulates a policy position that, when safe and effective use of a therapeutic product depends on adiagnostic device, the FDA generally will require approval or clearance of the diagnostic device at the same time that FDA approves the therapeutic product.The final guidance allows for two exceptions to the general rule of concurrent drug/device approval, namely, when the therapeutic product is intended totreat serious and life-threatening conditions for which no alternative exists, and when a serious safety issue arises for an approved therapeutic agent, and noFDA-cleared or FDA-approved companion diagnostic test is yet available. It is unclear how the FDA will apply this policy to our current or future genetherapy product candidates. Although we believe diagnoses based on symptoms in conjunction with existing genetic tests developed and administered bylaboratories certified under the Clinical Laboratory Improvement Amendments (CLIA) are sufficient to diagnose patients for our current product candidates,the FDA may disagree. Should the FDA deem genetic tests used for diagnosing patients for our therapies to be in vitro companion diagnostics requiring FDAclearance or approval, we may face significant delays or obstacles in obtaining approval of a BLA for our product candidates. On September 26, 2012 in theEuropean Union, the European Commission released a package of legislative proposals designed to replace the existing regulatory framework for medicaldevices and in vitro diagnostic medical devices in the EEA. These proposals are intended to strengthen the medical devices rules in the EEA countries. OnOctober 13, 2015, discussions commenced between the European Commission, the European Parliament and the Council of Ministers with the aim ofagreeing the final text of the Regulations. Depending on the outcome of the negotiations, the Regulation on in vitro diagnostic medical devices could bedefinitively adopted in the summer of 2016. If adopted in their current form, these revisions may impose additional obligations on us that may impact thedevelopment and authorization of our product candidates in the European Union.53 Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory oversight.Even if we obtain any regulatory approval for our product candidates, they will be subject to ongoing regulatory requirements for manufacturing,labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information. Any regulatoryapprovals that we receive for our product candidates also may be subject to a REMS, limitations on the approved indicated uses for which the product may bemarketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, andsurveillance to monitor the quality, safety and efficacy of the product. For example, the holder of an approved BLA is obligated to monitor and report adverseevents and any failure of a product to meet the specifications in the BLA. The FDA Guidance for Industry on Gene Therapy Clinical Trials—ObservingSubjects for Delayed Adverse Events advises that patients treated with some types of gene therapy undergo follow-up observations for potential adverseevents for as long as 15 years. The holder of an approved BLA also must submit new or supplemental applications and obtain the FDA approval for certainchanges to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with the FDA rules and aresubject to FDA review, in addition to other potentially applicable federal and state laws. Equivalent rules apply in the European Union and other foreigncountries.In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDAand other regulatory authorities for compliance with current good manufacturing practice (cGMP) requirements and adherence to commitments made in theBLA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events ofunanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labelingof that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall orwithdrawal of the product from the market or suspension of manufacturing.If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory authority may take avariety of actions, including: ·issue a warning letter asserting that we are in violation of the law; ·seek an injunction or impose administrative, civil or criminal penalties or monetary fines; ·suspend, vary or withdraw regulatory approval; ·suspend any ongoing clinical trials; ·refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategicpartners; ·restrict the marketing or manufacturing of the product; ·seize or detain the product or otherwise require the withdrawal of the product from the market; ·refuse to permit the import or export of products; or ·refuse to allow us to enter into supply contracts, including government contracts.Any government investigation of alleged violations of law could require us to expend significant time and resources to respond and could generatenegative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and harm ourbusiness, financial condition, results of operations and prospects.In addition, the FDA’s policies, and those of comparable foreign regulatory authorities, may change and additional government regulations may beenacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of governmentregulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existingrequirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approvalthat we may have obtained and we may not achieve or sustain profitability, which would materially harm our business, financial condition, results ofoperations and prospects.54 We 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 our product candidates.The biotechnology and pharmaceutical industries, including the gene therapy field, are characterized by rapidly changing technologies, significantcompetition and a strong emphasis on intellectual property. We face substantial competition from many different sources, including large and specialtypharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions.We are aware of several companies focused on developing gene therapies in various indications, as well as several companies addressing othermethods for modifying genes and regulating gene expression. Any advances in gene therapy technology made by a competitor may be used to developtherapies that could compete against any of our product candidates.Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and other resources, such aslarger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceuticalindustries may result in even more resources being concentrated among a smaller number of competitors. Our commercial opportunity could be reduced oreliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or areless expensive than any products that we may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly orearlier 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 uneconomical or obsolete, and we may not besuccessful in marketing our product candidates against those of 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.Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for our product candidates outside ofthe U.S. which would limit our market opportunities and harm our business.Approval of a product candidate in the U.S. by the FDA does not ensure approval of such product candidate by regulatory authorities in othercountries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries orby the FDA. Sales of our product candidates outside of the U.S. will be subject to foreign regulatory requirements governing clinical trials and marketingapproval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve themanufacturing and marketing of the product candidates in those countries. Approval procedures vary among jurisdictions and can involve requirements andadministrative review periods different from, and more onerous than, those in the U.S., including additional preclinical studies or clinical trials. In manycountries outside the U.S., a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the pricethat we intend to charge for our products, if approved, is also subject to approval. We intend to submit a marketing authorization application to EMA forapproval of our product candidates by the European Commission in the European Union. However, obtaining such approval from the European Commissionfollowing the opinion of EMA is a lengthy and expensive process. Even if a product candidate is approved, the FDA or the European Commission, as the casemay be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the U.S. and the European Unionalso have requirements for approval of product candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatoryapprovals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent theintroduction of our product candidates in certain countries.Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for any ofour product candidates may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realizethe full market potential of our product candidates will be harmed and our business, financial condition, results of operations and prospects will be harmed.Risks Related to Our Financial PositionWe have incurred substantial net losses since inception, and have only had one quarter since inception with profitability. We expect to incur losses for theforeseeable future and may never again achieve or maintain profitability.Since inception, we have incurred substantial net losses. Our net losses for the years ended December 31, 2015 and 2014 were $22.8 million and $4.0million, respectively. As of December 31, 2015, we had an accumulated deficit of $51.6 million. We55 historically have financed our operations primarily through private placements of our preferred stock and sublicensing rights to our NAV TechnologyPlatform. We have devoted substantially all of our efforts to licensing our NAV Technology Platform and to research and development, including preclinicaland planned clinical development of our product candidates, as well as to building out our team. We currently do not have any clinical programs, and weexpect that it could be several years, if ever, before we commercialize an internal product candidate. We license certain intellectual property related to ourNAV Technology Platform to third parties. Our NAV Technology Licensees have multiple preclinical studies and clinical trials in progress. However, noNAV Technology Licensee has an approved or commercialized gene therapy product based on such licensing program. We expect to generate only limitedrevenue, if any, from our current NAV Technology Licensees and any future NAV Technology Licensees in the near term. We expect to continue to incursignificant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. Weanticipate that our expenses will increase substantially if, and as, we: ·further develop our sublicensing activities and NAV Technology Platform; ·continue our research studies and preclinical development of our internal product candidates, including our Lead Product Candidates; ·initiate additional preclinical studies and clinical trials for our Lead Product Candidates and future product candidates, if any; ·initiate activities relating to manufacturing; ·seek to identify additional product candidates; ·prepare our BLA and MAA for our Lead Product Candidates and seek marketing approvals for any of our other product candidates thatsuccessfully complete clinical trials, if any; ·establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketingapproval, if any; ·operate as a public company; ·maintain, expand and protect our intellectual property portfolio; and ·acquire or in-license other product candidates and technologies.For us to become profitable, we and our NAV Technology Licensees must develop and eventually commercialize product candidates with significantmarket potential. This will require us and our NAV Technology Licensees to be successful in a range of business challenges, including expansion of thelicensing of our NAV Technology Platform, completing preclinical studies of our product candidates, commencing and completing clinical trials of ourproduct candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we mayobtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we maynever generate revenues that are sufficient to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on aquarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital,maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause youto lose all or part of your investment.We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when neededmay force us to delay, limit or terminate certain of our licensing activities, product development efforts or other operations.We will require substantial future capital in order to seek to broaden licensing of our NAV Technology Platform, complete the remaining researchstudies, preclinical and clinical development for our Lead Product Candidates and other future product candidates, if any, and potentially commercializethese product candidates. We expect our spending levels to increase in connection with our preclinical and clinical trials, if any, of our Lead ProductCandidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to product sales,medical affairs, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company.Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital whenneeded or on attractive terms, we would be forced to delay, reduce or eliminate certain of our licensing activities, our research and development programs orother operations.Our operations have consumed significant amounts of cash since inception. As of December 31, 2015, our cash, cash equivalents and marketablesecurities were $216.4 million. We expect that our existing cash, cash equivalents and marketable56 securities will enable us to initiate Phase I/II clinical trials for RGX-501 and RGX-111 and file an IND in preparation for a Phase I clinical trial for RGX-314,as well as fund our operating expenses and capital expenditure requirements into 2018.Our future capital requirements will depend on many factors, including: ·the results of our preclinical studies for our Lead Product Candidates and any subsequent clinical trials; ·our planned expansion of the licensing of our NAV Technology Platform; ·the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials, if any, for our otherproduct candidates; ·the costs, timing and outcome of regulatory review of our product candidates; ·the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our productcandidates for which we receive marketing approval; ·revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; ·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending anyintellectual property-related claims; ·our current licensing agreements remaining in effect; ·our ability to establish and maintain additional licensing agreements or collaborations on favorable terms, if at all; ·the extent to which we acquire or in-license other product candidates and technologies; and ·the costs associated with being a public company.Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is atime-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtainregulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Ourproduct revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales ofproducts that may not be commercially available for many years, if at all. In addition, revenue from our NAV Technology Platform sublicensing is dependentin part on the clinical and commercial success of our licensing partners. Neither we nor any of our NAV Technology Licensees have commercialized anyproducts using our NAV Technology Platform. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.To the extent that additional capital is raised through the sale of equity or equity-linked securities, the issuance of those securities could result insubstantial dilution for our current stockholders and the terms may include liquidation or other preferences that adversely affect the rights of our currentstockholders. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market priceof our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. Adequate additionalfinancing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with partners or otherwisethat may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us.We have generated limited revenue from our NAV Technology Platform sublicensing and may not successfully expand our licensing activities.Our ability to generate revenue from our NAV Technology Platform sublicensing depends on the acceptance by third parties of our NAV TechnologyPlatform as their primary gene therapy technology and our ability to market and license our technology platform. We do not anticipate generating revenuesfrom product sales for the next several years, if ever, as described elsewhere in these risk factors and anticipate generating only limited revenue from our NAVTechnology Platform sublicensing in the near future. To date, a significant portion of our revenues have been generated from the sublicensing of rights to ourNAV Technology Platform. Our ability to generate future revenues from our NAV Technology Platform sublicensing depends on many factors, including: ·our NAV Technology Licensees successfully developing gene therapy products using our NAV Technology Platform; ·obtaining and maintaining market acceptance of our NAV Technology Platform as a primary gene therapy technology; ·maintaining our licensing relationships with our licensor partners, including GlaxoSmithKline LLC (GSK) and The Trustees of the Universityof Pennsylvania (together with the University of Pennsylvania, Penn);57 ·addressing any competing technological and market developments; ·implementing additional internal systems and infrastructure, as needed; ·negotiating favorable terms in any licensing or other arrangements into which we may enter and performing our obligations in suchagreements; ·maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; ·avoiding and defending against third-party interference, infringement and other intellectual property related claims; and ·attracting, hiring and retaining qualified personnel.We have never generated revenue from product candidate sales and have only generated limited revenue from reagent sales.Our ability to generate revenue from product candidate sales depends on our ability, alone or with partners, to successfully complete the developmentof, and obtain the regulatory approvals necessary to commercialize, our product candidates. All of our revenues to date have been from sublicensing our NAVTechnology Platform and the sale of licensed reagents to third-parties for use in research and development. We do not consider reagent sales a core aspect ofour business model and we do not dedicate significant resources to sales efforts for reagents. Accordingly, future revenue from reagent sales is uncertain andmay fluctuate significantly from period to period. We do not anticipate generating revenues from our and our NAV Technology Licensees’ product candidatesales for the next several years, if ever. Our ability to generate future revenues from product candidate sales depends heavily on our, or our NAV TechnologyLicensees’, success in: ·completing research studies and preclinical and clinical development of our product candidates and identifying new gene therapy productcandidates; ·seeking and obtaining regulatory and marketing approvals for product candidates for which clinical trials are completed; ·launching and commercializing product candidates for which we obtain regulatory and marketing approval by establishing a sales force,marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; ·negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations insuch collaborations; ·qualifying for adequate coverage and reimbursement by government and third-party payors for our product candidates; ·maintaining and enhancing a sustainable, scalable, reproducible and transferable manufacturing process for our vectors and productcandidates; ·establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality,products and services to support clinical development and the market demand for our product candidates, if approved; ·obtaining market acceptance of our product candidates as a viable treatment option; ·addressing any competing technological and market developments; ·implementing additional internal systems and infrastructure, as needed; ·negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations insuch collaborations; ·maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; ·avoiding and defending against third-party interference, infringement and other intellectual property related claims; and ·attracting, hiring and retaining qualified personnel, including research and development, clinical development, regulatory and others.Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associatedwith commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or otherregulatory authorities to perform clinical and other studies in addition to those that we currently anticipate. Even if we are able to generate revenues from thesale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.58 Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.We are an emerging clinical-stage company formed in July 2008. Our operations to date have predominantly focused on organizing and staffing ourcompany, business planning, raising capital, acquiring our technology, administering and expanding our NAV Technology Platform sublicensing,identifying potential product candidates and undertaking research and preclinical studies of our product candidates and establishing licensing arrangements.We have initiated our first clinical trial with our development partners at Penn and intend to initiate a second clinical trial in 2016. We have not yetdemonstrated the ability to continue expansion of our NAV Technology Platform sublicensing efforts, complete and report clinical trials of our productcandidates, obtain marketing approvals, manufacture a commercial-scale product or conduct sales and marketing activities necessary for successfulcommercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longeroperating history.In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. Weare transitioning from a company with a licensing and research focus to a company that is also capable of supporting clinical development activities and wewill need to transition to supporting commercial activities in the future. We may not be successful in these transitions.The preparation of our financial statements requires significant interpretations, estimates and judgements. Disagreements with respect to theseinterpretations, estimates and judgements by the SEC, the Financial Accounting Standards Board or various other bodies could result the restatement ofour financial statements or other potential adverse effects.We are subject to complex tax laws, regulations, accounting principles and interpretations thereof. The preparation of our financial statements requiresus to interpret accounting principles and guidance and make estimates and judgments that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred duringthe reporting periods. Our interpretations, estimates and judgments are based on our historical experience and on various other factors that we believe arereasonable under the circumstances, the results of which form the basis for the preparation of our financial statements. U.S. generally accepted accountingprinciples are subject to interpretation by the SEC, the Financial Accounting Standards Board and various other bodies formed to interpret and createappropriate accounting principles and guidance. In the event that one of these bodies disagrees with our accounting recognition, measurement or disclosureor any of our accounting interpretations, estimates or assumptions, it may have a significant effect on our reported results and may retroactively affectpreviously reported results. The need to restate our financial results could, among other potential adverse effects, result in us incurring substantial costs, affectour ability to timely file our periodic reports until such restatement is completed, divert the attention of our management and employees from managing ourbusiness, result in material changes to our historical and future financial results, result in investors losing confidence in our operating results, subject us tosecurities class action litigation, and cause our stock price to decline.Our management will not be required to evaluate the effectiveness of our internal control over financial reporting until the end of the fiscal year for whichour second annual report is due. If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in theaccuracy of our financial reports.As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internalcontrols. Section 404 of the Sarbanes-Oxley Act (Section 404) requires that we evaluate and determine the effectiveness of our internal control over financialreporting. Beginning with our second annual report following our initial public offering (completed in September 2015), we will be required to provide amanagement report on internal control over financial reporting. When we are no longer an emerging growth company, our management report on internalcontrol over financial reporting will need to be attested to by our independent registered public accounting firm. We do not expect to have our independentregistered public accounting firm attest to our management report on internal control over financial reporting while we are an emerging growth company.If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statementsmay be materially misstated. In addition, our internal control over financial reporting will not prevent or detect all errors and fraud. Because of the inherentlimitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that allcontrol issues and instances of fraud will be detected.If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internalcontrols, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock todecline. In addition, we could become subject to investigations by NASDAQ, the59 Securities and Exchange Commission (SEC) or other regulatory authorities, which could require additional management attention and which could adverselyaffect our business.As described below, we currently have two material weaknesses which we are in the process of remediating.In preparation for our initial public offering, we identified two material weaknesses in our internal control over financial reporting. If we are unable toremedy our material weaknesses, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accuratefinancial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’confidence and our stock price.In connection with the audit of our financial statements as of and for the years ended December 31, 2014 and 2013, we identified two materialweaknesses in our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internalcontrol over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented ordetected on a timely basis.First, we determined that we did not have adequate procedures and controls in our contract review process to ensure the completeness of contractsreviewed and to appropriately identify and account for provisions within our contracts. Second, we determined that we did not maintain a sufficientcomplement of resources to ensure adequate review and segregation of duties within our financial reporting processes.These control deficiencies resulted in adjustments to our financial statements for 2013 and 2014 to revenues, equity, research and development,general and administrative, other operating income and interest expense. Each of the control deficiencies could result in a misstatement of aforementionedaccounts or disclosures that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected.Accordingly, our management has determined that these control deficiencies constitute material weaknesses.We are in the process of implementing measures designed to improve internal control over financial reporting to remediate the control deficienciesthat led to our material weaknesses. We cannot assure you that the measures we have taken to date, together with any measures we may take in the future, willbe sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or to avoid potentialfuture material weaknesses. In addition, neither our management nor an independent registered public accounting firm has ever performed an evaluation ofour internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Hadwe or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with theprovisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. If we are unable to successfully remediate our existing or anyfuture material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of ourfinancial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodicreports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price maydecline as a result.Risks Related to Third PartiesWe rely primarily on a sponsored research agreement with Penn for our nonclinical research and development activities and a loss of this relationship orof the principal investigator for that nonclinical research, James M. Wilson, M.D., Ph.D., would materially harm our business.In February 2009, we entered into an exclusive worldwide license agreement with Penn for patent and other intellectual property rights relating to agene therapy technology platform based on certain novel recombinant AAV vectors discovered at Penn in the laboratory of our Chief Scientific Advisor,James M. Wilson, M.D., Ph.D. This license was most recently amended in September 2014. In February 2009, we also entered into a sponsored researchagreement (the 2009 SRA) with Penn pursuant to which we fund the nonclinical research of Dr. Wilson relating to AAV gene therapy and obtain an option toacquire an exclusive worldwide license in certain intellectual property created pursuant to such 2009 SRA. In December 2014, we entered into anothersponsored research agreement (the 2014 SRA) with Penn funding related nonclinical research of Dr. Wilson.Under the 2014 SRA, we fund nonclinical research at Penn and pay certain intellectual property legal and filing expenses and receive the rights to theresearch results. All patentable inventions conceived, created, or conceived and reduced to practice pursuant to the 2014 SRA, together with patent rightsrepresented by or issuing from the U.S. patents and patent applications (including provisional patent applications) automatically become exclusivelylicensed to us under our existing licensing agreement with Penn and all research results are automatically licensed to us as know-how in our existing licenseagreement. The 2014 SRA will expire on60 December 31, 2016. We expect to amend the 2014 SRA in order to continue to fund work and receive rights to the results of the nonclinical research we fundat Penn. Also, a loss of our relationship with Penn or Dr. Wilson would materially harm our business.We have in the past, and in the future plan to, enter into licensing agreements with third parties licensing parts of our NAV Technology Platform for thedevelopment of product candidates. If these licensing arrangements are not successful, our business could be harmed.We have entered into agreements involving the licensing of parts of our NAV Technology Platform and relating to the development andcommercialization of certain product candidates and plan to enter into additional licensing agreements or collaborations in the future. We have limitedcontrol over the amount and timing of resources that our future collaborators or current and future partners, including our NAV Technology Licensees,dedicate to the development or commercialization of product candidates or of products utilizing licensed components of our NAV Technology Platform. Ourability to generate revenues from these arrangements will depend on our and our partners and collaborators’ abilities to successfully perform the functionsassigned to each of us in these arrangements. In addition, our partners have the ability to abandon research or development projects and terminate applicableagreements. Moreover, an unsuccessful outcome in any clinical trial for which our collaborator is responsible could be harmful to the public perception andprospects of our gene delivery platform.Any current or future licensing agreements or future collaborations we enter into may pose risks, including the following: ·licensees or collaborators have significant discretion in determining the efforts and resources that they will apply to these licensing agreementsor collaborations; ·licensees or collaborators may not perform their obligations as expected; ·the clinical trials conducted as part of these licensing agreements or collaborations may not be successful; ·subjects in clinical trials undertaken by licensees or future collaborators, including our NAV Technology Licensees, may die or suffer adverseeffects; ·licensees or collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval ormay elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the licensees’ orcollaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competingpriorities; ·licensees or collaborators may delay clinical trials, provide insufficient funding for clinical trials, stop a clinical trial or abandon a productcandidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; ·we may not have access to, or may be restricted from disclosing, certain information regarding product candidates being developed orcommercialized under a collaboration and, consequently, may have limited ability to inform our stockholders about the status of such productcandidates; ·licensees or collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with ourproduct candidates if the licensees or collaborators believe that competitive products are more likely to be successfully developed or can becommercialized under terms that are more economically attractive than ours; ·product candidates developed in collaboration with us may be viewed by our licensees or collaborators as competitive with their own productcandidates or products, which may cause licensees or collaborators to cease to devote resources to the commercialization of our productcandidates; ·a licensee or collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval maynot commit sufficient resources to the marketing and distribution of any such product candidate; ·disagreements with licensees or future collaborators, including disagreements over intellectual property and other proprietary rights, contractinterpretation or the preferred course of development of any product candidates, may cause delays or termination of the research, developmentor commercialization of such product candidates, may lead to additional responsibilities for us with respect to such product candidates or mayresult in litigation or arbitration, any of which would be time-consuming and expensive; ·licensees or collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such away as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potentiallitigation;61 ·disputes may arise with respect to the ownership of our other rights to intellectual property developed pursuant to our licensing agreements orcollaborations; ·licensees or collaborators may infringe or otherwise violate the intellectual property rights of third parties, which may expose us to litigationand potential liability; and ·licensing agreements or collaborations may be terminated for the convenience of the licensee or collaborator and, if terminated, we could berequired to raise additional capital to pursue further development or commercialization of the applicable product candidates.If our licensing agreements or collaborations do not result in the successful development and commercialization of products, or if one of our licenseesor collaborators terminates its agreement with us, we may not receive any future milestone or royalty payments, as applicable, under the collaboration. If wedo not receive the payments we expect under these agreements, our development of product candidates could be delayed and we may need additionalresources to develop our product candidates. In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to attractnew collaborators and the perception of us in the business and financial communities could be harmed. All of the risks relating to product development,regulatory approval and commercialization described in this Annual Report on Form 10-K apply to the activities of our collaborators, including our licensepartners.We may in the future decide to partner or collaborate with pharmaceutical and biotechnology companies for the development and potentialcommercialization of our product candidates. These relationships, or those like them, may require us to incur non-recurring and other charges, increase ournear- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we could facesignificant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Our ability to reach a definitivelicensing agreement or collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the termsand conditions of the proposed collaboration and the proposed collaborator’s evaluation of a variety of factors. If we license rights to product candidates, wemay not be able to realize the benefit of such transactions if we are unable to successfully integrate the licensed product candidates with our existingoperations and company culture.We may not be successful in finding strategic collaborators for continuing development of certain of our product candidates or successfullycommercializing.We may seek to establish strategic partnerships for developing and/or commercializing certain of our product candidates, due to capital costs requiredto develop the product candidates or manufacturing constraints. We may not be successful in our efforts to establish such a strategic partnership or otheralternative arrangements for our product candidates because our research and development pipeline may be insufficient, our product candidates may bedeemed to be at too early of a stage of development for collaborative effort or third parties may not view our product candidates as having the requisitepotential to demonstrate safety and efficacy or market opportunity. In addition, we may be restricted under existing collaboration agreements from enteringinto future agreements with potential collaborators. We cannot be certain that, following a strategic transaction or license, we will achieve an economicbenefit that justifies such transaction.If we are unable to reach agreements with suitable licensees or collaborators on a timely basis, on acceptable terms or at all, we may have to curtail thedevelopment of a product candidate, reduce or delay its development program, delay its potential commercialization, reduce the scope of any sales ormarketing activities or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to funddevelopment or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available tous on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary developmentand commercialization activities, we may not be able to further develop our product candidates and our business, financial condition, results of operationsand prospects may be materially harmed.Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our tradesecrets will be misappropriated or disclosed.Because we will rely on third parties, including contractors, to research, develop and manufacture our product candidates, we must, at times, sharetrade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transferagreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginningresearch or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information,including our trade secrets. Despite the contractual provisions employed when working with third parties, these provisions may be breached, and the need toshare trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are62 inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position isbased, in part, on our know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure wouldimpair our competitive position and may materially harm our business.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. For example, any academic institution thatwe may collaborate with in the future will usually expect to be granted rights to publish data arising out of such collaboration, provided that we are notifiedin advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectual property rightsarising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the future wemay also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development orsimilar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreementswith third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our tradesecrets would impair our competitive position and harm our business.Risks Related to ManufacturingGene therapies are novel, complex and difficult to manufacture. We could experience production problems that result in delays in our development orcommercialization programs, limit the supply of our products or otherwise harm our business.We currently have a development, manufacturing and testing agreement and cooperation agreement with WuXi AppTec, Inc. (WuXi) to manufacturesupplies of our product candidates in the future. Our product candidates require processing steps that are more complex than those required for most chemicalpharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of biologics such as ours generally cannot be fullycharacterized. As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, weemploy multiple steps to control our manufacturing process to assure that the process works and the product candidate is made strictly and consistently incompliance with the process. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects ormanufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achievingadequate quantities and quality of clinical-grade materials that meet FDA, European Union or other comparable applicable foreign standards or specificationswith consistent and acceptable production yields and costs. To date, no cGMP gene therapy manufacturing facility in the U.S. has received approval from theFDA for the manufacture of an approved gene therapy product, and, therefore, the timeframe required for us to obtain such approval is uncertain.In addition, FDA, EMA and other comparable foreign regulatory authorities may require us to submit samples of any lot of any approved producttogether with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA or other comparable foreignregulatory authorities may require that we not distribute a lot until the competent authority authorizes its release. Slight deviations in the manufacturingprocess, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures orproduct recalls. Lot failures or product recalls could cause us to delay clinical trials or product launches which could be costly to us and otherwise harm ourbusiness, financial condition, results of operations and prospects.We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to operate ourmanufacturing process which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.Any problems in our manufacturing process or the facilities with which we contract could make us a less attractive collaborator for potential partners,including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs.Problems in third-party manufacturing processes or facilities also could restrict our ability to meet market demand for our products. Additionally, should ouragreement with WuXi be terminated for any reason, there are a limited number of manufacturers who would be suitable replacements and it would take asignificant amount of time to transition the manufacturing to a replacement.Delays in obtaining regulatory approval of our manufacturing process or disruptions in our manufacturing process may delay or disrupt ourcommercialization efforts. To date, no cGMP gene therapy manufacturing facility in the U.S. has received approval from the FDA for the manufacture ofan approved gene therapy product.Before we can begin to commercially manufacture our product candidates in third-party or our own facilities, we must obtain regulatory approval fromthe FDA for the manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriate regulatory authorities in aEuropean Union Member State. In addition, we must pass a pre-approval inspection of63 our manufacturing facility by the FDA before any of our product candidates can obtain marketing approval, if ever. In order to obtain approval, we will needto ensure that all of our processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories andsuppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions inmanufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. The cGMPrequirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will beobligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications andother requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell anyproducts that we may develop.We currently rely and expect to continue to rely on third parties to conduct our product manufacturing, and these third parties may not performsatisfactorily.We do not currently plan to independently manufacture material for our planned preclinical and clinical programs. We currently rely, and expect tocontinue to rely, on third parties for the production of our preclinical study and planned clinical trial materials and, therefore, we can control only certainaspects of their activities.In addition, we rely on additional third parties to manufacture ingredients of our product candidates and to perform quality testing, and reliance onthese third parties entails risks to which we would not be subject if we manufactured the product candidates ourselves, including: ·reduced control for certain aspects of manufacturing activities; ·termination or nonrenewal of manufacturing and service agreements with third parties in a manner or at a time that is costly or damaging to us;and ·disruptions to the operations of our third-party manufacturers and service providers caused by conditions unrelated to our business oroperations, including the bankruptcy of the manufacturer or service provider.Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercializefuture product candidates. Some of these events could be the basis for FDA or European Union Member State regulatory authority action, includinginjunction, recall, seizure or total or partial suspension of product manufacture or manufacturing authorization.Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components couldresult in delays in our research studies, preclinical, clinical development or marketing schedules.Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm ourability to produce product candidates on schedule and could harm our results of operations and cause reputational damage.Some of the raw materials required in our manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and maybe subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in themanufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which couldmaterially harm our development timelines and our business, financial condition, results of operations and prospects.Risks Related to the Commercialization of Our Product CandidatesIf we are unable to establish sales, medical affairs and marketing capabilities or enter into agreements with third parties to market and sell our productcandidates, if approved, we may be unable to generate any product revenue.We currently have no products to sell and therefore no product sales and marketing organization. To successfully commercialize any products thatmay result from our development programs, we will need to develop these capabilities, either on our own or with others. The establishment and developmentof our own commercial team or the establishment of a contract sales force to market any products we may develop will be expensive and time-consuming andcould delay any product launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may enter intocollaborations regarding one or more of our product candidates with other entities to utilize their marketing and distribution capabilities, but we may beunable to enter into such agreements on favorable terms, if at all. If any current licensees or future licensees or collaborators do not commit sufficientresources to commercialize our products, or we are unable to develop the necessary capabilities on our own, we will be unable to generate64 sufficient product revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well-funded medicalaffairs, marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third partiesto assist us with the sales and marketing efforts of our product candidates. Without an internal team or the support of a third party to perform marketing andsales functions, we may be unable to compete successfully against these more established companies.Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources andmay never be successful. Such efforts may require more resources than are typically required due to the complexity and uniqueness of our potential products.If any of our product candidates is approved but fails to achieve market acceptance among physicians, patients or third-party payors, we will not be able togenerate significant revenues from such product, which could materially harm our business, financial condition, results of operations and prospects.If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayedand, as a result, our stock price may decline.From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals,which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and thesubmission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones areand will be based on numerous assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasonsbeyond our control. If we do not meet these milestones as publicly announced, or at all, the commercialization of our products may be delayed or neverachieved and, as a result, our stock price may decline.Even if we obtain marketing approval for our Lead Product Candidates or any future product candidate, they could be subject to restrictions orwithdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipatedproblems with our product candidates, when and if any of them are approved.Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or imposeongoing requirements for potentially costly and time consuming post-approval studies, post-market surveillance or clinical trials. Following approval, if atall, of our Lead Product Candidates or any future product candidates, such candidate will also be subject to ongoing FDA requirements governing thelabeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of safety and other post-marketinformation. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and otherregulatory authorities for compliance with cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records anddocuments. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity orfrequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturingfacility or us, including requesting recall or withdrawal of the product from the market or suspension of manufacturing.If regulatory approval is granted by the European Commission, or a comparable foreign regulatory authority, such approval can include restrictionsand onerous post-authorization obligations similar to those that the FDA and other U.S. regulatory authorities have power to impose. These can includedetailed pharmacovigilance obligations.If we or the manufacturing facilities for our Lead Product Candidates or any future product candidate that may receive regulatory approval, if any, failto comply with applicable regulatory requirements, a regulatory agency may: ·issue warning letters or untitled letters; ·seek an injunction or impose civil or criminal penalties or monetary fines; ·suspend, vary or withdraw regulatory approval; ·suspend any ongoing clinical trials; ·refuse to approve pending applications or supplements or applications filed by us; ·suspend or impose restrictions on operations, including costly new manufacturing requirements; or ·seize or detain products, refuse to permit the import or export of product or request us to initiate a product recall.The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue.65 The FDA has the authority to require a REMS plan as part of a BLA or after approval, which may impose further requirements or restrictions on thedistribution or use of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training,limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. The European Commission andcomparable foreign regulatory authorities have powers to impose similar obligations.In addition, if our Lead Product Candidates or any future product candidates are approved, our product labeling, advertising and promotion will besubject to regulatory requirements and continuing regulatory review. The FDA, the competent regulatory authorities in European Union Member States, andcomparable foreign regulatory authorities strictly regulate the promotional claims that may be made about prescription products. In particular, a product maynot be promoted for uses that are not approved by the FDA, the European Commission, the competent regulatory authorities in European Union MemberStates, or comparable foreign regulatory authorities as reflected in the product’s approved labeling. If we receive marketing approval for a product candidate,physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The FDA, other agencies, the competent regulatory authorities in European Union Member States,and comparable foreign regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that isfound to have improperly promoted off-label uses may be subject to significant sanctions. The federal government has levied large civil and criminal finesagainst companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. In the past, the FDA has alsorequested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.Our gene therapy approach utilizes vectors derived from viruses which may be perceived as unsafe or may result in unforeseen adverse events. Negativepublic opinion and increased regulatory scrutiny of gene therapy may damage public perception of the safety of our product candidates and harm ourability to conduct our business or obtain regulatory approvals for our product candidates.Gene therapy remains a novel technology, with no gene therapy product approved to date in the U.S. and only one gene therapy product approved todate in the European Union. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of thepublic or the medical community. In particular, our success will depend upon physicians who specialize in the treatment of genetic diseases targeted by ourproduct candidates, prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they arefamiliar and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would harm our business,financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates ordemand for any products we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemiaand death seen in other trials using other vectors. Serious adverse events in clinical trials we conduct, or other clinical trials involving our NAV TechnologyPlatform by our NAV Technology Licensees or others, other gene therapy products or our competitors’ products, even if not ultimately attributable to therelevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatorydelays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease indemand for any such product candidates.Even if we receive regulatory approval, we still may not be able to successfully commercialize our Lead Product Candidates or any future productcandidate, and the revenue that we generate from any approved product’s sales, if any, could be limited.Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting our products. From time to time,public sentiment may be more adverse to commercialization of gene therapy as a therapeutic technique. Even with the requisite approvals from the FDA inthe U.S., the European Commission in the European Union and other comparable regulatory foreign authorities, the commercial success of our productcandidates will depend, in part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and our productcandidates in particular, as medically necessary, cost-effective and safe. Any product that we commercialize may not gain acceptance by physicians, patients,health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significantproduct revenue and may not become profitable. The degree of market acceptance of our product candidates will depend on a number of factors, including: ·demonstration of clinical efficacy and safety compared to other more-established products; ·the limitation of our targeted patient population and other limitations or warnings contained in any FDA, European Commission, or othercomparable foreign regulatory authority-approved labeling; ·acceptance of a new formulation by health care providers and their patients; ·the prevalence and severity of any adverse effects;66 ·new procedures or methods of treatment that may be more effective in treating or may reduce the conditions which our products are intended totreat; ·pricing and cost-effectiveness; ·the effectiveness of our or any future collaborators’ sales and marketing strategies; ·our ability to obtain and maintain sufficient third-party coverage and reimbursement from government health care programs, includingMedicare and Medicaid, private health insurers and other third-party payors; ·unfavorable publicity relating to product candidates or gene therapy generally; and ·the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement.If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors or patients, wemay not generate sufficient revenue from that product candidate and may not become or remain profitable. Our efforts to educate the medical community andthird-party payors on the benefits of our Lead Product Candidates or any future product candidates may require significant resources and may never besuccessful. In addition, our ability to successfully commercialize our product candidates will depend on our ability to manufacture our products, differentiateour products from competing products and defend and enforce our intellectual property rights relating to our products. Additionally, if the marketopportunities for our Lead Product Candidates or any future product candidates are smaller than we believe they are, our product revenues may be harmedand our business may suffer.We focus our research and product development on treatments for severe genetic and orphan diseases. Our understanding of both the number of peoplewho have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, arebased on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. Thenumber of patients in the U.S., the European Union and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment withour products or patients may become increasingly difficult to identify and access, all of which would harm our business, financial condition, results ofoperations and prospects.Further, there are several factors that could contribute to making the actual number of patients who receive any products we develop less than thepotentially addressable market. These include the lack of widespread availability of, and limited reimbursement for, new therapies in many underdevelopedmarkets. Further, the severity of the progression of a disease up to the time of treatment, especially in certain degenerative conditions such as MPS I, MPS II,wet AMD and XLRP, will likely diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell death. Lastly, certain patients’ immunesystems might prohibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting the treatment outcomes.The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage andreimbursement for our products, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.We expect the cost of a single administration of gene therapy products, such as those we are developing, to be substantial, when and if they achieveregulatory approval. We expect that coverage and reimbursement by government and private payors will be essential for most patients to be able to affordthese treatments. Accordingly, sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs ofour product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will bereimbursed by government authorities, private health coverage insurers and other third-party payors. Coverage and reimbursement by a third-party payor maydepend upon several factors, including the third-party payor’s determination that use of a product is: ·a covered benefit under its health plan; ·safe, effective and medically necessary; ·appropriate for the specific patient; ·cost-effective; and ·neither experimental nor investigational.Obtaining coverage and reimbursement for a product from third-party payors is a time-consuming and costly process that could require us to provideto the payor supporting scientific, clinical and cost-effectiveness data. There is significant uncertainty related to third-party coverage and reimbursement ofnewly approved products. We may not be able to provide data sufficient to gain acceptance67 with respect to coverage and reimbursement. If coverage and reimbursement are not available, or are available only at limited levels, we may not be able tosuccessfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize asufficient return on our investment.Additionally, our Lead Product Candidates are designed to provide therapeutic benefit after a single administration and, therefore, the pricing andreimbursement of a single administration of our product candidates, if approved, must be adequate to support our commercial infrastructure. The downwardpressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become intense. As a result,increasingly high barriers are being erected to the entry of new products such as ours. If we are unable to obtain adequate levels of reimbursement, our abilityto successfully market and sell our product candidates will be harmed. The manner and level at which reimbursement is provided for services related to ourproduct candidates (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physicianresistance and limit our ability to market or sell our products.If we obtain approval to commercialize our product candidates outside of the U.S., in particular in the European Union, a variety of risks associated withinternational operations could materially harm our business.We expect that we will be subject to additional risks in commercializing our product candidates outside the U.S., including: ·different regulatory requirements for approval of drugs and biologics in foreign countries; ·reduced protection for intellectual property rights; ·unexpected changes in tariffs, trade barriers and regulatory requirements; ·economic weakness, including inflation, or political instability in particular foreign economies and markets; ·compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ·foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident todoing business in another country; ·workforce uncertainty in countries where labor unrest is more common than in the U.S.; ·production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and ·business interruptions resulting from geopolitical actions, including war and terrorism or natural disasters including earthquakes, floods andfires.Risks Related to our Business OperationsWe may not be successful in our efforts to identify or discover additional product candidates and may fail to capitalize on programs or product candidatesthat may be a greater commercial opportunity or for which there is a greater likelihood of success.The success of our business depends upon our ability to identify, develop and commercialize product candidates based on our NAV TechnologyPlatform. Research programs to identify new product candidates require substantial technical, financial and human resources. Although certain of our productcandidates are currently in research studies or preclinical development, we may fail to identify potential product candidates for clinical development forseveral reasons. For example, our research may be unsuccessful in identifying potential product candidates or our potential product candidates may be shownto have harmful side effects, may be commercially impracticable to manufacture or may have other characteristics that may make the products unmarketableor unlikely to receive marketing approval.Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or forindications that later prove to have greater commercial potential. Our spending on current and future research and development programs may not yield anycommercially viable products. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rightsto that product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us toretain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to a product candidate in atherapeutic area in which it would have been more advantageous to enter into a partnering arrangement.If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop apotentially successful product candidate, which could materially harm our business, financial condition, results of operations and prospects.68 Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.We are highly dependent on members of our executive team, including, without limitation, Kenneth T. Mills, our Chief Executive Officer; StephenYoo, M.D., our Chief Medical Officer; Vittal Vasista, our Chief Financial Officer; and Curran M. Simpson, our Senior Vice President, Technical Operations;and scientific advisors, including, without limitation, James M. Wilson, M.D., Ph.D., our Chief Scientific Advisor; the loss of any of whose services mayadversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of themcould leave our employment at any time, as all of our employees are “at will” employees. We currently do not have “key person” insurance on any of ouremployees. The loss of the services of one or more of our current employees, consultants and advisors might impede the achievement of our research,development, licensing and commercialization objectives.Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, also willbe critical to our success. There currently is a shortage of skilled individuals with substantial gene therapy experience, which we believe is likely to continue.As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate can be high. Wemay not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companiesand academic institutions for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials or applications formarketing approval may make it more challenging to recruit and retain qualified personnel. The inability to recruit, or loss of services of certain executives,including, without limitation, Kenneth T. Mills, our Chief Executive Officer; Stephen Yoo, M.D., our Chief Medical Officer; Vittal Vasista, our ChiefFinancial Officer; and Curran M. Simpson, our Senior Vice President, Technical Operations; key employees, consultants or advisors, including, withoutlimitation, James M. Wilson, M.D., Ph.D., our Chief Scientific Advisor; may impede the progress of our research, development, licensing andcommercialization objectives and materially harm our business, financial condition, results of operations and prospects. Additionally, our currentmanagement team has only been working together for a relatively short period of time and a number of members of our current management team have beenemployed by us for less than a year. We will also need to expand our current accounting and finance teams with additional qualified personnel to ensureproper internal control over financial reporting.If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resourcesto manage our operations, continue our research and development and licensing activities and, in the longer term, build a sales and marketing infrastructureto support commercialization of any of our product candidates that are approved for sale. Future growth would impose significant added responsibilities onmembers of management. It is likely that our management, finance, development personnel, systems and facilities currently in place may not be adequate tosupport this future growth. Our need to effectively manage our operations, growth and product candidates requires that we continue to develop more robustbusiness processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees. We maybe unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconductby these parties could include intentional failures to comply with FDA regulations or the regulations applicable in the European Union and otherjurisdictions, provide accurate information to the FDA, the European Commission and other regulatory authorities, comply with healthcare fraud and abuselaws and regulations in the U.S. and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales,marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct,kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing andpromotion, sales commission, customer incentive programs and other business arrangements. Such misconduct also could involve the improper use ofinformation obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctionsand cause serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify anddeter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risksor losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Ifany such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significantimpact on our business, financial condition, results of operations and prospects, including the imposition of significant fines or other sanctions.69 Healthcare legislative reform measures may materially harm our business and results of operations.In the U.S., there have been, and continue to be, several legislative initiatives to contain healthcare costs. For example, in March 2010, the PatientProtection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (PPACA), was passed. PPACA made major changes inhow healthcare is delivered and reimbursed, and increased access to health insurance benefits to the uninsured and underinsured population of the U.S.PPACA, among other things, increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement policiesthat tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other alternative payment methodologies,strengthened enforcement of fraud and abuse laws and encouraged the use of information technology. Many of these changes require implementingregulations which have not yet been drafted or have been released only as proposed rules.Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations. While PPACA is expected toincrease the number of persons with covered health benefits, we cannot accurately estimate the payment rates for any additional persons that are expected tobe covered by health benefits. For example, PPACA’s expansion of Medicaid coverage could cause patients who otherwise would have selected privatehealthcare to participate in government sponsored healthcare programs, and Medicaid and other government programs typically reimburse providers atsubstantially lower rates than private payors. Our revenue may be adversely impacted if states pursue lower rates or cost-containment strategies as a result ofany expansion of their existing Medicaid programs to include additional persons, particularly in states experiencing budget deficits. Exchanges created tofacilitate coverage for new persons to be covered by health benefits may also place additional pricing pressure on all providers, regardless of payor. The fullimpact of many of the provisions under PPACA is unknown at this time. For example, PPACA established an Independent Payment Advisory Board that canrecommend changes in payment for physicians under certain circumstances, which the Department of Health and Human Services (HHS) generally would berequired to implement unless Congress enacts superseding legislation. PPACA also requires HHS to develop a budget-neutral, value-based payment modifierthat provides for differential payment under the Medicare Physician Fee Schedule (the MPFS) for physicians or groups of physicians that is linked to qualityof care furnished compared to cost. Physicians in groups of 100 or more eligible professionals who submit claims to Medicare under a single taxidentification number are subject to the value modifier based on their performance in previous years. For example, in 2015, this modifier was based onperformance during calendar year 2013. In 2016, the modifier will apply to physicians in groups of 10 or more eligible professionals based on 2014performance. The modifier will apply to all other physicians by 2017.In November 2012, CMS adopted a rule under the PPACA that generally allowed physicians in certain specialties who provide eligible primary careservices to be paid at the Medicare rates in effect in calendar years 2013 and 2014 instead of state-established Medicaid reimbursement rates, referred to asthe Medicaid-Medicare Parity. Generally, state Medicaid reimbursement rates are lower than federally established Medicare rates. During 2013, state agencieswere required to submit their state plan amendments (SPAs) outlining how they will implement the rule, including frequency and timing of payments to CMSfor review and approval. In December 2013, CMS indicated that all SPAs had been approved for enhanced Medicaid-Medicare Parity reimbursement throughDecember 2014. Congress did not act before the end of the year to extend the Medicaid-Medicare Parity and the rule expired. As a result, states must decidewhether to revert to previous primary care payment levels or continue at a higher level but without the benefit of the enhanced federal match. It is unclear atthis time how these limited state increases or the continued failure to extend the rule at the federal level will impact our business.Finally, other legislative changes have been proposed and adopted in the U.S. since the PPACA was enacted. On August 2, 2011, the Budget ControlAct of 2011 was enacted, which, among other things, created the Joint Select Committee on Deficit Reduction, or the Joint Committee, to recommendproposals in spending reductions to Congress. The Joint Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013through 2021, triggering the legislation’s automatic reduction to several government programs. This included aggregate reductions to Medicare payments toproviders of two percent per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain ineffect through 2024 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act was signed into law, which,among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers. We expectthat additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and stategovernments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition andresults of operations.Additionally, in the U.S., the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biologic productsthat are demonstrated to be “highly similar” or “biosimilar or interchangeable” with an FDA-approved biologic product. This new pathway could allowcompetitors to reference data from biologic products already approved after 12 years from the70 time of approval. This could expose us to potential competition by lower-cost biosimilars even if we commercialize a product candidate faster than ourcompetitors.We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy andsecurity laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.If we obtain FDA, European Commission, or other comparable foreign regulatory authorities’ approval for any of our product candidates and begincommercializing those products in the U.S. or outside the U.S., our operations will be directly, or indirectly through our prescribers, customers and purchasers,subject to various federal, state and foreign fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician Payments Sunshine Act and regulations. These laws will impact, among otherthings, our proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government andthe states in which we conduct our business. The laws that will affect our operations include, but are not limited to: ·the federal Health Care Program Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfullysoliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly,in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federalhealthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements betweenpharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. The PPACA amends the intentrequirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute or specific intentto violate it; ·federal civil and criminal false claims laws and civil monetary penalty laws which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors thatare false or fraudulent. The PPACA provides and recent government cases against pharmaceutical and medical device manufacturers supportthe view that Federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the FalseClaims Act; ·the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created new federal criminal statutes that prohibit aperson from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefitprogram, regardless of the payor (e.g., public or private); ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and its implementing regulations,and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach NotificationRules Under HITECH and the Genetic Information Nondiscrimination Act; ·Other Modifications to HIPAA, published in January 2013, which imposes certain requirements relating to the privacy, security andtransmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as healthplans, health care clearinghouses and health care providers; ·federal transparency laws, including the federal Physician Payment Sunshine Act, that require disclosure of payments and other transfers ofvalue provided to physicians and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providersand their immediate family members and applicable group purchasing organizations; and ·state and foreign law equivalents of each of the above federal laws, state laws that require drug manufacturers to report information related topayments and other transfers of value to physicians and other healthcare providers or marketing expenditures and state laws governing theprivacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not havethe same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our businessactivities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the laws described above orany other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion fromparticipation in government health care programs, such as Medicare and Medicaid, imprisonment and the curtailment or restructuring of our operations, anyof which could harm our ability to operate our business and our results of operations.71 The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, orderor use of medicinal products is prohibited in the European Union. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member States, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines andimprisonment.Payments made to physicians in certain European Union Member States must be publically disclosed. Moreover, agreements with physicians oftenmust be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatoryauthorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes or professional codes ofconduct, applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands,administrative penalties, fines or imprisonment.The collection and use of personal health data in the European Union is governed by the provisions of the Data Protection Directive. This Directive,and the national implementing legislation of the individual European Union Member States, imposes several requirements relating to the consent of theindividuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competentnational data protection authorities and the security and confidentiality of the personal data. The European Union Data Protection Directive prohibits thetransfer of personal data to countries outside of the European Economic Area, or EEA that are not considered by the European Commission to provide anadequate level of data protection. These countries include the U.S. However, following the decision of the Court of Justice of the European Union in case C-362/14 Maximillian Schrems v. Data Protection Commissioner, which declared the European Union Safe Harbor Framework to be invalid, we can no longerrely on this route as a basis for transfer of personal data from the European Union to the U.S. for processing. We are, therefore, obliged to use alternateprocedures for transfer of data between the European Union and the U.S.On December 15, 2015, a proposal for an European Union Data Protection Regulation, intended to replace the current European Union DataProtection Directive, was agreed between the European Parliament, the Council of the European Union and the European Commission. The European UnionData Protection Regulation, which will be officially adopted in the first quarter of 2016, will introduce new data protection requirements in the EuropeanUnion as well as substantial fines for breaches of the data protection rules. The European Union Data Protection Regulation, which will be applicable twoyears after the date of its publication in the Official Journal for the European Union, will increase our responsibility and liability in relation to personal datathat we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerousand harm our business, financial condition, results of operations and prospects.Product liability lawsuits against us could cause us to incur substantial liabilities and could limit licensing of our NAV Technology Platform orcommercialization of any product candidates that we may develop.We face an inherent risk of product liability exposure related to our licensed NAV Technology Platform and the testing of our product candidates inclinical trials and may face an even greater risk if products utilizing our NAV Technology Platform are commercialized. If we cannot successfully defendourselves against claims that our technology or product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventualoutcome, liability claims may result in: ·decreased demand for our technology, including any product candidates that we may develop; ·loss of revenue; ·substantial monetary awards to trial participants or patients; ·significant time and costs to defend the related litigation; ·withdrawal of clinical trial participants; ·the inability to license our NAV Technology Platform or commercialize any product candidates that we may develop; and ·injury to our reputation and significant negative media attention.Although we currently maintain product liability insurance coverage in the amount of $5.0 million per occurrence and $5.0 million in the aggregate,our product liability insurance coverage may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase ourinsurance coverage each time we commence a clinical trial and if we successfully commercialize any product candidates. Insurance coverage is increasinglyexpensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.72 If we or our development partners, including our NAV Technology Licensees, fail to comply with environmental, health and safety laws and regulations,we could become subject to fines or penalties or incur costs that could materially harm the success of our business.We and our development partners, including our NAV Technology Licensees, are subject to numerous environmental, health and safety laws andregulations, including those governing laboratory procedures and the generation, handling, use, storage, treatment, manufacture, transportation and disposalof, and exposure to, hazardous materials and wastes, as well as laws and regulations relating to occupational health and safety. Our operations involve the useof hazardous and flammable materials, including chemicals and biologic and radioactive materials. Our and our development partners’, including our NAVTechnology Licensees’, operations also produce hazardous waste products. We cannot eliminate the risk of contamination or injury from these materials. Inthe event of contamination or injury resulting from our or our development partners’, including our NAV Technology Licensees’, use of hazardous materials,we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil orcriminal fines and penalties.Although we maintain workers’ compensation insurance in the amount of up to $500,000 per occurrence for certain costs and expenses we may incurdue to injuries to our employees resulting from work related injuries, this insurance may not provide adequate coverage against potential liabilities. We donot maintain insurance for toxic tort claims that may be asserted against us in connection with our storage or disposal of biologic, hazardous or radioactivematerials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, which havetended to become more stringent over time. These current or future laws and regulations may impair us or our development partners’, including our NAVTechnology Licensees’, research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines,penalties or other sanctions or liabilities, which could materially harm our business, financial condition, results of operations and prospects.We and our development partners, third-party manufacturer and suppliers use biological materials and may use hazardous materials, and any claimsrelating to improper handling, storage or disposal of these materials could be time consuming or costly.We and our development partners, including our NAV Technology Licensees, third-party manufacturer and suppliers may use hazardous materials,including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. Our operations and theoperations of our third-party manufacturers and suppliers also produce hazardous waste products. Federal, state and local laws and regulations, andcomparable foreign laws, govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicableenvironmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts.In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological orhazardous waste insurance coverage, and our property, casualty and general liability insurance policies (under which we currently have $12.0 million incoverage) specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in theevent of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trialsor regulatory approvals could be suspended.Unfavorable global economic conditions could harm our business, financial condition or results of operations.Our results of operations could be harmed by general conditions in the global economy and in the global financial markets. The most recent globalfinancial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the most recentglobal financial crisis, could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raiseadditional capital when needed on acceptable terms, if at all. This is particularly true in the European Union, which is undergoing a continued severeeconomic crisis. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our servicesby third-party payors or our future collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the currenteconomic climate and financial market conditions could harm our business.We and third parties on which we rely may be harmed by natural disasters and our business continuity and disaster recovery plans may not adequatelyprotect us from a serious disaster.Natural disasters could severely disrupt our operations or the operations of our third parties’ manufacturing facilities and materially harm our business,financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or asignificant portion of our headquarters, that damaged critical infrastructure or that otherwise disrupted operations, it may be difficult or, in certain cases,impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently arelimited and may not prove adequate73 in the event of a serious disaster or similar event. Our third party manufacturing facilities, as well as substantially all of our current supply of productcandidates, are located in Pennsylvania, and we do not have any existing back-up facilities in place or plans for such back-up facilities. We may incursubstantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could materially harm our business,financial condition, results of operations and prospects.Our internal computer systems, or those of our future collaborators or other contractors or consultants, may fail or suffer security breaches, which couldresult in a material disruption of our licensing and product development programs.Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damagefrom computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experiencedany such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result ina material disruption of our licensing and development programs and our business operations, whether due to a loss of our trade secrets or other proprietaryinformation or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in ourregulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were toresult in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, ourcompetitive position could be harmed and the further licensing of our NAV Technology Platform and development and commercialization of our productcandidates could be delayed.We are increasingly dependent on information technology systems, infrastructure and data.We are increasingly dependent upon information technology systems, infrastructure and data. Our computer systems may be vulnerable to serviceinterruption or destruction, malicious intrusion and random attack. Security breaches pose a risk that sensitive data, including intellectual property, tradesecrets or personal information may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication andintensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of service, socialengineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our key business partners face similarrisks, and a security breach of their systems could adversely affect our security posture. While we continue to invest data protection and informationtechnology, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect ourbusiness and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm.Our customers are concentrated and therefore the loss of a significant customer may harm our business.We rely on third parties for aspects of our business. Our revenue for the fiscal year ended December 31, 2015 consisted of license revenue, grantrevenue and the sale of licensed reagents to third-parties for use in research and development. Three customers accounted for approximately 79% of our totalrevenue for the year ended December 31, 2015. No other customer accounted for more than 10% of revenue in 2015. Future license revenue is uncertain dueto the contingent nature of our licenses granted to third-parties. We expect grant revenue to decrease in the future as we are not currently seeking any furthergrant awards. We do not consider reagent sales a core aspect of our business model and we do not dedicate significant resources to sales efforts for reagents.Accordingly, future revenue from sales of reagents is uncertain and may fluctuate significantly from period to period.Risks Related to Our Intellectual PropertyOur rights to license our NAV Technology Platform and to develop and commercialize our product candidates are subject, in part, to the terms andconditions of licenses granted to us by others.We do not currently own any patents or wholly own any pending patent applications, and we are heavily reliant upon licenses to certain patent rightsand proprietary technology from third parties that are important or necessary to the development of our technology and products, including technologyrelated to our manufacturing process and our gene therapy product candidates. These and other licenses may not provide exclusive rights to use suchintellectual property and technology in all relevant fields of use and in all territories in which we may wish to license our platform or develop orcommercialize our technology and products in the future. As a result, we may not be able to prevent competitors from developing and commercializingcompetitive products in territories not included in all of our licenses. For example, under our license agreement with GSK, GSK retained certain exclusive andnon-exclusive rights under the patent rights that it licensed from Penn.Licenses to additional third-party technology that may be required for our licensing or development programs may not be available in the future ormay not be available on commercially reasonable terms, or at all, which could materially harm our business and financial condition.74 In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain or enforcethe patents, covering technology that we license from third parties. For example, under our license agreement with Penn, Penn is entitled to control thepreparation, prosecution and maintenance of the patent rights licensed to us. However, if we determine that we desire a greater degree of control over suchpatent rights, the Penn license agreement provides that Penn will work in good faith with us to enter into an arrangement for such additional control withreimbursement by us of certain expenses. If our licensors fail to maintain such patents, or lose rights to those patents or patent applications, the rights we havelicensed may be reduced or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights could beimpacted. In addition to the foregoing, the risks associated with patent rights that we license from third parties will also apply to patent rights we may own inthe future.Furthermore, the research resulting in certain of our licensed patent rights and technology was funded by the U.S. government. As a result, thegovernment may have certain rights, or march-in rights, to such patent rights and technology. When new technologies are developed with governmentfunding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government to use theinvention for non-commercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercisemarch-in rights to use or allow third parties to use our licensed technology. The government can exercise its march-in rights if it determines that action isnecessary because we fail to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safetyneeds, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certainrequirements to manufacture products embodying such inventions in the U.S. Any exercise by the government of such rights could harm our competitiveposition, business, financial condition, results of operations and prospects.If we are unable to obtain and maintain patent protection for our products and technology, or if the scope of the patent protection obtained is notsufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfullylicense our NAV Technology Platform and commercialize our products and technology may be harmed.Our success depends, in large part, on our ability to obtain and maintain patent protection in the U.S. and other countries with respect to ourproprietary NAV Technology Platform, our product candidates and our manufacturing technology. Our licensors have sought and we intend to seek to protectour proprietary position by filing patent applications in the U.S. and abroad related to many of our novel technologies and product candidates that areimportant to our business.The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license allnecessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, certain patents in the field of gene therapy that may haveotherwise potentially provided patent protection for certain of our product candidates have expired or will soon expire. In some cases, the work of certainacademic researchers in the gene therapy field has entered the public domain, which we believe precludes our ability to obtain patent protection for certaininventions relating to such work. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too lateto obtain patent protection.We are a party to intellectual property license agreements with Penn and GSK, each of which is important to our business, and we expect to enter intoadditional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, variousdiligence, development and commercialization timelines, milestone payments, royalties and other obligations on us. If we fail to comply with our obligationsunder these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able tomarket products covered by the license.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions andhas, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights arehighly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or product candidates orwhich effectively prevent others from commercializing competitive technologies and product candidates. Changes in either the patent laws or interpretationof the patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.We may not be aware of all third-party intellectual property rights potentially relating to our technology and product candidates. Publications ofdiscoveries in the scientific literature often lag the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not publisheduntil 18 months after filing or, in some cases, not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in any owned orany licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.75 Even if the patent applications we license or may own in the future do issue as patents, they may not issue in a form that will provide us with anymeaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Ourcompetitors or other third parties may avail themselves of safe harbor under the Hatch-Waxman Amendments to conduct research and clinical trials and maybe able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts orpatent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable,which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patentprotection of our technology and product candidates. Given the amount of time required for the development, testing and regulatory review of new productcandidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual propertymay not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.Our intellectual property licenses with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of ourrights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in suchagreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what webelieve to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligationsunder the relevant agreement, either of which could materially harm our business, financial condition, results of operations and prospects.If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experiencedisruptions to our business relationships with our licensors, we could lose license rights that are important to our business.We have entered into license agreements with third parties and may need to obtain additional licenses from others to advance our research, to expandour licensing program or to allow commercialization of our product candidates. It is possible that we may be unable to obtain additional licenses at areasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology orproduct candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technicalor commercial basis. If we are unable to do so, we may be unable to redesign our platform technology or to develop or commercialize the affected productcandidates, which could materially harm our business. We cannot provide any assurances that third-party patents do not exist which might be enforcedagainst our current platform technology, manufacturing methods, product candidates or future methods or products, resulting in either an injunctionprohibiting our licensing, manufacture or sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation tothird parties.In each of our existing license agreements, and we expect in our future agreements, patent prosecution of our licensed technology is controlledprimarily by the licensor, and we are required to reimburse the licensor for certain costs of patent prosecution and maintenance. If our licensors fail to obtainand maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property orour exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. Further, in each of ourlicense agreements we could be responsible for bringing actions against any third party for infringing on the patents we have licensed if our licensor electsnot to enforce its rights against the infringing third party. Certain of our license agreements in which we are the licensee also require us to meet developmentmilestones to maintain the license, including establishing a set timeline for developing and commercializing products and minimum diligence obligations indeveloping and commercializing the product. Disputes may arise regarding intellectual property subject to a licensing agreement, including: ·the scope of rights granted under the license agreement and other interpretation-related issues; ·the extent to which our technology and processes infringe on or otherwise violate intellectual property of the licensor that is not subject to thelicensing agreement; ·the sublicensing of patent and other intellectual property rights under our collaborative development relationships; ·our diligence obligations under the license agreement and what activities satisfy those diligence obligations;76 ·the inventorship or ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors andus and our partners; and ·the priority of invention of patented technology.If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptableterms, we may be unable to successfully develop and commercialize the affected product candidates.We may not be successful in obtaining necessary rights to our product candidates through acquisitions and in-licenses.We currently have rights to intellectual property, through licenses from third parties, to license our NAV Technology Platform and develop ourproduct candidates. Because our programs may require the use of intellectual property or other proprietary rights held by third parties, the growth of ourbusiness may depend, in part, on our ability to acquire, in-license or use such intellectual property and proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, processes (and patents for such technology) or other intellectual property rights from third parties that we identifyas necessary for our technology platform and product candidates. The licensing or acquisition of third-party intellectual property rights is a competitive area,and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive.These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development andcommercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may beunable to license or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment.We sometimes collaborate with non-profit and academic institutions to accelerate our preclinical research or development under written agreementswith these institutions. Some of these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resultingfrom the collaboration, and under our relationship with Penn, any patentable inventions developed under our 2014 SRA automatically accrue to our existinglicense with Penn. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us.If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights wehave, we may have to abandon development of the relevant program or product candidate and our business, financial condition, results of operations andprospects could suffer.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or applications will be due to be paid to theU.S. Patent and Trademark Office (USPTO) and various patent agencies outside of the U.S. over the lifetime of our licensed patents and/or applications andany patent rights we may own or license in the future. We rely on our licensing partners to pay these fees due to non-U.S. patent agencies with respect to ourlicensed patent rights. The USPTO and various non-U.S. government patent agencies require compliance with several procedural, documentary, fee paymentand other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply and we are alsodependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In many cases,an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in whichnon-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could materially harm our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on our platform technology or product candidates in all countries throughout the world would beprohibitively expensive, and our intellectual property rights in some countries outside the U.S. could be less extensive than those in the U.S. Although Penn,GSK and ARIAD Pharmaceuticals, Inc. (ARIAD) license agreements grant us worldwide rights, certain of our in-licensed U.S. patent rights lack correspondingforeign patents or patent applications. For example, under our license agreement with the Regents of the University of Minnesota, the territory is limited tothose countries and territories, including the U.S., in which a licensed patent has issued and is unexpired or a licensed patent application is pending. Inaddition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently,we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing77 products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have notobtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patentprotection, but enforcement is not as strong as that in the U.S. These products may compete with our products and our patents or other intellectual propertyrights may not be effective or sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legalsystems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual propertyprotection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing ofcompeting products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result insubstantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpretednarrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits thatwe initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.Issued patents covering our NAV Technology Platform or our product candidates could be found invalid or unenforceable if challenged in court. We maynot be able to protect our trade secrets in court.If one of our licensing partners or we initiate legal proceedings against a third party to enforce a patent covering our NAV Technology Platform or oneof our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation inthe U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure tomeet any of several statutory requirements, including subject-matter eligibility, novelty, non-obviousness, written description or enablement. Grounds for anunenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability fromthe USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the U.S. or abroad,even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review and equivalent proceedings in foreignjurisdictions. Such proceedings could result in the revocation or cancellation of or amendment to our patents in such a way that they no longer cover ourNAV Technology Platform or our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. Withrespect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensingpartners were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, andperhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could materially harm our business.In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-howthat is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our technology, productcandidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, tradesecrets can be difficult to protect and some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. We seek to protect ourproprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors andcontractors. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets orproprietary technology and processes. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physicalsecurity of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals,organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our tradesecrets may otherwise become known or be independently discovered by competitors.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould materially harm our business.Our commercial success depends, in part, upon our ability to license our NAV Technology Platform, and on our NAV Technology Licensees’ ability todevelop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing or otherwise violating the proprietaryrights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigationregarding patents and other intellectual property rights. We may in the future become party to, or be threatened with, adversarial proceedings or litigationregarding intellectual property rights with respect to our product candidates and technology, including interference proceedings, post grant review and interpartes review before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in thefuture, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce78 or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that thesethird-party patents are valid, enforceable and infringed, which could materially harm our ability to license our technology platform or commercialize ourLead Product Candidates or any future product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge thevalidity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to presentclear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidatethe claims of any such U.S. patent. If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtaina license from such third party to continue licensing, developing, manufacturing and marketing our product candidates and technology. However, we maynot be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive,thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensingand royalty payments. We could be forced, including by court order, to cease licensing, developing, manufacturing and commercializing the infringingtechnology or product candidates. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are foundto have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us from licensing our technology platform ormanufacturing and commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.Claims that we have misappropriated the confidential information or trade secrets of third parties could similarly harm our business, financial condition,results of operations and prospects.Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.Competitors may infringe our patents or the patents of our licensing partners, or we may be required to defend against claims of infringement or thatour intellectual property is invalid or unenforceable. To counter infringement or unauthorized use claims or to defend against claims of infringement or otherintellectual property related claims can be expensive and time consuming. Even if resolved in our favor, litigation or other legal proceedings relating tointellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normalresponsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and ifsecurities analysts or investors perceive these results to be negative, it could materially harm the price of our common stock. Such litigation or proceedingscould substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distributionactivities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be ableto sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developedintellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent and other intellectual property litigation or proceedingscould materially harm our ability to compete in the marketplace.We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their currentor former employers or claims asserting ownership of what we regard as our own intellectual property.Many of our employees, consultants or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceuticalcompanies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and advisors do not use theproprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosedintellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may benecessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectualproperty rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction tomanagement.In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectualproperty to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, infact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or theassignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, todetermine the ownership of what we regard as our intellectual property.Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement ordefense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act (the Leahy-Smith Act) was signed into law. The Leahy-Smith Actincludes several significant changes to U.S. patent law. These include provisions that79 affect the way patent applications are prosecuted and also may affect patent litigation. These also include provisions that switched the U.S. from a “first-to-invent” system to a “first-to-file” system, allow third-party submission of prior art to the USPTO during patent prosecution and set forth additional proceduresto attack the validity of a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements forpatentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether anotherinventor had made the invention earlier. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act,and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effectiveon March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement ordefense of our issued patents, all of which could materially harm our business, financial condition, results of operations and prospects.The patent positions of companies engaged in the development and commercialization of biologics and pharmaceuticals are particularly uncertain.Two cases involving diagnostic method claims and “gene patents” have recently been decided by the Supreme Court of the U.S. (Supreme Court). OnMarch 20, 2012, the Supreme Court issued a decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (Prometheus), a case involving patentclaims directed to a process of measuring a metabolic product in a patient to optimize a drug dosage for the patient. According to the Supreme Court, theaddition of well-understood, routine or conventional activity such as “administering” or “determining” steps was not enough to transform an otherwisepatent-ineligible natural phenomenon into patent-eligible subject matter. On July 3, 2012, the USPTO issued a guidance memo to patent examinersindicating that process claims directed to a law of nature, a natural phenomenon or a naturally occurring relation or correlation that do not include additionalelements or steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied and the claim amounts tosignificantly more than the natural principle itself should be rejected as directed to not patent-eligible subject matter. On June 13, 2013, the Supreme Courtissued its decision in Association for Molecular Pathology v. Myriad Genetics, Inc. (Myriad), a case involving patent claims held by Myriad relating to thebreast cancer susceptibility genes BRCA1 and BRCA2. Myriad held that an isolated segment of naturally occurring DNA, such as the DNA constituting theBRCA1 and BRCA2 genes, is not patent eligible subject matter, but that complementary DNA, which is an artificial construct that may be created from RNAtranscripts of genes, may be patent eligible.The USPTO issued a number of Interim Guidance memoranda on patent eligibility under 35 U.S.C. §101 in 2014 and 2015 to instruct USPTOexaminers on the ramifications of the Prometheus and Myriad rulings and the application of the Myriad ruling to natural products and principles includingall naturally occurring nucleic acids. On March 4, 2014, the USPTO issued a guidance memorandum to patent examiners entitled 2014 Procedure for SubjectMatter Eligibility Analysis of Claims Reciting or Involving Laws of Nature/Natural Principles, Natural Phenomena, and/or Natural Products. In response topublic feedback, these Guidelines were superseded by the Interim Eligibility Guidance in December 2014, and again updated in January 2015. It is expectedthat the guidance will be further updated in view of developments in the case law and in response to public feedback. Patents for certain of our productcandidates contain claims related to specific DNA sequences that are naturally occurring and, therefore, could be the subject of future challenges made bythird parties. In addition, the recent USPTO guidance could make it impossible for us to pursue similar patent claims in patent applications we may prosecutein the future.We cannot assure you that our efforts to seek patent protection for our technology and products will not be negatively impacted by the decisionsdescribed above, rulings in other cases or changes in guidance or procedures issued by the USPTO. We cannot fully predict what impact the Supreme Court’sdecisions in Prometheus and Myriad may have on the ability of life science companies to obtain or enforce patents relating to their products andtechnologies in the future. These decisions, the guidance issued by the USPTO and rulings in other cases or changes in USPTO guidance or procedures couldmaterially harm our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.Moreover, although the Supreme Court has held in Myriad that isolated segments of naturally occurring DNA are not patent-eligible subject matter,certain third parties could allege that activities that we may undertake infringe other gene-related patent claims, and we may deem it necessary to defendourselves against these claims by asserting non-infringement and/or invalidity positions, or paying to obtain a license to these claims. In any of the foregoingor in other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could beforced to pay damages or be subjected to an injunction that would prevent us from utilizing the patented subject matter. Such outcomes could harm ourbusiness, financial condition, results of operations or prospects.If we do not obtain patent term extension and data exclusivity for our product candidates, our business may be materially harmed.Depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates, one or more of our U.S. patents may beeligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments). TheHatch-Waxman Amendments permit a patent extension term of up to five years as80 compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond atotal of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using itor a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligenceduring the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents orotherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than werequest. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval ofcompeting products following our patent expiration, and our revenue could be reduced, possibly materially.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 harmed.We have pending trademark applications with the USPTO for the mark “REGENXBIO” and the REGENXBIO logo, approval of which is notguaranteed. Once registered, our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing onother marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potentialpartners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability tobuild brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought byowners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long-term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and ourbusiness may be harmed. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or otherintellectual property may be ineffective and could result in substantial costs and diversion of resources and could harm our financial condition or results ofoperations.Intellectual property rights do not necessarily address all potential threats.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and maynot adequately protect our business or permit us to maintain our competitive advantage. For example: ·others may be able to make gene therapy products that are similar to our product candidates or utilize similar gene therapy technology but thatare not covered by the claims of the patents that we license or may own in the future; ·we, or our license partners or current or future collaborators, might not have been the first to make the inventions covered by the issued patentor pending patent application that we license or may own in the future; ·we, or our license partners or current or future collaborators, might not have been the first to file patent applications covering certain of our ortheir inventions; ·others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned orlicensed intellectual property rights; ·it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents; ·issued patents that we hold rights to may be held invalid or unenforceable, including 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 and then use theinformation learned from such activities to develop competitive products for sale in our major commercial markets; ·we may not develop additional proprietary technologies that are patentable; ·the patents of others may harm our business; and ·we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering suchintellectual property.Should any of these events occur, they could materially harm our business, financial condition, results of operations and prospects.81 Risks Related to Our Common StockThe trading price of the shares of our common stock has been and will likely continue to be highly volatile, and purchasers of our common stock may notbe able to resell the shares of our common stock at or above the purchase price and could incur substantial losses.Our stock price has been and is likely to continue to be volatile. The market price of our common stock could be subject to wide fluctuations inresponse to various factors, many of which are beyond our control. These factors include those discussed elsewhere in this “Risk Factors” section and otherssuch as: ·the delay or failure in initiating or completing preclinical studies or clinical trials, or unsatisfactory results of these trials; ·announcements about us or about our competitors including clinical trial results, regulatory approvals, or new product candidate introductions; ·developments concerning our current or future development partners, licensors or product candidate manufacturers; ·developments or changing views regarding the use of gene therapy; ·litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ·conditions in the pharmaceutical or biotechnology industries and the economy as a whole; ·governmental regulation and legislation; ·the recruitment or departure of members of our board of directors, management team or other key personnel; ·changes in our operating results; ·any changes in the financial projections we may provide to the public, our failure to meet these projections, or changes in recommendations byany securities analysts that elect to follow our common stock; ·any change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; ·the expiration of market standoff or contractual lock-up agreements; ·sales or potential sales of substantial amounts of our common stock; or ·price and volume fluctuations in the overall stock market or resulting from inconsistent trading volume levels of our shares.In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced extremeprice and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock isexperiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless ofour actual operating performance.As a newly public company, our stock price has been and may continue to be volatile, and securities class action litigation has often been institutedagainst companies following periods of volatility of their stock price. Any such litigation, if instituted against us, could result in substantial costs and adiversion of our management’s attention and resources.In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class actionlitigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of ourmanagement’s attention and resources.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including: ·variations in the level of expenses related to our NAV Technology Platform and Lead Product Candidates; ·addition or termination of clinical trials; ·regulatory developments affecting our Lead Product Candidates or future product candidates;82 ·our execution of any collaborative, licensing or similar arrangements, including our NAV Technology Licensees, and the timing of paymentswe may make or receive under these arrangements; and ·nature and terms of stock-based compensation grants and any intellectual property infringement lawsuit in which we may become involved.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could declinesubstantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock coulddecline.The trading market for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business.If few analysts commence coverage of us, the trading price of our stock would likely decrease. Although we have obtained analyst coverage, if one or more ofthe analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease tocover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict ouroperations or require us to relinquish proprietary rights.We will need to raise additional funding. To the extent that we raise additional capital by issuing equity securities, the share ownership of existingstockholders will be diluted. Any future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liensor additional debt, pay dividends, redeem our stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Inaddition, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of ourtechnologies or products or otherwise agree to terms unfavorable to us.We may use our cash and cash equivalents in ways that you and other stockholders may not approve.Our management has broad discretion in the application of our cash and cash equivalents. Because of the number and variability of factors that willdetermine our use of our cash and cash equivalents, their ultimate use may vary substantially from their currently intended use. Our management might notapply our cash and cash equivalents in ways that ultimately increase the value of your investment. The failure by our management to apply our cash and cashequivalents effectively could harm our business. Pending their use, we may invest our cash and cash equivalents in a variety of capital preservationinvestments, including short-term, interest-bearing, investment-grade instruments and U.S. government securities. These investments may not yield afavorable return to our stockholders.We have never paid and do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend onappreciation in the price of our common stock.We have never paid cash dividends on any of our capital stock, and we currently intend to retain future earnings, if any, to fund the development andgrowth of our business. Therefore, you are not likely to receive any dividends on our common stock for the foreseeable future or at all. Since we do not intendto pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. Thereis no guarantee that our common stock will appreciate or even maintain the price at which you have purchased it.Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.As of December 31, 2015, our executive officers, directors, holders of more than five percent of our capital stock and their respective affiliatesbeneficially owned 50.3% of our outstanding capital stock. Therefore, these stockholders may have the ability to influence us through their ownershipposition. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to controlelections of directors, amendments of our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. This mayprevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.83 Substantial future sales of shares by existing stockholders, or the perception that such sales may occur, could cause our stock price to decline.If our existing stockholders, particularly our directors and executive officers and the venture capital funds affiliated with our current and formerdirectors, sell substantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell substantial amounts ofour common stock, the trading price of our common stock could decline below the initial public offering price. We have 26,328,584 outstanding shares ofcommon stock as of March 1, 2016. Of these shares, only the shares of common stock sold in our initial public offering and registered shares issued pursuantto our equity plans will be freely tradable in the public market, subject to any applicable lock-up agreements or Rule 144 transfer restrictions applicable toaffiliates.Our officers, directors and holders of substantially all of our equity securities have entered into contractual lock-up agreements with the underwritersof our initial public offering pursuant to which they have agreed, subject to certain exceptions, not to sell or otherwise transfer any of their common stock orsecurities convertible into or exchangeable for shares of common stock for a period of 180 days ending March 14, 2016. However, we and the leadunderwriters in our initial public offering may permit these holders to sell shares prior to the expiration of the lock-up agreements with the underwriters ifcertain conditions are satisfied.Based on 26,328,584 shares outstanding as of March 1, 2016, after the contractual lock-up agreements pertaining to our initial public offering expireon March 14, 2016, up to an additional 19,050,708 shares will be eligible for sale in the public market, up to 8,159,293 of which are held by directors,executive officers and other affiliates and will be subject to volume and other limitations under Rule 144 under the Securities Act.In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans willbecome eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, thetrading price of our common stock could decline.Some of our existing security holders have demand and piggyback rights to require us to register with the SEC up to 16,298,045 shares of our commonstock, subject to expiration of the contractual lock-up agreements. If we register these shares of common stock, the stockholders would be able to sell thoseshares freely in the public market, subject to Rule 144 transfer restrictions applicable to affiliates.We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time tonew compliance initiatives.As a public company, and particularly after we are no longer an emerging growth company, we will continue to incur significant legal, accounting andother expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC andNASDAQ have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controlsand corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liabilityinsurance.Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including anattestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain anemerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independentregistered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will incur costs associated with the remediationof the material weaknesses identified in our internal control over financial reporting. We estimate these costs will be between $0.5 million and $1.0 millionper year. Additionally, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly andchallenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan toassess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate throughtesting that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financialreporting. Despite our efforts, there is a risk that we will not be able to conclude within the prescribed timeframe that our internal control over financialreporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliabilityof our financial statements.84 Provisions in our restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change incontrol of our company or changes in our management and, therefore, depress the market price of our common stock.Our restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the market price of our common stockby acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deemadvantageous. These provisions among other things: ·establish a classified board of directors so that not all members of our board are elected at one time; ·permit the board of directors to establish the number of directors; ·provide that directors may only be removed “for cause”; ·require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws; ·authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; ·eliminate the ability of our stockholders to call special meetings of stockholders; ·prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; ·provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and ·establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon bystockholders at annual stockholder meetings.In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our common stock.Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may beinitiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.Pursuant to our restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of theState of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), will be the sole and exclusiveforum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of ourdirectors, officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware GeneralCorporation Law, our restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by the internalaffairs doctrine. Additionally, if the subject matter of any action within the scope of the preceding sentence is filed in a court other than a court located withthe State of Delaware (a Foreign Action) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdictionof the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentenceand (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agentfor such stockholder. The forum selection clause in our restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicialforum for disputes with us, our directors, officers or other employees.We are an emerging growth company and the reduced disclosure and governance requirements applicable to emerging growth companies could make ourcommon stock less attractive to investors.We are an emerging growth company. Under the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revisedaccounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemptionfrom new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies thatare not emerging growth companies.For as long as we continue to be an emerging growth company, we intend to take advantage of certain other exemptions from various reportingrequirements that are applicable to other public companies, including reduced disclosure obligations regarding executive compensation in our periodicreports and proxy statements, exemptions from the requirements of holding a nonbinding85 advisory stockholder vote on executive compensation and any golden parachute payments not previously approved, exemption from the requirement ofauditor attestation on our internal control over financial reporting and exemption from any requirement that may be adopted by the Public CompanyAccounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about theaudit and the financial statements (auditor discussion and analysis). If we do, the information that we provide stockholders may be different than what isavailable with respect to other public companies.Investors could find our common stock less attractive because we will rely on these exemptions, which may make it more difficult for investors tocompare our business with other companies in our industry. If some investors find our common stock less attractive as a result, there may be a less activetrading market for our common stock and our stock price may be more volatile. In addition, it may be difficult for us to raise additional capital as and whenwe need it. If we are unable to do so, our financial condition and results of operations could be materially harmed.We will remain an emerging growth company until the earliest of (1) the end of the fiscal year in which the market value of our common stock that isheld by non-affiliates exceeds $700.0 million as of the end of the second fiscal quarter, (2) the end of the fiscal year in which we have total annual grossrevenue of $1.0 billion or more during such fiscal year, (3) the date on which we issue more than $1.0 billion in non-convertible debt in a three-year period or(4) December 31, 2020, the end of the fiscal year following the fifth anniversary of the completion of our initial public offering. ITEM 1B.UNRESOLVED STAFF COMMENTSNot applicable. ITEM 2.PROPERTIESOur corporate headquarters are currently located in Rockville, Maryland. We occupy approximately 11,000 square feet of office space in this locationunder a lease that expires in October 2020, renewable for two additional three-year terms, and which includes a right of first refusal on an additional 19,000square feet of office, laboratory and manufacturing space adjacent to our current premises which we exercised in September 2015. The lease term for theadditional space is five years from the date we occupy the space, which is currently anticipated to take place during the second quarter of 2016. In addition,we occupy 375 square feet of lab space in Philadelphia, Pennsylvania under a lease that expires in June 2016 and lease temporary office space on a month-to-month basis in Bethesda, Maryland. In January 2016, we entered into a new lease agreement for approximately 16,000 square feet of office space elsewhere inRockville, Maryland that expires in June 2023, renewable for an additional five-year term. We currently anticipate occupying this space in the first half of2016. We believe that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in thefuture on commercially reasonable terms. ITEM 3.LEGAL PROCEEDINGSFrom time to time, we may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. We currently are not aparty to any threatened or pending litigation and do not have contingency reserves established for any litigation liabilities. However, third parties mightallege that we are infringing their patent rights or that we are otherwise violating their intellectual property rights, including trade names and trademarks.Such third parties may resort to litigation. We accrue contingent liabilities when it is probable that future expenditures will be made and such expenditurescan be reasonably estimated. ITEM 4.MINE SAFETY DISCLOSURESNot applicable. 86 PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common stock has been trading on The NASDAQ Global Select Market under the symbol “RGNX” since our initial public offering on September17, 2015. Prior to that time, there was no established public trading market for our common stock. The following table sets forth, for the periods indicated, therange of high and low sale prices of our common stock as reported by NASDAQ. High Low Third quarter 2015 (beginning September 17, 2015) $32.00 $17.51 Fourth quarter 2015 $25.00 $13.77 On March 1, 2016, the last reported sale price for our common stock on The NASDAQ Global Select Market was $12.80 per share.Stock Performance GraphThe graph set forth below compares the cumulative total stockholder return on our common stock between September 17, 2015 (the date of our initialpublic offering) and December 31, 2015, with the cumulative total return of (a) the NASDAQ Biotechnology Index (^NBI) and (b) the NASDAQ CompositeIndex (^IXIC), over the same period. This graph assumes the investment of $100 on September 17, 2015 in our common stock, the NASDAQ BiotechnologyIndex and the NASDAQ Composite Index and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on September 17,2015 of $30.45 per share as the initial value of our common stock and not the initial offering price to the public of $22.00 per share.The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below isnot necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Information used in the graph was obtainedfrom the NASDAQ Stock Market LLC, a financial data provider and a source believed to be reliable. The NASDAQ Stock Market LLC is not responsible forany errors or omissions in such information. HoldersAs of March 1, 2016 there were 61 holders of record of our common stock. The number of holders of record of our common stock does not reflect thenumber of beneficial holders whose shares are held by depositors, brokers or other nominees.DividendsWe have not declared or paid any cash dividends on our common stock since our inception. We do not plan to pay dividends in the foreseeable future.87 Securities Authorized for Issuance Under Equity Compensation PlansThe following table provides information as of December 31, 2015 with respect to the shares of our common stock that may be issued under ourexisting equity compensation plans. Number of Securities Remaining Available for Number of Securities to Weighted-average Future Issuance Under be Issued upon Exercise Exercise Price of Equity Compensation of Outstanding Options, Outstanding Options, Plans (excluding securities Warrants and Rights Warrants and Rights (reflected in column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by stockholders 3,683,725(1) $5.52 2,567,812(2) Equity compensation plans not approved by stockholders — — — Total 3,683,725 $5.52 2,567,812 (1)Includes 3,683,725 shares of common stock issuable upon exercise of outstanding options under all existing equity compensation plans. Of theseshares, 3,019,600 were subject to options then outstanding under our 2014 Stock Plan and 664,125 were subject to options then outstanding underour 2015 Equity Incentive Plan (the 2015 Plan).(2)Represents 2,313,812 shares of common stock available for issuance under the 2015 Plan and 254,000 shares of common stock available for issuanceunder our 2015 Employee Stock Purchase Plan (the ESPP). On January 1 of each year, (i) the number of shares reserved under the 2015 Plan isautomatically increased by the lesser of 4% of the total number of shares of common stock that are outstanding at that time or such lesser number asmay be approved by our Board of Directors and (ii) the number of shares reserved under the ESPP is automatically increased by the lesser of 1% of thetotal number of shares of common stock that are outstanding at that time or such lesser number as may be approved by our Board of Directors. OnJanuary 1, 2016, an additional 1,052,538 shares became available for future issuance under the 2015 Stock Plan and no additional shares were addedto the ESPP. The additional shares from the annual increase on January 1, 2016 are not included in the table above.Recent Sales of Unregistered SecuritiesConversion from Limited Liability Company to CorporationIn September 2014, we converted from a Delaware limited liability company named ReGenX Biosciences, LLC (the LLC) to a Delaware corporationnamed REGENXBIO Inc. (the Conversion). Pursuant to the Conversion, we issued (i) 2,642,963 shares of common stock upon the conversion of 132,148,224Class A units of the LLC, (ii) 1,906,295 shares of Series A Preferred Stock upon the conversion of 119,656,372 Series A Preferred units of the LLC and (iii)2,393,127 shares of Series B Preferred Stock upon the conversion of 95,314,803 shares of Series B Preferred units of the LLC.Series D Preferred Stock FinancingIn May 2015, we entered into a stock purchase agreement (the Series D Purchase Agreement) with new and existing investors to raise an aggregate of$70.5 million from the sale of 7,366,849 shares of our Series D convertible preferred stock, $0.0001 par value per share (the Series D Preferred Stock), at apurchase price of $9.5699 per share (the Series D Financing).Series C Preferred Stock FinancingIn January 2015, we entered into a stock purchase agreement (the Series C Purchase Agreement) with new and existing investors to raise an aggregateof $30.0 million, including the conversion of approximately $3.8 million in outstanding convertible notes, from the sale of 4,631,774 shares of our Series Cconvertible preferred stock, $0.0001 par value per share (the Series C Preferred Stock), at a purchase price of $6.477 per share (the Series C Financing).The issuances of the securities described above pursuant to the Conversion were deemed to be exempt from registration under the Securities Act of1933, as amended (the Securities Act), in reliance on Section 4(2) of the Securities Act. The recipients of securities in the Conversion represented theirintention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legendswere affixed to the stock certificates issued in such transaction.88 The Series C Financing and the Series D Financing were made in reliance on Rule 506 promulgated under the Securities Act and was made withoutgeneral solicitation or advertising. Each purchaser represented that it was an accredited investor with access to information about us sufficient to evaluate theinvestment and that the common stock was being acquired without a view to distribution or resale in violation of the Securities Act. A Form D filing wasmade in accordance with the requirements of Regulation D for both the Series C Financing and the Series D Financing.No underwriters were involved in the foregoing issuances or sales of securities.Use of Proceeds from Public Offering of Common StockOn September 22, 2015, we closed our initial public offering (IPO) whereby 7,245,000 shares of common stock were sold at a public offering price of$22.00 per share for an aggregate offering price of $159.4 million, which included 945,000 shares of common stock sold at the IPO price of $22.00 pursuantto the underwriters’ option to purchase additional shares of common stock (Underwriters’ Option). The offer and sale of all of the shares in the IPO andpursuant to the Underwriters’ Option were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-206430), whichwas declared effective by the SEC on September 16, 2015. The offering commenced as of September 16, 2015 and did not terminate before all of thesecurities registered in the registration statement were sold. The syndicate of underwriters was led by Morgan Stanley & Co. LLC, Merrill Lynch, Pierce,Fenner & Smith Incorporated and Piper Jaffray & Co. as joint book-running managers, and Chardan Capital Markets, LLC, as co-manager. We raisedapproximately $145.2 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses. No payments were madeby us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in theordinary course of business to officers for salaries and to non-employee directors as compensation for board committee service.There has been no material change in the planned use of proceeds from our IPO as described in our prospectus dated September 16, 2015, filed withthe SEC pursuant to Rule 424(b)(4) under the Securities Act.Purchases of Equity Securities by the Issuer or Affiliated PurchasersThere were no repurchases of shares of common stock made during the year ended December 31, 2015.89 ITEM 6.SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations,” the financial statements and related notes and other financial information included in this Annual Report on Form 10-K.We derived the financial data for the years ended December 31, 2015, 2014 and 2013 and the balance sheet data as of December 31, 2015 and 2014from our audited financial statements, which are included elsewhere in this Annual Report on Form 10-K. We derived the balance sheet data as of December31, 2013 from our audited financial statements that are not included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarilyindicative of the results to be expected in future periods. Years Ended December 31, 2015 2014 2013 (in thousands, except per share data) Statements of Operations and Comprehensive Loss Data: Revenues License revenue $5,025 $4,355 $1,055 License revenue from related party 2,000 220 2,700 Reagent sales 257 326 368 Grant revenue 306 1,219 1,964 Total revenues 7,588 6,120 6,087 Expenses Costs of revenues Licensing costs (including amounts to related parties) 1,405 885 151 Costs of reagent sales (including amounts to related parties) 98 122 173 Research and development (including amounts to related parties) 17,279 4,961 5,051 General and administrative (including amounts to related parties) 11,912 3,851 5,474 Foreign currency transaction losses 57 30 14 Other operating income (26) (47) — Total operating expenses 30,725 9,802 10,863 Loss from operations (23,137) (3,682) (4,776)Other Income (Expense) Investment income 346 — — Interest expense (20) (321) (611)Total other income (expense) 326 (321) (611)Net loss $(22,811) $(4,003) $(5,387)Basic and diluted net loss per common share $(2.59) $(1.82) $(2.50)Weighted-average basic and diluted common shares 9,173 2,643 2,320 As of December 31, 2015 2014 2013 (in thousands) Balance Sheet Data: Cash and cash equivalents $54,116 $1,121 $1,119 Marketable securities 162,251 — — Working capital (deficit) 113,809 (6,158) (2,446)Total assets 221,380 3,491 2,510 Total liabilities 4,572 9,189 4,653 Convertible preferred stock and preferred units — 12,593 11,778 Common stock, Class A units and additional paid-in capital 269,147 10,518 10,885 Total stockholders’ equity (deficit) 216,808 (18,291) (13,921) 90 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our audited annual financial statements and the related notes that appearelsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risksand uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including thoseset forth in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. For further information regarding forward-lookingstatements, please refer to the “Special Note Regarding Forward-Looking Statements” at the beginning of Part I of this Annual Report on Form 10-K. Allamounts are expressed in thousands other than per share amounts.OverviewWe are a leading biotechnology company focused on the development, commercialization and licensing of recombinant adeno-associated virus(AAV) gene therapy. Our proprietary AAV gene delivery platform (our NAV Technology Platform) consists of exclusive rights to over 100 novel AAVvectors, including AAV7, AAV8, AAV9 and AAVrh10 (NAV Vectors). As of December 31, 2015, our NAV Technology Platform was being applied in thedevelopment of 28 product candidates for a variety of diseases, including five internally developed product candidates and 23 partnered product candidatesdeveloped by our third-party licensees (NAV Technology Licensees).We currently plan to build internal gene therapy franchises in the metabolic, neurodegenerative and retinal therapeutic areas, and develop multipleproduct candidates in each area. Our most advanced programs are for the treatment of two severe genetic diseases: homozygous familial hypercholesterolemia(HoFH) and Mucopolysaccharidosis Type I (MPS I). An IND to support a Phase I/II clinical trial to evaluate the effect of RGX-501 for the treatment of HoFHis active. We expect a Phase I/II clinical trial for RGX-501 to be initiated in the first half of 2016. We expect to file an IND with the U.S. Food and DrugAdministration (the FDA) for RGX-111, our program for MPS I, in the first half of 2016 to support a Phase I/II clinical trial, which we expect to initiate in mid-2016. We also have a preclinical program for wet age-related macular degeneration (wet AMD) for which we expect to file an IND with the FDA in the secondhalf of 2016 and a preclinical program for Mucopolysaccharidosis Type II (MPS II) for which we expect to file an IND with the FDA in the first half of 2017.Our partnered development pipeline benefits from the disease-specific expertise of our NAV Technology Licensees. Our partnering strategy providesus the flexibility to sublicense development of treatments designed to address significant unmet medical needs, while remaining focused on our coreprograms and therapeutic areas internally, which we believe enables us to achieve maximum value. We believe that the broad applicability of our NAVTechnology Platform and any clinical successes of the treatments utilizing NAV Vectors will create new internal and partnered pipeline opportunities.On September 22, 2015, we closed our initial public offering (IPO) whereby we sold 7,245 shares of common stock (inclusive of 945 shares of commonstock sold pursuant to the full exercise of an option to purchase additional shares granted to the underwriters in connection with the offering) at a price of$22.00 per share. The shares began trading on The Nasdaq Global Select Market on September 17, 2015. The aggregate net proceeds from the offering were$145,184, net of underwriting discounts and commissions and offering expenses payable by us. Upon the closing of the IPO, all outstanding shares ofconvertible preferred stock converted into 16,298 shares of common stock.Financial OverviewRevenueWe classify our revenue into three categories: license revenue, grant revenue and reagent sales. To date, we have generated limited revenue throughour licensing agreements with our NAV Technology Licensees for research, development and commercialization of product candidates using our proprietarytechnology. Additionally, we have generated limited revenue from grant programs and sales of licensed reagents to customers for use in research anddevelopment. We have not generated any revenue from sales of approved products or drug therapies. If we fail to complete the development of our productcandidates in a timely manner, or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised.License RevenueThe terms of our license agreements require delivery of a license for use of our intellectual property in either research only, or in research andcommercial development of drug therapies for various diseases. License agreements generally have a term equal to the life of the intellectual property, but areterminable at the option of the licensee. Non-refundable payments to us under these arrangements may include: (i) up-front license fees, (ii) option fees toexercise options to obtain commercial licenses, (iii) annual91 maintenance fees, (iv) sublicense fees, (v) payments based on the achievement of certain milestones by the licensee and (vi) royalties on product sales. Due tothe contingent nature of option fees, sublicense fees, milestone payments and future royalties on product sales under our licensing arrangements, futurelicense revenue is highly dependent on the successful development and commercialization of products by our licensees, which is uncertain and may fluctuatesignificantly from period to period.Grant RevenueGrant revenue is generated through research and development grant programs offered by the United States (U.S.) federal government and the EuropeanUnion (EU). As of December 31, 2015, all grants from the U.S. federal government have been completed. Grant revenue is expected to decrease in futureperiods as we expect to incur significantly less costs under the MeuSIX grant funded by the EU. We are not currently seeking any further grant awards.Reagent SalesReagent sales consist of the sales of licensed reagents to third-parties for use in research and development. We do not consider reagent sales a coreaspect of our business model and we do not dedicate significant resources to sales efforts for reagents. Accordingly, future revenue from sales of reagents isuncertain and may fluctuate significantly from period to period.ExpensesWe classify our expenses into three categories: costs of revenue, research and development and general and administrative expenses. Personnel costsincluding salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general andadministrative expenses. We allocate expenses associated with our facilities, information technology costs, depreciation and other overhead costs betweenresearch and development and general and administrative categories based on employee headcount and the nature of work performed by each employee.Costs of RevenueCosts of revenue primarily consist of our expenses related to the generation of revenue from our intellectual property licensing arrangements and salesof reagents. These expenses fall into the following categories: sublicense fees that are included in licensing costs to related parties, and royalties andproduction costs that are included in costs of reagent sales. Future costs of revenue are uncertain due to the nature of our license agreements and reagent sales,and significant fluctuations in costs of revenue may occur from period to period.Research and Development ExpenseOur research and development expense primarily consists of: ·salaries and personnel-related costs, including benefits, travel and any stock-based compensation, for our scientific personnel performingresearch and development activities; ·costs related to executing preclinical studies and clinical trials; ·costs related to acquiring, developing and manufacturing materials for preclinical studies and clinical trials; ·fees paid to consultants and other third-parties who support our internal product candidate development; ·other costs in seeking regulatory approval of our internal product candidates; and ·allocated facility-related costs and overhead.Up-front fees incurred in obtaining technology licenses for research and development activities are expensed as incurred if the technology licensedhas no alternative future use.We typically utilize our employee, consultant and infrastructure resources across our development programs. We do not allocate personnel costs, otherinternal costs or external consultant costs to specific product candidates or development programs.Prior to 2015, research and development expense primarily consisted of expenses incurred under our grant programs, as well as externally sourcedresearch and development services and fees incurred under our services agreement with FoxKiser LLP (FoxKiser), a related party. Under the FoxKiser servicesagreement, we paid a fixed monthly fee plus an additional support fee, as determined by FoxKiser on a monthly basis, as consideration for all personnel andoverhead costs including office facilities, equipment, supplies,92 general management, accounting, financial management, human resources, legal, secretarial, regulatory compliance and other services provided to us byFoxKiser. We allocated a portion of the service and support fees under the agreement with FoxKiser to research and development. The services agreementwith FoxKiser was terminated in January 2015.We plan to increase our research and development expenses for the foreseeable future as we continue development of our product candidates. Ourcurrent and planned research and development activities include the following: ·initiation of Phase I/II clinical trials to evaluate the safety and efficacy of our RGX-501 and RGX-111 product candidates for HoFH and MPS I,respectively; ·clinical trials to evaluate the safety and efficacy of our RGX-314 product candidate for wet AMD; ·research and development for our RGX-121 and RGX-321 programs for Mucopolysaccharidosis Type II (MPS II) and X-linked retinitispigmentosa (XLRP), respectively; ·research and development for additional product candidates addressing other diseases in the metabolic, neurodegenerative and retinaltherapeutic areas; ·continued investment in manufacturing process development activities; and ·continued acquisition and manufacture of clinical trial materials in support of our anticipated clinical trials.During the years ended December 31, 2015, 2014 and 2013, we incurred the following external research and development expenses: ·$5,658, $2,677 and $3,501, respectively, for external, preclinical research and development as well as grant activities related to our internalproduct candidates and the advancement of our technology and other potential product candidates; ·$2,435, $344 and $132, respectively, for the development of general manufacturing processes, which we intend to use in the manufacturing ofmaterials for clinical trials for RGX-111, RGX-121 and RGX-314; and ·$2,425, $320 and $14, respectively, for manufacturing of materials to be used in clinical trials for RGX-111, RGX-121 and RGX-314.The remainder of research and development expenses for the years ended December 31, 2015, 2014 and 2013 were not allocated to our programs andinclude personnel costs and overhead, and other unallocated research and development costs including consultants and other externally sourced research anddevelopment services.General and Administrative ExpenseGeneral and administrative expense consists primarily of salaries and personnel-related costs, including employee travel, benefits and any stock-basedcompensation, for employees performing functions other than research and development. This includes personnel in executive, finance, legal andadministrative support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research anddevelopment expense, professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents, insurance costs, costsof our information systems and other general corporate activities.Prior to 2015, general and administrative expense included service fees incurred under our services agreement with FoxKiser. Under the FoxKiserservices agreement, we paid a fixed monthly fee plus an additional support fee, as determined by FoxKiser on a monthly basis, as consideration for allpersonnel and overhead costs including office facilities, equipment, supplies, general management, accounting, financial management, human resources,legal, secretarial, regulatory compliance and other services provided to us by FoxKiser. We allocated a portion of the service and support fees under theagreement with FoxKiser to general and administrative expenses. The services agreement with FoxKiser was terminated in January 2015.We expect that our general and administrative expense will continue to increase as we just began operating as a publicly-traded company andcontinue to develop, and potentially commercialize, our internal product candidates. We believe that these increases likely will include increased costs fordirector and officer liability insurance, costs related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants.We also expect to incur increased costs to expand our accounting and finance team with knowledgeable personnel to comply with reporting requirementsapplicable to public companies and maintain adequate internal control over financial reporting.93 Other Income (Expense)Other income (expense) primarily includes investment income and interest expense. Investment income consists of interest income earned on cashequivalents and marketable securities. Cash equivalents are comprised of money market mutual funds and marketable securities are comprised of primarilycorporate debt securities. Interest expense is related to previously outstanding borrowings from FoxKiser.Amounts outstanding under the FoxKiser services agreement in excess of 30 days from their due date accrued interest at 1.5% per month,compounding monthly.On July 31, 2014, we received $1,800 in exchange for a promissory note issued to FoxKiser. On September 15, 2014, we received $600 in exchangefor a second promissory note issued to FoxKiser. Both promissory notes accrued interest at the Short-Term Applicable Federal Rate (0.34% at December 31,2014), compounding annually, and were payable on demand by FoxKiser at the earlier of December 31, 2014 or the next issuance of preferred equitysecurities by us. We determined that the promissory notes with FoxKiser bear interest at below-market rates. Accordingly, we imputed interest on thepromissory notes and recorded an aggregate discount of $128 on the promissory notes, which was amortized using the effective interest method throughDecember 31, 2014, at which date the notes became payable upon demand by FoxKiser. Amortization of the discount is recorded as interest expense in thestatements of operations.In January 2015, FoxKiser exercised its share settlement options and converted the aggregate principal and interest due under both its promissorynotes of $2,403, as well as $1,389 outstanding under the services agreement, into 585 shares of Series C convertible preferred stock (Series C Preferred Stock).The services agreement was terminated in January 2015. We expect interest expense to decrease in future periods as a result of the settlement of these debtinstruments, termination of the FoxKiser services agreement and no further debt outstanding as of December 31, 2015.Critical Accounting Policies and Significant Judgments and EstimatesThis Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on our financial statements, which wehave prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements requires us to makeestimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of ourfinancial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoingbasis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of whichform the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results maydiffer from these estimates under different assumptions or conditions.While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report onForm 10-K, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation ofour financial statements and understanding and evaluating our reported financial results.RevenueWe generate revenue primarily through license agreements with our NAV Technology Licensees for research, development and commercialization ofproduct candidates using our proprietary technology. Additionally, we have generated revenue from grant programs and sales of licensed reagents tocustomers for use in research and development.We recognize revenue when all of the following criteria are met: ·persuasive evidence of an arrangement exists; ·delivery has occurred or services have been rendered; ·our price to the buyer is fixed or determinable; and ·collectability is reasonably assured.We defer amounts we receive prior to satisfying the revenue recognition criteria until such time as the revenue recognition criteria are met.94 License Revenue and License Revenue from Related PartyThe terms of our license agreements require delivery of an intellectual property license for use in either research only, or in research and commercialdevelopment of product candidates for various diseases. We have determined that none of our license agreements contain multiple deliverables. Werecognize nonrefundable up-front license fees when we deliver the license provided there are no undelivered elements in the arrangement and we have met allof the necessary criteria for revenue recognition. When we determine an option to exercise a commercial license is substantive, we recognize the option fee asrevenue upon exercise and delivery of the underlying commercial license, provided there are no undelivered elements in the arrangement and we have met allof the necessary criteria for revenue recognition. Annual maintenance fees do not represent a separate deliverable other than the delivery of the license. Werecognize annual maintenance fees as revenue under our license agreements when the price is fixed or determinable and collectability is reasonably assured,provided that we have satisfied all other revenue recognition criteria, which is typically upon each anniversary date of the underlying license agreement.Sublicense fees are payable to us upon the receipt of certain fees by the licensee from any sublicensees. We recognize sublicense fees as revenue whenthe price is fixed and determinable and collectability is reasonably assured, provided that we have satisfied all other revenue recognition criteria.We recognize milestone payments as revenue upon achievement of the milestone by the licensee, provided that we have satisfied all other revenuerecognition criteria. At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone is substantive and at risk toboth parties on the basis of the contingent nature of the milestone. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risksthat must be overcome to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone in making thisassessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone issubstantive. We have evaluated each, and concluded that all of the clinical, regulatory and commercial milestones pursuant to our license agreements aresubstantive.We will recognize royalty revenue in the period of sale of the related product(s) based on the underlying contract terms, provided that we can reliablymeasure the reported sales, we have no remaining performance obligations and we have satisfied all other revenue recognition criteria.License revenue from a related party consists of license fees from licenses granted to Dimension Therapeutics, Inc. (Dimension) recognized prior toSeptember 30, 2015. Since October 2013, we have granted Dimension a number of commercial licenses to our proprietary technology. In March 2015, weentered into a new option and license agreement with Dimension that grants Dimension options to exclusive commercial licenses for four new diseaseindications to be elected by Dimension. When elected, each option carries an option fee of $1,000 payable to us upon exercise and annual maintenance feesof $50. Additionally, for each option exercised, Dimension is obligated to pay us up to $9,000 upon their achievement of various substantive milestones, aswell as mid to upper-single digit percentage royalties on net sales of licensed products and mid-single digit to low-double digit percentage sublicense fees, ifany. In May, August and December 2015, Dimension exercised its first three options, respectively, under the agreement for total aggregate license option feesof $3,000. In accordance with our revenue recognition policy, the license fees were recognized in full upon the delivery of the license, as we have no furtherperformance obligations under the agreements. As of September 30, 2015, we no longer consider Dimension to be a related party. Accordingly, licenserevenue from licenses granted to Dimension recognized subsequent to September 30, 2015 is no longer included in license revenue from related party in thestatements of operations and comprehensive loss.Grant RevenueWe generate grant revenue through research and development grant programs offered by the U.S. federal government and the EU. We recognizerevenue related to government grants in the period during which the related costs are incurred and the related services are rendered, provided that we havemet the applicable performance obligations under the grants. If we are the principal and the primary obligor under the arrangements, we record the funds wereceive under the grants as revenue. If we are not the principal or primary obligor, we record the grant proceeds as a reduction to research and developmentexpense.Our grants contain refund provisions in the case of non-compliance with the provisions of the grant, which include, but are not limited to, theeligibility of costs, calculation of personnel rates, selection of subcontractors and other provisions included in the underlying grant agreements. We reviewthose refund provisions to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, the grant isrecognized as revenue. If the probability of repayment is determined to be more than remote, we record the amount of potential repayment of the grant as aliability, until such time that the grant requirements have been satisfied. Funds received in advance of the performance of the services are recorded as deferredrevenue.95 Reagent SalesOur reagent sales consist of the sales of licensed reagents to third-parties for use in research and development. We recognize revenue from reagent salesupon delivery to customers, provided that we have satisfied all other revenue recognition criteria.Accrued Research and Development ExpensesWe estimate our accrued research and development expenses as of each balance sheet date. This process involves reviewing contracts and purchaseorders with service providers, identifying services that have been performed on our behalf and estimating the level of service performed, expected remainingperiod of performance and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majorityof our service providers invoice us monthly in arrears for services performed. Expenses that are paid in advance of performance are deferred as a prepaidexpense and expensed as the services are provided.Examples of estimated accrued research and development expenses include fees paid to: ·contract research organizations (CROs) in connection with preclinical development and clinical studies; ·vendors related to process development and manufacturing of materials for use in preclinical development and clinical studies; and ·service providers for professional service fees such as consulting and other research and development related services.Our understanding of the status and timing of services performed relative to the actual status and timing may vary and may result in us reportingchanges in estimates in any particular period. To date, there have been no material differences from our estimates to the amount actually incurred.Stock-Based CompensationIn June 2015, our Board of Directors adopted our 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan replaces our 2014 Stock Plan (the 2014Plan). Any options or awards outstanding under the 2014 Plan at the effective date of the 2015 Plan remained outstanding and effective. Our stock-basedcompensation expense relates solely to stock options issued to employees, directors and non-employee advisors under the 2014 Plan and 2015 Plan. We didnot grant any stock options or record any stock-based compensation expense in any years prior to 2014.Our stock-based awards are subject to either service or performance-based vesting conditions. We record compensation expense for awards toemployees and directors with service-based vesting conditions based on the estimated grant date fair value of the awards. We recognize compensationexpense for employee awards on a straight-line basis over the requisite service period, which is generally the vesting term. We record compensation expensefor awards to non-employees with service-based vesting conditions based on the then-current fair value at each financial reporting date prior to themeasurement date over the associated service period of the award, which is generally the vesting term, on a straight-line basis. We recognize compensationexpense for non-employee awards with performance-based vesting conditions based on the then current fair value at each financial reporting date prior to themeasurement date over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition isprobable. We recognize compensation expense for employee awards with performance-based vesting conditions based on the estimated grant date fair valueover the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.Determination of the Fair Value of Stock-Based Compensation GrantsWe calculate the fair value of stock options using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the useof subjective assumptions, including the expected volatility of our common stock, the assumed dividend yield, the expected term of our stock options, therisk-free interest rate for a period that approximates the expected term of our stock options and the fair value of the underlying common stock on the date ofgrant. In applying these assumptions, we considered the following factors: ·Our common stock has only been publicly traded since September 2015 and, accordingly, we do not have sufficient history to estimate thevolatility of our common stock. We calculate expected volatility based on reported data for selected similar publicly traded companies forwhich the historical information is available. For the purpose of identifying peer companies, we consider characteristics such as enterprisevalue, risk profiles, position within the industry and length of historical share price information. We focus our peer group company selection oncompanies that operate within the biotechnology industry, and specifically on companies that use gene therapy, or similar technologies, fortreating diseases96 and/or are focused on treating diseases in our development pipeline or our licensees’ pipelines. We ensure that the companies selected have asufficient trading history to provide meaningful data to estimate the expected volatility of our common stock over the expected term of stockoptions we have granted. We plan to continue to use the guideline peer group volatility information until the historical volatility of ourcommon stock is sufficient to measure expected volatility for future option grants; ·The assumed dividend yield of zero is based on our expectation of not paying dividends for the foreseeable future; ·We determine the average expected life of “plain vanilla” stock options based on the simplified method in accordance with Securities andExchange Commission Staff Accounting Bulletin Nos. 107 and 110, as our common stock has only been publicly traded since September2015. We expect to use the simplified method until we have sufficient historical exercise data to provide a reasonable basis upon which toestimate expected term; ·We determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities with a remaining term equal to theexpected life assumed at the date of grant; and ·We estimate forfeitures based on our historical analysis of actual stock option forfeitures. To date, we have had minimal forfeitures, andaccordingly, we have assumed no forfeiture rate.The following summarizes the weighted-average assumptions we used to estimate the fair value of stock options that we granted to employees andnon-employees for the periods indicated: Years Ended December 31, Employees 2015 2014 Expected volatility 68% 64%Expected term (in years) 6.1 6.0 Risk-free interest rate 1.7% 2.0%Expected dividend yield 0.0% 0.0% Years Ended December 31, Non-Employees 2015 2014 Expected volatility 75% 65%Expected term (in years) 9.5 9.9 Risk-free interest rate 2.1% 2.4%Expected dividend yield 0.0% 0.0% Fair Value of Common StockIn setting the exercise price of the stock options at each grant date, our Board of Directors or its compensation committee uses the estimated fair valueof our common stock on the date of the grant. Prior to our IPO, there were significant assumptions and estimates required in determining the fair value of ourcommon stock. Valuation estimates were prepared by management in accordance with the framework of the American Institute of Certified PublicAccountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, as well as through independent third-partyvaluations and were approved by our Board of Directors. Valuation estimates were based on a variety of factors including our financial position and historicalfinancial performance, our stage of development, the valuations of comparable publicly traded companies, marketplace and macro-economic factors, theilliquid nature of our common stock, arm’s-length sales of our preferred equity securities, the rights and preferences of our preferred equity securities and theprospects of a liquidity event such as an IPO, among others. After the completion of our IPO in September 2015, the fair value of our common stock used todetermine the exercise price and fair value of stock options is based on the closing price of our common stock on the date of grant.Income Taxes and Utilization of Net Operating Loss CarryforwardAs of December 31, 2015, we had federal net operating loss (NOL) carryforwards of $21,215 and U.S. state NOL carryforwards of $34,199 which maybe available to offset future income tax liabilities and expire at various dates through 2035.Under the provisions of the Internal Revenue Code, the NOL carryforwards are subject to review and possible adjustment by the Internal RevenueService and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownershipinterest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code,respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income ortax liabilities. The amount of the annual limitation is97 determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.We have completed several financings since our inception, including our IPO, which may have resulted in a change in control as defined by Sections 382 and383 of the Internal Revenue Code, or could result in a change in control in the future.We account for income taxes in accordance with Financial Accounting Standards Board (FASB) ASC Topic 740, Income Taxes, which provides fordeferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events thathave been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financialstatement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuationallowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not berealized.We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets, including our NOLs. Based on ourhistory of operating losses, we believe that it is more likely than not that the benefit of our deferred tax assets will not be realized. Accordingly, we haveprovided a full valuation allowance for deferred tax assets as of December 31, 2015 and 2014.Convertible Preferred Stock and Preferred UnitsWe evaluated our convertible preferred stock and preferred units upon issuance in order to determine classification as to permanent or temporaryequity and whether or not the instruments contain an embedded derivative that requires bifurcation. This analysis followed the whole instrument approachwhich compares an individual feature against the entire convertible preferred stock or preferred unit instrument which includes that feature. This analysis wasbased on a consideration of the economic characteristics and risk of each series of convertible preferred stock and preferred units.We evaluated all of the stated and implied substantive terms and features, including: (i) whether the convertible preferred stock and preferred unitsincluded redemption features, (ii) how and when any redemption features could be exercised, (iii) whether the holders of convertible preferred stock andpreferred units were entitled to dividends and how those dividends were calculated, (iv) the voting rights of the convertible preferred stock and preferredunits and (v) the existence and nature of any conversion rights.As a result of this analysis, we concluded that each series of convertible preferred stock and preferred units represented a debt host and, therefore, theredemption feature of each was considered to be clearly and closely related to the associated debt host instrument and was not considered an embeddedderivative that required bifurcation.We also concluded that the conversion rights under the convertible preferred stock were not clearly and closely related to the debt host instruments,however the conversion features did not meet the net settlement criteria of a derivative and, therefore, were not considered embedded derivatives thatrequired bifurcation.As a result of this analysis, we concluded that it was appropriate to classify the outstanding shares of convertible preferred stock and preferred unitsoutside of permanent equity and within temporary equity, due to their associated redemption features and liquidation preferences which were considered tobe outside of our control. At each reporting date, each series of outstanding convertible preferred stock and preferred units was accreted and stated at theamounts in which each series was currently redeemable, which was also equal to the aggregate liquidation preference at that date.In connection with the completion of our IPO in September 2015, all outstanding shares of convertible preferred stock were converted into shares ofcommon stock on a one-for-one basis.98 Extinguishment of Preferred StockIn connection with our issuance of Series C Preferred Stock in January 2015, the rights, preferences and privileges of the Series A convertible preferredstock (Series A Preferred Stock) and the Series B convertible preferred stock (Series B Preferred Stock) then outstanding were modified. More specifically,holders of Series C Preferred Stock received preference over Series A Preferred Stock, Series B Preferred Stock and common stock in regards to dividends andliquidation. The dividend rights changed from cumulative dividend rights to noncumulative dividend rights for all series of convertible preferred stock, andall accrued but unpaid cumulative dividends on the Series A Preferred Stock and Series B Preferred Stock as of January 13, 2015 were forfeited. As a result ofthis modification, the redemption values and liquidation preferences of Series A Preferred Stock and Series B Preferred Stock, which were previously equal tooriginal issue price plus accrued but unpaid cumulative dividends, was reduced to original issue price plus non-cumulative dividends declared. Additionally,the redemption date of Series A Preferred Stock and Series B Preferred Stock was changed from October 30, 2018 to December 31, 2019.We accounted for the amendment to the rights, preferences and privileges of the Series A Preferred Stock and Series B Preferred Stock as anextinguishment of the old convertible preferred stock and issuance of new convertible preferred stock due to the significance of the modifications to thesubstantive contractual terms of the convertible preferred stock and the associated fundamental changes to the nature of the convertible preferred stock.Accordingly, we recorded a loss of $1,317 on the Series A Preferred Stock and a gain of $2,076 on the Series B Preferred Stock within stockholders’ deficitequal to the difference between the fair value of the new shares of convertible preferred stock issued and the carrying amount of the old shares of preferredstock extinguished. We allocated the entire net gain on extinguishment of convertible preferred stock of $759 to additional paid-in capital. The net gain onextinguishment is reflected in the calculation of net loss available to common stockholders in accordance with FASB ASC Topic 260, Earnings per Share.The fair value of the Series A Preferred Stock and Series B Preferred Stock was determined using the option-pricing back-solve method on the per share priceof Series C Preferred Stock to estimate aggregate equity value. We used the option-pricing method to allocate equity value to the Series A Preferred Stock andSeries B Preferred Stock using Black-Scholes option-pricing model.Related Party TransactionsDuring the years ended December 31, 2015, 2014 and 2013, we transacted with a number of related parties in the course of ordinary business. Ourrelated party transactions are described in detail in Note 13 to our financial statements appearing elsewhere in this Annual Report on Form 10-K.Recently Announced Accounting PronouncementsSee Note 2 “Recently Announced Accounting Pronouncements” in the notes to the financial statements appearing elsewhere in this Annual Report onForm 10-K for a full description of recent accounting pronouncements and the potential impact on our financial statements.99 Results of OperationsComparison of the Years Ended December 31, 2015 and 2014 Years Ended December 31, 2015 2014 Change Revenues License revenue $5,025 $4,355 $670 License revenue from related party 2,000 220 1,780 Reagent sales 257 326 (69)Grant revenue 306 1,219 (913)Total revenues 7,588 6,120 1,468 Expenses Costs of revenues Licensing costs (including amounts to related parties) 1,405 885 520 Costs of reagent sales (including amounts to related parties) 98 122 (24)Research and development (including amounts to related parties) 17,279 4,961 12,318 General and administrative (including amounts to related parties) 11,912 3,851 8,061 Foreign currency transaction losses 57 30 27 Other operating income (26) (47) 21 Total operating expenses 30,725 9,802 20,923 Loss from operations (23,137) (3,682) (19,455)Other Income (Expense) Investment income 346 — 346 Interest expense (20) (321) 301 Total other income (expense) 326 (321) 647 Net loss $(22,811) $(4,003) $(18,808) License Revenue and License Revenue from Related Party. License revenue and license revenue from a related party increased by $2,450, from $4,575for the year ended December 31, 2014 to $7,025 for the year ended December 31, 2015. This increase in license revenue is primarily attributable to anincrease in revenue recognized from up-front fees and option fees of $1,900 driven by seven new commercial licenses granted by us in 2015, as well as anincrease in milestone fees of $250 and recurring annual maintenance fees of $250 recognized for licenses granted prior to 2015. Commercial licenses grantedin 2015 generally carried higher up-front fees than licenses granted in 2014.Grant Revenue. Grant revenue decreased by $913, from $1,219 for the year ended December 31, 2014 to $306 for the year ended December 31, 2015.This decrease is primarily due to significantly less research and development activities conducted under our grant programs. As of January 2015, all grantsawards from agencies of the U.S. federal government were completed. Additionally, we incurred significantly less reimbursable costs under our grant awardfrom the EU. We expect grant revenue to decrease in future periods as we are not currently seeking any further grant awards.Licensing Costs to Related Parties. Licensing costs to related parties increased by $520, from $885 for the year ended December 31, 2014 to $1,405for the year ended December 31, 2015. This increase is attributable to an increase in sublicense fees payable to The Trustees of the University ofPennsylvania (Penn) and GlaxoSmithKline LLC (GSK), as a result of a $2,450 increase in license revenue recognized by us in 2015.Research and Development Expense. Research and development expenses increased by $12,318, from $4,961 for the year ended December 31, 2014to $17,279 for the year ended December 31, 2015. This increase is primarily attributable to the following: ·an increase of $7,660 for externally sourced research and development, process development and manufacturing of material for clinical trialsrelated primarily to RGX-111, RGX-121 and RGX-314; and ·an increase of $3,923 for additional personnel costs as a result of increased headcount and stock-based compensation expense, as well asrecruiting costs associated with the hiring of key research and development personnel.100 General and Administrative Expense. General and administrative expenses increased by $8,061, from $3,851 for the year ended December 31, 2014 to$11,912 for the year ended December 31, 2015. This increase is primarily attributable to the following: ·an increase of $3,410 for additional personnel costs as a result of increased headcount and stock-based compensation expense, as well asrecruiting costs associated with the hiring of general corporate personnel; ·an increase of $3,102 for professional fees related to legal, accounting and consulting services; ·an increase of $348 for travel expenses supporting general corporate activities, due largely to increased headcount; ·an increase of $340 for information technology expenses supporting general corporate activities; and ·an increase of $253 for insurance expenses as a result of general growth and operating as a public company.Investment Income. Investment income increased by $346, from $0 for the year ended December 31, 2014 to $346 for the year ended December 31,2015. This increase is attributable to significantly higher investments in marketable securities and money market mutual funds during 2015 as a result of netcash proceeds received from the sale and issuance of Series C Preferred Stock and Series D Preferred Stock prior to our IPO and from the sale and issuance ofcommon stock in our IPO.Interest Expense. Interest expense decreased by $301, from $321 for the year ended December 31, 2014 to $20 for the year ended December 31, 2015.This decrease is attributable to the conversion of debt instruments outstanding with FoxKiser into Series C Preferred Stock in January 2015, and thetermination of the services agreement with FoxKiser in January 2015.Comparison of the Years Ended December 31, 2014 and 2013 Years Ended December 31, 2014 2013 Change Revenues License revenue $4,355 $1,055 $3,300 License revenue from related party 220 2,700 (2,480)Reagent sales 326 368 (42)Grant revenue 1,219 1,964 (745)Total revenues 6,120 6,087 33 Expenses Costs of revenues Licensing costs (including amounts to related parties) 885 151 734 Costs of reagent sales (including amounts to related parties) 122 173 (51)Research and development (including amounts to related parties) 4,961 5,051 (90)General and administrative (including amounts to related parties) 3,851 5,474 (1,623)Foreign currency transaction losses 30 14 16 Other operating income (47) — (47)Total operating expenses 9,802 10,863 (1,061)Loss from operations (3,682) (4,776) 1,094 Other Income (Expense) Interest expense (321) (611) 290 Total other income (expense) (321) (611) 290 Net loss $(4,003) $(5,387) $1,384 License Revenue and License Revenue from Related Party. License revenue and license revenue from a related party increased by $820, from $3,755for the year ended December 31, 2013 to $4,575 for the year ended December 31, 2014. This increase in license revenue is primarily attributable to anincrease in revenue recognized from up-front fees of $750 driven by six new commercial licenses granted by us in 2014, as well as an increase in recurringannual maintenance fees of $185 recognized for licenses granted prior to 2014. License revenue included $2,700 and $220 for the years ended December 31,2013 and 2014, respectively, recognized from a license granted to Dimension.101 Grant Revenue. Grant revenue decreased by $745, from $1,964 for the year ended December 31, 2013 to $1,219 for the year ended December 31,2014. The decrease is primarily due to significantly less research and development activity conducted under our U.S. federal grant programs, resulting in acorresponding decrease of $916 of grant revenue. The decrease in U.S. federal grant revenue was partially offset by increased costs incurred for research anddevelopment under our grant with the EU, which resulted in a $171 increase in grant revenue.Licensing Costs to Related Parties. Licensing costs to related parties increased by $734, from $151 for the year ended December 31, 2013 to $885 forthe year ended December 31, 2014. This increase is due primarily to an increase in sublicense fees payable to Penn and GSK related to up-front fees receivedby us for six new licenses granted in 2014. Additionally, in 2013, $3,000 of license revenue from up-front license fees was paid to us in the form of non-cashconsideration, for which we were not required to pay corresponding sublicense fees to Penn or GSK.Research and Development Expense. Research and development expense decreased by $90, from $5,051 for the year ended December 31, 2013 to$4,961 for the year ended December 31, 2014. This decrease was primarily attributable to the following: ·a decrease of $924 for externally sourced research and development performed by Penn; and ·a decrease of $575 for costs incurred under our grant programs.The decrease was partially offset by the following: ·an increase of $1,037 for externally sourced research and development, process development and manufacturing activities; ·an increase of $172 for service fees from FoxKiser allocated for research and development as a result of increased headcount; ·an increase of $116 for consulting services; ·an increase of $60 for stock compensation expense for research and development personnel; and ·an increase of $25 for license fees to access technology for use in research and development.General and Administrative Expense. General and administrative expense decreased by $1,623, from $5,474 for the year ended December 31, 2013 to$3,851 for the year ended December 31, 2014. This decrease is primarily attributable to a decrease of $2,450 in compensation to related parties for transactionservices related to the license with Dimension as well as professional fees for legal, accounting and consulting services. The decrease is partially offset byincreases of $259 in stock compensation expense, $227 in services from FoxKiser allocated to general and administrative expenses as a result of higherheadcount, $124 in license maintenance fees and $102 in recruiting costs for the hiring of additional personnel.Interest Expense. Interest expense decreased by $290 from $611 for the year ended December 31, 2013 to $321 for the year ended December 31, 2014.This decrease was due to the conversion of $5,892 of debt to FoxKiser into Series B Preferred Units, which occurred in October 2013 resulting in less debtoutstanding during 2014.Liquidity and Capital ResourcesPrior to our IPO, we funded our research and development and operating activities principally from the issuance of convertible preferred stock,preferred units and debt instruments with share settlement options. Additionally, we have supplemented our cash flows with fees received from grantingcommercial licenses to our proprietary technology to other biotechnology and pharmaceutical companies.In January 2015, we completed the sale and issuance of 4,632 shares of Series C Preferred Stock, par value $0.0001 per share, at a per share price of$6.477 for aggregate gross proceeds of $30,000. The aggregate purchase price of $30,000 included $26,208 of cash proceeds and the conversion $3,792 ofdebt by FoxKiser. In May 2015, we completed the sale and issuance of 7,367 shares of Series D convertible preferred stock (Series D Preferred Stock), parvalue $0.0001 per share, at a per share price of $9.5699 generating aggregate gross proceeds of $70,500.102 In September 2015, we completed our IPO whereby we sold 7,245 shares of common stock (inclusive of 945 shares of common stock sold pursuant tothe full exercise of an option to purchase additional shares granted to the underwriters in connection with the offering) at a price of $22.00 per share. Theaggregate net proceeds from the offering were $145,184, net of underwriting discounts and commissions and offering expenses payable by us. Upon theclosing of the IPO, all outstanding shares of convertible preferred stock converted into 16,298 shares of common stock. As of December 31, 2015, we hadcash, cash equivalents and marketable securities of $216,367. We believe that our cash, cash equivalents and marketable securities as of December 31, 2015will enable us to initiate Phase I/II clinical trials for RGX-501 and RGX-111 and file an IND in preparation for a Phase I clinical trial for RGX-314, as well asfund our operating expenses and capital expenditure requirements into 2018.We have incurred losses since our inception and, as of December 31, 2015, had an accumulated deficit of $51,620. We anticipate that we will continueto incur losses for at least the next several years. We expect that our research and development and general and administrative expenses will continue toincrease for the foreseeable future. As a result, we may need additional capital to fund our operations, which we may obtain through one or more equityofferings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements.Cash Flows Years Ended December 31, 2015 2014 2013 Net cash used in operating activities $(22,515) $(2,399) $(3,012)Net cash used in investing activities (163,800) — — Net cash provided by financing activities 239,310 2,401 1,965 Net increase (decrease) in cash and cash equivalents $52,995 $2 $(1,047) Operating ActivitiesFor the year ended December 31, 2015, our net cash used in operating activities of $22,515 consisted of a net loss of $22,811 and changes in workingcapital of $3,040, offset by $3,336 in adjustments for non-cash items. The change in working capital is primarily attributable to a decrease in related partypayables of $3,761, an increase in trade receivables of $1,342 and an increase of prepaid expenses of $992, and was partially offset by an increase in accountspayable, accrued expenses and other current liabilities of $2,811. Adjustments for non-cash items primarily consisted of stock-based compensation expensesof $2,921 and net amortization of premiums on marketable debt securities of $311.For the year ended December 31, 2014, our net cash used in operating activities of $2,399 consisted of a net loss of $4,003, primarily attributable togeneral and administrative and research and development expenses, offset by $494 in adjustments for non-cash items and $1,110 of cash provided bychanges in working capital. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $319. The change in workingcapital was primarily attributable to an increase in accounts payable and accrued expenses of $797, an increase in service fees payable to FoxKiser and otherrelated party payables of $1,026, an increase in advance payments of $153, a decrease in related party receivables of $174, partially offset by an increase intrade receivables of $799 and unbilled receivables of $213 primarily consisting of reimbursements due to us under our grant with the EU.For the year ended December 31, 2013, our net cash used in operating activities of $3,012 consisted of a net loss of $5,387, primarily attributable togeneral and administrative and research and development expenses, decreased by $289 in adjustments for non-cash items and partially offset by $2,664 ofcash provided by changes in working capital. Adjustments for non-cash items primarily consisted of $303 of non-cash consideration received for licensesgranted. The change in working capital was primarily attributable to an increase in service fees payable to FoxKiser of $3,192, an increase in accountspayable and accrued expenses of $364, a decrease in unbilled receivables of $109, partially offset by an increase in related party receivables of $924Investing ActivitiesFor the year ended December 31, 2015, net cash used in investing activities consisted of $163,278 to purchase marketable securities and $522 topurchase property and equipment.We had no cash flows from investing activities for the years ended December 31, 2014 and 2013.103 Financing ActivitiesFor the year ended December 31, 2015, net cash provided by financing activities primarily consisted of $26,021 in net proceeds from the sale andissuance of Series C Preferred Stock, $67,998 in net proceeds from the sale and issuance of Series D Preferred Stock and $145,184 in net proceeds from thesale and issuance of common stock in our IPO.For the year ended December 31, 2014, net cash provided by financing activities primarily consisted of $2,400 in proceeds from promissory notesissued to FoxKiser.For the year ended December 31, 2013, net cash provided by financing activities primarily consisted of $1,965 in net proceeds from the sale andissuance of Series B preferred units.Future Funding RequirementsTo date, we have generated a limited amount of revenue through license agreements with strategic partners for research, development andcommercialization of product candidates using our proprietary technology. Additionally, we have generated revenue from grant programs and sales oflicensed reagents to customers for use in research and development, for which we do not expect significant future revenue. We do not expect to generatesignificant recurring revenue unless and until we obtain regulatory approval for and commercialize our product candidates. In addition, we expect ourexpenses to increase in connection with our ongoing development activities, particularly as we continue to expand the research, development and clinicaltrials of, and seek regulatory approval for, our internally developed product candidates. As a result of our IPO, we have and expect to continue to incuradditional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval for our internally developed productcandidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that wewill need substantial additional funding in connection with our continuing operations.Based upon our current operating plan, we believe that our cash and cash equivalents and marketable securities as of December 31, 2015, will enableus to initiate Phase I/II clinical trials for RGX-501 and RGX-111 and file an IND in preparation for a Phase I clinical trial for RGX-314, as well as fund ouroperating expenses and capital expenditure requirements into 2018. We intend to devote the majority of our current capital to clinical development andregulatory approval of our internally developed product candidates. We have based our estimates on assumptions that may prove to be wrong, and we mayuse our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development andcommercialization of gene therapy product candidates, we are unable to estimate the amounts of increased capital outlays and operating expendituresnecessary to complete the development of product candidates.Our future capital requirements will depend on many factors, including: ·the results of our preclinical studies for our internal product candidates and any subsequent clinical trials; ·our planned expansion of the licensing of our NAV Technology Platform; ·the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials, if any, for our otherproduct candidates; ·the costs, timing and outcome of regulatory review of our product candidates; ·the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our productcandidates for which we receive marketing approval; ·revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; ·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending anyintellectual property-related claims; ·our current licensing agreements remaining in effect; ·our ability to establish and maintain additional licensing agreements or collaborations on favorable terms, if at all; ·the extent to which we acquire or in-license other product candidates and technologies; and ·the costs associated with being a public company.Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is atime-consuming, expensive and uncertain process that takes years to complete, and we may never generate the104 necessary data or results required to obtain regulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved,may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments under our license agreements, will bederived from or based on sales of products that may not be commercially available for many years, if at all. In addition, revenue from our NAV TechnologyPlatform sublicensing is dependent in part on the clinical and commercial success of our licensing partners. Neither we nor any of our NAV TechnologyLicensees have commercialized any products using our NAV Technology Platform. Accordingly, we will need to continue to rely on additional financing toachieve our business objectives.To the extent that additional capital is raised through the sale of equity or equity-linked securities, the issuance of those securities could result insubstantial dilution for our existing stockholders and the terms may include liquidation or other preferences that adversely affect the rights of our existingstockholders. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market priceof our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. Adequate additionalfinancing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with collaborative partnersor otherwise that may require us the relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us.Contractual Obligations, Commitments and ContingenciesOur principal commitments consist of obligations under vendor contracts to provide research services and other purchase commitments with ourvendors. Additionally, our commitments consist of obligations to our licensors under our in-license agreements, which include sublicense fees, milestonesfees, royalties and reimbursement of patent maintenance costs.The amount and timing of when these payments will actually be made is uncertain and the payments are contingent upon the initiation andcompletion of future activities, including services to be provided by our vendors. Sublicense fees are due to the licensors when we sublicense licenses tothird-parties; the fees are based on a percentage of the sublicense fees received from the sublicensees. Milestone fees are payable by us upon our futureachievement of certain development and regulatory milestones. Royalty fees are based on a percentage of net sales of licensed products. Maintenance costsare reimbursements to the licensors for maintaining licensed patents. These amounts are not fixed and determinable and therefore are not included in the tablebelow.We have entered into a number of short-term and long-term operating leases for office and laboratory space in Bethesda, Maryland, Rockville,Maryland and Philadelphia, Pennsylvania. As of December 31, 2015, future lease payments under operating leases are as follows: (in thousands) Less Than Years Years More Than Total 1 Year 1-3 3-5 5 Years Future minimum lease payments $4,299 $777 $1,672 $1,706 $144 In January 2016, we entered into a non-cancelable operating lease for additional office space in Rockville, Maryland. The lease is expected tocommence in March 2016, and has a term of approximately 7.5 years. Initial monthly rent payments required under the lease are $38 beginning seven monthsfrom the commencement date and escalate annually in accordance with the lease.Off-Balance Sheet ArrangementsWe did not have any off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet arrangements,as defined in the rules and regulations of the SEC. 105 ITEM 7A.QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate SensitivityOur primary exposure to interest rate sensitivity results from the cash equivalents and marketable securities in our investment portfolio. Our primaryobjectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Thesecurities we hold in our investment portfolio are subject to interest rate risk. At any time, significant changes in interest rates can affect the fair value of theinvestment portfolio and its interest earnings. After a review of the investment portfolio, we do not believe a sudden change in the interest rates would have amaterial impact on our financial condition or results of operations. Currently, we do not hedge these interest rate exposures. We have established policies andprocedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure toany one issuer and do not use derivative financial instruments in our investment portfolio. We invest in highly liquid, investment-grade securities and moneymarket funds of various issues, types and maturities. Our investments in marketable securities are classified as available-for-sale and are carried at fair value.Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive loss and reported as a separatecomponent of stockholders’ equity until realized. A decline in the fair value below cost of available-for-sale securities that is deemed other-than-temporary ischarged to results of operations, resulting in the establishment of a new cost basis for the security.We were subject to interest rate risk in connection with our debt instruments outstanding at December 31, 2014 bearing variable interest rates. We hadno debt instruments outstanding at December 31, 2015.Concentrations of Credit RiskWe deposit our cash with financial institutions that we consider to be of high credit quality and purchase marketable securities, which are generallyinvestment grade, liquid, fixed income securities, and money-market instruments denominated in U.S. dollars. Our marketable securities consist primarily ofcorporate debt securities.Three customers accounted for approximately 79% of our total revenue for the year ended December 31, 2015. No other customer accounted for morethan 10% of revenue in 2015. Future revenue is uncertain and may fluctuate significantly from period to period.Foreign Currency RiskOur results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. A substantial majority of ourexpenses are denominated in U.S. Dollars. Our results of operations and cash flow are, therefore, subject to fluctuations due to changes in foreign currencyexchange rates and may be harmed in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements withrespect to foreign currency risk or other derivative instruments. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to ourbusiness would not harm our business, financial condition or results of operations. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe financial statements and related financial statement schedules required to be filed are listed in the Index to Financial Statements and areincorporated herein. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable. ITEM 9A.CONTROLS AND PROCEDURESConclusion Regarding the Effectiveness of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934 (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information requiredto be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the SEC’s106 rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to bedisclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2015 that our disclosure controls andprocedures were not effective at the reasonable assurance level due to material weaknesses in our internal control over financial reporting. We did notmaintain (i) effective controls in our contract review process to ensure the completeness of contracts reviewed and to appropriately identify and account forprovisions within our contracts; and (ii) a sufficient complement of resources to ensure adequate review and segregation of duties within our financialreporting processes.Notwithstanding the material weaknesses, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that thefinancial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for theperiods presented in conformity with accounting principles generally accepted in the U.S.Management’s Report on Internal Control over Financial ReportingThis Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or anattestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companiesand emerging growth companies.Remediation ActivitiesManagement has been actively engaged in remediating the above described material weaknesses. The following remedial actions have been takenduring the year ended December 31, 2015: ·hired additional full-time accounting resources and financial planning and analysis resources with appropriate levels of experience, including anew Accounting Manager and Senior Accountant, and reallocated responsibilities across the accounting organization to ensure that theappropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review; ·strengthened our internal policies, processes and reviews, including substantial completion of the formal documentation thereof; ·implemented a financial close policy and monitoring program, including the formation of a disclosure committee comprised of members of ourexecutive committee, financial management and representatives from our accounting and legal departments to address and coordinate SECfilings and investor communications, the results of which are discussed with the audit committee quarterly; ·implemented new contract management software that will facilitate the documentation and review of contracts by appropriate accounting andother company personnel and analysis of the financial statement impact of all executed agreements; and ·engaged a professional accounting services firm to help us assess and commence documentation of our internal controls for complying with theSarbanes-Oxley Act. The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipateand react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financialreporting system that is adequate to satisfy our reporting obligations.As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address controldeficiencies or modify certain of the remediation measures described above.While significant progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing,documenting and testing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure thesustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we willcontinue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until theapplicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operatingeffectively.107 Changes in Internal Control over Financial ReportingThe items described in “Remediation Activities” above related to the strengthening of internal policies, process and reviews, including formalizationof the documentation thereof, as well as the implementation of new contract management software is considered a change in our internal control overfinancial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2015 that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.Limitations on the Effectiveness of ControlsControl systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that theobjectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatementsdue to error or fraud may occur and not be detected. ITEM 9B.OTHER INFORMATIONNone. 108 PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item regarding our directors, including the audit committee and audit committee financial experts, and executiveofficers corporate governance, our code of conduct and compliance with Section 16(a) of the Exchange Act will be included in our Proxy Statement for the2016 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of fiscal year ended December 31, 2015(2016 Proxy Statement) and is incorporated herein by reference. ITEM 11.EXECUTIVE COMPENSATIONThe information required by this item regarding executive compensation will be included in our 2016 Proxy Statement and is incorporated herein byreference. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item regarding security ownership and certain beneficial owners and management will be included in our 2016 ProxyStatement and is incorporated herein by reference. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item regarding certain relationships and related transactions and director independence will be included in our 2016Proxy Statement and is incorporated herein by reference. ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this item regarding principal accounting fees and services will be included in our 2016 Proxy Statement and isincorporated herein by reference. 109 PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K: 1.Financial Statements. See Index to Financial Statements under Item 8 of this Annual Report on Form 10-K. 2.Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is notapplicable or is shown in the financial statements or related notes. 3.Exhibits. We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanyingExhibit Index immediately following the financial statements in this Annual Report on Form 10-K.(b) Exhibits. See Item 15(a)(3) above.(c) Financial Statement Schedules. See Item 15(a)(2) above. 110 SignaturesPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report onForm 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rockville, State of Maryland, on March 3, 2016. REGENXBIO INC. By: /s/ Kenneth T. Mills Kenneth T. Mills,President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons onbehalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Kenneth T. Mills Chief Executive Officer, President and March 3, 2016Kenneth T. Mills Director (Principal Executive Officer) /s/ Vittal Vasista Chief Financial Officer March 3, 2016Vittal Vasista (Principal Financial and Accounting Officer) /s/ Donald J. Hayden, Jr. Chairman of the Board of Directors March 3, 2016Donald J. Hayden, Jr. /s/ Luke M. Beshar Director March 3, 2016Luke M. Beshar /s/ Edgar G. Engleman, M.D. Director March 3, 2016Edgar G. Engleman, M.D. /s/ Allan M. Fox Director March 3, 2016Allan M. Fox /s/ A.N. “Jerry” Karabelas, Ph.D. Director March 3, 2016A.N. “Jerry” Karabelas, Ph.D. /s/ Camille Samuels Director March 3, 2016Camille Samuels /s/ David C. Stump Director March 3, 2016David C. Stump 111 REGENXBIO INC.INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 113Financial Statements: Balance Sheets 114Statements of Operations and Comprehensive Loss 115Statements of Convertible Preferred Stock and Preferred Units, and Stockholders’ and Members’ Equity (Deficit) 116Statements of Cash Flows 118Notes to Financial Statements 119 112 Report of Independent Registered Public Accounting FirmTo the Stockholders and Board of Directors ofREGENXBIO Inc.:In our opinion, the accompanying balance sheets and the related statements of operations and comprehensive loss, statements of convertible preferredstock and preferred units, and stockholders’ and members’ equity (deficit), and statements of cash flows present fairly, in all material respects, the financialposition of REGENXBIO Inc. (the Company) at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years inthe period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. These financial statementsare the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion./s/ PricewaterhouseCoopers LLPMcLean, VirginiaMarch 3, 2016 113 REGENXBIO INC.BALANCE SHEETS(in thousands, except per share data) As of December 31, 2015 2014 Assets Current assets Cash and cash equivalents $54,116 $1,121 Marketable securities 60,025 — Accounts receivable Trade receivables 2,136 805 Related party receivables — 750 Unbilled receivables — 327 Prepaid expenses 1,020 28 Other current assets 851 — Total current assets 118,148 3,031 Marketable securities 102,226 — Property and equipment, net 538 — Cost method investments 300 303 Deferred issuance costs — 157 Other assets 168 — Total assets $221,380 $3,491 Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities Accounts payable $1,014 $334 Accrued expenses and other current liabilities 3,198 1,115 Due to related party under services agreement — 1,423 Related party promissory notes — 2,403 Other related party payables — 3,761 Advance payments 127 153 Total current liabilities 4,339 9,189 Deferred rent, net of current portion 233 — Total liabilities 4,572 9,189 Commitments and contingencies (Note 7) Convertible preferred stock Series A convertible preferred stock; $0.0001 par value; no shares authorized, issued and outstanding at December 31, 2015; 2,393 shares authorized, issued and outstanding at December 31, 2014 — 3,963 Series B convertible preferred stock; $0.0001 par value; no shares authorized, issued and outstanding at December 31, 2015; 1,906 shares authorized, issued and outstanding at December 31, 2014 — 8,630 Total convertible preferred stock — 12,593 Stockholders’ equity (deficit) Preferred stock; $0.0001 par value; 10,000 shares authorized, and no shares issued and outstanding at December 31, 2015; no shares authorized, issued and outstanding at December 31, 2014 — — Common stock; $0.0001 par value; 100,000 and 9,500 shares authorized at December 31, 2015 and December 31, 2014, respectively; 26,313 and 2,645 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively 3 — Additional paid-in capital 269,144 10,518 Accumulated other comprehensive loss (719) — Accumulated deficit (51,620) (28,809)Total stockholders’ equity (deficit) 216,808 (18,291)Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $221,380 $3,491 The accompanying notes are an integral part of these financial statements. 114 REGENXBIO INC.STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except per share data) Years Ended December 31, 2015 2014 2013 Revenues License revenue $5,025 $4,355 $1,055 License revenue from related party 2,000 220 2,700 Reagent sales 257 326 368 Grant revenue 306 1,219 1,964 Total revenues 7,588 6,120 6,087 Expenses Costs of revenues Licensing costs (including amounts to related parties) 1,405 885 151 Costs of reagent sales (including amounts to related parties) 98 122 173 Research and development (including amounts to related parties) 17,279 4,961 5,051 General and administrative (including amounts to related parties) 11,912 3,851 5,474 Foreign currency transaction losses 57 30 14 Other operating income (26) (47) — Total operating expenses 30,725 9,802 10,863 Loss from operations (23,137) (3,682) (4,776)Other Income (Expense) Investment income 346 — — Interest expense (20) (321) (611)Total other income (expense) 326 (321) (611)Net loss $(22,811) $(4,003) $(5,387)Other Comprehensive Loss Unrealized loss on available-for-sale securities (719) — — Total other comprehensive loss (719) — — Comprehensive loss $(23,530) $(4,003) $(5,387)Reconciliation of net loss to net loss applicable to common stockholders Net loss $(22,811) $(4,003) $(5,387)Accretion and dividends on convertible preferred stock (1,747) (815) (422)Net gain on extinguishment of convertible preferred stock 759 — — Net loss applicable to common stockholders $(23,799) $(4,818) $(5,809)Basic and diluted net loss per common share $(2.59) $(1.82) $(2.50)Weighted-average basic and diluted common shares 9,173 2,643 2,320 The accompanying notes are an integral part of these financial statements. 115 REGENXBIO INC.STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND PREFERRED UNITS,AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)(in thousands) Total Convertible Series A Series B Series A Convertible Series B Convertible Series C Convertible Series D Convertible Preferred Preferred Units Preferred Units Preferred Stock Preferred Stock Preferred Stock Preferred Stock Stock and Units Amount Units Amount Shares Amount Shares Amount Shares Amount Shares Amount PreferredUnits Balances at December 31,2012 119,656 $3,499 — $— — $— — $— — $— — $— $3,499 Issuance of Series Bpreferred units, net of transaction costs of$35 — — 24,155 1,965 — — — — — — — — 1,965 Issuance of Series Bpreferred units for the conversion ofoutstanding related party debt — — 71,160 5,892 — — — — — — — — 5,892 Accretion of preferredunits — 280 — 142 — — — — — — — — 422 Net loss — — — — — — — — — — — — — Balances at December 31,2013 119,656 3,779 95,315 7,999 — — — — — — — — 11,778 Conversion from LLC toC corporation (119,656) (3,779) (95,315) (7,999) 2,393 3,779 1,906 7,999 — — — — — Accretion of convertiblepreferred stock — — — — — 184 — 631 — — — — 815 Discount on related partypromissory notes — — — — — — — — — — — — — Exercise of stock options — — — — — — — — — — — — — Stock-based compensationexpense — — — — — — — — — — — — — Net loss — — — — — — — — — — — — — Balances at December 31,2014 — — — — 2,393 3,963 1,906 8,630 — — — — 12,593 Issuance of Series Cconvertible preferred stock, net of transactioncosts of $187 — — — — — — — — 4,047 26,021 — — 26,021 Issuance of Series Cconvertible preferred stock for the conversionof outstanding related party debt — — — — — — — — 585 3,792 — — 3,792 Issuance of Series Dconvertible preferred stock, net of transactioncosts of $2,502 — — — — — — — — — — 7,367 67,998 67,998 Loss (gain) onextinguishment of convertible preferredstock — — — — — 1,317 — (2,076) — — — — (759)Accretion (decretion) ofconvertible preferred stock — — — — — (2,280) — 1,338 — 187 — 2,502 1,747 Conversion of convertiblepreferred stock into common stockupon initial public offering — — — — (2,393) (3,000) (1,906) (7,892) (4,632) (30,000) (7,367) (70,500) (111,392)Issuance of common stockupon initial public offering, net oftransaction costs of $14,206 — — — — — — — — — — — — — Discount on related partypromissory notes — — — — — — — — — — — — — Exercise of stock options — — — — — — — — — — — — — Stock-based compensationexpense — — — — — — — — — — — — — Unrealized loss onavailable-for-sale securities — — — — — — — — — — — — — Net loss — — — — — — — — — — — — — Balances at December 31,2015 — $— — $— — $— — $— — $— — $— $—116 Accumulated Total Additional Other Stockholders’ Class A Units Common Stock Paid-in Comprehensive Accumulated and Members’ Units Amount Shares Amount Capital Loss Deficit Equity(Deficit) Balances at December 31, 2012 112,672 $10,597 — $— $— $— $(18,709) $(8,112)Issuance of Series B preferred units, net of transaction costs of $35 19,476 288 — — — — (288) — Issuance of Series B preferred units for the conversion of outstanding related party debt — — — — — — — — Accretion of preferred units — — — — — — (422) (422)Net loss — — — — — — (5,387) (5,387)Balances at December 31, 2013 132,148 10,885 — — — — (24,806) (13,921)Conversion from LLC to C corporation (132,148) (10,885) 2,643 — 10,885 — — — Accretion of convertible preferred stock — — — — (815) — — (815)Discount on related party promissory notes — — — — 128 — — 128 Exercise of stock options — — 2 — 1 — — 1 Stock-based compensation expense — — — — 319 — — 319 Net loss — — — — — — (4,003) (4,003)Balances at December 31, 2014 — — 2,645 — 10,518 — (28,809) (18,291)Issuance of Series C convertible preferred stock, net of transaction costs of $187 — — — — — — — — Issuance of Series C convertible preferred stock for the conversion of outstanding related party debt — — — — — — — — Issuance of Series D convertible preferred stock, net of transaction costs of $2,502 — — — — — — — — Loss (gain) on extinguishment of convertible preferred stock — — — — 759 — — 759 Accretion (decretion) of convertible preferred stock — — — — (1,747) — — (1,747)Conversion of convertible preferred stock into common stock upon initial public offering — — 16,298 2 111,390 — — 111,392 Issuance of common stock upon initial public offering, net of transaction costs of $14,206 — — 7,245 1 145,183 — — 145,184 Discount on related party promissory notes — — — — 13 — — 13 Exercise of stock options — — 125 — 107 — — 107 Stock-based compensation expense — — — — 2,921 — — 2,921 Unrealized loss on available-for-sale securities — — — — — (719) — (719)Net loss — — — — — — (22,811) (22,811)Balances at December 31, 2015 — $— 26,313 $3 $269,144 $(719) $(51,620) $216,808 The accompanying notes are an integral part of these financial statements. 117 REGENXBIO INC.STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2015 2014 2013 Cash flows from operating activities Net loss $(22,811) $(4,003) $(5,387)Adjustments to reconcile net loss to net cash used in operating activities Stock-based compensation expense 2,921 319 — Imputed interest on related party promissory notes 13 128 — Unrealized foreign currency transaction losses 11 44 14 Net amortization of premiums and accretion of discounts on marketable debt securities 311 — — Depreciation and amortization 80 — — Non-cash consideration received for licenses granted — — (303)Other non-cash adjustments — 3 — Changes in operating assets and liabilities Trade receivables (1,342) (799) (36)Related party receivables 750 174 (924)Unbilled receivables 327 (213) 109 Prepaid expenses (992) (28) — Other current assets (851) — — Other assets (168) — — Accounts payable 590 33 257 Accrued expenses and other current liabilities 2,221 764 107 Due to related party under services agreement (34) 768 3,192 Other related party payables (3,761) 258 (41)Advance payments (26) 153 — Deferred rent 246 — — Net cash used in operating activities (22,515) (2,399) (3,012)Cash flows from investing activities Purchases of marketable securities (163,278) — — Purchases of property and equipment (522) — — Net cash used in investing activities (163,800) — — Cash flows from financing activities Proceeds from issuance of Series B preferred units, net of transaction costs — — 1,965 Proceeds from related party promissory notes — 2,400 — Proceeds from exercise of stock options 107 1 — Proceeds from issuance of Series C convertible preferred stock, net of transaction costs 26,021 — — Proceeds from issuance of Series D convertible preferred stock, net of transaction costs 67,998 — — Proceeds from initial public offering of common stock, net of transaction costs 145,184 — — Net cash provided by financing activities 239,310 2,401 1,965 Net increase (decrease) in cash and cash equivalents 52,995 2 (1,047)Cash and cash equivalents Beginning of period 1,121 1,119 2,166 End of period $54,116 $1,121 $1,119 Supplemental cash flow information Cash paid for interest $7 $164 $— Supplemental disclosures of non-cash investing and financing activities Conversion of accrued service fees to related party into Series C convertible preferred stock $2,403 $— $— Conversion of related party promissory notes into Series C convertible preferred stock $1,389 $— $— Conversion of convertible preferred stock into common stock upon initial public offering $111,392 $— $— Purchases of property and equipment in accounts payable and accrued expenses $96 $— $— Deferred issuance costs for Series C convertible preferred stock in accrued expenses $— $157 $— Conversion of accrued service fees to related party into Series B preferred units $— $— $5,892 Non-cash consideration received for licenses granted $— $— $303 The accompanying notes are an integral part of these financial statements. 118 REGENXBIO INC.NOTES TO FINANCIAL STATEMENTS(in thousands, except per share data) 1. Nature of BusinessREGENXBIO Inc. (the Company) was formed on July 16, 2008 in the state of Delaware as ReGenX, LLC, and on December 22, 2009, changed itsname to ReGenX Biosciences, LLC. On September 16, 2014, the Company converted from a limited liability company (LLC) to a C-corporation, andchanged its name to REGENXBIO Inc. The Company uses its proprietary NAV® Technology platform and collaborates with clinical advisors to advance thedevelopment of gene therapy treatments for a range of severe diseases with unmet needs.Initial Public OfferingOn September 22, 2015, the Company completed its initial public offering (IPO) whereby the Company sold 7,245 shares of common stock (inclusiveof 945 shares of common stock sold by the Company pursuant to the full exercise of an option to purchase additional shares granted to the underwriters inconnection with the offering) at a price of $22.00 per share. The shares began trading on The Nasdaq Global Select Market on September 17, 2015. Theaggregate net proceeds received by the Company from the offering were $145,184, net of underwriting discounts and commissions and offering expensespayable by the Company. Upon the closing of the IPO, all outstanding shares of convertible preferred stock converted into 16,298 shares of common stock.Liquidity and RisksAs of December 31, 2015, the Company had generated an accumulated deficit of $51,620 since inception. As the Company continues to incur losses,transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and achieving a level ofrevenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company willcontinue to need to raise additional capital. As of December 31, 2015, the Company had cash, cash equivalents and marketable securities of $216,367, whichmanagement believes is sufficient to fund operations for at least the next twelve months.The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company orits competitors of technological innovations, risks of failure of clinical trials, dependence on key personnel, protection of proprietary technology,compliance with government regulations and ability to transition from preclinical manufacturing to commercial production of products. 2. Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States ofAmerica (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States (U.S.) generally accepted accountingprinciples as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board(FASB).Foreign Currency TransactionsTransaction gains (losses) that arise from exchange rate fluctuations on transactions denominated in a currency other than the U.S. dollar are includedin the statements of operations and comprehensive loss as incurred.119 Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factorsin selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of thesefinancial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expectedbusiness and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates and whether historical trends areexpected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate futureoutcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differingmaterially from those estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas, among others: stock-based compensation expense, accrued research and development expenses and the fair value of financial instruments.Segment and Geographical InformationOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by thechief operating decision maker (CODM), or decision making group, in making decisions on how to allocate resources and assess performance. TheCompany’s CODM, the Chief Executive Officer, views its operations and manages its business as one operating segment.For the year ended December 31, 2015, 78 percent and 21 percent of the Company’s revenue was generated from customers located in the U.S. andEurope, respectively. For the year ended December 31, 2014, 60 percent and 40 percent of the Company’s revenue was generated from customers located inthe U.S. and Europe, respectively. For the year ended December 31, 2013, 86 percent and 13 percent of the Company’s revenue was generated from customerslocated in the U.S. and Europe, respectively. Country of origin for revenue is determined by the Company based on the country of domicile of licensees forlicense revenue, the country in which reagent sales are delivered to for reagent sales and the location of grantors for government grant revenue. All of theCompany’s assets currently reside in the U.S.Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cashand cash equivalents include cash held in banks and money market mutual funds.Marketable SecuritiesThe Company’s marketable securities are classified as available-for-sale and are carried at fair value. Marketable securities with remaining maturitydates exceeding twelve months which are not intended to be sold prior to maturity for use in current operations are classified as non-current. Unrealized gainsand losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive loss and reported as a separate component ofstockholders’ equity until realized. A decline in the fair value below cost of available-for-sale securities that is deemed other-than-temporary is charged toresults of operations, resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted into the cost basisover the life of the related security as adjustments to the yield using the effective-interest method. Interest income is recognized when earned. Realized gainsand losses from the sale of marketable securities are based on the specific identification method and are included in results of operations.The Company regularly evaluates whether declines in the fair value of its investments below their cost are other-than-temporary. The evaluationincludes consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized lossposition, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than notthat the Company will be required to sell the securities before the recovery of their amortized cost basis. If the Company determines that the decline in fairvalue of an investment is below its accounting basis and this decline is other-than-temporary, the Company would reduce the carrying value of the security itholds and record a loss for the amount of such decline. The Company has not recorded any declines in value judged to be other-than-temporary on itsinvestments.Concentrations of Credit Risk and Off-balance Sheet RiskCash and cash equivalents, marketable securities and accounts receivable are financial instruments that are potentially subject to concentrations ofcredit risk. The Company’s cash and cash equivalents are deposited in accounts at multiple financial institutions, and120 amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depositoryinstitutions in which the cash and cash equivalents are held. The Company’s marketable securities consist of fixed income corporate debt securities and maysubject the Company to concentrations of credit risk. The Company has adopted an investment policy which limits potential concentrations of investmentsand establishes minimum acceptable credit ratings, thereby reducing credit risk exposure. Management believes that it is not exposed to significant creditrisk related to accounts receivable due to the credit quality and history of collections from its significant customers. The Company has no financialinstruments with off-balance sheet risk of loss.The following table summarizes those customers who represented at least 10 percent of revenue or accounts receivable for the periods presented: Revenue Accounts Receivable Years Ended December 31, December 31, 2015 2014 2013 2015 2014 Customer A * 33% * * * Customer B * 14% 11% 25% 46%Customer C(1) 41% * 44% * 40%Customer D * * * * 11%Customer E * * 21% * * Customer F 16% * * 42% * Customer G 22% * * 19% * *Represented less than 10%(1)Represents a related party prior to September 30, 2015Accounts ReceivableTrade accounts receivable consist of amounts due to the Company resulting from the Company’s licensing arrangements, reagent sales and grantprograms. Related party accounts receivable consists of amounts due from related parties (Note 13). Unbilled receivables consist of estimated costs incurredunder the Company’s grant programs which have not yet been submitted to the grantor for reimbursement. Receivables are stated net of an allowance fordoubtful accounts, if deemed necessary based on the Company’s evaluation of collectability using specific identification of account balances and historicalinformation regarding write-offs. Account balances are charged off against the allowance when the potential for recovery is considered remote. The Companyhas not recorded an allowance for doubtful accounts as of December 31, 2015 or 2014.Deferred Issuance CostsDeferred issuance costs, which consist of direct and incremental fees relating to the issuance of equity securities are capitalized. As of December 31,2014, the Company capitalized $157 of deferred issuance costs related to Series C convertible preferred stock (Series C Preferred Stock) (Note 8), which wereoffset against the proceeds from the issuance of the Series C Preferred Stock in January 2015. As of December 31, 2015, no amounts were deferred.Property and EquipmentProperty and equipment is stated at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed tooperations as incurred. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is includedin the results of operations. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accountsand any resulting gain or loss is recognized. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of theassets, which are as follows: Computer equipment and software 3 years Lab equipment 5 years Furniture and fixtures 5 years Leasehold improvements Shorter of lease term or estimated useful life Impairment of Long-lived AssetsThe Company reviews long-lived assets when events or changes in circumstances indicate the carrying value of the assets may not be recoverable.Recoverability is measured by comparison of the book values of the assets to estimated future net undiscounted121 cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amountby which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from theassets. No impairment losses have been recorded during the years ended December 31, 2015, 2014 and 2013.Cost Method InvestmentsCost method investments consist of non-marketable holdings in certain corporations and are stated at cost. The Company accounts for its investmentsin other entities using the cost method if its ownership interest is below 20 percent and the Company does not have significant influence over the operationsof the entity. As of December 31, 2015, the Company’s cost method investment in Audentes Therapeutics, Inc. (Audentes) (Note 9) had a carrying value of$300. As of December 31, 2014, cost method investments in Audentes and Dimension Therapeutics, Inc. (Dimension) (Note 13) had a carrying value of $303.Declines in the fair value of cost method investments below their carrying value that are deemed to be other-than-temporary are reflected in thestatements of operations and comprehensive loss as realized losses. In estimating other-than-temporary impairment losses, management considers, amongother things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer andthe intent and ability of the Company to retain its investments in the issuer for a period of time sufficient to allow for the anticipated recovery in fair value.The Company has not identified any events or changes in circumstances that would have an adverse effect on the fair value of its cost method investments.Accordingly, no other-than-temporary impairment losses were recorded for the years ended December 31, 2015, 2014 and 2013.The Company applies the variable interest model under FASB ASC Topic 810, Consolidation (ASC 810), to any entity in which the Company holdsan equity investment or to which the Company has granted a commercial license. If the entity is within the scope of the model, and meets the definition of avariable interest entity (VIE), the Company considers whether it must consolidate the VIE or if further disclosures regarding the Company’s involvement withthe VIE are necessary. If the Company is determined to be the primary beneficiary of the VIE, the Company will consolidate the VIE. This analysis isperformed at the initial investment in the entity or the inception of the commercial license agreement, or upon any reconsideration event.The Company considers a legal entity a VIE if (i) its investors do not have sufficient equity at risk for the legal entity to finance its activities withoutadditional subordinated financial support or (ii) as a group, the holders of the equity investment at risk do not have both the power to direct the activities ofthe legal entity that most significantly impact the entity’s economic performance and the obligation to absorb the expected losses or the right to receiveexpected residual returns of the legal entity. The Company considers itself to be the primary beneficiary of a VIE if the Company has both the power to directthe activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive benefits from, theVIE that could be potentially significant to the VIE. If the Company, or any of the Company’s related parties which have a variable interest in the VIE,individually lack the necessary power and benefits criteria, but the related party group as a whole has the necessary power and benefits, the Companydetermines which of the related party group members is most closely associated with the VIE and considers that party to be the primary beneficiary. As ofDecember 31, 2015 and 2014, the Company has not consolidated any VIE’s. See Note 13 for further information regarding the Company’s involvement andvariable interests in related parties and entities controlled by related parties.Related Party Debt InstrumentsThe Company evaluates each of its related party debt instruments (Note 6) with embedded features under FASB ASC Topic 815, Derivatives andHedging (ASC 815). More specifically, the Company evaluates all of the stated and implied substantive terms and features of the debt, including: (i) whetherthe debt included redemption features, (ii) how and when any redemption features could be exercised and settled and (iii) the existence and nature of anyconversion rights.122 Fair Value of Financial InstrumentsThe Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used indetermining the reported fair values. FASB ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), establishes a hierarchy of inputs used inmeasuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs beused when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained fromsources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants woulduse in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only tothe valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels ofthe fair value hierarchy are described below: ·Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability toaccess at the measurement date. ·Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs areobservable, either directly or indirectly. ·Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement andunobservable.To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair valuerequires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized inLevel 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair valuemeasurement. Please refer to Note 4 for further information on the fair value measurement of the Company’s financial instruments.Convertible Preferred Stock and Preferred UnitsIn accordance with the guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity, outstanding shares of convertible preferred stockand preferred units (Note 8) were classified outside of permanent equity and within temporary equity as of December 31, 2014 due to their associatedredemption features and liquidation preferences. At each reporting date, each series of convertible preferred stock and preferred units is accreted and stated atthe amounts in which each series is currently redeemable, which is also equal to the aggregate liquidation preference at that date.The Company evaluated each series of its convertible preferred stock and preferred units and determined that each individual series is considered adebt host under ASC 815. In making this determination, the Company’s analysis followed the whole instrument approach which compares an individualfeature against the entire convertible preferred stock or preferred unit instrument which includes that feature. The Company’s analysis was based on aconsideration of the economic characteristics and risks of each series of convertible preferred stock and preferred units. More specifically, the Companyevaluated all of the stated and implied substantive terms and features, including: (i) whether the convertible preferred stock and preferred units includedredemption features, (ii) how and when any redemption features could be exercised, (iii) whether the holders of convertible preferred stock and preferred unitswere entitled to dividends and how those dividends were calculated, (iv) the voting rights of the convertible preferred stock and preferred units and (v) theexistence and nature of any conversion rights. As a result of the Company’s conclusion that the convertible preferred stock and preferred units represent adebt host, the redemption features of all series of convertible preferred stock and preferred units were considered to be clearly and closely related to theassociated debt host instruments. Accordingly, the redemption features of all series of convertible preferred stock were not considered embedded derivativesthat required bifurcation. The Company also concluded that the conversion rights under the convertible preferred stock were not clearly and closely relatedto the debt host instruments. However, the Company concluded that the conversion rights did not meet the net settlement criteria of a derivative and,therefore, were not considered embedded derivatives that required bifurcation.The Company accounts for potential beneficial conversion features of convertible preferred stock under FASB ASC 470-20, Debt with Conversionand Other Options. At the time of each of the issuances of convertible preferred stock, the Company’s common stock into which each series of the Company’sconvertible preferred stock was convertible had an estimated fair value less than the effective conversion prices of the convertible preferred stock. Therefore,there was no intrinsic value on the respective issuance dates.123 Revenue RecognitionThe Company primarily generates revenue through license agreements with third parties which may grant rights to the research, development, andcommercialization of product candidates using the Company’s NAV® Technology. Additionally, the Company has generated revenue from grant programsand sales of licensed reagents to customers for use in research and development.The Company recognizes revenue in accordance with FASB ASC Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue is recognized foreach unit of accounting when all of the following criteria are met: ·Persuasive evidence of an arrangement exists; ·Delivery has occurred or services have been rendered; ·The seller’s price to the buyer is fixed or determinable; and ·Collectability is reasonably assured.Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s balance sheets.The Company analyzes its revenue arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition-Multiple-ElementArrangements (ASC 605-25). Pursuant to the guidance in ASC 605-25, the Company evaluates multiple-element arrangements to determine (i) thedeliverables included in the arrangement and (ii) whether the individual deliverables represent separate units of accounting or whether they must beaccounted for as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about theindividual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are consideredseparate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes ageneral right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in thecontrol of the Company. The Company does not have any material revenue arrangements that contain multiple deliverables.License Revenue and License Revenue From Related Party. The terms of the Company’s license agreements require delivery of an intellectualproperty license for use of the Company’s intellectual property in research and/or commercial development of product candidates for various diseases.License agreements generally have a term equal to the life of the intellectual property, but are terminable at the option of the licensee. Non-refundablepayments to the Company under these arrangements may include: (i) up-front license fees, (ii) option fees to exercise options to obtain commercial licenses,(iii) annual maintenance fees, (iv) sublicense fees, (v) payments based on the achievement of certain milestones based solely on the efforts of the licenseesand (vi) royalties on product sales.Nonrefundable up-front license fees are recognized as revenue upon delivery of the license provided there are no undelivered elements in thearrangement and the necessary criteria under ASC 605 for revenue recognition have been met.Options to exercise commercial licenses are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether thelicensee will choose to exercise the option. Factors that the Company considers in evaluating whether an option is substantive include the overall objectiveof the arrangement, the benefit the licensee might obtain from the arrangement without exercising the option, the cost to exercise the option and thelikelihood that the option will be exercised. For arrangements under which an option is considered substantive, the Company does not consider the itemunderlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in allocable arrangementconsideration, provided the option is not priced at a significant and incremental discount. Conversely, for arrangements under which an option is notconsidered substantive or if an option is priced at a significant and incremental discount, the Company would consider the item underlying the option to be adeliverable at the inception of the arrangement and a corresponding amount would be included in allocable arrangement consideration. As of December 31,2015 and 2014, all of the options included in the Company’s license agreements have been determined to be substantive, and none of the options are pricedat a significant and incremental discount. Option fees are recognized as revenue upon exercise and delivery of the underlying commercial license, providedthere are no undelivered elements in the arrangement and the necessary criteria under ASC 605 for revenue recognition have been met.Annual maintenance fees under the Company’s license agreements do not represent a separate deliverable aside from the delivery of the license sincethe Company has no further obligations under the agreements. Accordingly, annual maintenance fees are recognized as revenue when billable under theagreement, provided the price is fixed or determinable and collectability is deemed reasonably assured.124 Sublicense fees are payable to the Company upon the receipt of certain fees by the licensee from any sublicensees. Sublicense fees received by theCompany are recognized as revenue when the price is fixed or determinable and collectability is deemed reasonably assured.At the inception of an arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk toboth parties on the basis of the contingent nature of the milestone. The Company evaluates factors such as the scientific, clinical, regulatory, commercial andother risks that must be overcome to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone inmaking this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that amilestone is substantive. The Company has concluded that all of the clinical, regulatory and commercial milestones pursuant to its license agreements aresubstantive. Milestone payments are recognized as revenue upon achievement of the milestone by the licensee, provided that all other revenue recognitioncriteria are satisfied.The Company recognizes royalty revenue, if any, in the period of sale of the related product(s) based on the underlying contract terms, provided thatthe reported sales are reliably measurable and the Company has no remaining performance obligations, and provided that all other revenue recognitioncriteria under ASC 605 are satisfied. To date, the Company has not generated any royalty revenues.Please refer to Note 13 for information regarding license revenue from related party.Grant Revenue. Grant revenue is generated through research and development grant programs offered by the U.S. federal government and theEuropean Union. Government grants provide funds for certain types of expenditures in connection with research and development activities over acontractually defined period. Revenue related to government grants is recognized in the period during which the related costs are incurred and the relatedservices are rendered, provided that the applicable performance obligations under the grants have been met. Funds received under grants are recorded asrevenue if the Company is deemed to be the principal participant and primary obligor in the contract arrangements because the activities under the contractsare part of the Company’s development programs. If the Company is not the principal participant or primary obligor, the grant proceeds are recorded as areduction to research and development expense.The Company’s grants contain refund provisions. The Company reviews those refund provisions to determine the likelihood of repayment. If thelikelihood of repayment of the grant is determined to be remote, the grant is recognized as revenue. If the probability of repayment is determined to be morethan remote, the Company records the amount of potential repayment of the grant as a liability, until such time that the grant requirements have beensatisfied. Funds received in advance of the performance of the services are recorded as deferred revenue. Please refer to Note 9 for further informationregarding the Company’s grant agreements.Reagent Sales. Reagent sales consist of sales of licensed reagents to third parties for use in research and development. Revenue from reagent sales isrecognized upon delivery to customers, provided that all other revenue recognition criteria under ASC 605 are satisfied.Research and Development ExpensesResearch and development costs are charged to expense as costs are incurred. Research and development costs include salaries and benefits, otherpersonnel costs, facilities costs, overhead costs, preclinical and clinical contract services, regulatory, manufacturing and other related costs. Up-front feesincurred in obtaining technology licenses are charged to research and development expense as incurred if the technology licensed has no alternative futureuse. Advance payments for goods or services for future research and development activities are deferred and expensed as the goods are delivered or therelated services are performed.The Company estimates research and development expenses for manufacturing activities, process development, preclinical studies and clinical trialsbased on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage the activities onthe Company’s behalf. In accruing these research and development expenses, the Company estimates the time period over which services will be performedand the level of effort to be expended in each period. These estimates are based on communications with the third party service providers and otherinformation available to the Company at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from theestimate, the Company will adjust the accrual accordingly. There have been no significant changes from the Company’s original estimates in any of theperiods presented.125 Stock-based CompensationThe Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—StockCompensation (ASC 718). ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in thestatement of operations and comprehensive loss based on their fair values.The Company’s stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards toemployees with service-based vesting conditions is recognized on a straight-line basis based on the estimated grant date fair value over the associated serviceperiod of the award, which is generally the vesting term. Compensation expense related to awards to non-employees with service-based vesting conditions isrecognized based on the then-current fair value at each financial reporting date prior to the measurement date over the associated service period of the award,which is generally the vesting term, on a straight-line basis. Compensation expense related to awards to employees with performance-based vestingconditions is recognized based on the estimated grant date fair value over the requisite service period using the accelerated attribution method to the extentachievement of the performance condition is probable. Compensation expense related to awards to non-employees with performance-based vestingconditions is recognized based on the then-current fair value at each financial reporting date prior to the measurement date over the requisite service periodusing the accelerated attribution method to the extent achievement of the performance condition is probable.The Company estimates the fair value of its option awards to employees and directors using the Black-Scholes option-pricing model, which requiresthe input of and subjective assumptions, including (i) the fair value of the underlying common stock, (ii) the expected stock price volatility, (iii) thecalculation of expected term of the award, (iv) the risk-free interest rate and (v) expected dividends. Due to the lack of company specific historical andimplied volatility data of its common stock, the Company has based its estimate of expected volatility on the historical volatility of a group of similarcompanies that are publicly traded. When selecting these public companies on which it has based its expected stock price volatility, the Company selectedcompanies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry and with historical share priceinformation sufficient to meet the expected term of the stock-based awards. The Company will continue to apply this method of estimating expectedvolatility until a sufficient amount of historical information regarding the volatility of its own common stock price becomes available. The Companycomputes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expectedterm of the stock-based awards. The Company has estimated the expected term of its employee stock options using the “simplified” method, whereby, theexpected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historical data. Therisk-free interest rates for periods within the expected term of the option are based on the U.S. Treasury securities with a maturity date commensurate with theexpected term of the associated award. The Company has never paid, and does not expect to pay dividends in the foreseeable future.The Company is also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differfrom its estimates. To date, a forfeiture rate of zero has been used to calculate stock-based compensation expense. To the extent that actual forfeitures differfrom the Company’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were revised. Stock-based compensationexpense recognized in the financial statements is based on awards that are ultimately expected to vest.The Company has granted stock options to non-employees as compensation for advisory services provided to the Company. Consistent with theguidance in FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, the fair value of each non-employee stock option is estimated at the dateof grant using the Black-Scholes option-pricing model with assumptions generally consistent with those used for employee stock options, with the exceptionof expected term, which is based on the contractual life.Income TaxesIncome taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes (ASC 740), which provides for deferred taxes using an asset andliability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included inthe financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basesof assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, ifbased upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Companyrecognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefitwill more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.As of December 31, 2015 and 2014, the Company did not have any significant uncertain tax positions.126 The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2015 and 2014, theCompany had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements ofoperations and comprehensive loss.Net Loss Per ShareOn September 16, 2014, the Company converted from an LLC to a C-corporation. Upon the conversion, every 50 Class A Units, Series A PreferredUnits and Series B Preferred Units (Note 8) held were converted into 1 share of common stock, Series A convertible preferred stock (Series A Preferred Stock)and Series B convertible preferred stock (Series B Preferred Stock), respectively. Class A Units of the LLC had similar rights and characteristics of commonstock issued upon the conversion. In calculating net loss per share, the Company retrospectively applied the effects of the conversion to the number ofClass A Units, Series A Preferred Units and Series B Preferred Units outstanding prior to the conversion. Net loss per share for periods prior to the conversionto a C-corporation refers to net loss per Class A Unit.The Company computes net loss per share in conformity with the two-class method required for participating securities. The Company considers allseries of convertible preferred stock outstanding prior to the IPO, and all series of preferred units outstanding prior to the conversion to a C-corporation, to beparticipating securities. The holders of convertible preferred stock outstanding prior to the IPO were entitled to receive preferential dividends in the eventthat a dividend was to be paid to the holders of common stock, and the holders of preferred units outstanding prior to the conversion to a C-corporation wereentitled to a preferred return in the event that operating distributions were to be paid to the Class A Unit holders of the LLC. The holders of convertiblepreferred stock and preferred units did not have a contractual obligation to share in the losses of the Company. As such, the Company’s net losses for theyears ended December 31, 2015, 2014 and 2013 were not allocated to these participating securities. In connection with the IPO, all outstanding shares ofconvertible preferred stock were automatically converted into shares of common stock.Basic net loss per share is calculated by dividing net loss applicable to holders of common stock by the weighted-average shares outstanding duringthe period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted-average shares outstandingfor the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted netloss per share calculation, convertible preferred stock and preferred units, stock options and debt instruments containing share settlement options areconsidered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive.Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic anddiluted net loss per share until the contingency has been fully met. Accordingly, basic and diluted net loss per share and unit were the same for all periodspresented.Comprehensive LossThe Company’s comprehensive loss includes its net loss as well as net unrealized losses on available-for-sale securities.Recently Announced Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and providesprinciples for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply adual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase bythe lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over theterm of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelvemonths regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. Thestandard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company isevaluating the application of this ASU, but has not yet determined the potential effects it may have on the Company’s financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Topic 825-10): Recognition and Measurement of Financial Assetsand Financial Liabilities, which supersedes the current guidance to classify equity securities with readily determinable fair values into different categoriesand requires equity securities to be measured at fair value with changes in the fair value recognized through net income (loss). This guidance is effective forannual and interim periods beginning after December 15, 2017. The Company is evaluating the application of this ASU, but has not yet determined thepotential effects it may have on the Company’s financial statements.127 In February 2015, the FASB issued ASU 2015-2, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which provides clarificationregarding the guidance surrounding consolidation of certain legal entities. This guidance is effective for annual and interim periods beginning afterDecember 15, 2015. The Company has evaluated the application of this ASU, and determined that it does not have a material effect on the Company’sfinancial statements.In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern, requiring management to evaluate whether events or conditions could impact anentity’s ability to continue as a going concern and to provide disclosures if necessary. Management will be required to perform the evaluation within oneyear after the date that the financial statements are issued. Disclosures will be required if conditions give rise to substantial doubt and the type of disclosurewill be determined based on whether management’s plans will be able to alleviate the substantial doubt. The ASU will be effective for the first annual periodending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. The Company is evaluating theapplication of this ASU, but has not yet determined the potential effects it may have on the Company’s financial statement disclosures.In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When theTerms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period, which requires the Company to assess share-based awards with performance targets that could be achieved after the requisite service period for potential treatment as performance conditions. Under theASU, compensation expense is to be recognized when the performance target is deemed probable and should represent the compensation expense attributableto the periods for which service has already been rendered. If the performance target is reached prior to achievement of the service period, the remainingunrecognized compensation cost should be recognized over the remaining service period. The ASU is effective for annual and interim periods beginning afterDecember 15, 2015 with early adoption permitted. The Company has evaluated the application of this ASU, and determined that it does not have a materialeffect on the Company’s financial statements.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognitionrequirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU alsorequires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, includingsignificant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issuedASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), which deferred the effective date of the guidance under ASU No. 2014-09 for entitiesby one year. The ASU is now effective for annual and interim reporting periods beginning after December 15, 2017. Earlier application is permitted only as ofannual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluatingthe application of this ASU, but has not yet determined the potential effects it may have on the Company’s financial statements. 3. Marketable SecuritiesThe following table presents a summary of the Company’s marketable securities, which consist solely of available-for-sale securities: Amortized Cost Unrealized Gains UnrealizedLosses Fair Value December 31, 2015 Corporate bonds $157,977 $4 $(759) $157,222 Commercial paper 4,990 — — 4,990 Common equity securities 3 36 — 39 $162,970 $40 $(759) $162,251 The Company’s common equity securities consist of shares of common stock of Dimension, which became a publicly traded company in October2015. The Company obtained these shares in connection with a license granted to Dimension in October 2013 (Note 13). The Company is restricted fromtrading these securities until April 2016 pursuant to a lock-up agreement entered into in connection with Dimension’s IPO. The Company has classified theseshares as available-for-sale securities and recognized an unrealized gain of $36 which is included in other comprehensive loss for the year ended December31, 2015. Prior to Dimension’s IPO, the shares were not marketable and were accounted for as a cost method investment on the Company’s balance sheets.128 As of December 31, 2015, no available-for-sale securities had remaining maturities greater than three years. The Company did not hold any available-for-sale securities as of December 31, 2014.The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. As of December 31,2015, the balance in the Company’s accumulated other comprehensive loss consisted solely of net unrealized gains and losses on available-for-salesecurities. For the year ended December 31, 2015, the Company recognized net unrealized losses on available-for-sale securities of $719, which is includedin other comprehensive loss. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the year endedDecember 31, 2015, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive loss for the period.As of December 31, 2015, the Company did not hold any available-for-sale securities in an unrealized loss position for more than twelve months. Theaggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2015 was $155,486,which consisted of corporate debt securities with credit ratings of A-2/A or higher. The Company has the intent and ability to hold such securities untilrecovery. The Company determined that there have been no material changes in the credit risk of these investments since their initial purchases. As a result,the Company determined that none of these investments are other-than-temporarily impaired as of December 31, 2015. 4. Fair Value of Financial InstrumentsFinancial instruments reported at fair value on a recurring basis include cash equivalents and marketable securities. Cash equivalents consist solely ofmoney market mutual funds. Marketable securities consist of corporate debt securities, including corporate bonds and commercial paper, as well as commonequity securities as disclosed in Note 3. The following tables present the fair value of cash equivalents and marketable securities in accordance with thehierarchy discussed in Note 2: Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total December 31, 2015 Money market mutual funds (cash equivalents) $— $54,104 $— $54,104 Corporate bonds (marketable securities) — 157,222 — 157,222 Commercial paper (marketable securities) — 4,990 — 4,990 Common equity securities (marketable securities) 39 — — 39 $39 $216,316 $— $216,355 Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total December 31, 2014 Money market mutual funds (cash equivalents) $— $844 $— $844 $— $844 $— $844 Management estimates that the carrying amounts of its accounts receivable, accounts payable, accrued expenses and other current liabilities andrelated party payables approximate fair value due to the short-term nature of those instruments. Certain debt instruments (Note 6) outstanding at December 31, 2014 accrued interest at below market rates. The Company has recorded a discount tothe face value of the instrument to account for the difference between the present value of the debt at an estimated market rate versus face value. Accordingly,management believes that the carrying values of all debt instruments approximate fair value.The Company has determined that it is not practicable to estimate the fair value of cost method investments. The Company has not identified anyevents or changes in circumstances that would have an adverse effect on the fair value of its cost method investments. 129 5. Property and Equipment, NetProperty and equipment, net consists of the following: December 31, 2015 Computer equipment and software $458 Furniture and fixtures 105 Leasehold improvements 55 Total property and equipment 618 Accumulated depreciation and amortization (80)Property and equipment, net $538 As of December 31, 2014, the Company had no property and equipment because the Company’s resources used in operations were provided by arelated party (Note 13). Accordingly, no depreciation or amortization expense was recorded for the years ended December 31, 2014 and 2013. The Companyrecorded $80 of depreciation and amortization expense for the year ended December 31, 2015. 6. Related Party Debt InstrumentsDue to Related Party Under Services AgreementUntil terminated in January 2015, the Company was party to a services agreement with FoxKiser LLP (FoxKiser), a related party (Note 13). Under theservices agreement, the Company paid a fixed monthly fee and a support fee to FoxKiser. Amounts outstanding under the services agreement in excess of 30days from their due date accrued interest at 1.5 percent per month, compounding monthly.The Company entered into an agreement (the Initial Conversion Agreement) with FoxKiser in which all principal and interest owed under the servicesagreement as of September 30, 2013, which was $5,892, may be settled at the option of FoxKiser, in whole or in part, (i) upon the next issuance of preferredequity securities by the Company, in shares of such preferred equity securities issued at a price per share equal to the issuance price of such shares, or (ii) if anissuance of preferred equity securities has not taken place by December 31, 2013, in shares of common equity securities of the Company at a price per shareequal to the fair value of such common equity securities as determined by the Board of Directors. The debt is deemed fully settled upon conversion intoequity securities of the Company.On October 30, 2013, in conjunction with the Company’s issuance of Series B Preferred Units (Note 8), FoxKiser converted the entire $5,892outstanding under the Initial Conversion Agreement into 71,160 Series B Preferred Units at a price per unit of $0.082798.On July 31, 2014, the Company entered into another agreement (the Second Conversion Agreement) with FoxKiser. Under the Second ConversionAgreement, all principal and interest owed under the services agreement between the Company and FoxKiser on or after July 31, 2014, with a maximumamount of $2,000, may be settled at the option of FoxKiser, in whole or in part, (i) upon the next issuance of preferred equity securities by the Company, inshares of such preferred equity securities issued at a price per share equal to the issuance price of such shares, or (ii) if an issuance of preferred equitysecurities has not taken place by December 31, 2014, in shares of common equity securities of the Company at a price per share equal to the fair value of suchcommon equity securities as determined by the Board of Directors. The debt is deemed fully settled upon conversion into equity securities of the Company.As of December 31, 2014, the Company had accrued $1,423 payable to FoxKiser under the services agreement, which contained an option to besettled in preferred or common shares in accordance with the Second Conversion Agreement.Related Party Promissory NotesOn July 31, 2014, the Company received $1,800 in exchange for a promissory note issued to FoxKiser. On September 15, 2014, the Company received$600 in exchange for a second promissory note issued to FoxKiser. Both promissory notes accrued interest at the Short-Term Applicable Federal Rate (0.34%at December 31, 2014), compounding annually, and were payable on demand by FoxKiser at the earlier of December 31, 2014 or the next issuance ofpreferred equity securities by the Company.130 Both promissory notes may be settled at the option of FoxKiser, in whole or in part, (i) upon the next issuance of preferred equity securities by theCompany, in shares of such preferred equity securities issued at a price per share equal to the issuance price of such shares, or (ii) if an issuance of preferredequity securities has not taken place by December 31, 2014, in shares of common equity securities of the Company at a price per share equal to the fair valueof such common equity securities as determined by the Board of Directors. The debt is fully settled upon conversion into equity securities of the Company.The promissory notes with FoxKiser bear interest at below-market rates. Accordingly, the Company imputed interest on the promissory notes andrecorded a discount equal to the difference between the face value of the promissory notes and the present value of the notes at an estimated market rate of 15percent. The aggregate discount of $128 on the promissory notes was amortized using the effective interest method through December 31, 2014, at whichdate the notes became payable upon demand by FoxKiser. The discount was recorded as additional paid-in capital from FoxKiser due to the related partynature of the borrowing arrangements. Amortization of the discount is recorded as interest expense in the statements of operations and comprehensive loss. Asof December 31, 2014, the promissory notes had an outstanding principal of $2,400, and accrued interest of $3.The Company evaluated the embedded features of each of its debt instruments under ASC 815. The Company has concluded that the redemptionfeatures, including all put and call features, with the exception of settlement upon a liquidation or change in control as discussed further below, are clearlyand closely related to the debt host instruments and, therefore, are not considered embedded derivatives that require bifurcation. Additionally, the Companyconcluded that the share settlement rights of the debt instruments do not require bifurcation as embedded derivatives because in the event of a settlement inshares, the debt is settled in a variable number of equity securities with an aggregate fair value equaling the debt principal outstanding on the debt hostinstruments.Pursuant to the terms of the Initial Conversion Agreement, Second Conversion Agreement and each of the promissory notes with FoxKiser, in theevent of a liquidation or change in control, as defined in the agreements, the Company shall pay two times (2x) the principal and accrued interest thenoutstanding in order to settle the debt. The Company evaluated this redemption feature in accordance with ASC 815 and determined that it is an embeddedderivative that should be bifurcated from each of the debt host instruments. However, due to the low probability of a liquidation or change in control event,the Company has determined that the liability associated with this derivative instrument is de minimis as of December 31, 2014. As discussed below, uponthe conversion of the debt instruments into Series C Convertible Preferred Stock in January 2015, this redemption feature is no longer outstanding.On January 13, 2015, in conjunction with the Company’s issuance of Series C Preferred Stock (Note 8), FoxKiser elected its share settlement optionsand converted $1,389 of the amount due under the services agreement and $2,403 of principal and interest due under the promissory notes, for a total of$3,792, into 585 shares of Series C Preferred Stock at a per share price of $6.477. The promissory notes were settled in full upon the conversion, and theCompany terminated the services agreement with FoxKiser and paid the remainder of the outstanding service fees in full. As of December 31, 2015, noamounts were outstanding under the services agreement or promissory notes with FoxKiser.Interest expense to FoxKiser under the services agreement and promissory notes, inclusive of imputed interest, for the years ended December 31, 2015,2014 and 2013 was $20, $321 and $611, respectively. 7. Commitments and ContingenciesLease AgreementsThe Company recognizes rent expense on a straight-line basis over the term of its operating leases commencing on the date the Company takespossession of the leased property. Tenant improvement allowances which are considered to be lease incentives from the lessor are recorded as deferred rentand amortized as a reduction of rent expense over the term of the lease from the possession date.In January 2015, the services agreement with FoxKiser (Note 13) was terminated and the Company entered into an operating lease with FoxKiser foroffice space in Washington, D.C. The lease agreement, which had a month-to-month term, required monthly payments of $20. The lease was terminated inApril 2015.In March 2015, the Company entered into a 5.5-year, non-cancelable operating lease for office space in Rockville, Maryland. The lease commenced inApril 2015, and expires in September 2020. The Company has options to extend the lease for up to 6 years. Initial monthly payments required under the leasewere $24 beginning in October 2015 and escalate annually in accordance with the lease.In September 2015, and again in October 2015, the Company amended its operating lease in Rockville, Maryland to include additional office andlaboratory space and extend the term of the lease for its existing space to October 2020. The lease for the131 additional space is expected to commence in April 2016, and has a 5-year term. The Company has options to extend the lease for the additional space to becoterminous with the Company’s existing lease at that facility. Initial monthly payments required under the lease for the additional space are $41 andescalate annually in accordance with the lease. The Company received a $286 tenant improvement allowance from the landlord which will be deferred andamortized on a straight-line basis as a reduction of rent expense over the term of lease.The Company has entered into various short-term operating leases for office and laboratory space in Bethesda, Maryland and Philadelphia,Pennsylvania, which expire at various dates through June 2016.As of December 31, 2015, future minimum lease payments under non-cancelable operating leases are as follows: Operating Leases 2016 $777 2017 824 2018 848 2019 874 2020 832 Thereafter 144 Total minimum lease payments $4,299 Rent expense under all operating leases, including additional rent charges for utilities, parking, property management, operating expenses and realestate taxes for the years ended December 31, 2015, 2014 and 2013 was $396, $45 and $45, respectively.In January 2016, the Company entered into a non-cancelable operating lease for additional office space in Rockville, Maryland. The lease is expectedto commence by March 2016, and has term of approximately 7.5 years. Initial monthly payments required under the lease are $38 beginning seven monthsfrom the commencement date and escalate annually in accordance with the lease. The Company received a $725 tenant improvement allowance from thelandlord which, if used by the Company, will be deferred and amortized on a straight-line basis as a reduction of rent expense over the term of lease.Licenses Granted to the CompanyLicenses granted to the Company may require the Company to make future payments relating to sublicense fees, milestone fees for milestones not metas of December 31, 2015 and royalties on future sales of licensed products. Additionally, the Company may be responsible for the cost of the maintenance ofthe intellectual property as incurred by its licensors. Up-front fees to obtain licensed technology are included in research and development expenses andpatent maintenance costs are included in general and administrative expenses in the statements of operations and comprehensive loss. Sublicense fees arebased on a specified percentage of license fees earned by the Company and are included in licensing costs in the statements of operations and comprehensiveloss. Royalties on sales of licensed reagents for use in research and development are included in costs of reagent sales in the statements of operations andcomprehensive loss. The Company has not commercialized any product candidates or paid any royalties under these agreements other than for the sales oflicensed reagents.The Trustees of the University of Pennsylvania. On February 20, 2009, the Company entered into a license agreement, as amended, with The Trusteesof the University of Pennsylvania (Penn) for exclusive, worldwide rights to certain patents owned by Penn underlying the Company’s NAV® Technologyplatform. Under the terms of the agreement, in consideration for the license, the Company issued to Penn 24.5 percent of the then outstanding membershipinterest in the LLC on a fully diluted basis after issuance. The Company is obligated to pay Penn royalties on net sales and sublicense fees, if any.Additionally, the Company is obligated to reimburse Penn for certain costs incurred related to the maintenance of the licensed patents.Expenses incurred by the Company related to its license from Penn were as follows: Years Ended December 31, 2015 2014 2013 Sublicense fees $703 $443 $76 Royalties on sales of reagents 9 17 18 Maintenance of licensed patents 154 256 120 $866 $716 $214 132 As of December 31, 2015 and 2014, the Company had accrued $440 and $305, respectively, in expenses payable to Penn under the license agreement.As of December 31, 2015, these amounts are included in accounts payable and accrued expenses and as of December 31, 2014, these amounts are included inother related party payables on the Company’s balance sheets. Until September 30, 2015, the Company considered Penn to be a related party. For the ninemonths ended September 30, 2015, the Company incurred $264, $8 and $118 in expenses for sublicense fees, royalties on reagent sales and reimbursement ofpatent maintenance costs, respectively, under its license from Penn. See Note 13 for further information on related party transactions with Penn.GlaxoSmithKline LLC. On March 6, 2009, the Company entered into a license agreement, as amended, with GlaxoSmithKline LLC (GSK) forexclusive, worldwide rights to certain patents underlying the Company’s NAV® Technology platform which are owned by Penn and exclusively licensed toGSK. Under the terms of the agreement, in consideration for the license the Company issued to GSK 19.9 percent of then outstanding membership interest inthe LLC on a fully diluted basis after issuance. The Company is obligated to pay GSK royalties on net sales and sublicense fees, if any. Additionally, theCompany is obligated to reimburse GSK for certain costs incurred and invoiced to the Company related to the maintenance of the licensed patents. TheCompany is obligated to pay GSK up to $1,500 upon the achievement of various milestones. As of December 31, 2015, no milestones have been achievedand accordingly no milestone payments were payable to GSK.Expenses incurred by the Company related to its license from GSK were as follows: Years Ended December 31, 2015 2014 2013 Sublicense fees $703 $443 $76 Royalties on sales of reagents 5 10 11 Maintenance of licensed patents 573 432 455 $1,281 $885 $542 As of December 31, 2015 and 2014, the Company had accrued $526 and $2,028, respectively, in expenses payable to GSK under the licenseagreement. As of December 31, 2015, these amounts are included in accounts payable and accrued expenses and as of December 31, 2014, these amounts areincluded in other related party payables on the Company’s balance sheets. Until September 30, 2015, the Company considered GSK to be a related party. Forthe nine months ended September 30, 2015, the Company incurred $264, $5 and $474 in expenses for sublicense fees, royalties on reagent sales andreimbursement of patent maintenance costs, respectively, under its license from GSK. See Note 13 for further information on related party transactions withGSK.ARIAD Pharmaceuticals, Inc. On November 19, 2010, the Company entered into a license agreement with ARIAD Pharmaceuticals, Inc. (ARIAD), forexclusive, worldwide rights to certain patents owned and exclusively licensed by ARIAD. In consideration for the license, the Company issued Class A Unitsto ARIAD with a fair value of $726. Under the terms of the agreement, the Company is obligated to pay ARIAD royalties on net sales, and sublicense fees, ifany. Additionally, the Company is obligated to pay ARIAD up to $2,300 and annual maintenance fees of $50 upon the achievement of various milestones.As of December 31, 2015, no milestones have been achieved and accordingly no milestone payments or maintenance fees were payable to ARIAD.Additionally, the Company has not incurred any royalties or sublicense fees payable to ARIAD since the inception of the agreement. The Company had noamounts due to ARIAD under the agreement as of December 31, 2015 and 2014.Regents of the University of Minnesota. On November 10, 2014, the Company entered into a license agreement with Regents of the University ofMinnesota (Minnesota), for an exclusive license under certain patent rights to commercialize products covered by the licensed patent rights in any country orterritory in which a licensed patent has been issued and is unexpired, or a licensed patent application is pending. In consideration for the license, theCompany paid an up-front fee of $25 and reimbursed Minnesota for patent maintenance expenses of $9. Under the terms of the agreement, the Company isobligated to pay Minnesota annual maintenance fees between $5 and $15 per year on each anniversary date of the agreement. Additionally, the Company isobligated to pay royalties on net sales and sublicense fees, if any, and up to $125 per licensed product upon the achievement of various milestones. As ofDecember 31, 2015 and 2014, no milestones have been achieved and accordingly no milestone payments were payable to Minnesota. Additionally, theCompany has not incurred any royalties or sublicense fees payable to Minnesota since the inception of the agreement. The Company had no amounts due toMinnesota under the agreement as of December 31, 2015 and 2014.Guarantees and IndemnificationsIn the normal course of business, the Company enters into agreements that contain a variety of representations and provide for generalindemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in thefuture. To date, the Company has not paid any claims or been required to defend any action related to its133 indemnification obligations. As of December 31, 2015 and 2014, the Company did not have any material indemnification claims that were probable orreasonably possible and consequently has not recorded any related liabilities. 8. CapitalizationIn connection with the IPO, which closed on September 22, 2015, all of the outstanding shares of the Company’s convertible preferred stock wereconverted into 16,298 shares of its common stock. As of December 31, 2015, the authorized capital stock of the Company included 100,000 shares ofcommon stock, par value $0.0001 per share, and 10,000 shares of preferred stock, par value $0.0001 per share. The Company’s restated certificate ofincorporation and bylaws, which were adopted in connection with the IPO, contain the rights, preferences and privileges of the Company’s stockholders andtheir respective shares.As of December 31, 2014, the authorized capital stock of the Company included 9,500 shares of common stock, par value $0.0001 per share, and4,299 shares of preferred stock, par value $0.0001 per share. The Company’s authorized preferred stock included 2,393 shares designated as Series A PreferredStock and 1,906 shares designated as Series B Preferred Stock.Preferred UnitsOn December 31, 2010, the Company issued 119,656 Series A Preferred Units at a per unit price of $0.0251 for aggregate proceeds of $3,000. OnOctober 30, 2013, the Company issued 95,315 Series B Preferred Units at a per unit price of $0.082798 for an aggregate amount of $7,857, net of issuancecosts of $35. The aggregate purchase price of $7,857 included $1,965 of net cash proceeds from new investors and the conversion $5,892 of debt under theInitial Conversion Agreement (Note 6) with FoxKiser. The Series A Preferred Units and Series B Preferred Units are herein collectively referred to as “PreferredUnits.”Holders of the Preferred Units were entitled to a pre-tax cumulative internal rate of return of 8 percent per annum, compounding annually (the PreferredReturn). Subsequent to the issuance of the Series B Preferred Units, Preferred Units were redeemable by the holder upon the majority vote of all Preferred Unitholders on a per unit basis on or after October 30, 2018. The redemption price of the Preferred Units was equal to the original issue price of each unit heldplus any amounts due under the Preferred Return on the redemption date.Conversion to C-corporationOn September 16, 2014, the Company converted from an LLC to a C-corporation. Upon the conversion, Preferred Units were subject to a 50-to-1reverse unit split, and converted into Series A Preferred Stock and Series B Preferred Stock of the Company. Specifically, the 119,656 Series A Preferred Unitsissued and outstanding on the conversion date were converted into 2,393 shares of Series A Preferred Stock, and the 95,315 Series B Preferred Units issuedand outstanding on the conversion date were converted into 1,906 shares of Series B Preferred Stock.Upon the conversion to a C-corporation and filing of the Company’s certificate of incorporation on September 16, 2014, and as of December 31, 2014,rights, preferences and privileges of Series A Preferred Stock and Series B Preferred Stock consisted of the following:Dividends. The holders of Series A Preferred Stock and Series B Preferred Stock were entitled to receive dividends, in preference to common stock, ona pro rata basis, at a dividend rate equal to $0.1003 and $0.331192 per annum for each share of Series A Preferred Stock and Series B Preferred stock,respectively. Dividends were cumulative and accrued on each share of Series A Preferred Stock and Series B Preferred Stock from the respective original dateof issuance of each share. After payment dividends to holders of Series A Preferred Stock and Series B Preferred Stock, any additional dividends were to bemade to the holders of Series A Preferred Stock, Series B Preferred Stock and common stock in proportion to the number of shares of common stock thatwould be held by each holder if all shares of Series A Preferred Stock and Series B Preferred Stock were converted to common stock at the then effectiveconversion rate. As of December 31, 2015 the Company has not declared or paid any dividends or operating distributions since its inception.Liquidation Preference. In the event of a liquidation event, as defined below, either voluntary or involuntary, the holders of Series A Preferred Stockand Series B Preferred Stock had preference over common stock to any proceeds from liquidation at an amount equal to the original issuance price per shareof Series A Preferred Stock and Series B Preferred Stock plus any accrued but unpaid dividends, whether declared or not, and any other declared but unpaiddividends. A liquidation event includes (i) the sale or disposition of substantially all of the Company’s assets or the exclusive license of substantially all ofthe Company’s intellectual property, (ii) a merger or consolidation in which the stockholders of the Company prior to the transaction no longer hold at least50 percent of the voting power of the merged or consolidated entity, (iii) a transaction, or series of transactions, which results in a single134 party, or group of affiliated entities representing a single party, owning 50 percent of more the Company’s equity securities or (iv) a liquidation, dissolution,or winding up of the Company. For purposes of the liquidation preference, the original issuance price of Series A Preferred Stock and Series B Preferred Stockwas $1.255 and $4.1399 per share, respectively. If proceeds from the liquidation event were insufficient to pay the entire liquidation preference to holders ofSeries A Preferred Stock and Series B Preferred Stock, then the proceeds were to be distributed ratably among the holders of Series A Preferred Stock andSeries B Preferred Stock in proportion to the total preferential amount each holder was entitled to under the liquidation preference. Upon full payment of theliquidation preference, any remaining proceeds were to be distributed among the holders of Series A Preferred Stock and Series B Preferred Stock andcommon stock pro rata based on the number of shares of common stock, assuming full conversion of all Series A Preferred Stock and Series B Preferred Stockinto common stock, held by each holder. For purposes of determining the amount each holder of Preferred Stock was entitled to receive with respect to aliquidation event, holders of Series A Preferred Stock and Series B Preferred Stock were deemed to have their shares converted into shares of common stockimmediately prior to the liquidation event if, as a result of an actual conversion, the holder would receive an aggregate amount greater than the amount thatwould be distributed if the holder’s preferred shares had not been converted into common stock. If the holder was deemed to have converted shares of SeriesA Preferred Stock and Series B Preferred Stock into shares of common stock for purposes of the liquidation preference, then the holder was not entitled toreceive any distribution that would be made to holders of preferred shares that were not converted.Redemption. Series A Preferred Stock and Series B Preferred Stock was redeemable upon the majority vote of all Series A Preferred Stock and Series BPreferred Stock holders on a per share basis, after October 30, 2018. The redemption price of the Series A Preferred Stock and Series B Preferred Stock wasequal to the original issue price of each share held plus all accrued but unpaid dividends, whether or not declared, and was to be paid in three annualinstallments beginning on the first redemption date. For purposes of the redemption price, the original issuance price of Series A Preferred Stock and Series BPreferred Stock was $1.255 and $4.1399 per share, respectively.Conversion. Each share of Series A Preferred Stock and Series B Preferred Stock was convertible at the option of the holder at any point in time intofully paid and non-assessable shares of common stock. Upon conversion, the Series A Preferred Stock and Series B Preferred Stock would be fully settled.Each share of Series A Preferred Stock and Series B Preferred Stock was convertible into that number of shares of common stock as determined by dividingthe original issuance price of such share by the applicable conversion price. For purposes of determining the conversion rate, the original issuance price ofSeries A Preferred Stock and Series B Preferred Stock was $1.255 and $4.1399 per share, respectively. As of December 31, 2014, the conversion rate was 1:1,but was subject to future adjustments to the conversion price upon the occurrence of certain events including (i) certain future issuances of common stock at aprice less than the conversion price in effect on the date of such issuance, and (ii) future stock splits, subdivisions or combinations of outstanding commonstock.Each share of Series A Preferred Stock and Series B Preferred Stock would automatically convert into shares of common stock at the applicableconversion rate upon (i) a qualified public offering, as defined in the Certificate of Incorporation, at a per share price no less than $20.6995 per share (asadjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like) and $50,000 in aggregate gross proceeds, prior todeduction of underwriting discounts and commissions, or (ii) the majority vote of the holders of Series A Preferred Stock and Series B Preferred Stock on a pershare and as-converted to common stock basis.Voting. The holders of each share of Series A Preferred Stock and Series B Preferred Stock had the right to one vote for each share of common stockinto which the shares could then be converted. Holders of Series A Preferred Stock and Series B Preferred Stock had full voting rights and powers equal tothose of common stock holders. As long as shares of Series A Preferred Stock remained outstanding, the holders of Series A Preferred Stock, voting as aseparate class, were entitled to elect three directors to the Board of Directors. As long as shares of Series B Preferred Stock remained outstanding, the holdersof Series B Preferred Stock, voting as a separate class, were entitled to elect one director to the Board of Directors. The holders of outstanding common stock,voting as a separate class, were entitled to elect one director to the Board of Directors. The holders of Preferred Stock and common stock, voting together as asingle class on an as-converted basis for Preferred Stock, were entitled to elect any remaining directors of the Company.The Company evaluated the conversion of Series A Preferred Units and Series B Preferred Units into Series A Preferred Stock and Series B PreferredStock, respectively, giving consideration to all changes in the rights, preferences and privileges of each class of securities. As a result of the conversion,holders of previously issued preferred units were given a conversion option to convert their newly issued preferred stock into common stock. Additionally,dividends on the newly issued preferred shares were no longer compounded annually as they were under the Preferred Return, which decreased theliquidation and redemption values of the securities. Management determined that the changes to these rights, privileges and preferences should be accountedfor as a modification of the securities.135 Issuance of Series C Preferred StockOn January 13, 2015, the Company completed the issuance and sale of 4,632 shares of Series C Preferred Stock, par value $0.0001 per share, at a pershare price of $6.477 for aggregate gross proceeds of $30,000. The aggregate purchase price of $30,000 included $26,021 of cash proceeds, net of issuancecosts of $187, and the conversion of $3,792 of debt as discussed in Note 6.Extinguishment of Preferred StockIn connection with the issuance of the Series C Preferred Stock in January 2015, the rights, preferences and privileges of Series A Preferred Stock andSeries B Preferred Stock then outstanding were modified. More specifically, Series C Preferred Stock received preference in dividends and liquidationproceeds over Series A Preferred Stock and Series B Preferred Stock. Additionally, the dividend rights changed from cumulative dividend rights to non-cumulative dividend rights, and all accrued but unpaid cumulative dividends on the Series A Preferred Stock and Series B Preferred Stock as of January 13,2015 were forfeited. As a result of this modification, the redemption value and liquidation preferences of Series A Preferred Stock and Series B PreferredStock, which were previously equal to original issue price plus accrued but unpaid cumulative dividends, were reduced to original issue price plus non-cumulative dividends declared. Additionally, the redemption date of Series A Preferred Stock and Series B Preferred Stock was changed from October 30,2018 to December 31, 2019.The Company has accounted for the amendment to the rights, preferences and privileges of the Series A Preferred Stock and Series B Preferred Stock asan extinguishment of the original convertible preferred stock and issuance of new convertible preferred stock due to the significance of the modifications tothe substantive contractual terms of the convertible preferred stock and the associated fundamental changes to the nature of the convertible preferred stock.Accordingly, upon extinguishment the Company recorded a loss of $1,317 on the Series A Preferred Stock and a gain of $2,076 on the Series B PreferredStock within stockholders’ equity (deficit) equal to the difference between the fair value of the new shares of preferred stock issued and the carrying amountof the old shares of preferred stock extinguished. The Company allocated the entire net gain on extinguishment of convertible preferred stock of $759 toadditional paid-in capital. The net gain on extinguishment is reflected in the calculation of net loss available to common stockholders in accordance withFASB ASC Topic 260, Earnings per Share. The fair value of the Series A Preferred Stock and Series B Preferred Stock was determined using the option-pricing method (OPM) back-solve method on the per share price of Series C Preferred Stock to estimate aggregate equity value. The OPM was used to allocateequity value to the Series A Preferred Stock and Series B Preferred stock using the Black-Scholes option-pricing model.Issuance of Series D Preferred StockOn May 15, 2015, the Company completed the sale and issuance of 7,367 shares of Series D Preferred Stock, par value $0.0001 per share, at a per shareprice of $9.5699 for proceeds of $67,998, net of issuance costs of $2,502.In connection with the issuance of the Series D Preferred Stock, the Company amended and restated its certificate of incorporation. Series A PreferredStock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are herein collectively referred to as Preferred Stock. Under the amendedand restated certificate of incorporation in effect prior to the IPO, the rights, preferences and privileges of Preferred Stock consisted of the following:Dividends. The holders of Series D Preferred Stock were entitled to receive dividends, in preference to Series A Preferred Stock, Series B PreferredStock, Series C Preferred Stock and common stock when and if declared by the Company’s Board of Directors. After payment of dividends to holders of SeriesD Preferred Stock, holders of Series C Preferred Stock were entitled to receive dividends in preference to Series A Preferred Stock, Series B Preferred Stock andcommon stock. After payment of dividends to holders of Series C Preferred Stock, holders of Series A Preferred Stock and Series B Preferred Stock wereentitled to receive dividends in preference to common stock. Dividends to holders of Preferred Stock were non-cumulative and had a dividend rate equal to$0.1003, $0.331192, $0.51816 and $0.765592 per annum for each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock andSeries D Preferred Stock, respectively. After payment of dividends to holders of Preferred Stock, any additional dividends were to be made to the holders ofPreferred Stock and common stock in proportion to the number of shares of common stock that would be held by each holder if all shares of Preferred Stockwere converted to common stock at the then effective conversion rate.Liquidation Preference. In the event of a liquidation event, as defined below, either voluntary or involuntary, the holders of Series D Preferred Stockhad preference over Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and common stock to any proceeds from liquidation. Uponpayment of the liquidation preference to holders of Series D Preferred Stock, holders of Series C Preferred Stock had preference in liquidation proceeds overholders of Series A Preferred Stock, Series B Preferred Stock and common stock. Upon payment of the liquidation preference to holders of Series C PreferredStock, holders of Series A Preferred Stock and Series B Preferred Stock had preference in liquidation proceeds over holders of common stock.136 Liquidation preferences of Preferred Stock were at an amount equal to the original issuance price per share of Preferred Stock plus any accrued but unpaiddividends, whether declared or not, and any other declared but unpaid dividends. A liquidation event included (i) the sale or disposition of substantially allof the Company’s assets or the exclusive license of substantially all of the Company’s intellectual property, (ii) a merger or consolidation in which thestockholders of the Company prior to the transaction no longer hold at least 50 percent of the voting power of the merged or consolidated entity, (iii) atransaction, or series of transactions, which results in a single party, or group of affiliated entities representing a single party, owning 50 percent or more ofthe Company’s equity securities, or (iv) a liquidation, dissolution, or winding up of the Company. For purposes of the liquidation preference, the originalissuance price of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock was $1.255, $4.1399, $6.477 and$9.5699 per share, respectively. If proceeds from the liquidation event were insufficient to pay the entire liquidation preference to holders of any series ofPreferred Stock, then the proceeds were to be distributed ratably among the holders of that series of Preferred Stock in proportion to the total preferentialamount each holder is entitled to under the liquidation preference. Upon full payment of the liquidation preference, any remaining proceeds were to bedistributed among the holders of Preferred Stock and common stock pro rata based on the number of shares of common stock, assuming full conversion of allPreferred Stock into common stock, held by each holder. For purposes of determining the amount each holder of Preferred Stock was entitled to receive withrespect to a liquidation event, holders of Preferred Stock were deemed to have their shares of Preferred Stock converted into shares of common stockimmediately prior to the liquidation event if, as a result of an actual conversion, the holder would receive an aggregate amount greater than the amount thatwould be distributed if the holder’s Preferred Shares had not been converted into common stock. If the holder was deemed to have converted shares ofPreferred Stock into shares of common stock for purposes of the liquidation preference, then the holder was not entitled to receive any distribution that wouldbe made to holders of Preferred Stock that were not converted.Redemption. All series of Preferred Stock were redeemable upon the majority vote of all Preferred Stock holders on a per share basis, afterDecember 31, 2019. The redemption price of the Preferred Stock was equal to the original issue price of each share held plus all accrued but unpaiddividends, whether or not declared, and was to be paid in three annual installments beginning on the first redemption date. For purposes of the redemptionprice, the original issuance price of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock was $1.255,$4.1399, $6.477 and $9.5699 per share, respectively.Conversion. Each share of Preferred Stock was convertible at the option of the holder at any point in time into fully paid and non-assessable shares ofcommon stock. Upon conversion, the Preferred Stock would be fully settled. Each share of Preferred Stock was convertible into that number of shares ofcommon stock as determined by dividing the original issuance price of such share by the applicable conversion price. For purposes of determining theconversion rate, the original issuance price of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock was$1.255, $4.1399, $6.477 and $9.5699 per share, respectively. Initially, the conversion rate was 1:1 for each series of Preferred Stock, but was subject to futureadjustments to the conversion price upon the occurrence of certain events including (i) certain future issuances of common stock at a price less than theconversion price in effect on the date of such issuance and (ii) future stock splits, subdivisions, or combinations of outstanding common stock.Each share of Preferred Stock was to automatically convert into shares of common stock at the applicable conversion rate upon (i) a qualified publicoffering, as defined in the Company’s amended and restated certificate of incorporation, of at least $40,000 in aggregate gross proceeds, prior to deduction ofunderwriting discounts and commissions, or (ii) the majority vote of the holders of Preferred Stock on a per share and as-converted to common stock basis.Voting. The holders of each share of Preferred Stock had the right to one vote for each share of common stock into which the Preferred Stock couldthen be converted. Holders of Preferred Stock had full voting rights and powers equal to those of common stockholders.As long as shares of Series A Preferred Stock remained outstanding, the holders of Series A Preferred Stock, voting as a separate class, were entitled toelect three directors to the Board of Directors. As long as shares of Series B Preferred Stock remained outstanding, the holders of Series B Preferred Stock,voting as a separate class, were entitled to elect one director to the Board of Directors. As long as shares of Series C Preferred Stock remained outstanding, theholders of Series C Preferred Stock, voting as a separate class, were entitled to elect one director to the Board of Directors. As long as shares of Series DPreferred Stock remained outstanding, the holders of Series D Preferred Stock, voting as a separate class, were entitled to elect one director to the Board ofDirectors. The holders of outstanding common stock, voting as a separate class, were entitled to elect one director to the Board of Directors. The holders ofPreferred Stock and common stock, voting together as a single class on an as-converted basis for Preferred Stock, were entitled to elect any remainingdirectors of the Company.Prior to the closing of the IPO on September 22, 2015, all of the outstanding shares of the Company’s Preferred Stock were converted into 16,298shares of its common stock. As of December 31, 2015, the Company did not have any preferred equity securities (including Preferred Stock) issued oroutstanding.137 Common Stock, Class A Units and Class B UnitsClass A Units. The Company’s authorized Class A Units were initially issued for the contributions of the various members, which included capital,services and intellectual property. Additionally, certain members received Class A Units in accordance with anti-dilution provisions in the Company’s LLCagreement. In conjunction with the October 30, 2013 issuance of Series B Preferred Units, certain holders of Class A Units received an aggregate of 19,476additional Class A Units as a result of the anti-dilution provisions. Upon the completion of the Series B Preferred Units issuance, all anti-dilution provisionshad been fully utilized and were no longer outstanding.Upon the Company’s conversion from an LLC to a C-corporation on September 16, 2014, the 132,148 of then issued and outstanding Class A Unitswere subject to a 50-to-1 reverse unit split, and converted into 2,643 shares of common stock.Class B Units. In December 2009, the Company entered into the 2009 Equity Incentive Plan. Under the 2009 Equity Incentive Plan, which wasadministered by the Board of Managers, the Company was authorized to grant Class B Units. Class B Units were designed to provide equity incentivecompensation to managers, employees, advisory board members and consultants of the Company, with such terms and conditions including vesting andforfeiture determined by the Board of Managers in its sole discretion. The Class B Units represented a profits interest in the Company as that term is definedin the Internal Revenue Code. The holders of Class B Units had no voting power and were only eligible for distributions resulting from a qualified liquidityevent of the Company, as defined by the LLC agreement, and if the proceeds from such event exceed a fixed distribution threshold per unit. Distributionthresholds were determined by the Board of Managers for each Class B Unit awarded. In the case of a qualified public offering, as defined in the 2009 EquityIncentive Plan, the Class B Units would convert into shares of restricted common stock and continue to vest in accordance with each award agreement. TheClass B Units were non-transferable and upon termination of service, the Company had the option to purchase all vested units from the award holder. TheCompany did not repurchase any Class B Units.As of December 31, 2013, the Company had authorized up to 24,500 Class B Units for issuance, 22,828 of which were issued and subject to vestingconditions set forth in each Class B Unit award. Upon the Company’s conversion from an LLC to a C-corporation on September 16, 2014, all outstandingClass B Units were terminated along with the 2009 Equity Incentive Plan, and the Company executed the 2014 Stock Plan and granted stock options. Pleaserefer to Note 10 for further information regarding the 2014 Stock Plan.Management evaluated the Class B Unit awards and determined that they should be accounted for as a share-based payments in accordance with ASC718. However, since no distribution is to be made to Class B Unit holders unless a qualified liquidity event occurs, management has determined that theawards are subject to both a service condition (vesting period) and a performance condition (qualified liquidity event). Additionally, the awards only convertinto restricted common stock upon the event of a qualified public offering. Management did not consider a qualified liquidity event or public offering to beprobable at any point during the outstanding terms of the Class B Units, and accordingly, no compensation expense was recorded in connection with theawards.The Company accounted for the termination of the Class B Units and simultaneous grant of stock options under the 2014 Stock Plan as a modificationto share-based payments under ASC 718. Since the performance conditions under the Class B Unit awards were deemed improbable of achievement, noincremental compensation cost from the modification was recognized. Please refer to Note 10 for information on stock-based compensation expenseregarding stock options issued by the Company.Common stock. As of December 31, 2014 and prior to the closing of the Company’s IPO on September 22, 2015, the dividend, liquidation and votingrights of the Company’s common stockholders were subject to, and qualified by, the rights, preferences and privileges of the holders of the outstandingPreferred Stock.The Company’s reserved shares of common stock for future issuance are as follows: December 31, 2015 2014 Series A convertible preferred stock — 2,393 Series B convertible preferred stock — 1,906 Reserved for issuance under equity incentive plans 5,998 2,500 Reserved for issuance under employee stock purchase plan 254 — Debt with share settlement option (Note 6) — 3,715 6,252 10,514 138 9. Significant AgreementsPlease refer to Note 13 for significant agreements with related parties and Note 7 for licenses granted to the Company.Licenses Granted by the CompanyThe Company has granted a number of intellectual property licenses to other biotechnology and pharmaceutical companies. The terms of the licensesvary, however licenses may be exclusive or non-exclusive and may be sublicensable by the licensee. Licenses may grant intellectual property rights forpurposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drugtherapies for specific diseases using the Company’s NAV® Technology. License agreements generally have a term equal to the life of the underlying patentsand are terminable only at the option of the licensee. License agreements may require licensees to pay non-refundable up-front fees, option fees and annualmaintenance fees. Additional contingent consideration under the licenses may include sublicense fees, milestone fees and royalties on net sales ofcommercialized products. Sublicense fees vary by license and range from a mid-single digit percentage to a low-double digit percentage of license feesreceived by licensees as a result of sublicenses. Royalties on net sales of commercialized products vary by license and range from a mid-single digitpercentage to a low-teen percentage of net sales by licensees.In July 2013, the Company granted an exclusive commercial license to Audentes. The license required an up-front fee of $600, $300 of which waspayable in cash and the remainder in common stock of Audentes. As discussed in Note 2, the investment in Audentes is accounted for under the cost method.The carrying value of the equity investment in Audentes was $300 at December 31, 2015 and 2014, and is included in cost method investments on thebalance sheets.Milestone fees are payable to the Company upon the achievement of specific clinical and regulatory developments by licensees. As of December 31,2015, the Company’s license agreements, excluding additional licenses that could be granted upon the exercise of options by licensees, could result inaggregate milestone fees payable to the Company of up to $500 upon the submission of preclinical regulatory filings, $16,650 upon the commencement ofvarious stages of clinical trials, $28,000 upon the submission of regulatory approval filings, $73,500 upon the approval of commercial products byregulatory agencies and $47,000 upon the achievement of specified sales targets for licensed products.License revenue, including amounts from related parties, consists of the following: Years Ended December 31, 2015 2014 2013 Up-front fees and option fees for commercial licenses $5,900 $4,000 $3,400 Milestone fees for commercial licenses 250 — — Maintenance fees for commercial licenses 635 385 200 Research and other license revenue 240 190 155 $7,025 $4,575 $3,755 Grant ProgramsMeuSIX. In December 2012, as part of a consortium of research and development entities called MeuSIX, the Company was awarded a long-term grantby the European Commission’s Seventh Framework Program, to perform preclinical and clinical research and development services for the treatment of MPSVI, a severe lysosomal storage disorder. Under the grant agreement, the Company is reimbursed by the grantor for 75 percent of qualified research anddevelopment costs, up to approximately €2,273 (approximately $2,859 based on the average conversion rate for the grant period to date throughDecember 31, 2015) of such costs over the five year grant period. Funds received under the grant are subject to refund in the case of non-compliance with theprovisions of the grant, which include, but are not limited to, the eligibility of costs, calculation of personnel rates, selection of subcontractors, and otherprovisions. As of December 31, 2015, the Company is in compliance with all provisions of the grants and no refunds are payable to the grantor. During theyears ended December 31, 2015, 2014 and 2013, the Company incurred $912, $1,109 and $882, respectively, of research and development expenses underthe grant program. The Company recorded grant revenue of $258, $832 and $661 related to the grant program for the years ended December 31, 2015, 2014and 2013, respectively. As of December 31, 2015 and 2014, the Company had $534 and $865, respectively, of accounts receivable under the grant program,of which $0 and $320, respectively, is included in unbilled receivables on the balance sheets.Federal Grants. The Company has received grant awards from agencies of the U.S. federal government to support critical research and developmentprojects for the Company. In 2010, the Company was awarded two grants from the National Institute of Health (NIH) in amounts totaling $3,063. In 2012, theCompany was awarded two additional grants from the NIH totaling $515. In 2013, the Company was awarded an additional grant from the NIH totaling $261.Funds received under the grants are subject to139 refund in the case of non-compliance with the provisions of the grant, which include, but are not limited to, the eligibility of costs, calculation of personnelrates, selection of subcontractors, and other provisions. As of December 31, 2015, the Company is in compliance with all provisions of the grants and norefunds are payable to the grantor. As a result of the NIH grants, the Company has recorded revenue from reimbursement of qualified research anddevelopment costs of $46, $387 and $1,303 for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2014 the Companyhad $51 of accounts receivable under the NIH grants. As of January 2015, all NIH grants were completed and the Company has no amounts receivable underthe grants as of December 31, 2015. 10. Stock-based CompensationEquity Incentive PlansIn September 2014, the Board of Directors adopted the 2014 Stock Plan (2014 Plan). As of December 31, 2014, the number of shares of common stockauthorized for issuance under the 2014 Plan was 2,500.In June 2015, the Company’s Board of Directors adopted the 2015 Equity Incentive Plan (2015 Plan), which became effective on September 16, 2015,the date on which the registration statement for the IPO was declared effective. The 2015 Plan replaced the 2014 Plan, and as of the effective date of the 2015Plan, no further awards may be issued under the 2014 Plan. Any options or awards outstanding under the 2014 Plan at the effective date of the 2015 Planremained outstanding and effective. The initial amount of shares authorized for issuance under the 2015 Plan was 2,952. The number of authorized sharesunder the 2015 Plan automatically increases annually on January 1, beginning January 1, 2016, by the lesser of (i) 4% of the total number of shares ofcommon stock outstanding on December 31 of the prior year, or (ii) a number of common shares determined by the Board of Directors. As of December 31,2015, the total number of shares of common stock authorized for issuance under the 2015 Plan and 2014 Plan is 6,125, of which 2,314 remain available forfuture grants under the 2015 Plan.The 2014 Plan and 2015 Plan provide for the issuance of stock options, stock appreciation rights, restricted and unrestricted stock awards andperformance cash awards to employees, members of the Board of Directors and consultants of the Company. No stock appreciation rights, restricted orunrestricted stock awards or performance cash awards have been granted under the 2014 Plan and 2015 Plan, since the inception of the plans. Stock optionsunder the 2014 Plan and 2015 Plan generally expire ten years following the date of grant. Options typically vest over a four year period, but vestingprovisions can vary by award based on the discretion of the Board of Directors. Certain awards issued by the Company include performance conditions thatmust be achieved in order for vesting to occur. Stock options under the 2014 Plan and 2015 Plan carry an exercise price at least equal to the estimated fairvalue of the Company’s common stock on the date of grant.Shares of common stock underlying awards previously issued under the 2014 Plan and 2015 Plan which are reacquired by the Company, withheld bythe Company in payment of the purchase price, exercise price or withholding taxes, expired, cancelled due to forfeiture or otherwise terminated other than byexercise, are added to the number of shares of common stock available for issuance under the 2015 Plan. Shares available for issuance under the 2015 Planmay be authorized but unissued shares of the Company’s common stock or common stock reacquired by the Company and held in treasury. The 2015 Planexpires in June 2025, ten years from the date it was adopted by the Board of Directors, unless earlier terminated.140 The following table summarizes stock option activity under the Company’s equity incentive plans: Weighted- average Weighted- Remaining average Contractual Aggregate Exercise Life Intrinsic Shares Price (Years) Value (a) Outstanding at December 31, 2013 — $— — $— Granted 2,132 $0.85 Exercised (2) $0.85 Cancelled or forfeited (23) $0.85 Outstanding at December 31, 2014 2,107 $0.85 9.8 $379 Granted 1,727 $10.80 Exercised (125) $0.85 Cancelled or forfeited (25) $1.19 Outstanding at December 31, 2015 3,684 $5.52 9.1 $44,472 Exercisable at December 31, 2015 1,328 $1.45 8.8 $20,194 Vested and expected to vest at December 31, 2015 3,684 $5.52 9.1 $44,472 (a)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of thecommon stock for the options that were in the money at the dates reported.The weighted-average grant date fair value per share of options granted during the years ended December 31, 2015 and 2014 was $7.08 and $0.51,respectively. The weighted-average grant date fair value per share of options vested during the years ended December 31, 2015 and 2014 was $1.10 and$0.51, respectively. During the years ended December 31, 2015 and 2014, the total number of stock options exercised was 125 and 2, respectively, resultingin total proceeds of $107 and $1, respectively. The total intrinsic value of options exercised during the years ended December 31, 2015 and 2014 was $525and $0, respectively. There were no stock options granted prior to the year ended December 31, 2014.Stock-based compensation expense relates solely to stock options granted under the 2014 Plan and 2015 Plan. The Company has recorded aggregatestock-based compensation expense related to the issuance of stock option awards to employees and non-employees in the statement of operations andcomprehensive loss as follows: Years Ended December 31, 2015 2014 Research and development $1,760 $60 General and administrative 1,161 259 $2,921 $319 There were no stock options granted prior to the year ended December 31, 2014, and accordingly, no stock-based compensation expense was recordedfor the year ended December 31, 2013.Valuation of Common Stock. Prior to the Company’s IPO, the Company estimated the fair value of its common stock underlying stock option awardsat the grant date of the award. Valuation estimates were prepared by management in accordance with the framework of the American Institute of CertifiedPublic Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, as well as through independent third-party valuations and were approved by the Company’s Board of Directors. Valuation estimates were based on a variety of factors including the Company’sfinancial position and historical financial performance, the Company’s stage of development, the valuations of comparable publicly traded companies,marketplace and macro-economic factors, the illiquid nature of the common stock, arm’s-length sales of the Company’s preferred equity securities, the effectof the rights, preferences and privileges of preferred shareholders and preferred unit holders and the prospects of a liquidity event, among others. After thecompletion of the Company’s IPO in September 2015, the fair value of the common stock is based on the closing price of the common stock on the date ofgrant.141 Stock Options Granted to Employees. For the years ended December 31, 2015 and 2014, the Company recorded $1,443 and $299, respectively, ofstock-based compensation expense related to employees’ stock options. The fair value of options granted to employees was estimated at the date of grantusing the Black-Scholes valuation model with the following weighted-average assumptions: Years Ended December 31, 2015 2014 Expected volatility 68% 64%Expected term (in years) 6.1 6.0 Risk-free interest rate 1.7% 2.0%Expected dividend yield 0.0% 0.0% As of December 31, 2015, there was $11,133 of unrecognized stock-based compensation expense related to employees’ awards that is expected to berecognized over a weighted-average period of 3.48 years.Stock Options Granted to Non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as thestock options are earned. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of theservices rendered. For the years ended December 31, 2015 and 2014, the Company recorded $1,478 and $20, respectively, of stock-based compensationexpense related to non-employees’ stock options. The Company used the following weighted-average assumptions in estimating non-employees’ stock-based compensation expense: Years Ended December 31, 2015 2014 Expected volatility 75% 65%Expected term (in years) 9.5 9.9 Risk-free interest rate 2.1% 2.4%Expected dividend yield 0.0% 0.0% Employee Stock Purchase PlanIn June 2015, the Company’s Board of Directors adopted the 2015 Employee Stock Purchase Plan (2015 ESPP), which became effective onSeptember 16, 2015, the date on which the registration statement for the IPO was declared effective. The 2015 ESPP authorizes the initial issuance of up to atotal of 254 shares of the Company’s common stock to participating employees. The number of shares reserved for issuance under the 2015 ESPPautomatically increases on the first business day of each fiscal year, commencing in 2016, by a number equal to the lesser of (i) 1% of the shares of commonstock outstanding on the last business day of the prior fiscal year; or (ii) the number of shares determined by the Company’s Board of Directors. Unlessotherwise determined by the administrator of the 2015 ESPP, two offering periods of six months’ duration will begin each year on January 1 and July 1. As ofDecember 31, 2015, there was no activity under the 2015 ESPP. 11. Retirement PlanIn February 2015, the Company established a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code (the 401(k)Plan). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of theirannual compensation. The Company matches employee deferrals up to 5.75 percent of eligible compensation. For the year ended December 31, 2015, theCompany contributed $184 in matching contributions to the 401(k) Plan. As of December 31, 2014, the Company did not sponsor any retirement plans. 12. Income TaxesFrom inception through September 16, 2014, the Company was a Delaware LLC for federal and state income tax purposes, and therefore, all items ofincome or loss through September 16, 2014 flowed through to the members of the LLC. Effective September 16, 2014, the Company converted from an LLCto a C-corporation for federal and state income tax purposes. Prior to the conversion to a C-corporation, the Company did not record deferred tax assets orliabilities or have any net operating loss (NOL) carryforwards for federal income tax purposes. However, the Company had recorded a deferred tax asset forstate income tax purposes, which consisted primarily of NOL carryforwards for state jurisdictions that did not recognize the Company’s LLC status.Effective upon the conversion to a C-corporation, the Company became subject to income tax at the federal and state levels. Accordingly, as ofDecember 31, 2015 and 2014 the Company recorded a deferred tax asset for federal and state income taxes.142 As all of the Company’s income is generated in the U.S., and attributable to the U.S. jurisdiction, there are no foreign income tax expenses for the yearsended December 31, 2015, 2014 and 2013.The Company did not record a current or deferred income tax expense or benefit for the years ended December 31, 2015, 2014 and 2013. Since theCompany was an LLC for the year ended December 31, 2013, the Company was not subject to federal income tax. A reconciliation of income tax expense(benefit) computed at the statutory federal income tax rate of 34 percent to income tax expense (benefit) as reflected in the financial statements is as follows: Years Ended December 31, 2015 2014 2013 Federal income tax benefit at statutory rate $(7,756) $(1,089) $— State income tax benefit, net of federal benefit (1,511) (264) (537)Change in income tax rates upon conversion to C-corporation — 427 — Federal deferred tax assets upon conversion to C-corporation — (105) — Step-up in assets upon conversion to C-corporation (709) (448) — Stock-based compensation expense for incentive stock options 283 98 — Imputed interest on related party promissory notes — 52 — Taxable gain upon conversion to C-corporation — 73 — Other non-deductible expenses and reconciling items 240 4 — Change in valuation allowance 9,453 1,252 537 Total income tax expense (benefit) $— $— $— The significant components of the Company’s deferred tax assets are as follows: December 31, 2015 2014 Deferred tax assets: Net operating loss carryforwards $9,254 $1,844 Step-up in assets upon conversion to C-corporation 1,046 438 Stock-based compensation expense for non-qualified stock options 855 31 Unrealized losses on marketable securities 284 — Deferred rent 97 — Accruals and other 568 42 Total deferred tax assets before valuation allowance 12,104 2,355 Valuation allowance (12,093) (2,355)Total deferred tax assets 11 — Deferred tax liabilities: Depreciation (11) — Total deferred tax liabilities (11) — Net deferred tax assets $— $— The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’shistory of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized.Accordingly, the Company has provided a full valuation allowance for its net deferred tax assets as of December 31, 2015 and 2014. The valuation allowanceincreased approximately $9,453 and $1,252 during the years ended December 31, 2015 and 2014, respectively, due primarily to the conversion to a C-corporation and the federal and state net operating losses generated during the periods.As of December 31, 2015 and 2014, the Company had U.S. federal NOL carryforwards of approximately $21,215 and $2,979, respectively, which maybe available to offset future income tax liabilities and expire at various dates through 2035. As of December 31, 2015 and 2014, the Company also had U.S.state NOL carryforwards of approximately $34,199 and $13,406, respectively, which may be available to offset future income tax liabilities and expire atvarious dates through 2035.143 Under the provisions of the Internal Revenue Code, the NOL carryforwards are subject to review and possible adjustment by the Internal RevenueService and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownershipinterest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code,respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income ortax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequentownership changes may further affect the limitation in future years. The Company has completed several financings since its inception which may haveresulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future.The Company files income tax returns in the U.S. at the federal level and in states in which the Company conducts business activities. The federal andstate income tax returns are generally subject to tax examinations for the tax years ended December 31, 2012 through December 31, 2015. To the extent theCompany has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal RevenueService or state tax authorities to the extent utilized in a future period. 13. Related Party TransactionsThe Trustees of the University of PennsylvaniaPenn is a stockholder of the Company as a result of the intellectual property license granted to the Company in February 2009, and prior to September30, 2015 the Company considered Penn to be a related party. See Note 7 for further information, including costs incurred by the Company, regarding itslicense from Penn.As a result of various factors, including the dilution to the Company’s stockholders resulting from the sale and issuance of Series C Preferred Stockand Series D Preferred Stock, and the closing of the Company’s IPO on September 22, 2015, the Company no longer considers Penn to be a related partysubsequent to the period ended September 30, 2015.In addition to the license agreement, Penn also provides manufacturing and research and development services to the Company. Expenses incurred bythe Company for manufacturing and research and development for the nine months ended September 30, 2015 and the years ended December 31, 2014 and2013 are as follows: Nine Months Ended Years Ended September 30, December 31, 2015 2014 2013 Manufacturing of reagents for sale $80 $92 $143 Research and development services 5,136 1,286 2,778 $5,216 $1,378 $2,921 As of December 31, 2014, the Company had accrued $677 in manufacturing and research and development costs to Penn which are included in otherrelated party payables on the balance sheets.GlaxoSmithKline LLCGSK is a stockholder of the Company as a result of the intellectual property license granted to the Company in March 2009, and prior to September30, 2015 the Company considered GSK to be a related party. See Note 7 for further information, including costs incurred by the Company, regarding itslicense from GSK.As a result of various factors, including the dilution to the Company’s stockholders resulting from the sale and issuance of Series C Preferred Stockand Series D Preferred Stock, and the closing of the Company’s IPO on September 22, 2015, the Company no longer considers GSK to be a related partysubsequent to the period ended September 30, 2015.Dimension Therapeutics, Inc.The Company and a number of its members, directors and management received common stock of Dimension as consideration for a license granted toDimension in October 2013. Additionally, at the date of the license three of the Company’s board members also served on the board of directors ofDimension. As a result, prior to September 30, 2015 the Company considered Dimension to be a related party.144 As of September 30, 2015, the Company no longer had any overlapping board members with Dimension. Additionally, the Company’s directors andmanagement do not have significant influence over Dimension. Accordingly, the Company no longer considers Dimension to be a related party subsequentto the period ended September 30, 2015.On October 30, 2013, the Company granted an exclusive, sublicensable, worldwide commercial license to Dimension for preclinical and clinicalresearch and development and commercialization of drug therapies using the Company’s licensed patents for the treatment of hemophilia A and hemophiliaB, as well as a one year option to obtain exclusive licenses for the commercialization of two other diseases to be elected by Dimension in the future. Theagreement requires on-going annual maintenance fees of $35, for each indication elected by Dimension, beginning in October 2014. The agreement alsorequires Dimension to pay royalties on net sales, if any, to the Company at an amount intended to approximate the royalties that will be due by the Companyto Penn and GSK on such sales. In consideration for the license granted, Dimension issued the Company, and various members, directors and executives ofthe Company, an aggregate total of 10,000 shares of its common stock with an estimated fair value of $2,700. The Company recorded $2,700 as revenueupon delivery of the license. Of the 10,000 shares, a total of 10 shares were issued to the Company, with an estimated fair value of $3, which is included incost method investments on the balance sheet as of December 31, 2014. As of the December 31, 2015 the investment in Dimension is included in marketablesecurities on the balance sheet as Dimension completed its IPO in October 2015 and the shares are now marketable. In consideration for the efforts by thevarious members, directors and executives of the Company which were responsible for executing the license agreement with Dimension, the Companyrecorded expenses equal to the estimated fair value of the 9,990 shares of common stock of Dimension received by those parties of $2,697, which is includedin general and administrative expenses in the statements of operations and comprehensive loss for the year ended December 31, 2013. In accordance with itsrevenue recognition policy, the Company has determined that the $2,700 in revenue from the license granted to Dimension should be recognized in fullupon the delivery of the license, as the Company has no further significant performance obligations under the agreement. Additionally, the Companydetermined that the $2,697 of general and administrative expenses to related parties should be recognized in full upon the execution of the agreement withDimension, as those parties have no further performance obligations to the Company.In addition to related parties of the Company holding common stock in Dimension as a result of the license agreement noted above, three of theCompany’s board members served on the board of directors of Dimension on the effective the date of the license. Management evaluated the consolidationguidance under ASC 810 and determined that Dimension was considered a VIE on the date of the license and as of December 31, 2014, however, it did notconsolidate Dimension because it lacked the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Thecarrying amount of the investment in Dimension as of December 31, 2014 was $3 and receivables due from Dimension as of December 31, 2014 were $750.As a result of capital raised by Dimension in its IPO in October 2015, the Company no longer considers Dimension to be a VIE as of December 31, 2015.In connection with the license agreement granted to Dimension, the Company entered into an arrangement with Penn and Dimension in which theCompany helped coordinate and manage research and development activities performed by Penn on behalf of Dimension. Under the arrangement, Dimensionreimbursed the Company at an amount equal to costs incurred and paid to Penn, and the Company retains rights to certain intellectual property discoveredunder the contracted research and development. Due to the uncertainty of any future intellectual property rights that may be discovered and retained by theCompany, and because such intellectual property would have no future alternative use due to the stage of development of the drug therapies underdevelopment, the Company has not recognized any benefit from the arrangement as consideration paid by Dimension to the Company as a result of thelicense agreement. Management has evaluated the facts and circumstances of the arrangements with regards to ASC 605-45 Revenue Recognition-PrincipalAgent Considerations and determined that the proceeds received from Dimension should be recorded on a net basis. Accordingly, proceeds received fromDimension under the arrangement were recorded as a reduction of research and development expense in the statements of operations and comprehensive loss.For the years ended December 31, 2014 and 2013, the Company recorded research and development expense to Penn, and related reimbursements fromDimension of $6,177 and $924, respectively, for a net cost of $0 for each period. As of December 31, 2014, the Company had recorded a related party payableof $750 to Penn and a related party receivable of $750 from Dimension under the arrangement. The arrangement expired on December 31, 2014 and as ofDecember 31, 2015 the final payments under this arrangement were received by the Company and paid to Penn, and the arrangement has ended.In September 2014, Dimension elected its third indication under the license agreement, and the license was amended to extend the term of the optionto elect the fourth and final disease indication for an additional six months. In consideration for the extension of the option, Dimension paid an extension feeof $150. In January 2015, Dimension elected its fourth and final indication under the license.In March 2015, the Company entered into an option and license agreement with Dimension that grants Dimension options to commercial exclusivelicenses for four new disease indications to be elected by Dimension in the future. If elected, each option carries an option fee of $1,000 payable to theCompany upon exercise, and annual maintenance fees of $50. Additionally, for each option145 exercised, Dimension is obligated to pay the Company up to $9,000 upon achievement of various substantive milestones, as well as mid to upper-single digitpercentage royalties on net sales of licensed products and mid-single digit to low-double digit percentage sublicense fees, if any. In May 2015, Dimensionexercised its first option under the agreement and paid $1,000 to the Company. In August 2015, Dimension exercised its second option under the agreementand paid $1,000 to the Company. In December 2015, Dimension exercised its third option under the agreement and paid $1,000 to the Company.During the nine months ended September 30, 2015, and the years ended 2014 and 2013, the Company recognized $2,000, $220 and $2,700,respectively, in license revenue from license agreements with Dimension which is included in license revenue from related party in the statements ofoperations and comprehensive loss. License revenue recognized from Dimension subsequent to September 30, 2015 is no longer included in license revenuefrom related party in the statements of operations and comprehensive loss.During the year ended December 31, 2014, the Company received $200 from Dimension for the purchase of materials owned by the Company andused in the Company’s manufacturing process for research and development and clinical trials. The $200 is recognized as a gain on disposal of the materialas the material is delivered to Dimension. For the years ended December 31, 2015 and 2014, the Company recognized gains of $26 and $47, respectively,related to the delivery of purchased material. Gains resulting from the delivery of the purchased material to Dimension is included in other operating incomein the statements of operations. As of December 31, 2015 and 2014, the Company recorded an advance payment liability of $127 and $153, respectively, forproceeds received for undelivered material.FoxKiserThe Company was party to a services agreement, as amended from time to time, with FoxKiser, an affiliate of certain stockholders of the Company andaffiliate of one current and one former member of the Board of Directors, which was terminated in January 2015. Under the agreement, the Company paid afixed monthly fee plus an additional support fee, as determined by FoxKiser on a monthly basis, as consideration for office facilities, equipment, supplies,general management, accounting, financial management, human resources, legal, secretarial, regulatory compliance and other services provided to theCompany. The amounts outstanding to FoxKiser under the services agreement in excess of 30 days from their due date accrued interest at 1.5 percent permonth, compounding monthly. The Company allocated the service fees from FoxKiser between research and development and general and administrativeexpense. Costs incurred by the Company under the services agreement with FoxKiser were as follows: Years Ended December 31, 2015 2014 2013 Research and development $168 $1,283 $1,111 General and administrative 237 1,696 1,469 $405 $2,979 $2,580 As of December 31, 2014, the Company had recorded $1,423 payable to FoxKiser under the services agreement. As discussed in Note 6, amounts owedunder the services agreement were converted into Series C Preferred Stock on January 13, 2015. In January 2015, the services agreement was terminated andthe remaining amounts due to the FoxKiser under the agreement were paid in full in cash. The Company also entered into promissory notes with FoxKiser asdiscussed in Note 6.The Company entered into a Professional Services Agreement with FoxKiser effective as of January 1, 2016, pursuant to which the Company incurs afixed monthly fee of $80 in consideration for certain strategic planning, development and regulatory services to be provided by FoxKiser. The ProfessionalServices Agreement has an initial term of one year and is terminable by either party, at any time, upon sixty days prior written notice to the other party.Chief Scientific AdvisorIn September 2014, the Company entered into an advisory agreement with its Chief Scientific Advisor, who is also the Chairman of the Company’sScientific Advisory Board. The agreement was amended in May 2015 and expires in March 2017. During the years ended December 31, 2015 and 2014, theCompany incurred advisory fees of $180 and $45, respectively, to the Chief Scientific Advisor under the agreement. Additionally, the Company granted 70and 142 options to purchase common stock to the Chief Scientific Advisor during the years ended December 31, 2015 and 2014, respectively, ascompensation for services to be provided to the Company, which vest partially upon the completion of future service conditions, and partially upon theachievement of specified performance conditions as set forth in the award agreements. 146 14. Net Loss Per ShareThe following potentially dilutive securities outstanding at the end of the period were excluded from the computations of diluted weighted-averageshares outstanding for the periods indicated as they would be anti-dilutive: Years Ended December 31, 2015 2014 2013 Series A convertible preferred stock and preferred units — 2,393 2,393 Series B convertible preferred stock and preferred units — 1,906 1,906 Stock options issued and outstanding 3,684 2,107 — Debt with share settlement option (Note 6) — 3,715 — 3,684 10,121 4,299 Amounts in the table above reflect the common stock equivalents of the noted instruments. 15. Supplemental DisclosuresAccrued expenses and other current liabilities consists of the following: As of December 31, 2015 2014 Accrued personnel costs $1,371 $— Accrued external research and development 791 781 Accrued sublicense fees and royalties on reagent sales 260 — Other accrued expenses and current liabilities 776 334 $3,198 $1,115 Accrued external research and development, accrued sublicense fees and royalties on reagent sales and other accrued expenses to Penn and GSK as ofDecember 31, 2014 were included in related party payables on the Company’s balance sheet. Subsequent to September 30, 2015, neither party is consideredto be a related party of the Company. See Note 13 for further information on related party transactions with Penn and GSK prior to September 30, 2015. 16. Selected Quarterly Financial Information (Unaudited)The following table contains quarterly financial information for 2015 and 2014. Management believes that the following information reflects allnormal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are notnecessarily indicative of results for any future period. Amounts in the following table are in thousands, except per share data. Quarters Ended March 31, 2015 June 30, 2015 September 30,2015 December 31,2015 Total revenues $644 $1,363 $1,140 $4,441 Total operating expenses $4,637 $7,659 $8,487 $9,942 Net loss $(4,011) $(6,290) $(7,332) $(5,178)Basic and diluted net loss per common share $(0.94) $(3.24) $(1.52) $(0.20) Quarters Ended March 31, 2014 June 30, 2014 September 30,2014 December 31,2014 Total revenues $2,937 $1,549 $483 $1,151 Total operating expenses $2,102 $2,150 $2,184 $3,366 Net income (loss) $795 $(672) $(1,793) $(2,333)Basic and diluted net income (loss) per common share $0.08 $(0.34) $(0.73) $(0.97) 147 EXHIBIT INDEX Exhibit Description 3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K as filed on September 22, 2015,and incorporated herein by reference) 3.2 Amended and Restated Bylaws (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K as filed on September 22, 2015, andincorporated herein by reference) 4.1 Specimen stock certificate evidencing the shares of common stock (filed as Exhibit 4.1 to the Registrant’s Registration Statement on FormS-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 4.2 Amended and Restated Investors’ Rights Agreement dated as of May 15, 2015 (filed as Exhibit 4.2 to the Registrant’s RegistrationStatement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.1 Form of Indemnity Agreement for directors and officers (filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (SECFile No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.2+ 2014 Stock Plan, as amended (filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), asfiled on August 17, 2015, and incorporated herein by reference) 10.3+ 2015 Equity Incentive Plan and form of option agreement thereunder (filed as Exhibit 10.3 to the Registrant’s Registration Statement onForm S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.4+ 2015 Employee Stock Purchase Plan (filed as Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 8, 2015, and incorporated herein by reference) 10.5+ Employment Agreement effective as of June 30, 2015 between the Registrant and Kenneth T. Mills (filed as Exhibit 10.5 to theRegistrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein byreference) 10.6+ Employment Agreement effective as of June 30, 2015 between the Registrant and Stephen Yoo, M.D. (filed as Exhibit 10.6 to theRegistrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein byreference) 10.7+ Employment Agreement effective as of June 30, 2015 between the Registrant and Vittal Vasista (filed as Exhibit 10.7 to the Registrant’sRegistration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.8+ Independent Director Compensation Policy (filed as Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (SEC File No.333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.9† License Agreement effective February 24, 2009 between the Registrant and The Trustees of the University of Pennsylvania (filed asExhibit 10.9 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, andincorporated herein by reference) 10.10† First Amendment to License Agreement dated March 6, 2009 between the Registrant and The Trustees of the University of Pennsylvania(filed as Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015,and incorporated herein by reference) 10.11† Second Amendment to License Agreement effective September 9, 2014 between the Registrant and The Trustees of the University ofPennsylvania (filed as Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed onSeptember 15, 2015, and incorporated herein by reference) 10.12† License Agreement dated March 6, 2009 between the Registrant and SmithKline Beecham Corporation d/b/a GlaxoSmithKline (filed asExhibit 10.12 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, andincorporated herein by reference)148 Exhibit Description 10.13 Amendment to License Agreement dated April 15, 2009 between the Registrant and SmithKline Beecham Corporation d/b/aGlaxoSmithKline (filed as Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), as filed onAugust 17, 2015, and incorporated herein by reference) 10.14† License Agreement dated April 10, 2014 between the Registrant and AAVLife (filed as Exhibit 10.14 to the Registrant’s RegistrationStatement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.15† License Agreement dated July 9, 2013 between the Registrant and Audentes Therapeutics, Inc. (filed as Exhibit 10.15 to the Registrant’sRegistration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.16† License Agreement dated March 21, 2014 between the Registrant and AveXis, Inc. (filed as Exhibit 10.16 to the Registrant’s RegistrationStatement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.17† License Agreement dated November 22, 2010 between the Registrant and Baxalta US Inc. (as assignee of Baxter Healthcare Corporation,as assignee of Chatham Therapeutics, LLC) (filed as Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A (SEC File No.333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.18† License Agreement dated October 30, 2013 between the Registrant and Dimension Therapeutics, Inc. (filed as Exhibit 10.18 to theRegistrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 16, 2015, and incorporated hereinby reference) 10.19† First Amendment to License Agreement dated June 18, 2014 between the Registrant and Dimension Therapeutics, Inc. (filed as Exhibit10.19 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, andincorporated herein by reference) 10.20† Second Amendment to License Agreement dated September 29, 2014 between the Registrant and Dimension Therapeutics, Inc. (filed asExhibit 10.20 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 16, 2015, andincorporated herein by reference) 10.21† Option and License Agreement dated March 10, 2015 between the Registrant and Dimension Therapeutics, Inc. (filed as Exhibit 10.21 tothe Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 16, 2015, and incorporatedherein by reference) 10.22† License Agreement dated March 5, 2014 between the Registrant and Laboratorios Del Dr. Esteve, S.A. (filed as Exhibit 10.22 to theRegistrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated hereinby reference) 10.23† License Agreement dated December 2, 2013 between the Registrant and Lysogene Société par Actions Simplifiée (filed as Exhibit 10.23to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporatedherein by reference) 10.24† License Agreement dated May 28, 2014 between the Registrant and Voyager Therapeutics, Inc. (filed as Exhibit 10.24 to the Registrant’sRegistration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15, 2015, and incorporated herein by reference) 10.25† Exclusive Patent License Agreement dated November 10, 2014 between the Registrant and the Regents of the University of Minnesota(filed as Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September 15,2015, and incorporated herein by reference) 10.26 Lease dated March 6, 2015 between the Registrant and BMR-Medical Center Drive LLC (filed as Exhibit 10.26 to the Registrant’sRegistration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.27† Development, Manufacturing, and Testing Standard Terms and Conditions dated April 3, 2015 between the Registrant and WuXi AppTec,Inc. (filed as Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1/A (SEC File No. 333-206430), as filed on September15, 2015, and incorporated herein by reference)149 Exhibit Description 10.28† Cooperation Agreement dated May 28, 2015 between the Registrant and WuXi AppTec, Inc. (filed as Exhibit 10.28 to the Registrant’sRegistration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.29+ REGENXBIO Inc. Management Cash Incentive Plan (filed as Exhibit 10.29 to the Registrant’s Registration Statement on Form S-1 (SECFile No. 333-206430), as filed on August 17, 2015, and incorporated herein by reference) 10.30 Board of Managers Agreement dated February 6, 2013 between the Registrant and Donald J. Hayden, Jr. (filed as Exhibit 10.30 to theRegistrant’s Registration Statement on Form S-1 (SEC File No. 333-206430), as filed on August 17, 2015, and incorporated herein byreference) 10.31* First Amendment to Lease dated September 30, 2015 between the Registrant and BMR-Medical Center Drive LLC 10.32* Second Amendment to Lease dated November 23, 2015 between the Registrant and BMR-Medical Center Drive LLC 10.33* Lease dated January 28, 2016 between the Registrant and TNREF III 9600 Blackwell, LLC 10.34* Employment Agreement effective as of February 16, 2016 between the Registrant and Curran Simpson 23.1* Consent of PricewaterhouseCoopers LLP, independent registered accounting firm 31.1* Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of the Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certifications of the Chief Executive Officer and Chief Financial Officer as required by 18 U.S.C. 1350 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 +Indicates management contract or compensatory plan.†Confidential treatment has been granted with respect to certain portions of this document.*Filed herewith.The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is not deemed filed with the SEC and is not to beincorporated by reference into any filing of REGENXBIO Inc. under the Securities Act or the Exchange Act, whether made before or after the date of thisAnnual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. 150 Exhibit 10.31FIRST AMENDMENT TO LEASETHIS FIRST AMENDMENT TO LEASE (this “Amendment”) is entered into as of this 30th day of September, 2015 (the“Amendment Execution Date”), by and between BMR-MEDICAL CENTER DRIVE LLC, a Delaware limited liability company(“Landlord”), and REGENXBIO INC., a Delaware corporation (“Tenant”).RECITALSA. WHEREAS, Landlord owns certain real property (the “Property”) and the improvements on the Property located at 9704,9708, 9712 and 9714 Medical Center Drive, Rockville, Maryland, including the buildings located thereon;B. Landlord and Tenant are parties to that certain Lease dated as of March 6, 2015, as affected by that certainAcknowledgement of Term Commencement Date and Term Expiration Date dated as of April 17, 2015 (the “Acknowledgement”),given by Tenant in favor of Landlord (collectively, as the same may have been amended, supplemented or modified from time totime, the “Existing Lease”), whereby Tenant leases certain premises consisting of approximately ten thousand eight hundred thirty-three (10,833) square feet of Rentable Area (the “9712 Premises”) from Landlord in the building at 9712 Medical Center Drive,Rockville, Maryland (the “9712 Building”);C. WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to lease from Landlord, additional premisesconsisting of approximately nineteen thousand fifty-six (19,056) square feet of Rentable Area (the “9714 Premises) on the secondfloor of the building at 9714 Medical Center Drive in Rockville, Maryland (the “9714 Building”), as depicted on Exhibit A-1 attachedhereto; andD. WHEREAS, Landlord and Tenant desire to modify and amend the Existing Lease only in the respects and on theconditions hereinafter stated.AGREEMENTNOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree asfollows:1. Definitions. For purposes of this Amendment, capitalized terms shall have the meanings ascribed to them in the ExistingLease unless otherwise defined herein. The Existing Lease, as amended by this Amendment, is referred to collectively herein as the“Lease.” From and after the date hereof, the term “Lease,” as used in the Existing Lease, shall mean the Existing Lease, as amended bythis Amendment.2. Term of 9712 Premises. The parties wish to correct the Term Expiration Date noted in the Acknowledgement. Inaccordance with Section 3 of the Existing Lease, the Term Expiration Date for the 9712 Premises shall be October 31, 2020 (and BaseRent with respect to the 9712 Premises for the period from October 17, 2020 through October 31, 2020 shall be paid in accordancewith Section 3 of the Existing Lease). 3. Lease of 9714 Premises. Effective on the Amendment Execution Date, Landlord hereby leases to Tenant, and Tenanthereby leases from Landlord, the 9714 Premises, for use by Tenant in accordance with the 9714 Permitted Use (as defined in Section 5below) and no other uses. From and after the Amendment Execution Date, the term “Premises,” as used in the Lease, shall mean the9712 Premises and/or the 9714 Premises, Exhibit A to the Existing Lease shall be supplemented with the addition of Exhibit A-1 tothis  Amendment and the term “Building” shall mean, individually and collectively, as the context dictates, the 9712 Building and/or the9714 Building. All provisions of the Lease applicable to the “Premises” shall be applicable to both the 9712 Premises and the 9714Premises, except to the extent specifically set forth herein.4. Rentable Area and Pro Rata Share. The chart in Section 2.2 of the Existing Lease is hereby deleted in its entirety andreplaced with the following: Definition or ProvisionMeans the Following (Asof the AmendmentExecution Date)Approximate Rentable Area of 9712 Premises10,833 square feetApproximate Rentable Area of 9714 Premises19,056 square feetApproximate Rentable Area of 9712 Building22,907 square feetApproximate Rentable Area of 9714 Building35,375 square feetApproximate Rentable Area of South Campus92,125 square feetApproximate Rentable Area of Project214,725 square feetTenant’s Pro Rata Share of 9712 Building47.29%Tenant’s Pro Rata Share of 9714 Building53.87%Tenant’s Pro Rata Share of South Campus for 9712 Premises11.76%Tenant’s Pro Rata Share of South Campus for 9714 Premises20.68%Tenant’s Pro Rata Share of Project for 9712 Premises5.05%Tenant’s Pro Rata Share of Project for 9714 Premises8.87% 5. 9714 Permitted Use. The Permitted Use under Section 2.7 of the Existing Lease shall apply solely to the 9712Premises. The Permitted Use for the 9714 Premises shall be office and laboratory use in conformity with all Applicable Laws. Theterm “Permitted Use” as used in the Lease shall mean, individually and collectively, as the context dictates, the Permitted Use for the9712 Building and/or the 9714 Building and all provisions of the Lease applicable to the “Permitted Use” shall be applicable to boththe 9712 Premises and the 9714 Premises, except to the extent otherwise specifically set forth herein.6. 9714 Premises Term. The provisions of Sections 2.4, 2.5 and 3 of the Existing Lease shall apply solely to the 9712Premises. The Term of the Lease for the 9714 Premises (the “9714 Premises Term”) shall commence on the 9714 TermCommencement Date (as defined in Section 7(b) of this Amendment) and end on the day before the date that is sixty (60) months afterthe actual 9714 Term Commencement Date (the “9714 Term Expiration Date”), provided that if the actual 9714 Term CommencementDate is not the first day of a calendar month, the 9714 Premises Term and the 9714 Term Expiration Date shall be extended to the lastday of the calendar month in which the 9714 Term Expiration Date would otherwise occur (and Base Rent for the 9714 Premises forsuch extension period shall be payable at the rate in effect during the month immediately preceding such extension period). The 9714Premises Term shall be subject to earlier termination of the Lease as provided in the Lease and to extension pursuant to the Options (asdefined in the Existing Lease and modified in Section 15 below). The term “Term Expiration Date” as used in the Lease shall mean,individually and collectively, as the context dictates, the Term Expiration Date for the 9712 Premises and/or the 9714 Term ExpirationDate and all provisions of the Lease applicable to the “Term Expiration Date” shall be applicable to both the 9712 Premises and the9714 Premises, except to the extent otherwise specifically set forth herein.2  7. 9714 Tenant Improvements.(a) The provisions of Article 4 and Exhibit B of the Existing Lease shall apply solely to the 9712 Premises. Withrespect to the 9714 Premises, Landlord shall use commercially reasonable efforts to tender possession of the 9714 Premises to Tenanton March 1, 2016 (the “Estimated 9714 Term Commencement Date”), broom-clean and free and clear of debris and any othertenancies, occupants and their personal property, furniture, fixtures and equipment, and with the work required of Landlord describedin the 9714 Approved Plans (as defined below) (the “9714 Tenant Improvements”) Substantially Complete (collectively the “DeliveryCondition”). Tenant agrees that in the event possession of the 9714 Premises is not delivered to Tenant in the Delivery Condition onor before the Estimated 9714 Term Commencement Date for any reason, then (i) neither this Amendment nor the Lease shall be voidor voidable, (ii) Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, (iii) the 9714 Term Expiration Dateshall be extended accordingly and (iv) Tenant shall not be responsible for the payment of any Base Rent for the 9714 Premises untilthe 9714 Term Commencement Date as described in Section 7(b) of this Amendment actually occurs. For purposes of thisAmendment, the term “Substantially Complete” or “Substantial Completion” means that (A) the 9714 Tenant Improvements aresubstantially complete in accordance with the 9714 Approved Plans and this Amendment, as certified by Landlord’s architect, exceptfor minor punch list items, the existence, completion or correction of which will not materially interfere with Tenant’s use andoccupancy of the 9714 Premises for the Permitted Use therefor, and (B) a certificate of occupancy for the 9714 Premises has beenissued by the applicable Governmental Authority. Notwithstanding anything in the Lease to the contrary, Landlord’s obligation totimely achieve Substantial Completion shall be subject to extension on a day-for-day basis as a result of Force Majeure (as defined inthe Existing Lease). Notwithstanding the foregoing, if due to any reason other than a holdover by the then-existing occupants of the9714 Premises or Force Majeure, the 9714 Term Commencement Date does not occur within forty-five (45) days after the Estimated9714 Term Commencement Date (the “Outside Possession Date”), then, commencing on the 9714 Term Commencement Date,Tenant shall be entitled to receive one (1) day of Base Rent abatement for the 9714 Premises for each day beyond the OutsidePossession Date that the 9714 Term Commencement Date fails to occur. (b) The “9714 Term Commencement Date” shall be the later of (i) the Estimated 9714 Term Commencement Date,and (ii) the date on which Landlord delivers possession of the 9714 Premises to Tenant in the Delivery Condition (as defined inSection 7(a) above). If such delivery of possession is delayed by action of Tenant, then the 9714 Term Commencement Date shall bethe date that the 9714 Term Commencement Date would have occurred but for such delay. The date upon which the Term for the9714 Premises actually commences shall be the “9714 Term Commencement Date.” Tenant shall execute and deliver to Landlordwritten acknowledgement of the 9714 Term Commencement Date within ten (10) days after the occurrence of the 9714 TermCommencement Date in the form attached as Exhibit C to this Amendment. Failure to execute and deliver such acknowledgement,however, shall not affect the 9714 Term Commencement Date or Landlord’s or Tenant’s liability under the Lease. Failure by Tenantto obtain validation by any medical review board or other similar governmental licensing of the 9714 Premises required for thePermitted Use of the 9714 Premises by Tenant shall not serve to extend the 9714 Term Commencement Date. For clarificationpurposes, the phrase “other similar governmental licensing” as used in the preceding sentence shall not apply to Landlord’s obligationto obtain a certificate of occupancy for the 9714 Premises as a condition precedent to the 9714 Tenant Improvements being deemedSubstantially Complete.(c) Landlord shall cause the 9714 Tenant Improvements to be constructed in the 9714 Premises at a cost to Landlordnot to exceed (i) Two Hundred Eighty-Five Thousand Eight Hundred Forty and 00/100 Dollars ($285,840.00) (based upon Fifteenand 00/100 Dollars ($15.00) per square foot of Rentable Area of the 9714 Premises (the “9714 Base TI Allowance”), plus (ii) ifrequested by Tenant by a letter in the form attached3  as Exhibit D hereto executed by an authorized officer of Tenant, up to Six Hundred Sixty-Six Thousand Nine Hundred Sixty and00/100 Dollars ($666,960.00) (based upon Thirty-Five and 00/100 Dollars ($35.00) per square foot of Rentable Area of the 9714Premises) (the “9714 Additional TI Allowance”), for a total of up to Nine Hundred Fifty-Two Thousand Eight Hundred and 00/100Dollars ($952,800.00) (based upon Fifty Dollars ($50.00) per square foot of Rentable Area of the 9714 Premises). The 9714 Base TIAllowance, together with the 9714 Additional TI Allowance (if and to the extent properly requested by Tenant pursuant to thisSection), shall be referred to herein as the “9714 TI Allowance.” The 9714 TI Allowance may be applied to the following costs inconnection with the 9714 Tenant Improvements: (A) construction, (B) project review and supervision fee to Landlord (which fee shallequal three percent (3%) of the cost of the 9714 Tenant Improvements, including the 9714 Base TI Allowance and, if used by Tenant,the 9714 Additional TI Allowance), (C) commissioning of mechanical, electrical and plumbing systems serving the 9714 Premises bya licensed, qualified commissioning agent hired by Landlord, and review of such party’s commissioning report by a licensed, qualifiedcommissioning agent hired by Landlord, (D) space planning, architect, engineering and other related professional or consultingservices performed by third parties unaffiliated with Tenant, (E) building permits and other taxes, fees, charges and levies byGovernmental Authorities for permits or for inspections, and (F) costs and expenses for labor, materials, equipment and fixtures. In noevent shall the 9714 TI Allowance be used for (V) the cost of work that is not authorized by the 9714 Approved Plans or otherwiseapproved in writing by Landlord, (W) payments to Tenant or any affiliates of Tenant, (X) the purchase of any furniture, personalproperty or other non-building system equipment, (Y) costs resulting from any default by Tenant of its obligations under the Lease or(Z) costs that are recoverable by Tenant from a third party (e.g., insurers, warrantors, or tortfeasors).(d) Tenant shall have until March 31, 2017 (the “9714 TI Allowance Deadline”) to expend the unused portion of the9714 TI Allowance, after which date Landlord’s obligation to fund such costs shall expire, provided, however, that the 9714 TIAllowance Deadline shall be extended by one (1) day for each day beyond the Estimated 9714 Term Commencement Date thatSubstantial Completion of the 9714 Tenant Improvements is delayed as a direct result of Force Majeure or delay caused by Landlord.Monthly Base Rent for the 9714 Premises shall be increased to include the amount of the 9714 Additional TI Allowance requested byTenant and disbursed by Landlord (the “Actual 9714 Additional TI Allowance Amount”) in accordance with this Amendment,amortized over the initial 9714 Premises Term at a rate of eight percent (8%) annually, as if the Actual 9714 Additional TI AllowanceAmount had been loaned to Tenant as of the 9714 Term Commencement Date (subject to adjustment as provided below) and repaid inequal monthly installments. The amount by which monthly Base Rent with respect to the 9714 Premises shall be increased shall bedetermined (and Base Rent shall be increased accordingly) as of the 9714 Term Commencement Date (with Landlord to provideTenant an accounting of the same) and, if such determination does not reflect use by Tenant of all of the 9714 Additional TIAllowance requested by Tenant, the Actual 9714 Additional TI Allowance Amount shall be determined again as of the TI Deadline(with Landlord to provide Tenant with a reasonably detailed accounting of the same), with Tenant paying (on the next succeedingdate that Base Rent is due under the Lease which is at least thirty (30) days after Tenant receives such accounting (the “TI True-UpDate”)), any underpayment of the further adjusted Base Rent for the 9714 Premises for the period beginning on the 9714 TermCommencement Date and ending on the TI True-Up Date.(e) To the extent that the total projected cost of the 9714 Tenant Improvements (as reasonably projected andevidenced by Landlord via a reasonably detailed written calculation provided to Tenant) exceeds the 9714 TI Allowance (such excess,the “Excess 9714 TI Costs”), Tenant shall pay the costs of the 9714 Tenant Improvements on a pari passu basis with Landlord as suchcosts are paid, in the proportion of Excess 9714 TI Costs payable by Tenant to the 9714 Base TI Allowance (and, if properly requestedby Tenant pursuant to this Amendment, the 9714 Additional TI Allowance) payable by Landlord. Landlord shall not be obligated4  to expend any portion of the 9714 Additional TI Allowance until Landlord shall have received from Tenant a letter in the formattached as Exhibit D hereto executed by an authorized officer of Tenant. In no event shall any unused 9714 TI Allowance entitleTenant to a credit against Rent payable under the Lease.(f) Landlord designates, as Landlord’s authorized representative (“Landlord’s Authorized Representative”), (i) TimStoll as the person authorized to initial plans, drawings, approvals and to sign change orders pursuant to this Amendment, and (ii) anofficer of Landlord as the person authorized to sign any amendments to the Lease. Tenant shall not be obligated to respond to or actupon any such item until such item has been initialed or signed (as applicable) by the appropriate Landlord’s AuthorizedRepresentative. Landlord may change either Landlord’s Authorized Representative upon one (1) business day’s prior written notice toTenant.(g) Tenant designates Vittal Vasista (“Tenant’s Authorized Representative”) as the person authorized to initial andsign all plans, drawings, change orders and approvals pursuant to this Amendment. Landlord shall not be obligated to respond to oract upon any such item until such item has been initialed or signed (as applicable) by Tenant’s Authorized Representative. Tenant maychange Tenant’s Authorized Representative upon one (1) business day’s prior written notice to Landlord.(h) The schedule for design and development of the 9714 Tenant Improvements, including the time periods forpreparation and review of construction documents, approvals and performance, shall be in accordance with a schedule to be preparedby Landlord and reasonably approved by Tenant (the “9714 Schedule”). The 9714 Schedule shall be subject to adjustment asmutually agreed upon in writing by the parties, acting reasonably. Except as otherwise expressly provided in this Amendment, Tenantshall respond to all written requests for consents, approvals or directions made by Landlord pursuant to this Amendment and inaccordance with Sections 2.10 and 39 of the Lease as amended hereby within five (5) business days following Tenant’s receipt of suchrequest. Tenant’s failure to respond within such five (5) business day period shall be deemed approval by Tenant.(i) Subject to the provisions of this Section 7(i), the architect, engineering consultants, design team, general contractorand subcontractors responsible for the construction of the 9714 Tenant Improvements shall be selected by Landlord and shall bequalified and licensed in the applicable jurisdiction(s). Promptly after Landlord and Tenant have approved the 9714 ConstructionPlans (as defined and provided in Section 7(k) below), Landlord shall promptly solicit bids to perform the 9714 Tenant Improvementsfrom at least (2) qualified and licensed general contractors selected by Landlord and shall provide copies of such bids toTenant. Landlord shall take into consideration the lowest price, as well as qualifications and experience, in selecting Landlord’scontractor, and shall endeavor to select the contractor with the lowest bid (although Landlord shall not be obligated to select thecontractor with the lowest bid if Landlord determines that such contractor or such contractor’s team could cause labor disharmony orthat such contractor’s or contractor’s team’s qualifications or experience performing comparable tenant improvement projects in similarbuildings is not sufficient). All 9714 Tenant Improvements shall be performed by Landlord’s contractor, at Tenant’s sole cost andexpense (subject to Landlord’s obligations with respect to any portion of the 9714 TI Allowance) and in accordance, in all materialrespects, with the 9714 Approved Plans and this Amendment. All materials and equipment furnished by Landlord or its contractors asthe 9714 Tenant Improvements shall be new and in accordance with the 9714 Approved Plans and the 9714 Tenant Improvementsshall be performed in a first-class, workmanlike manner.(j) Landlord shall prepare and submit to Tenant for approval in accordance with Sections 2.10 and 39 of the Lease asamended hereby, schematics covering the 9714 Tenant Improvements prepared in5  conformity with the applicable provisions of this Amendment (the “9714 Draft Schematic Plans”). The 9714 Draft Schematic Plansshall contain sufficient information and detail to accurately describe the proposed design to Tenant. Tenant shall notify Landlord inwriting within five (5) business days after receipt of the 9714 Draft Schematic Plans whether Tenant approves or objects to the 9714Draft Schematic Plans and of the manner, if any, in which the 9714 Draft Schematic Plans are unacceptable. Tenant’s failure torespond within such five (5) business day period shall be deemed approval by Tenant. If Tenant objects to the 9714 Draft SchematicPlans, then Landlord shall revise the 9714 Draft Schematic Plans and cause Tenant’s objections to be remedied in the revised 9714Draft Schematic Plans. Landlord shall then resubmit the revised 9714 Draft Schematic Plans to Tenant for approval, such approval notto be unreasonably withheld, conditioned or delayed. Tenant’s approval of or objection to revised 9714 Draft Schematic Plans andLandlord’s correction of the same shall be in accordance with this Section 7(j) until Tenant has approved the 9714 Draft SchematicPlans in writing or been deemed to have approved them. The iteration of the 9714 Draft Schematic Plans that is approved or deemedapproved by Tenant without objection shall be referred to herein as the “9714 Approved Schematic Plans.” In the event that 9714Draft Schematic Plans are not approved by Tenant in accordance with this Section 7(j) prior to November 1, 2015, provided thatLandlord submits to Tenant for approval by October 15, 2015 in accordance with this Section 7(j) a revised set of 9714 DraftSchematic Plans, then, notwithstanding anything in this Amendment to the contrary, Landlord shall be entitled to a day-for-day delayin the Estimated 9714 Term Commencement Date for every day after such November 1, 2015 date until 9714 Draft Schematic Plansare approved by Tenant in accordance with this Section 7(j).(k) Commencing promptly after the Amendment Execution Date, Landlord shall cause its architect and engineer toprepare final plans and specifications for the 9714 Tenant Improvements that (i) are consistent with and are logical evolutions of the9714 Approved Schematic Plans and (ii) incorporate any other Tenant-requested (and Landlord-approved) Changes (as definedbelow). As soon as such final plans and specifications (“9714 Construction Plans”) are completed, Landlord shall deliver the same toTenant for Tenant’s approval in accordance with Sections 2.10 and 39 of the Lease as amended hereby, which approval shall not beunreasonably withheld, conditioned or delayed (provided that Tenant may only disapprove the 9714 Construction Plans if they (A) arenot consistent with and logical evolutions of the 9714 Approved Schematic Plans, (B) do not incorporate any Tenant-requested (andLandlord-approved) Change, or (C) reflect a violation of Applicable Law or design defect). Such 9714 Construction Plans shall beapproved or disapproved by Tenant in accordance with this Section 7(k) within five (5) business days after delivery toTenant. Tenant’s failure to respond within such five (5) business day period shall be deemed approval by Tenant. If the 9714Construction Plans are disapproved by Tenant for one of the reasons set forth in subsections (A), (B) or (C) of this Section 7(k), thenTenant shall notify Landlord in writing of such objections to such 9714 Construction Plans, and the parties shall confer and negotiatein good faith to reach agreement on the 9714 Construction Plans. Landlord shall then resubmit the revised 9714 Construction Plans toTenant for approval, such approval not to be unreasonably withheld, conditioned or delayed. Tenant’s approval of or objection torevised 9714 Construction Plans and Landlord’s correction of the same shall be in accordance with this Section 7(k) until Tenant hasapproved the 9714 Construction Plans in writing or been deemed to have approved them in accordance with this Section7(k). Promptly after the 9714 Construction Plans are approved (or deemed approved) by Landlord and Tenant in accordance with thisSection 7(k), two (2) copies of such 9714 Construction Plans shall be initialed and dated by Landlord and Tenant, and Landlord shallpromptly submit such 9714 Construction Plans to all appropriate Governmental Authorities for approval. The 9714 Construction Plansso approved, and all change orders specifically permitted by this Amendment, are referred to herein as the “9714 Approved Plans.”6  (l) Any changes to the 9714 Approved Plans (each, a “Change”) shall be requested and instituted in accordance withthe provisions of this Section 7(l) and shall be subject to the written approval of the non-requesting party in accordance with thisAmendment.(i) Either Landlord or Tenant may request Changes after Tenant approves the 9714 Approved Plans bynotifying the other party thereof in writing in substantially the same form as the AIA standard change order form (a “ChangeRequest”), which Change Request shall detail the nature and extent of any requested Changes, including (i) the Change, (ii) the partyrequired to perform the Change and (iii) any modification of the 9714 Approved Plans and the 9714 Schedule, as applicable,necessitated by the Change. If the nature of a Change requires revisions to the 9714 Approved Plans, then the requesting party shall besolely responsible for the cost and expense of such revisions and any increases in the cost of the 9714 Tenant Improvements as a resultof such Change. Change Requests shall be signed by the requesting party’s Authorized Representative.(ii) All Change Requests shall be subject to the other party’s prior written approval, which approval shallnot be unreasonably withheld, conditioned or delayed. The non-requesting party shall have five (5) business days after receipt of aChange Request in accordance with Sections 2.10 and 39 of the Lease as amended hereby to notify the requesting party in writing ofthe non-requesting party’s decision either to approve or object to the Change Request. The non-requesting party’s failure to respondwithin such five (5) business day period shall be deemed approval by the non-requesting party.(m) Notwithstanding anything to the contrary set forth elsewhere in this Amendment, Landlord shall not have anyobligation to expend any portion of the 9714 TI Allowance until Landlord and Tenant shall have approved in writing the budget forthe 9714 Tenant Improvements (the “9714 Approved Budget”). Landlord shall provide the proposed 9714 Approved Budget toTenant in accordance with Sections 2.10 and 39 of the Lease as amended hereby concurrently with its approval of the bid andselection of the contractor for the performance of the 9714 Tenant Improvements pursuant to Section 7(i) hereof. If prior to approvalof the 9714 Approved Budget, Tenant shall direct Landlord in writing to commence construction of the 9714 Tenant Improvements,then Tenant shall be responsible to pay all of the costs and expenses incurred in connection with the 9714 Tenant Improvements asthey become due until such time as the 9714 Approved Budget is approved at which time the other applicable provisions of thisSection 7 shall apply to all such costs and expenses both theretofore and thereafter incurred; provided, however that Landlord shallhave no obligation to commence the 9714 Tenant Improvements prior to approval of the 9714 Approved Budget unless and untilTenant delivers such written direction to Landlord to commence construction, and the Estimated 9714 Term Commencement Dateshall be extended by one (1) day for every day beyond November 1, 2015 that Tenant has neither delivered such written direction toLandlord nor approved the 9714 Approved Budget.(n) This Section 7 shall not apply to improvements performed in any additional premises added to the Premises atany time or from time to time after the Amendment Execution Date, whether by any options under the Lease or otherwise; or to anyportion of the Premises or any additions to the Premises in the event of a renewal or extension of the original Term, whether by anyoptions under the Lease or otherwise.8. Condition of 9714 Premises. Tenant acknowledges that (a) it is fully familiar with the condition of the 9714 Premises and,notwithstanding anything contained in the Lease to the contrary, agrees to take the same in its condition “as is” as of the 9714 TermCommencement Date, and (b) Landlord shall have no obligation to alter, repair or otherwise prepare the 9714 Premises for Tenant’soccupancy or to pay for any improvements to the 9714 Building, except in either case as may be expressly provided in the Lease orSection 7 above.7  9. 9714 Base Rent. The provisions of Section 2.3 and 7.1 of the Existing Lease shall apply solely to the 9712 Premises. Withrespect to the 9714 Premises, Tenant shall pay to Landlord as Base Rent for the 9714 Premises, commencing on the 9714 TermCommencement Date, the monthly installments of Base Rent for the 9714 Premises set forth below, in advance on the first day of eachand every calendar month during the 9714 Premises Term: DatesSquareFeet of Rentable AreaBase Rent per SquareFoot of Rentable AreaMonthlyBase Rent*AnnualBase Rent*9714 Lease Year 119,056$26.00 annually$41,288.00$495,456.009714 Lease Year 219,056$26.78 annually$42,526.64$510,319.689714 Lease Year 319,056$27.58 annually$43,797.04$525,564.489714 Lease Year 419,056$28.41 annually$45,115.08$541,380.969714 Lease Year 519,056$29.26 annually$46,464.88$557,578.56 * prorated for any partial periodAs used herein, “9714 Lease Year” shall mean the 12-month period commencing on the 9714 Term Commencement Date and eachsubsequent 12-month period (or portion thereof) during the 9714 Premises Term, provided that if the actual 9714 TermCommencement Date is not the first day of a calendar month, the 9714 Premises Term and the 9714 Term Expiration Date shall beextended to the last day of the calendar month in which the 9714 Term Expiration Date would otherwise occur (and Base Rent for the9714 Premises for such extension period shall be payable at the rate in effect during the month immediately preceding such extensionperiod).10. 9714 Additional Rent.(a) The provisions of Section 7.2 of the Existing Lease shall apply solely to the 9712 Premises. With respect to the9714 Premises, in addition to Base Rent for the 9714 Premises, Tenant shall pay to Landlord as Additional Rent for the 9714 Premisesat times hereinafter specified in this Amendment (i) Tenant’s 9714 Adjusted Share (as defined below) of Operating Expenses (asdefined in the Existing Lease) for (A) the 9714 Building, (B) the South Campus for the 9714 Premises and (c) the Project for the 9714Premises, (ii) the Property Management Fee (as defined in the Existing Lease) and (iii) any other amounts that Tenant assumes oragrees to pay under the provisions of the Lease that are owed to Landlord, including any and all other sums that may become due byreason of any default of Tenant or failure on Tenant’s part to comply with the agreements, terms, covenants and conditions of theLease to be performed by Tenant, after notice and the lapse of any applicable cure periods. To the extent that Tenant uses more thanTenant’s Pro Rata Share of any item of Operating Expenses related to the 9714 Premises, Tenant shall pay Landlord for such excess inaddition to Tenant’s obligation to pay Tenant’s Pro Rata Share of Operating Expenses (such excess, together with Tenant’s Pro RataShare, “Tenant’s 9714 Adjusted Share”).(b) The provisions of the first paragraph of Section 9.2 and Section 9.2(y) of the Existing Lease shall apply solely tothe 9712 Premises. With respect to the 9714 Premises, Tenant shall pay to Landlord on the first day of each calendar month of theTerm, as Additional Rent, commencing on the 9714 Term Commencement Date, (i) the Property Management Fee and (ii) Landlord’sgood faith estimate of Tenant’s 9714 Adjusted Share of Operating Expenses with respect to the 9714 Building, the South Campus forthe 9714 Premises and the Project for the 9714 Premises for such month.8  (c) The provisions of Section 9.4 and 9.5 of the Existing Lease shall apply solely to the 9712 Premises. Tenant shallnot be responsible for Operating Expenses with respect to the 9714 Premises with respect to any time period prior to the 9714 TermCommencement Date; provided, however, that if Landlord shall permit Tenant possession of the 9714 Premises prior to the 9714 TermCommencement Date, Tenant shall be responsible for Operating Expenses from such earlier date of possession (the 9714 TermCommencement Date or such earlier date, as applicable, the “Expense Trigger Date”); and provided, further, that Landlord mayannualize certain Operating Expenses incurred prior to the Expense Trigger Date over the course of the budgeted year during whichthe Expense Trigger Date occurs, and Tenant shall be responsible for the annualized portion of such Operating Expensescorresponding to the number of days during such year, commencing with the Expense Trigger Date, for which Tenant is otherwiseliable for Operating Expenses with respect to the 9714 Premises pursuant to the Lease. Tenant’s responsibility for Tenant’s AdjustedShare of Operating Expenses with respect to the 9714 Premises shall continue to the latest of (i) the date of termination of the Leasewith respect to the 9714 Premises, (ii) the date Tenant has fully vacated the 9714 Premises and (c) if termination of the Lease is due toa default by Tenant, the date of rental commencement of a replacement tenant. Operating Expenses for the calendar year in whichTenant’s obligation to share therein commences and for the calendar year in which such obligation ceases shall be prorated on a basisreasonably determined by Landlord. Expenses such as taxes, assessments and insurance premiums that are incurred for an extendedtime period shall be prorated based upon the time periods to which they apply so that the amounts attributed to the 9714 Premises relatein a reasonable manner to the time period wherein Tenant has an obligation to share in Operating Expenses.11. Utilities and Services for the 9714 Premises. The provisions of Article 16 of the Existing Lease shall apply solely to the9712 Premises. With respect to the 9714 Premises:(a) Tenant shall pay for all water (including the cost to service, repair and replace reverse osmosis, de-ionized andother treated water), gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilitiessupplied to the 9714 Premises, together with any fees, surcharges and taxes thereon. If any such utility is not separately metered toTenant, Tenant shall pay Tenant’s Adjusted Share of all charges of such utility jointly metered with all other premises in the 9714Building as Additional Rent or, in the alternative, Landlord may, at its option, directly meter the usage of such utilities by Tenantprovided that, if the decision to direct meter the usage of such utilities is due to the overconsumption of such utilities by Tenant, thenthe cost of purchasing, installing and monitoring such metering equipment shall be paid by Tenant as Additional Rent, and otherwisesuch cost shall be paid by Landlord. Landlord may base its bills for utilities on reasonable estimates; provided that Landlord adjustssuch billings promptly thereafter or as part of the next Landlord’s Statement to reflect the actual cost of providing utilities to the 9714Premises. To the extent that Tenant uses more than Tenant’s Pro Rata Share of any utilities, then Tenant shall pay Landlord forTenant’s Adjusted Share of such utilities to reflect such excess. In the event that the 9714 Building, South Campus or Project is lessthan fully occupied during a calendar year, Tenant acknowledges that Landlord may extrapolate utility usage that varies depending onthe occupancy of the 9714 Building, South Campus or Project (as applicable) to equal Landlord’s reasonable estimate of what suchutility usage would have been had the 9714 Building, South Campus or Project, as applicable, been ninety-five percent (95%)occupied during such calendar year; provided, however, that Landlord shall not recover more than one hundred percent (100%) of thecost of such utilities. Tenant shall not be liable for the cost of utilities supplied to the 9714 Premises attributable to the time period priorto the 9714 Term Commencement Date; provided, however, that, if Landlord shall permit Tenant possession of the 9714 Premisesprior to the 9714 Term Commencement Date and Tenant uses the 9714 Premises for any purpose other than for the placement of itscabling, equipment, furniture and personal property therein, then Tenant shall be responsible for the cost of utilities supplied to the9714 Premises from such earlier date of possession. In any event, if Landlord permits Tenant any early access to the9  9714 Premises, then Tenant shall exercise such right of early access in a manner that does not interfere with the construction of the9714 Tenant Improvements in the 9714 Premises.(b) Landlord shall not be liable for, nor shall any eviction of Tenant result from, the failure to furnish any utility orservice to the 9714 Premises, whether or not such failure is caused by Force Majeure (as defined in the Existing Lease) or SevereWeather Conditions (as defined in the Existing Lease), provided, however, that the provisions of Section 16.2 of the Existing Leaseshall apply to any Material Services Failure (as defined in the Existing Lease) to the 9714 Premises.(c) Tenant shall pay for, prior to delinquency of payment therefor, any utilities and services that may be furnished tothe 9714 Premises during or, if Tenant occupies the 9714 Premises after the expiration or earlier termination of the Term, after theTerm, beyond those utilities provided by Landlord, including telephone, internet service, cable television and othertelecommunications, together with any fees, surcharges and taxes thereon. Upon Landlord’s demand, utilities and services provided tothe 9714 Premises that are separately metered shall be paid by Tenant directly to the supplier of such utilities or services.(d) Tenant shall not, without Landlord’s prior written consent, use any device in the 9714 Premises (including dataprocessing machines) that will in any way (i) increase the amount of ventilation, air exchange, gas, steam, electricity or water requiredor consumed in the 9714 Premises based upon Tenant’s Pro Rata Share of the 9714 Building or Project (as applicable) beyond theexisting capacity of the 9714 Building or the Project usually furnished or supplied for the Permitted Use or (ii) exceed Tenant’s ProRata Share of the 9714 Building’s or Project’s (as applicable) capacity to provide such utilities or services.(e) If Tenant shall require utilities or services in excess of those usually furnished or supplied for tenants in similarspaces in the 9714 Building or the Project by reason of Tenant’s equipment or extended hours of business operations, then Tenant shallfirst procure Landlord’s consent for the use thereof, which consent Landlord may condition upon the availability of such excess utilitiesor services, and Tenant shall pay as Additional Rent an amount equal to the cost of providing such excess utilities and services.(f) Landlord shall provide water in Common Area for lavatory and landscaping purposes only, which water shall befrom the local municipal or similar source; provided, however, that if Landlord reasonably determines that Tenant requires, uses orconsumes water provided to the Common Area for any purpose other than ordinary lavatory purposes, and such additionalrequirement, use or consumption is not promptly discontinued after written demand from Landlord, Landlord may install a TenantWater Meter (as defined in the Existing Lease) and thereby measure Tenant’s water consumption for all purposes. Tenant shall payLandlord for the costs of any Tenant Water Meter and the installation and maintenance thereof during the Term. If Landlord installs aTenant Water Meter, Tenant shall pay for water consumed, as shown on such meter, as and when bills are rendered. If Tenant fails totimely make such payments, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurredor payments made by Landlord for any of the reasons or purposes stated in this Section shall be deemed to be Additional Rent payableby Tenant and collectible by Landlord as such.(g) Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and utilitysystems, when Landlord reasonably deems necessary, due to accident, emergency or the need to make repairs, alterations orimprovements, until such repairs, alterations or improvements shall have been completed, and except as provided in Section 11(b)above, Landlord shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilation, airconditioning or utility service when prevented from doing so by Force Majeure or, to the extent permitted by Applicable Laws,Landlord’s negligence. Without limiting the foregoing, it is expressly understood and agreed that any covenants on10  Landlord’s part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or toperform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the sameby virtue of Force Majeure or, to the extent permitted by Applicable Laws, Landlord’s negligence.(h) For the 9714 Premises, Landlord shall (i) maintain and operate the HVAC systems (excluding any Tenant-installed supplemental units exclusively serving the 9714 Premises) used for the Permitted Use only (“Base HVAC”) and (ii) subject toSubsection 11(h)(i), furnish Base HVAC as reasonably required (except as this Amendment otherwise provides) for reasonablycomfortable occupancy of the 9714 Premises twenty-four (24) hours a day, every day during the 9714 Premises Term, subject tocasualty, eminent domain or as otherwise specified in this Section. Tenant’s HVAC usage for the 9714 Premises shall be separatelymetered. Tenant may deliver written notice to Landlord from time to time stating the specific temperature to which Tenant desires theHVAC system for the 9714 Premises to be set during specific hours on specific days (“HVAC Checkpoints”), and Landlord shallprogram the HVAC system to reflect Tenant’s desired HVAC Checkpoints. Notwithstanding anything to the contrary in this Section(but subject to Section 11(b) above), Landlord shall have no liability, and Tenant shall have no right or remedy, on account of anyinterruption or impairment in Base HVAC services; provided that Landlord diligently endeavors to cure any such interruption orimpairment.(i) For any utilities serving the 9714 Premises for which Tenant is billed directly by such utility provider, Tenantagrees to furnish to Landlord, within thirty (30) days after Landlord’s request, (a) any invoices or statements for such utilities, (b) anyother utility usage information reasonably requested by Landlord, and (c) within thirty (30) days after each calendar year during the9714 Premises Term, authorization to allow Landlord to access Tenant’s usage information reasonably available and reasonablynecessary for Landlord to complete an ENERGY STAR® Statement of Performance (or similar comprehensive utility usage report(e.g., related to Labs 21), if requested by Landlord) and any other information reasonably requested by Landlord for the immediatelypreceding year; and Tenant shall comply with any other energy usage or consumption requirements required by ApplicableLaws. Tenant shall retain records of utility usage at the 9714 Premises, including invoices and statements from the utility provider, forat least sixty (60) months, or such other period of time as may be requested by Landlord. Tenant acknowledges that any utilityinformation for the 9714 Premises, the 9714 Building and the Project may be shared with third parties, including Landlord’sconsultants and Governmental Authorities. In addition to the foregoing, Tenant shall comply with all Applicable Laws related to thedisclosure and tracking of energy consumption at the 9714 Premises. The provisions of this Section shall survive the expiration orearlier termination of the Lease.12. 9714 Premises Repairs and Maintenance. The provisions of Section 18.1 of the Existing Lease shall apply solely to the9712 Premises. With respect to the 9714 Premises, Landlord shall repair and maintain the structural and exterior portions andCommon Area of the 9714 Building and the Project, including roofing and covering materials; foundations (excluding anyarchitectural slabs, but including any structural slabs); exterior walls; plumbing; fire sprinkler systems (if any); HVAC systems;elevators; and electrical systems installed or furnished by Landlord.13. Security Deposit. Landlord currently holds Twenty-Three Thousand Nine Hundred Twenty-Two and 88/100 Dollars($23,922.88) as the Security Deposit under the Existing Lease. Tenant shall deposit with Landlord on or before the AmendmentExecution Date an additional sum of Eighty-Two Thousand Five Hundred Seventy-Six and 00/100 Dollars ($82,576.00), for a totalSecurity Deposit of One Hundred Six Thousand Four Hundred Ninety-Eight and 88/100 Dollars ($106,498.88). 11  14. 9714 Parking. Parking for both the 9712 Premises and the 9714 Premises shall be as set forth in Section 13.3 of theExisting Lease. As of the Amendment Execution Date, Tenant’s Pro Rata Share of the parking facilities serving the Project is equal to2.6 parking spaces per one thousand (1,000) square feet of Rentable Area.15. Options to Extend the Term. The Options to extend the Term set forth in Article 42 of the Existing Lease shall apply tothe entire Premises (including the 9714 Premises); provided, however, that (a) the time period for exercise and length of the first Optionshall be calculated based upon the expiration of the Term of the Lease for the 9712 Premises (i.e., October 31, 2020) and (b) the 9714Premises Term would only be extended to the extent necessary to make it coterminous with the Term of the Lease for the 9712Premises as extended pursuant to such Option (i.e., the Term with respect to the first Option for both the 9712 Premises and the 9714Premises would be extended until October 31, 2023).16. Right of First Refusal. The first (1st) sentence of Article 43 of the Existing Lease is hereby amended and restated in itsentirety as follows:Commencing upon the Amendment Execution Date (as defined in the First Amendment to this Lease), but subject toany other parties’ pre-existing rights existing on such Amendment Execution Date with respect to Available ROFRPremises (as defined below) (including, without limitation, any such rights granted to GlycoMimetics, Inc.), Tenantshall have a right of first refusal (“ROFR”) as to any rentable premises on the first (1st) floor of the building locatedat 9714 Medical Center Drive, Rockville, Maryland, for which Landlord is seeking a tenant (“Available ROFRPremises”); provided, however, that in no event shall Landlord be required to lease any Available ROFR Premises toTenant for any period past the date on which this Lease expires or is terminated pursuant to its terms.17. Broker. Tenant represents and warrants that it has not dealt with any broker or agent in the negotiation for or the obtainingof this Amendment, other than Sheer Partners (“Broker”), and agrees to reimburse, indemnify, save, defend (at Landlord’s option andwith counsel reasonably acceptable to Landlord, at Tenant’s sole cost and expense) and hold harmless the Landlord Indemnitees (asdefined in the Lease) for, from and against any and all cost or liability for compensation claimed by any such broker or agent, otherthan Broker, employed or engaged by Tenant or claiming to have been employed or engaged by Tenant. Broker is entitled to a leasingcommission in connection with the making of this Amendment, and Landlord shall pay such commission to Broker pursuant to aseparate agreement between Landlord and Broker. Landlord represents and warrants that it has had no dealings with any real estatebroker or agent in connection with the negotiation of this Amendment other than Broker and agrees to reimburse, indemnify, save,defend (at Tenant’s option and with counsel reasonably acceptable to Tenant, at Landlord’s sole cost and expense) and hold Tenantharmless for, from and against any and all cost or liability for compensation claimed by any broker or agent, other than Broker,employed or engaged by Landlord or claiming to have been employed or engaged by Landlord.18. No Default. Landlord and Tenant each represents, warrants and covenants to the other that, to the best of its knowledge,Landlord and Tenant are not in default of any of their respective obligations under the Existing Lease and no event has occurred that,with the passage of time or the giving of notice (or both) would constitute a default by either Landlord or Tenant thereunder.12  19. Notices. The address for notices to Tenant set forth in Section 2.10 of the Existing Lease and the address for invoices toTenant set forth in Section 2.11 of the Existing Lease are both hereby deleted in their entirety and replaced respectively with thefollowing:Address for Notices to Tenant: REGENXBIO Inc.9712 Medical Center Drive, Suite 100Rockville, MD 20850Attn: General Counsel With copies by email to: Sberl@regenxbio.com and to: Vvasista@regenxbio.comAddress for Invoices to Tenant:REGENXBIO Inc.9712 Medical Center Drive, Suite 100Rockville, MD 20850Attn: Chief Financial Officer20. Effect of Amendment. Except as modified by this Amendment, the Existing Lease and all the covenants, agreements,terms, provisions and conditions thereof shall remain in full force and effect and are hereby ratified and affirmed. In the event of anyconflict between the terms contained in this Amendment and the Existing Lease, the terms herein contained shall supersede and controlthe obligations and liabilities of the parties.21. Successors and Assigns. Each of the covenants, conditions and agreements contained in this Amendment shall inure tothe benefit of and shall apply to and be binding upon the parties hereto and their respective heirs, legatees, devisees, executors,administrators and permitted successors and assigns and sublessees. Nothing in this section shall in any way alter the provisions of theLease restricting assignment or subletting.22. Miscellaneous. This Amendment becomes effective only upon execution and delivery hereof by Landlord and Tenant.The captions of the sections, subsections, paragraphs and subparagraphs in this Amendment are inserted and included solely forconvenience and shall not be considered or given any effect in construing the provisions hereof. All exhibits hereto are incorporatedherein by reference. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of oroption for a lease, and shall not be effective as a lease, lease amendment or otherwise until execution by and delivery to both Landlordand Tenant.23. Authority. Landlord and Tenant each guarantees, warrants and represents that the individual or individuals signing thisAmendment have the power, authority and legal capacity to sign this Amendment on13  behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations andentities on whose behalf such individual or individuals have signed.24. Counterparts; Facsimile and PDF Signatures. This Amendment may be executed in one or more counterparts, each ofwhich, when taken together, shall constitute one and the same document. A facsimile or portable document format (PDF) signature onthis Amendment shall be equivalent to, and have the same force and effect as, an original signature.25. Entire Agreement. The terms of the Lease are intended by the parties as a final, complete and exclusive expression oftheir agreement with respect to the terms that are included therein, and may not be contradicted or supplemented by evidence of anyother prior or contemporaneous agreement.26. Savings Clause. Any provision of this Amendment that shall prove to be invalid, void or illegal shall in no way affect,impair or invalidate any other provision hereof, and all other provisions of this Amendment shall remain in full force and effect andshall be interpreted as if the invalid, void or illegal provision did not exist.[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 14  IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date and year first above written.LANDLORD: BMR-MEDICAL CENTER DRIVE LLC,a Delaware limited liability company By: /s/ Kevin M. SimonsenName: Kevin M. SimonsenTitle: Sr. VP, Real Estate Legal TENANT: REGENXBIO INC.,a Delaware corporation By: /s/ Kenneth MillsName: Kenneth MillsTitle: President and CEO  EXHIBIT A-19714 PREMISES A-1-1  EXHIBIT B[INTENTIONALLY DELETED] B-2  EXHIBIT CACKNOWLEDGEMENT OF 9714 TERM COMMENCEMENT DATEAND 9714 TERM EXPIRATION DATETHIS ACKNOWLEDGEMENT OF 9714 TERM COMMENCEMENT DATE AND 9714 TERM EXPIRATION DATEis entered into as of [_______], 20[__], with reference to that certain Lease dated as of March 6, 2015 (the “Original Lease”), asamended by that certain First Amendment to Lease dated as of September____, 2015, (the “First Amendment” and together with theOriginal Lease, and as the same may have been further amended, amended and restated, supplemented or modified from time to time,the “Lease”), by REGENXBIO INC., a Delaware corporation (“Tenant”), in favor of BMR-MEDICAL CENTER DRIVE LLC, aDelaware limited liability company (“Landlord”). All capitalized terms used herein without definition shall have the meanings ascribedto them in the Lease.Tenant hereby confirms the following:1. Tenant accepted possession of the 9714 Premises for use in accordance with the Permitted Use for the 9714 Premises on [_______],20[__]. Tenant first occupied the 9714 Premises for the Permitted Use on [_______], 20[__].2. To Tenant’s knowledge, the 9714 Premises are in good order, condition and repair.3. The 9714 Tenant Improvements are Substantially Complete.4. To Tenant’s knowledge, all conditions of the Lease to be performed by Landlord as a condition to the full effectiveness of the Leasehave been satisfied, and Landlord has fulfilled all of its duties in the nature of inducements offered to Tenant to lease the 9714Premises.5. In accordance with the provisions of Section 6 of the First Amendment, the 9714 Term Commencement Date is [_______], 20[__],and, unless the Lease is terminated prior to the 9714 Term Expiration Date pursuant to its terms, the 9714 Term Expiration Date shallbe [_______], 20[__].6. The Lease is in full force and effect, and the same represents the entire agreement between Landlord and Tenant concerning the9714 Premises[, except [_______]].7. To Tenant’s knowledge, Tenant has no existing defenses against the enforcement of the Lease by Landlord, and, to Tenant’sknowledge, there exist no offsets or credits against Rent owed or to be owed by Tenant.C-1  8. The obligation to pay Rent is presently in effect and all Rent obligations on the part of Tenant under the Lease with respect to the9714 Premises commenced to accrue on [_______], 20[__], with Base Rent for the 9714 Premises payable on the dates and amountsset forth in the chart below: DatesApproximate SquareFeet of Rentable AreaBase Rent per SquareFoot of Rentable AreaMonthlyBase Rent*Annual BaseRent*[__]/[__]/[__]-[__]/[__]/[__][ ]$[_______] annually[ ][ ] * prorated for any partial period9. The undersigned Tenant has not made any prior assignment, transfer, hypothecation or pledge of the Lease or of the rents thereunderor sublease of the Premises or any portion thereof.[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]C-2  IN WITNESS WHEREOF, Tenant has executed this Acknowledgment of 9714 Term Commencement Date and 9714 TermExpiration Date as of the date first written above.TENANT: REGENXBIO INC.,a Delaware corporation By: Name: Title: C-3  EXHIBIT DFORM OF 9714 ADDITIONAL TI ALLOWANCE LETTER[TENANT LETTERHEAD] BMR-Medical Center Drive LLC17190 Bernardo Center DriveSan Diego, California 92128Attn: Real Estate Legal Department[Date]Re: 9714 Additional TI AllowanceTo Whom It May Concern:This letter concerns that certain Lease dated as of March 6, 2015 (the “Original Lease”), as amended by that certain FirstAmendment to Lease dated as of September ______, 2015, (the “First Amendment” and together with the Original Lease, and as thesame may have been further amended, amended and restated, supplemented or modified from time to time, the “Lease”), betweenBMR-MEDICAL CENTER DRIVE LLC, a Delaware limited liability company (“Landlord”) and REGENXBIO INC., a Delawarecorporation (“Tenant”). Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease.Tenant hereby notifies Landlord that it wishes to exercise its right to utilize the 9714 Additional TI Allowance pursuant toSection 6(e) of the First Amendment in the amount of $_______________.If you have any questions, please do not hesitate to call [_______] at ([___]) [___]-[____].Sincerely,[Name][Title of Authorized Signatory]cc:Greg LubushkinKaren SztraicherJohn BonannoKevin SimonsenD-1  Exhibit 10.32SECOND AMENDMENT TO LEASEThis SECOND AMENDMENT TO LEASE (this “Amendment”) is entered into as of this 23rd day of November, 2015 (the“Effective Date”) by and between BMR-MEDICAL CENTER DRIVE LLC, a Delaware limited liability company (“Landlord”) andREGENXBIO INC., a Delaware corporation (“Tenant”).RECITALSWHEREAS, Landlord and Tenant are parties to that certain Lease dated as of March 6, 2015, as amended by that certain FirstAmendment to Lease, dated as of September 30, 2015 (the “First Amendment”) (collectively, as amended, the “Existing Lease”), forthe lease of certain premises consisting of approximately 10,833 square feet of Rentable Area in the building at 9712 Medical CenterDrive (the “9712 Premises”) and approximately 19,056 square feet of Rentable Area in the building at 9714 Medical Center Drive (the“9714 Premises”), both located in Rockville, Maryland, as more particularly described in the Lease (collectively, the “Premises”); andWHEREAS, Landlord was required to make certain improvements to the 9714 Premises pursuant to the terms of the FirstAmendment (“9714 Tenant Improvements”);WHEREAS, Tenant has requested to perform the 9714 Tenant Improvements and Landlord agrees to such request asprovided herein; andWHEREAS, Landlord and Tenant desire to modify and amend the Existing Lease only in the respects and on the conditionshereinafter stated.AGREEMENTNOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree asfollows:1. Definitions. For purposes of this Amendment, capitalized terms shall have the meanings ascribed to them in the ExistingLease unless otherwise defined herein. The Existing Lease, as amended by this Amendment, is referred to collectively herein as the“Lease.” From and after the date hereof, the term “Lease,” as used in the Existing Lease, shall mean the Existing Lease, as amended bythis Amendment.2. 9714 Tenant Improvements. Section 7 of the First Amendment is hereby deleted in its entirety and replaced with thefollowing:(a) The provisions of Article 4 and Exhibit B of the Existing Lease shall apply solely the 9712 Premises. Withrespect to the 9714 Premises, Tenant shall accept the 9714 Premises in its “as-is” condition without any obligation on the Landlord’spart to perform any additions, alterations, improvements, demolition or other work therein or pertaining thereto except (i) Landlordshall deliver the 9714 Premises broom-clean and free and clear of debris and any other tenancies, occupants and their personalproperty, furniture, fixtures and equipment and (ii) as may be expressly provided in the Lease. Subject to Landlord’s obligation toprovide the 9714 TI Allowance (as defined below), Tenant, at its sole cost and expense, shall perform all work (the “9714 TenantImprovements”) necessary to prepare the 9714 Premises for Tenant’s occupancy in accordance with the 9714 Approved Plans (asdefined below). 1  (b) The “9714 Term Commencement Date” shall be April 1, 2016, provided that if Substantial Completion of the9714 Tenant Improvements is delayed beyond April 1, 2016 solely as a direct result of a Landlord Delay, the 9714 CommencementDate shall be extended by one day for each day beyond April 1, 2016 that Substantial Completion is delayed due to such LandlordDelay. Except as set forth in the preceding sentence, failure by Tenant to complete the 9714 Tenant Improvements, or obtain validationby any medical review board or other similar governmental licensing of the 9714 Premises required for the Permitted Use of the 9714Premises by Tenant shall not serve to extend the 9714 Term Commencement Date. The term “Substantially Complete” or “SubstantialCompletion” means that the Tenant Improvements are substantially complete in accordance with the Approved Plans (as defined in theWork Letter), except for minor punch list items, the existence, completion or correction of which will not materially interfere withTenant’s use and occupancy of the 9714 Premises for the Permitted Use therefor, and (B) a certificate of occupancy for the 9714Premises has been issued by the applicable Governmental Authority. The term “Landlord Delay” means delay in SubstantialCompletion of the 9714 Tenant Improvements as a result of (i) Landlord’s failure to comply with its obligations under Section 7(v)below, (ii) any Change requested by Landlord that is not required to comply with Applicable Laws, correct a construction defect orerror or omission, remedy an issue affecting human health or safety, address an item that will affect (or damage) structural elements orsystems of the Building, overtax or overprescribe the systems of the Building, or adversely affect the mechanical, electrical, plumbingand other systems of the Building, or address a matter that will affect (in Landlord’s reasonable judgment) the exterior appearance ofthe Building or Common Areas or the appearance or operations of the public areas of the Building or adversely affect the operations ofthe Building or (iii) any other act or omission (where there was a duty to act) by Landlord, its employees, contractors or agents that isnot pursuant to an express right of Landlord under the Lease.(c) Tenant shall cause the 9714 Tenant Improvements to be constructed in the 9714 Premises at a cost to Landlordnot to exceed (i) Two Hundred Eighty-Five Thousand Eight Hundred Forty and 00/100 Dollars ($285,840.00) (based upon Fifteenand 00/100 Dollars ($15.00) per square foot of Rentable Area of the 9714 Premises (the “9714 Base T1 Allowance”), plus (ii) ifrequested by Tenant by a letter in the form attached as Exhibit D to the First Amendment executed by an authorized officer of Tenant,up to Six Hundred Sixty-Six Thousand Nine Hundred Sixty and 00/100 Dollars ($666,960.00) (based upon Thirty-Five and 00/100Dollars ($35.00) per square foot of Rentable Area of the 9714 Premises) (the “9714 Additional TI Allowance”), for a total of up toNine Hundred Fifty-Two Thousand Eight Hundred and 00/100 Dollars ($952,800.00) (based upon Fifty Dollars ($50.00) per squarefoot of Rentable Area of the 9714 Premises). The 9714 Base TI Allowance, together with the 9714 Additional T1 Allowance (if andto the extent properly requested by Tenant pursuant to this Section), shall be referred to herein as the “9714 TI Allowance.” The 9714TI Allowance may be applied to the following costs in connection with the 9714 Tenant Improvements: (A) construction, (B) projectreview and supervision fee to Landlord (which fee shall equal the actual out-of-pocket costs incurred by Landlord for project reviewand supervision, not to exceed three percent (3%) of the cost of the 9714 Tenant Improvements, including the 9714 Base TIAllowance and, if used by Tenant, the 9714 Additional TI Allowance), (C) commissioning of mechanical, electrical and plumbingsystems serving the 9714 Premises by a licensed, qualified commissioning agent hired by Tenant, and review of such party’scommissioning report by a licensed, qualified commissioning agent hired by Landlord, (D) space planning, architect, engineering andother related professional or consulting services performed by third parties unaffiliated with Tenant, (E) building permits and othertaxes, fees, charges and levies by Governmental Authorities for permits or for inspections, and (F) costs and expenses for labor,materials, equipment and fixtures. In no event shall the 9714 TI Allowance be used for (V) the cost of work that is not authorized bythe 9714 Approved Plans or otherwise approved in writing by Landlord, (W) payments to Tenant or any affiliates of Tenant, (X) thepurchase of any furniture, personal property or other non-building system equipment, (Y) costs resulting from any default by Tenant ofits2  obligations under the Lease or (Z) costs that are recoverable by Tenant from a third party (e.g., insurers, warrantors, or tortfeasors). (d) Tenant shall have until March 31, 2017 (the “9714 TI Allowance Deadline”) to expend the unused portion of the9714 TI Allowance, after which date Landlord’s obligation to fund such costs shall expire, provided, however, that the 9714 TIAllowance Deadline shall be extended by one (1) day for each day beyond June 1, 2016 that Substantial Completion of the 9714Tenant Improvements is delayed solely as a direct result of Force Majeure or Landlord Delay. Monthly Base Rent for the 9714Premises shall be increased to include the amount of the 9714 Additional TI Allowance requested by Tenant and disbursed byLandlord (the “Actual 9714 Additional TI Allowance Amount”) in accordance with this Amendment, amortized over the initial 9714Premises Term at a rate of eight percent (8%) annually, as if the Actual 9714 Additional TI Allowance Amount had been loaned toTenant as of the 9714 Term Commencement Date (subject to adjustment as provided below) and repaid in equal monthly installments.The amount by which monthly Base Rent with respect to the 9714 Premises shall be increased shall be determined (and Base Rentshall be increased accordingly) as of the 9714 Term Commencement Date (with Landlord to provide Tenant an accounting of thesame) and, if such determination does not reflect use by Tenant of all of the 9714 Additional TI Allowance requested by Tenant, theActual 9714 Additional TI Allowance Amount shall be determined again as of the 9714 TI Allowance Deadline (with Landlord toprovide Tenant with a reasonably detailed accounting of the same), with Tenant paying (on the next succeeding date that Base Rent isdue under the Lease which is at least thirty (30) days after Tenant receives such accounting (the “TI True-Up Date")), anyunderpayment of the further adjusted Base Rent for the 9714 Premises for the period beginning on the 9714 Term CommencementDate and ending on the TI True-Up Date.(e) Notwithstanding anything to the contrary set forth elsewhere in the Lease, Landlord shall not have any obligationto expend any portion of the 9714 TI Allowance until Landlord and Tenant shall have approved in writing the budget for the 9714Tenant Improvements (the “9714 Approved Budget”). Prior to Landlord’s approval of the 9714 Approved Budget, Tenant shall payall of the costs and expenses incurred in connection with the 9714 Tenant Improvements as they become due. Landlord shall not beobligated to reimburse Tenant for costs or expenses relating to the 9714 Tenant Improvements that exceed the amount of the 9714 TIAllowance. Landlord shall not unreasonably withhold, condition or delay its approval of any budget for 9714 Tenant Improvementsthat is proposed by Tenant. Landlord shall not be obligated to expend any portion of the 9714 Additional TI Allowance until Landlordshall have received from Tenant a letter in the form attached as Exhibit D to the First Amendment executed by an authorized officer ofTenant. In no event shall any unused 9714 TI Allowance entitle Tenant to a credit against Rent payable under the Lease.(f) To the extent that the total projected cost of the 9714 Tenant Improvements (as projected by Landlord) exceedsthe 9714 TI Allowance (such excess, the “Excess 9714 TI Costs”), Tenant shall pay the costs of the 9714 Tenant Improvements on apari passu basis with Landlord’s funding of the 9714 TI Allowance as such costs are paid, in the proportion of Excess 9714 TI Costspayable by Tenant to the 9714 Base TI Allowance (and, if properly requested by Tenant pursuant to this Amendment, the 9714Additional TI Allowance) payable by Landlord. If Tenant fails to pay, or is late in paying, any sum due to Landlord under this Section,then subject to any applicable notice and cure periods, Landlord shall have all of the rights and remedies set forth in the Lease fornonpayment of Rent (including the right to interest and the right to assess a late charge), and for purposes of any litigation institutedwith regard to such amounts the same shall be considered Rent. (g) Subject to subparagraph (e) above, upon submission by Tenant to Landlord of (i) a statement (a “9714 FundRequest”) setting forth the total amount of the 9714 TI Allowance requested, (ii) a summary of the 9714 Tenant Improvementsperformed using AIA standard form Application for Payment (G 702) executed3  by the general contractor and by the architect, (iii) invoices from the general contractor, the architect, and any subcontractors, materialsuppliers and other parties requesting payment with respect to the amount of the 9714 TI Allowance then being requested, and (iv)unconditional lien releases from the general contractor and each subcontractor and material supplier with respect to previous paymentsmade by either Landlord or Tenant for the 9714 Tenant Improvements in a form reasonably acceptable to Landlord and complyingwith Applicable Laws, then Landlord shall, within thirty (30) days following receipt by Landlord of a 9714 Fund Request and theaccompanying materials required by this Section, pay to Tenant (for reimbursement for payments made by Tenant to such contractors,subcontractors or material suppliers either prior to Landlord’s approval of the 9714 Approved Budget or as a result of Tenant’sdecision to pay for the 9714 Tenant Improvements itself and later seek reimbursement from Landlord in the form of one lump sumpayment in accordance with the Lease), or if Tenant has not already paid such contractors, subcontractors or material suppliers, then,(as elected by Landlord) to Tenant or directly to the applicable contractors, subcontractors and material suppliers, the amount of 9714Tenant Improvement costs set forth in such 9714 Fund Request or Landlord’s pari passu share thereof if Excess 9714 TI Costs existbased on the Approved Budget. Notwithstanding anything in this Section to the contrary, Tenant shall not submit a 9714 FundRequest more often than every thirty (30) days. Any additional 9714 Fund Requests submitted by Tenant shall be void and of no forceor effect.(h) In addition to the other requirements of this Section, Tenant shall, no later than the fifth (5th) business day of eachmonth until the 9714 Tenant Improvements are complete, provide Landlord with an estimate of (a) the percentage of design and othersoft cost work that has been completed, (b) design and other soft costs spent through the end of the previous month, both fromcommencement of the 9714 Tenant Improvements and solely for the previous month, (c) the percentage of construction and other hardcost work that has been completed, (d) construction and other hard costs spent through the end of the previous month, both fromcommencement of the 9714 Tenant Improvements and solely for the previous month, and (e) the date of Substantial Completion of the9714 Tenant Improvements.(i) Landlord designates, as Landlord’s authorized representative (“Landlord’s Authorized Representative”), (i) TimStoll as the person authorized to initial plans, drawings, approvals and to sign change orders pursuant to this Amendment, and (ii) anofficer of Landlord as the person authorized to sign any amendments to the Lease. Tenant shall not be obligated to respond to or actupon any such item until such item has been initialed or signed (as applicable) by the appropriate Landlord’s AuthorizedRepresentative. Landlord may change either Landlord’s Authorized Representative upon one (1) business day’s prior written notice toTenant.(j) Tenant designates Vittal Vasista (“Tenant’s Authorized Representative”) as the person authorized to initial andsign all plans, drawings, change orders and approvals pursuant to this Amendment. Landlord shall not be obligated to respond to or actupon any such item until such item has been initialed or signed (as applicable) by Tenant’s Authorized Representative. Tenant maychange Tenant’s Authorized Representative upon one (1) business day’s prior written notice to Landlord.4  (k) The schedule for design and performance of the 9714 Tenant Improvements, including the time periods forpreparation and review of construction documents, approvals and performance, shall be in accordance with a schedule prepared byTenant and reasonably approved by Landlord (the “9714 Schedule”). Tenant shall prepare the 9714 Schedule so that it is a reasonableschedule for the completion of the 9714 Tenant Improvements. The 9714 Schedule shall clearly identify all activities requiringLandlord participation, including specific dates and time periods when Tenant’s contractor will require access to areas of the Projectoutside of the 9714 Premises. As soon as the 9714 Schedule is completed, Tenant shall deliver the same to Landlord for Landlord’sapproval, which approval shall not be unreasonably withheld, conditioned or delayed. Such 9714 Schedule shall be approved ordisapproved by Landlord within ten (10) business days after delivery to Landlord. Landlord’s failure to respond within such ten (10)business day period shall be deemed approval by Landlord. If Landlord disapproves the 9714 Schedule, then Landlord shall notifyTenant in writing of its objections to such 9714 Schedule, and the parties shall confer and negotiate in good faith to reach agreement onthe 9714 Schedule. 9714 The Schedule shall be subject to adjustment as mutually agreed upon in writing by the parties or as providedin this Second Amendment. (l) Subject to the provisions of this Section 7(l), the architect, engineering consultants, design team, general contractorand subcontractors responsible for the construction of the 9714 Tenant Improvements shall be selected by Tenant and approved byLandlord, which approval Landlord shall not unreasonably withhold, condition or delay. Landlord may refuse to use any architects,consultants, contractors, subcontractors or material suppliers that Landlord reasonably believes could cause labor disharmony or maynot have sufficient experience, in Landlord’s reasonable opinion, to perform work in an occupied Class “A” laboratory researchbuilding and in lab areas. All Tenant contracts related to the 9714 Tenant Improvements shall provide that Tenant may assign suchcontracts and any warranties with respect to the 9714 Tenant Improvements to Landlord at any time.(m) All 9714 Tenant Improvements shall be performed by Tenant’s contractor, at Tenant’s sole cost and expense,subject to Landlord’s obligations with respect to any portion of the 9714 Base TI Allowance (and, if properly requested by Tenant, the9714 Additional TI Allowance), and in accordance with the 9714 Approved Plans (as defined below) and the Lease. All material andequipment furnished by Tenant or its contractors as the 9714 Tenant Improvements shall be new or “like new;” the 9714 TenantImprovements shall be performed in a first-class, workmanlike manner; and the quality of the 9714 Tenant Improvements shall be of anature and character not less than the Building Standard. Tenant shall take, and shall require its contractors to take, commerciallyreasonable steps to protect the 9714 Premises during the performance of any 9714 Tenant Improvements, including covering ortemporarily removing any window coverings, so as to guard against dust, debris or damage. All 9714 Tenant Improvements shall beperformed in accordance with Article 17 of the Existing Lease; provided that in the event of a conflict between this Section 7 of thisAmendment and Article 17 of the Existing Lease, the terms of this Section 7 shall govern.(n) Tenant shall prepare and submit to Landlord for approval in accordance with Sections 2.9 and 39 of the Lease,schematics covering the 9714 Tenant Improvements prepared in conformity with the applicable provisions of this Amendment (the“9714 Draft Schematic Plans”). The 9714 Draft Schematic Plans shall contain sufficient information and detail to accurately describethe proposed design to Landlord and such other information as Landlord may reasonably request in order to complete its reviewthereof. Landlord’s approval rights as to the 9714 Draft Schematic Plans shall be limited to a review of the 9714 Draft SchematicPlans to confirm that: (i) the 9714 Tenant Improvements do not affect (and are not damaging to) the structural elements or systems ofthe Building, do not overtax or overprescribe the systems of the Building and do not adversely affect the mechanical, electrical,plumbing and other systems of the Building, (ii) the 9714 Tenant Improvements do not affect (in Landlord’s reasonable judgment) theexterior appearance of the Building or Common Areas or the appearance or operations of the public areas of the Building or adverselyaffect the5  operations of the Building or the Common Areas, (iii) the 9714 Tenant Improvements comply with all Applicable Laws, and (iv) the9714 Draft Schematic Plans do not reflect any violation of Applicable Laws, contain construction defects or errors or omissions, orreflect any matters that could adversely affect human health or safety, and (v) the 9714 Draft Schematic Plans contain sufficientinformation and detail to accurately describe the proposed design to Landlord. Landlord shall notify Tenant in writing within seven (7)business days after receipt of the 9714 Draft Schematic Plans whether Landlord approves or objects as permitted hereby to the 9714Draft Schematic Plans and of the manner, if any, in which the 9714 Draft Schematic Plans are unacceptable as permittedhereby. Landlord’s failure to respond within such seven (7) business day period shall be deemed approval by Landlord. If Landlordobjects to the 9714 Draft Schematic Plans pursuant to its rights and within the time periods provided hereunder, then Tenant shallrevise the 9714 Draft Schematic Plans and cause Landlord’s objections to be remedied in the revised 9714 Draft SchematicPlans. Tenant shall then resubmit the revised 9714 Draft Schematic Plans to Landlord for approval, such approval not to beunreasonably withheld, conditioned or delayed. Landlord’s approval of or objection to revised 9714 Draft Schematic Plans andTenant’s correction of the same shall be in accordance with this Section 7(n) until Landlord has (or is deemed to have) approved the9714 Draft Schematic Plans in writing or been deemed to have approved them. The iteration of the 9714 Draft Schematic Plans that isapproved or deemed approved by Landlord without objection shall be referred to herein as the “9714 Approved Schematic Plans.”(o) Tenant shall prepare final plans and specifications for the 9714 Tenant Improvements that (a) are consistent withand are logical evolutions of the 9714 Approved Schematic Plans and (b) incorporate any other approved Changes (as defined inSection 7(p) below). As soon as such final plans and specifications (“9714 Construction Plans”) are completed, Tenant shall deliverthe same to Landlord for Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord’sapproval rights as to the 9714 Construction Plans shall be limited to a review of the 9714 Construction Plans to confirm that: (i) the9714 Construction Plans are consistent with and are logical evolutions of the 9714 Approved Schematic Plans including any approvedChanges, (ii) the 9714 Tenant Improvements as expressed by the 9714 Construction Plans comply with all Applicable Laws, and (iii)the 9714 Construction Plans do not violate Applicable Laws, contain construction defects or errors or omissions, or reflect any mattersthat could adversely affect human health or safety and contain any approved Changes. All such 9714 Construction Plans shall besubmitted by Tenant to Landlord in electronic .pdf, CADD and full-size hard copy formats, and shall be approved or disapproved byLandlord in accordance with its rights hereunder within seven (7) business days after delivery to Landlord. Landlord’s failure torespond within such seven (7) business day period shall be deemed approval by Landlord. If the 9714 Construction Plans aredisapproved by Landlord in accordance with its rights hereunder, then Landlord shall notify Tenant in writing of its objections, andTenant shall revise the 9714 Construction Plans and cause Landlord’s objections to be remedied in the revised 9714 ConstructionPlans. Tenant shall then resubmit the revised 9714 Construction Plans to Landlord for approval, such approval not to be unreasonablywithheld, conditioned or delayed. Landlord’s approval of or objection to revised 9714 Construction Plans and Tenant’s correction ofthe same shall be in accordance with this Section 7(o) until Landlord has (or is deemed to have) approved the 9714 Construction Plansin writing or been deemed to have approved them. Promptly after the 9714 Construction Plans are approved or deemed approved byLandlord, two (2) copies of such 9714 Construction Plans shall be initialed and dated by Landlord and Tenant, and Tenant shallpromptly submit such 9714 Construction Plans to all appropriate Governmental Authorities for permitting. The 9714 ConstructionPlans so approved, and all Changes specifically permitted by this Section 7, are referred to herein as the “9714 Approved Plans.”6  (p) Any changes to the 9714 Approved Plans (each, a “Change”) shall be requested and instituted in accordancewith the provisions of this Section 7(p) and shall be subject to the written approval of the non-requesting party in accordance herewith.(i) Either Landlord or Tenant may request Changes after Landlord has (or is deemed to have) approved the9714 Approved Plans by notifying the other party thereof in writing in substantially the same form as the AIA standard change orderform (a “Change Request”), which Change Request shall detail the nature and extent of any requested Changes, including (i) theChange, (ii) the party required to perform the Change and (iii) any modification of the 9714 Approved Plans and the 9714 Schedule, asapplicable, necessitated by the Change. If the nature of a Change requires revisions to the 9714 Approved Plans, then the requestingparty shall be solely responsible for the cost and expense of such revisions and any delays in completion and increases in the cost of the9714 Tenant Improvements as a result of such Change. Change Requests shall be signed by the requesting party’s AuthorizedRepresentative.(ii) All Change Requests shall be subject to the other party’s prior written approval, which approval byLandlord shall not be unreasonably withheld, conditioned or delayed and which approval by Tenant may be withheld or conditioned inits sole and absolute discretion unless such Change Request is required to comply with Applicable Laws, correct a construction defector error or omission, remedy an issue affecting human health or safety, address an item that will affect (or damage) structural elementsor systems of the Building, overtax or overprescribe the systems of the Building or adversely affect the mechanical, electrical,plumbing and other systems of the Building, or address a matter that will affect (in Landlord’s reasonable judgment) the exteriorappearance of the Building or Common Areas or the appearance or operations of the public areas of the Building or adversely affectthe operations of the Building or Common Areas, in which event such approval by Tenant shall not be unreasonably withheld,conditioned or delayed. The non-requesting party shall have five (5) business days after receipt of a Change Request in accordancewith Section 2.09 or 2.10 (as applicable) and Section 39 of the Lease to notify the requesting party in writing of the non-requestingparty’s decision either to approve or object to the Change Request. The non-requesting party’s failure to respond within such five (5)business day period shall be deemed approval by the non-requesting party.(iii) Tenant shall, before proceeding with any approved or deemed approved Change, using commerciallyreasonable efforts, prepare as soon as is reasonably practicable (but in no event more than five (5) business days after delivering aChange Request to Landlord or receipt of a Change Request from Landlord) an estimate of the increased costs or savings that wouldresult from such Change, as well as an estimate of such Change’s effects on the 9714 Schedule. Landlord shall have five (5) businessdays after receipt of such information from Tenant to (a) in the case of a Tenant-initiated Change Request, approve or reject suchChange Request in writing, or (b) in the case of a Landlord-initiated Change Request, notify Tenant in writing of Landlord’s decisioneither to proceed with or abandon the Landlord-initiated Change Request.(q) Tenant shall provide Landlord with information regarding the following (together, the “QCP”): (i) Tenant’sgeneral contractor’s quality control program and (ii) evidence of subsequent monitoring and action plans. The QCP shall be subject toLandlord’s reasonable review and approval and shall specifically address the 9714 Tenant Improvements. Tenant shall ensure that theQCP is regularly implemented on a scheduled basis and shall provide Landlord with reasonable prior notice and access to attend allinspections and meetings between Tenant and its general contractor. At the conclusion of construction of the 9714 TenantImprovements, Tenant shall cause its general contractor to deliver a copy the quality control log to Landlord, which shall include allrecords of quality control meetings and testing and of inspections held in the field, including inspections relating to concrete, steelroofing, piping pressure testing and system commissioning.7  (r) Tenant shall perform and complete the 9714 Tenant Improvements in all respects (i) in substantial conformancewith the 9714 Approved Plans, (ii) otherwise in compliance with provisions of the Lease and (iii) in accordance with Applicable Laws,the requirements of Tenant’s insurance carriers, the requirements of Landlord’s insurance carriers (to the extent Landlord provides itsinsurance carriers’ requirements to Tenant) and the board of fire underwriters having jurisdiction over the Premises. The 9714 TenantImprovements shall be deemed finally completed at such time as Tenant shall furnish to Landlord (A) evidence satisfactory to Landlordthat (1) all 9714 Tenant Improvements (including punch list items) have been completed and paid for in full (which shall be evidencedby the architect’s certificate of completion and the general contractor’s and each subcontractor’s and material supplier’s finalunconditional waivers and releases of liens, each in a form reasonably acceptable to Landlord and complying with Applicable Laws,and a Certificate of Substantial Completion in the form of the American Institute of Architects document G704, executed by the projectarchitect and the general contractor, together with a statutory notice of substantial completion from the general contractor), (2) all 9714Tenant Improvements have been accepted by Landlord (provided that the only grounds for Landlord refusal to accept any 9714 TenantImprovements is that the other requirements of this Section 2(r) have not been complied with, (3) any and all liens related to the 9714Tenant Improvements have either been discharged of record (by payment, bond, order of a court of competent jurisdiction orotherwise) or waived by the party filing such lien and (4) no security interests relating to the 9714 Tenant Improvements areoutstanding, (B) all certifications and approvals with respect to the 9714 Tenant Improvements that may be required from anyGovernmental Authority and any board of fire underwriters or similar body for the use and occupancy of the Premises (including acertificate of occupancy for the Premises for the Permitted Use), (C) certificates of insurance required by the Lease to be purchased andmaintained by Tenant, (D) an affidavit from Tenant’s architect certifying that all work performed in, on or about the Premises is inaccordance with the 9714 Approved Plans, (E) complete “as built” drawing print sets, project specifications and shop drawings andelectronic CADD files on disc (showing the 9714 Tenant Improvements as an overlay on the 9714 Building “as built” plans (providedthat Landlord provides the 9714 Building “as-built” plans provided to Tenant) of all contract documents for work performed by theirarchitect and engineers in relation to the 9714 Tenant Improvements, (F) a commissioning report prepared by a licensed, qualifiedcommissioning agent hired by Tenant and approved by Landlord for all new or affected mechanical, electrical and plumbing systems(which report Landlord may hire a licensed, qualified commissioning agent to peer review, and whose reasonable recommendationsTenant’s commissioning agent shall perform and incorporate into a revised report) and (G) such other “close out” materials as Landlordreasonably requests consistent with Landlord’s own requirements for its contractors, such as copies of manufacturers’ warranties,operation and maintenance manuals and the like.(s) At all times during the period beginning with commencement of construction of the 9714 Tenant Improvementsand ending with final completion of the 9714 Tenant Improvements, Tenant shall maintain, or cause to be maintained (in addition tothe insurance required of Tenant pursuant to the Lease), property insurance insuring Landlord and the Landlord Parties, as theirinterests may appear, which conforms with the following requirements. Such policy shall, on a completed values basis for the fullinsurable value at all times, insure against loss or damage by fire, vandalism and malicious mischief and other such risks as arecustomarily covered by the so-called “broad form extended coverage endorsement” upon all 9714 Tenant Improvements and thegeneral contractor’s and any subcontractors’ machinery, tools and equipment, all while each forms a part of, or is contained in, the9714 Tenant Improvements or any temporary structures on the Premises, or is adjacent thereto; provided that, for the avoidance ofdoubt, insurance coverage with respect to the general contractor’s and any subcontractors’ machinery, tools and equipment shall becarried on a primary basis by such general contractor or the applicable subcontractor(s). Tenant agrees to pay any deductible, andLandlord is not responsible for any deductible, for a claim under such insurance. Such property insurance shall8  contain an express waiver of any right of subrogation by the insurer against Landlord and the Landlord Parties, and shall nameLandlord and its affiliates as loss payees as their interests may appear.(t) At all times during the period of construction of the 9714 Tenant Improvements, Tenant shall, or shall cause itscontractors or subcontractors to, maintain statutory workers’ compensation insurance as required by Applicable Laws.(u) The provisions of Section 28 of the Lease shall apply to, any and all injuries or the death of any persons,including Tenant’s contractors and subcontractors and their respective employees, agents and invitees, and for any and all damages toproperty caused by, resulting from or arising out of the prosecution of the 9714 Tenant Improvements. Any deficiency in design orconstruction of the 9714 Tenant Improvements shall be solely the responsibility of Tenant, notwithstanding the fact that Landlord mayhave approved of the same in writing.(v) Tenant and Tenant’s contractors, subcontractors and material suppliers, at the expense of Tenant, shall be allowedto utilize Tenant’s Adjusted Share of power, water and other existing utility facilities as necessary in connection with construction ofthe 9714 Tenant Improvements. In addition, Tenant and Tenant’s contractors, subcontractors and material suppliers shall be allowed toutilize on a non-exclusive basis, the Building’s freight elevator and loading docks in connection with construction of the 9714 TenantImprovements at no additional cost or expense to Tenant, subject to any pre-existing rights of any other tenants to use such freightelevator or loading docks, and provided that such rights shall be exercised in a manner that does not disturb other tenants. Tenantagrees to coordinate use of the freight elevator and loading docks with Landlord who shall grant such use on a priority basis to theextent possible, subject to any pre-existing rights of any other tenants to use such freight elevator or loading docks.(w) This Section 7 shall not apply to improvements performed in any additional premises added to the Premises atany time or from time to time after the Amendment Execution Date, whether by any options under the Lease or otherwise; or to anyportion of the Premises or any additions to the Premises in the event of a renewal or extension of the original Term, whether by anyoptions under the Lease or otherwise.3. Broker. Tenant represents and warrants that it has not dealt with any broker or agent in the negotiation for or the obtainingof this Amendment, and agrees to reimburse, indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable toLandlord, at Tenant’s sole cost and expense) and hold harmless the Landlord Indemnitees (as defined in the Lease) for, from andagainst any and all cost or liability for compensation claimed by any such broker or agent employed or engaged by Tenant or claimingto have been employed or engaged by Tenant. Landlord represents and warrants that it has had no dealings with any real estate brokeror agent in connection with the negotiation of this Amendment and agrees to reimburse, indemnify, save, defend (at Tenant’s optionand with counsel reasonably acceptable to Tenant, at Landlord’s sole cost and expense) and hold Tenant harmless for, from andagainst any and all cost or liability for compensation claimed by any broker or agent employed or engaged by Landlord or claiming tohave been employed or engaged by Landlord.4. No Default. Each of Landlord and Tenant represents, warrants and covenants to the other that, to the best of itsknowledge, neither Landlord nor Tenant are in default of any of their respective obligations under the Existing Lease and no event hasoccurred that, with the passage of time or the giving of notice (or both) would constitute a default by either Landlord or Tenantthereunder.5. Effect of Amendment. Except as modified by this Amendment, the Existing Lease and all the covenants, agreements,terms, provisions and conditions thereof shall remain in full force and effect and are9  hereby ratified and affirmed. In the event of any conflict between the terms contained in this Amendment and the Existing Lease, theterms herein contained shall supersede and control the obligations and liabilities of the parties.6. Successors and Assigns. Each of the covenants, conditions and agreements contained in this Amendment shall inure to thebenefit of and shall apply to and be binding upon the parties hereto and their respective heirs, legatees, devisees, executors,administrators and permitted successors and assigns and sublessees. Nothing in this section shall in any way alter the provisions of theLease restricting assignment or subletting.7. Miscellaneous. This Amendment becomes effective only upon execution and delivery hereof by Landlord and Tenant. Thecaptions of the paragraphs and subparagraphs in this Amendment are inserted and included solely for convenience and shall not beconsidered or given any effect in construing the provisions hereof. All exhibits hereto are incorporated herein byreference. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for alease, and shall not be effective as a lease, lease amendment or otherwise until execution by and delivery to both Landlord and Tenant.8. Authority. Tenant guarantees, warrants and represents that the individual or individuals signing this Amendment have thepower, authority and legal capacity to sign this Amendment on behalf of and to bind all entities, corporations, partnerships, limitedliability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.9. Counterparts; Facsimile and PDF Signatures. This Amendment may be executed in one or more counterparts, each ofwhich, when taken together, shall constitute one and the same document. A facsimile or portable document format (PDF) signature onthis Amendment shall be equivalent to, and have the same force and effect as, an original signature.10. Entire Agreement. The terms of the Lease are intended by the parties as a final, complete and exclusive expression oftheir agreement with respect to the terms that are included therein, and may not be contradicted or supplemented by evidence of anyother prior or contemporaneous agreement.11. Savings Clause. Any provision of this Amendment that shall prove to be invalid, void or illegal shall in no way affect,impair or invalidate any other provision hereof, and all other provisions of this Amendment shall remain in full force and effect andshall be interpreted as if the invalid, void or illegal provision did not exist.[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 10  IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the Effective Date stated above.LANDLORD: BMR MEDICAL CENTER DRIVE LLC,a Delaware limited liability company By: /s/ Kevin M. SimonsenName: Kevin M. SimonsenTitle: Sr. VP, Real Estate Legal TENANT: REGENXBIO INC., a Delaware corporation By: /s/ Kenneth MillsName: Kenneth MillsTitle: President & CEO  Exhibit 10.33LEASE AGREEMENT9600 Blackwell RoadRockville, MarylandTNREF III 9600 BLACKWELL, LLCLandlordandREGENXBIO INC.TenantDATED: January 28, 2016  INDEX Section/Caption Page Basic Lease Provisions 1 Lease Terms 1. Premises, Term and Purpose 42. Rent 53. Expenses; Taxes; 64. Condition of Premises 105. Compliance with Laws 106. Surrender; Alterations and Repairs 107. Negative Covenants of Tenant 138. Affirmative Covenants of Tenant 149. Building Directory and Signage 1410. Casualty and Insurance 1511. Indemnification 1812. Non-Liability of Landlord 1813. Remedies and Termination Upon Tenant Default 1914. Remedies Cumulative; Non-Waiver; Jury Trial Waiver 2115. Building Services 2116. Subordination 2417. Landlord’s Cure of Tenant’s Default 2518. Notices 2519. Quiet Enjoyment 2520. Inspection and Entry by Landlord 2621. Brokerage 2622. Landlord's Inability to Perform 2623. Condemnation 2624. Assignment and Subletting 2725. Environmental Law 3026. Parties Bound 3227. Tenant’s Bankruptcy or Insolvency 3228. Miscellaneous 3329. Security Deposit 3630. Parking 37 Exhibit A Plan of the Premises A-1Exhibit B Commencement Memorandum C-1Exhibit C Rules and Regulations C-1Exhibit D Special Stipulations C-3Exhibit E Work Letter E-1Exhibit F Estoppel Certificate F-1Exhibit G Janitorial Specifications G-1  LEASE AGREEMENTTHIS LEASE AGREEMENT (this “Lease”) is entered into by and between TNREF III 9600 Blackwell, LLC, a Delaware limitedliability company (“Landlord”), and Regenxbio Inc., a Delaware corporation (“Tenant”), and is dated as of the Effective Date (definedbelow).BASIC LEASE PROVISIONSThe following terms of this Lease are defined as follows:1. Building: The building located at 9600 Blackwell Road, Rockville, Maryland 20850. 2. Land: The parcel of land on which the Building is located.3. Premises: Suite No. 210 containing approximately Sixteen Thousand One Hundred Sixteen (16,116) rentable square feeton Floor 2 (the “Premises”) of the Building. A floor plan showing the Premises is attached hereto as Exhibit A.4. Commencement Date: The earlier of (i) the date of Tenant's occupancy of all or any portion of the Premises for theconduct of its business or (ii) thirty (30) days after the Delivery Date. The “Delivery Date” shall be the date that Landlord deliverspossession of the Premises to Tenant in its “as is, where is” condition, anticipated to be February 1, 2016; further provided thatnotwithstanding anything to the contrary in this Lease, if the Delivery Date has not occurred by February 16, 2016, then theAbatement Period shall be extended by one (1) day for each day thereafter that the Delivery Date has not occurred.5. Expiration Date: 12:00 noon E.S.T. on the last day of the ninety-first (91st) full calendar month of the Lease Term. Asused herein, the term “Lease Year” means each consecutive twelve (12) calendar month period beginning on the CommencementDate, except that if the Commencement Date is not the first day of a month, then the first Lease Year shall begin on the first day of themonth immediately following the month in which the Commencement Date occurs, but shall include the days between and includingthe Commencement Date and the last day of the month in which the Commencement Date occurs.6. Rent Commencement Date: The Commencement Date; provided, however, so long as Tenant is not in default hereunderbeyond any applicable notice and cure period pursuant to Section 13, Landlord shall abate the Fixed Rent otherwise payable for thefirst seven (7) months of the Lease Term (the “Abatement Period”) and the day after the last day of the Abatement Period shall bedeemed to be the Rent Commencement Date.7. Renewal Term(s): One (1) renewal term of five (5) Lease Years. [See Exhibit D - Special Stipulations]8. Permitted Use: General business office purposes.1 9. Fixed Rent: For each Lease Year, an amount equal to the Fixed Rent set forth below: LEASE YEARANNUAL FIXED RENTMONTHLY INSTALLMENT$/RSF1$451,248.00*$37,604.00*$28.00*2$464,785.44$38,732.12$28.843$478,806.36$39,900.53$29.714$493,149.60$41,095.80$30.605$507,815.16$42,317.93$31.516$523,125.36$43,593.78$32.467$538,757.88$44,896.49$33.438$555,035.04**$46,252.92$34.44 Note: Fixed Rent is shown net of Additional Rent and other amounts payable by Tenant under this Lease.*The Fixed Rent due for the Abatement Period shall be abated and shall only be due and payable to Landlord following a default byTenant hereunder beyond any applicable notice and cure period pursuant to Section 13.**Annualized.*** Amounts shall be prorated for any partial month.10. Late Charge: Five percent (5%) of the amount of the payment due; provided, however, that no Late Charge shall beassessed for the first time in any twelve (12) month period as long as such payment is received by Landlord within five (5) days afterLandlord's notice to Tenant that such payment was not received.11. Default Rate: The “prime rate” of interest (the “Prime Rate”) as published in the “Money Rates” column of The WallStreet Journal as of the default date or other date of calculation, as the case may be, plus five percent (5%).12. Expense Base Year: Calendar year 2016.13. Tax Base Year: Calendar year 2016.14. Tenant's Proportionate Share: 15.91% (calculated by dividing (i) the rentable square footage of the then-current Premises(initially, 16,116) by (ii) the then-current rentable square footage of the Building (101,326). All rentable square footage measurementswill be calculated in accordance with the BOMA Legacy Method A 2010 Standard Method for Measuring Floor Area in OfficeBuildings).15. Security Deposit: Initially, Seventy-Five Thousand Two Hundred Eight Dollars ($75,208.00), subject to reduction asprovided in Section 29.16. Intentionally Omitted.17. Landlord’s Tenant Improvement Work: The Work that Landlord is obligated to perform in the Premises pursuant to theWork Letter, if any, attached as Exhibit E.18. Improvement Allowance: Seven Hundred Twenty-Five Thousand Two Hundred Twenty Dollars ($725,220.00) (i.e.,$45.00 per rentable square foot in the initial Premises), being the amount Landlord has agreed to contribute towards the cost of theWork as set forth in Exhibit E.2 19. Brokers: CB Richard Ellis, Inc., representing Landlord, and Scheer Partners, Inc., representing Tenant.20. Notice Address: Landlord: TNREF III 9600 Blackwell, LLC c/o True North Management Group 10 Bank Street, 12th Floor White Plains, NY 10606 Attn: Fung Lin Tenant: REGENXBIO Inc. 9712 Medical Center Drive, Suite 100 Rockville, MD 20850 Attn: General Counsel With copies by email to: Sberl@regenxbio.com and to: Vvasista@regenxbio.com Address for Invoices to Tenant: REGENXBIO Inc. 9712 Medical Center Drive, Suite 100 Rockville, MD 20850 Attn: Chief Financial Officer 21. Tenant Primary Contact Information (for administrative purposes and not for formal notices):Name: Paul BrobergPhone Number: (240) 552-8168 (desk), (240) 315-5097 (mobile)Email Address:pbroberg@regenxbio.com22. Special Stipulations: As set forth in Exhibit D.23. Effective Date: The later of the dates on which this Lease is executed by Landlord and Tenant, as indicated below eachparty’s signature.3 24. Exhibits: The following exhibits are attached to this Lease and form a part hereof. Exhibit A Plan of the PremisesExhibit B Commencement MemorandumExhibit C Rules and RegulationsExhibit D Special StipulationsExhibit E Work LetterExhibit F Estoppel CertificateExhibit G Janitorial SpecificationsLEASE TERMSThe parties hereby agree to the following terms and conditions:1. Premises, Term and Purpose.(a) Landlord does hereby lease to Tenant, and Tenant does hereby lease from Landlord, the Premises, for a term commencing upon the Commencement Date and ending on the Expiration Date (the “Term”), or such later date to which the Termmay be extended or renewed, or such earlier date upon which the Term may expire or be terminated pursuant to the provisions of thisLease or pursuant to applicable Laws. Notwithstanding the foregoing, Tenant shall be permitted to enter the Premises on the Delivery Date to install telephone lines,equipment, computer lines and to move in furniture and other personal property; provided, however, that (i) all waiver and indemnityprovisions of this Lease (including, but not limited to, those contained in Section 11) shall apply to such early entry, and (ii) allproperty placed in the Premises by Tenant shall remain there at Tenant's sole risk. Landlord hereby approves Zayo as Tenant'stelecommunications provider for the Premises in the Building; provided, however, that any equipment to be installed by Zayo onTenant's behalf is subject to obtaining Landlord's prior written approval, which shall not be unreasonably withheld, conditioned ordelayed.Landlord shall use commercially reasonable efforts to cause the current tenant in the Premises (Foulger Pratt) to convey toLandlord and leave in place such tenant’s furniture (“FF&E”) located or installed at the Premises as of the Effective Date. In suchevent, Tenant shall take possession of the Premises with the FF&E in place in its “as is, where is” condition and Tenant shall have theright to use the FF&E during the Term without charge. Landlord makes no representations or warranties of any kind with respect tosuch FF&E other than as of the Effective Date, the FF&E shall be owned by Landlord and is and shall remain free and clear of anyliens or encumbrances. During the Term, Tenant shall repair and maintain the FF&E and cause the FF&E to be insured in the samemanner as Tenant’s Property. Upon the expiration or earlier termination of this Lease, Tenant shall surrender possession of the FF&Ein the same condition as originally received, reasonable wear and tear resulting from the Permitted Use, damage due to the acts oromissions of Landlord, its agents, employees or contractors, excepted.(b) Intentionally deleted.(c) in the form attached hereto as Exhibit B, confirming the Commencement Date, the Expiration Date and suchother matters as are set forth therein.(d) The Premises shall be used by Tenant solely for the Permitted Use and for no other use or purpose. Tenant shallnot use or occupy the Premises or any part thereof for any purpose that is unlawful or which is extra-hazardous on account of fire orother casualty. Tenant, at its sole cost and expense, shall obtain4 and maintain all consents, licenses, permits or approvals required to conduct its business at the Premises. Tenant shall not do or permitto be done anything which shall invalidate the insurance policies carried by Landlord. Tenant shall pay the entirety of any increase inthe property insurance premium for the Building over what it was immediately prior to the effective date of this Lease if the increase isspecified by Landlord’s insurance carrier as being solely caused by the nature of Tenant’s occupancy (other than for general officepurposes) or any act or omission of Tenant (other than for general office purposes).(e) The “Common Areas” of the Building shall be those parts of the Building and other facilities or improvementsowned, operated or maintained by Landlord and designated, in whole or in part, from time to time by Landlord for the general,nonexclusive use of all tenants and occupants of the Building, including, among other things, non-dedicated elevators, halls, lobbies,entranceways, delivery passages, drinking fountains, public restrooms and the like, and all driveways, sidewalks, landscaping, servicebuildings, improvements or other facilities designated for such use by Landlord, or otherwise made available by Landlord for thecommon use by all tenants and occupants of the Building, whether used in conjunction with the occupants of other buildings or usedexclusively by tenants of the Building, all of which facilities shall be subject to Landlord's management and control. Tenant, and itsemployees and invitees, shall have the general, nonexclusive right to use the Common Areas, such use to be in common withLandlord, other tenants of the Building and other persons entitled to use the same. Landlord reserves the right, from time to time, toestablish or change the rules and regulations regarding use of the Common Areas as provided in Section 8(b) hereof, and toreconfigure, close, change, add or eliminate the Common Areas without liability; provided that the access to and the use andoccupancy of the Premises shall not be materially impaired thereby and that the Building shall at all times have the number of parkingspaces required to meet applicable Laws.(f) This Lease is subject to all encumbrances, covenants, restrictions, declarations, easements and other matters ofrecord (provided, however, that Landlord represents that the foregoing do not (i) adversely affect Tenant's ability to use the Premisesfor the Permitted Use), or (2) materially increase Tenant's obligations or materially impair Tenant's rights hereunder), and to all zoningand land use regulations, affecting the Land and Building.2. Rent. (a) The rent reserved under this Lease shall be and consist of (a) the Fixed Rent, payable in advance in equalmonthly installments on the first day of each and every calendar month; plus (b) additional rent (the “Additional Rent”) in an amountequal to Tenant's Proportionate Share of the Excess Expenses and the Excess Taxes (defined below), all separate charges for servicesand utilities provided in Section 15 of this Lease and any other charges as shall become due and payable hereunder, which AdditionalRent shall be payable as hereinafter provided, all to be paid to Landlord at its office stated in Section 20 of the Basic Lease Provisionsor such other place in the continental United States (excluding Alaska) as Landlord may designate by at least thirty (30) days priorwritten notice in lawful money of the United States of America, commencing on the Rent Commencement Date; provided, however,that (i) the first monthly installment of Fixed Rent shall be paid by Tenant upon execution of this Lease, and (ii) if the RentCommencement Date shall occur on a date other than the first calendar day of a month, then the rent for the partial month commencingon the Rent Commencement Date shall be pro-rated on a per diem basis.(b) Tenant does hereby covenant and agree promptly to pay the Fixed Rent, Additional Rent and any other chargesherein reserved as and when the same shall become due and payable, without demand therefor (except as otherwise provided in thisLease), and without any set-off or deduction whatsoever (except as otherwise provided in this Lease). All Additional Rent and othercharges payable hereunder, which are not due and payable on a monthly basis during the Term, unless otherwise specified herein, shallbe due and5 payable within thirty (30) days of delivery by Landlord to Tenant of notice to pay the same, which notice shall be accompanied byreasonable supporting documentation or other reasonable explanation of any such charges which are not regularly recurring. Any rentor other sum that falls due on a Saturday, Sunday or legal holiday in the state in which the Premises are located shall be deemed due onthe next business day.(c) In the event that any payment of Fixed Rent, Additional Rent or any other charge shall be paid after the due dateprovided herein, Tenant shall pay, together with such payment, the Late Charge and interest thereon at the Default Rate from the duedate until the date of payment. This Late Charge and interest are compensation to Landlord for administrative costs in processing latepayments and will not be construed as a penalty. Notwithstanding the foregoing, such Late Charge and interest shall be waived as tothe first instance of late payment in any Lease Year provided such payment is made within five (5) days after written notice fromLandlord to Tenant that the same is past due.(d) Any payment by Tenant or acceptance by Landlord of a lesser amount than due from Tenant to Landlord may betreated as a payment on account, notwithstanding any endorsement or statement on any check or in any letter accompanying paymentthat the lesser payment is payment in full, and Landlord may accept such check without waiving any other rights or remedies thatLandlord may have against Tenant. If Tenant’s bank, for any reason, returns or refuses for any reason to honor a check drawn byTenant, Tenant shall pay to Landlord, as Additional Rent, a returned check fee currently in the amount of Fifty and 00/100 Dollars($50.00) (which amount shall be subject to periodic adjustment during the Term). Upon the occurrence of two (2) such returnedchecks during the Term, Landlord may require that all future payments from Tenant to Landlord shall be by certified check or bankcheck.3. Expenses; Taxes. (a) During each calendar year during the Term after the Expense Base Year and the Tax Base Year, as applicable,Tenant shall pay, as Additional Rent, Tenant’s Proportionate Share of (i) the amount, if any, by which Expenses (defined below) foreach calendar year during the Term, or portion thereof, exceed Expenses for the Expense Base Year (the “Excess Expenses”) and, (ii)the amount, if any, by which Taxes (defined below) for each calendar year during the Term, or portion thereof, exceed Taxes for theTax Base Year (the “Excess Taxes”). (i) Prior to the end of each calendar year during the Term after the Expense Base Year and the Tax BaseYear, as applicable, Landlord shall provide Tenant with a reasonably detailed written good faith estimate of the projected ExcessExpenses and Excess Taxes, as the case may be, for the coming calendar year (or balance of the current calendar year, as the case maybe), together with the amount of Tenant’s Proportionate Share of such estimated amounts. On or before the first day of each monthcommencing on the first day of the calendar year immediately following the Expense Base Year or the Tax Base Year, Tenant shallpay to Landlord, as Additional Rent, one-twelfth (1/12th) of Tenant’s Proportionate Share of Landlord’s estimate of Excess Expensesand Excess Taxes.(ii) Within 180 days (or as soon as reasonably practicable thereafter) following the end of each calendaryear during the Term after the Expense Base Year and the Tax Base Year, as applicable, Landlord shall send to Tenant a statement ofthe actual Expenses and Taxes for the prior calendar year and for the Expense Base Year and the Tax Base Year (“ReconciliationStatement”). If the amounts paid by Tenant for Excess Expenses or Excess Taxes exceeds Tenant’s Proportionate Share of the actualExcess Expenses or Excess Taxes, as the case may be, for such calendar year, Landlord shall credit such excess amount to Tenant’sobligation to pay Excess Expenses or Excess Taxes, as the case may be, next coming due hereunder (or, if this Lease has then expiredor been terminated, Landlord shall refund such excess amount to Tenant together with the Reconciliation Statement). If the amountspaid by Tenant for Excess Expenses or Excess Taxes were less6 than Tenant’s Proportionate Share of the actual Excess Expenses or Excess Taxes, as the case may be, for such calendar year,Landlord shall provide Tenant with an invoice stating the additional amount due which shall be paid in full by Tenant within thirty (30)days after receipt.(iii) So long as Tenant is not then in default under this Lease beyond any applicable notice and cure periodhereunder, Tenant or its designated lease auditor (which shall be a qualified certified public accounting or lease audit firm,compensated on a non-contingent fee basis), at Tenant’s sole cost and expense (except as otherwise provided herein), shall have theright, upon written notice received by Landlord within the ninety (90) day period following Tenant’s receipt of the ReconciliationStatement, to review in Landlord’s management office located in the Washington, DC metropolitan area, and during normal businesshours, Landlord’s records of Expenses and Taxes stated in the Reconciliation Statement for the calendar year just ended, and for theExpense Base Year and the Tax Base Year, as applicable, the first time Tenant performs any such audit, but in any event not morethan three (3) years after the Commencement Date. Tenant shall deliver to Landlord a copy of the results of its review within ten (10)days of its completion, but in no event later than 180 days following Tenant’s receipt of the Reconciliation Statement. No subtenantshall have any right to conduct a review. If Tenant does not provide the results of its review and give written notice in detail statingreasonable objections to Landlord’s calculations by the 180th day following Tenant’s receipt of the Reconciliation Statement, thenunless such delay is due to Landlord’s failure or refusal to provide timely access to Landlord’s records of Expenses and Taxes, Tenantshall be deemed to have approved the Reconciliation Statement for all purposes. If it is determined by Landlord and Tenant thatTenant’s Proportionate Share of actual Excess Expenses or Excess Taxes were overpaid by more than five percent (5%), Landlordshall reimburse Tenant for the reasonable out-of-pocket third-party cost of the review. In addition, Landlord shall provide a credit forthe overpaid amount against the then next due payments of Excess Expenses or Excess Taxes, as the case may be, or shall promptlyrefund the overpaid amount to Tenant if this Lease is then expired or thereafter terminates or expires prior to full recoverythereof. Tenant’s exercise of its review rights shall not relieve Tenant from its obligation to pay Tenant’s Proportionate Share ofExcess Expenses and Excess Taxes as billed by Landlord when due under this Lease, all of which amounts shall be paid pendingcompletion of any review. All such amounts must be paid in full prior to Tenant exercising its review rights under this Section 3(a)(iii).(iv) In the event (i) that the Rent Commencement Date shall occur on a day other than the first day of acalendar year, (ii) that the date of the expiration or other termination of this Lease shall be a day other than the last day of a calendaryear, or (iii) of any increase or decrease in the gross rentable area of the Building, then in each such event in applying the provisions ofthis Section 3 with respect to any calendar year in which such event shall have occurred, appropriate adjustments shall be made toreflect the occurrence of such event on a basis consistent with the principles underlying the provisions of this Section 3, taking intoconsideration the portion of such calendar year which shall have elapsed prior to the Rent Commencement Date, the date of suchexpiration or other termination or the date of such increase or decrease.(b) “Taxes” shall mean all taxes and assessments, general and special, ordinary as well as extraordinary, charges(including, but not limited to, water and sewer rents and charges), levies, impositions and payments wholly or partly in lieu thereof,however denominated, now or hereafter in effect, which are or may be imposed upon or made liens upon the Land and/or theBuilding. Taxes shall not include capital or stock taxes, profit taxes, franchise taxes, gift taxes, succession or transfer taxes, gift taxes,inheritance or estate taxes, federal and state income taxes or other taxes applicable to Landlord’s general or net income, or any personalproperty taxes attributable to “Fine Art”. Taxes shall also not include any items includable in or excluded from Expenses or reservesfor future Taxes not payable in the current calendar year. If, due to a change in the method of taxation or assessment, any franchise,income, profit or other tax, however designated, shall be substituted by7 the applicable taxing authority in whole or in part, for the Taxes now or hereafter imposed on the Land or the Building, such franchise,income, profit or other tax shall be deemed to be included in the term “Taxes.”(c) “Expenses” shall mean the total of all costs and expenses paid or incurred by Landlord with respect to themanagement, operation, maintenance, repair and replacement of the Building, the Common Areas and the Land and the servicesprovided to tenants therein, including, by way of illustration and not limitation, costs and expenses incurred for and with respect to: (i)utilities, including, without limitation, water, gas, electricity, sewer and waste disposal supplied to the Building and the Common Areasand not otherwise paid for by, or reimbursed by, a tenant, including costs to maintain, repair and replace wiring, pipes, conduit boxes,units, sockets, meters and other equipment used to supply such services to the Building and the Common Areas, (ii) lobby and seasonaldecorations, (iii) elevators and other equipment costs including, without limitation, the cost of service agreements, and the costsassociated with any licenses, permits and inspection fees, and any sales or use tax incurred in connection therewith, (iv) health and lifesafety equipment and systems and security and alarm services, (v) interior and exterior landscaping and garden maintenance, (vi) snowremoval, (vii) costs of maintaining easements granted to governmental bodies, (viii) costs associated with the use of the loading docksserving the Building, (ix) costs incurred pursuant to any recorded easements, restrictions, covenants or conditions benefiting orotherwise affecting the Building and/or the Land, (x) maintenance, repair, replacement, painting and cleaning of the Common Areas(which shall include janitorial services provided to the Building, including tenant spaces, and trash removal in accordance with Section15 of the Lease), the Land and all non-tenant areas of the Building, including, without limiting the generality of the foregoing, the costof exterior window cleaning (xi) fire, special form coverage, earthquake, environmental, terrorism, boiler and machinery, sprinkler,apparatus, public liability and property damages, rental and plate glass insurance, other coverages elected by Landlord which arecustomarily maintained by landlords of comparable buildings in the vicinity of the Building, and any insurance required by amortgagee and the deductible amounts paid under applicable insurance policies maintained by Landlord provided such deductibles arecommercially reasonable (xii) supplies, (xiii) wages, salaries, disability benefits, pensions, hospitalization, retirement plans, groupinsurance, and other employee benefits respecting employees of the Landlord working at (or to the extent they provide service to) theBuilding up to and including the grade of building manager, (xiv) uniforms and working clothes for such employees and the cleaningthereof, (xv) expenses imposed on the Landlord pursuant to law or to any collective bargaining agreement with respect to suchemployees, (xvi) workers compensation insurance, payroll, social security, unemployment and other similar taxes with respect to suchemployees, (xvii) the cost for a bookkeeper, (xviii) professional and consulting fees including, without limitation, legal, accounting andauditing fees incurred by Landlord in connection with the management and operation of the Building and the Land, (xix) associationfees or dues, (xx) the reasonable out-of-pocket expenses, including payments to attorneys and appraisers, reasonably incurred byLandlord in connection with any application or proceeding wherein Landlord seeks to obtain a reduction or refund of the Taxespayable or paid upon or against the Land or Building, (xxi) management fees of the Building not to exceed here percent (3%) of theannual gross revenues generated by the Building, (xxii) all repairs, replacements and improvements which are appropriate for thecontinued operation of the Building, including capital repair and replacement costs (provided that such costs shall be amortized overthe estimated functional life of the improvement and only such annual amortized portion of such costs shall be included in Expenses foreach year), and (xxiii) any other reasonable and customary expenses incurred in managing, operating, maintaining and repairing theBuilding and the Land. It is agreed, however, that the foregoing costs and expenses shall exclude from the definition of Expenses or have deductedfrom them, as the case may be: (i) leasing commissions, (ii) salaries and benefits for employees above the grade of building manager,(iii) amounts received by Landlord through proceeds of insurance to the extent the proceeds are compensation for expenses whichwere previously or are to be included in Expenses hereunder, (iv) cost of repairs or replacements to the extent Landlord is compensatedtherefor through proceeds of insurance, warranties, service contracts, condemnation proceeds or otherwise, (v)8 advertising, marketing (including, a marketing center) and promotional expenditures, (vi) legal fees for disputes with tenants and legaland auditing fees, other than legal and auditing fees reasonably incurred in connection with maintenance and operation of the Buildingor in connection with the preparation of statements required pursuant to additional rent or lease escalation provisions, (vii) utilityexpenses sub-metered to a tenant’s space and any other costs and expenses paid directly or reimbursed by Tenant or other tenants, (viii)any expenses incurred for leasing, renovating or improving space for other tenants or prospective tenants, including, without limitation,legal and consulting fees and expenses, tenant improvement and/or relocation cost allowances or reimbursements (including expensesthat relate to preparation, renovating or otherwise demolishing, modifying, improving, decorating, fixturing, furnishing, painting oraltering of rental space for any tenant), and lease buy-out payments, (ix) costs incurred because Landlord or another tenant defaultedunder the terms of a lease (including this Lease), (x) the cost of any work done by affiliates of Landlord otherwise includable inExpenses to the extent that such cost is in excess of the then going rate for similar work in the geographic area where the Building islocated, (xi) costs incurred to remedy structural or other defects in original construction materials or installations, (xii) any costs, finesor penalties incurred because Landlord violated any governmental rule or authority, (xiii) charitable contributions or contributions topolitical organizations, (xiv) loan payments and other finance charges relating to debt service on the Building and/or Land, includingpoints, commissions, closing costs, legal fees, costs or expenses and any other costs relating to any refinancing or sale of the Buildingand/or Land; (xv) costs incurred by Landlord in connection with bringing the Building into compliance with all Laws (defined below),except as otherwise provided in this Lease; (xvi) increases in Building insurance premiums to the extent such increase is caused by orattributable to the use, occupancy or act of another tenant; (xvii) the cost of overtime or other expenses to Landlord in curing itsdefaults or performing work expressly provided in this Lease to be borne at Landlord’s expense; (xviii) ground rent and similarpayments; (xix) costs and expenses incurred in connection with any transfer of Landlord’s interest in the Building and the Land; (xx)funding of mortgagee-required reserve accounts; (xxi) costs incurred by Landlord to maintain its existence; (xxii) interest or penaltiesarising by reason of Landlord’s failure to timely pay Taxes or Expenses; (xxv) costs for the acquisition of decorations and other “FineArt”; (xxvi) Landlord's general overhead and administrative expenses; (xxvii) reserves for future Expenses not payable in the currentcalendar year; and (xxviii) and any item that, if included in Expenses, would involve a double collection for such item by Landlord.(d) Tenant shall reimburse Landlord, within thirty (30) days after Landlord's written demand (accompanied byreasonably supporting documentation), for any gross receipts tax imposed upon Landlord on account of the rentals reserved or receivedunder this Lease. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenantin the Premises (herein called “Tenant's Property”). If any such taxes for which Tenant is liable are levied or assessed against Landlordor Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is expressly increased byinclusion of Tenant’s Property, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord within thirty(30) days after Landlord's written demand (accompanied by reasonably supporting documentation) that part of such taxes for whichTenant is primarily liable hereunder.(e) Each and every of the amounts payable by Tenant pursuant to this Section 3, whether requiring lump sumpayment or constituting projected monthly amounts, shall for all purposes be treated and considered as Additional Rent and the failureof Tenant to pay the same as and when due shall afford Landlord all rights and remedies provided in this Lease, including, withoutlimitation, the Late Charge and interest at the Default Rate as provided in subsection 2(c) of this Lease.(f) If during all or part of any calendar year during the Term, less than ninety-five percent (95%) of the rentable areaof the Building is leased and occupied, the cost of any item which fluctuates based upon the occupancy of the Building, then for thepurpose of computing the Additional Rent payable hereunder, the amount of the Expenses for such item for such period shall beincreased to an amount equal to the operating and9 maintenance expenses which would have been incurred during such period by Landlord if ninety-five percent (95%) of the rentablearea of the Building had been leased and occupied; provided, however, that nothing contained herein shall require that Tenant pay orcontribute to the payment of Tenant’s Proportionate Share of Excess Expenses that would result in Landlord receiving an amountgreater than the amount actually incurred by Landlord.(g) In the event that any facilities, services or utilities used in connection with the Building, the Land and/or theCommon Areas are provided from another office building that is owned or operated by Landlord (or any affiliate of Landlord), theexpenses incurred by Landlord in connection with such facilities, services or utilities shall be allocated on an equitable basis byLandlord, with only that portion allocated to the Building, the Land and/or the Common Areas being included in the definition ofExpenses as set forth above.4. Condition of Premises. Subject to Landlord’s obligation, if any, to perform Landlord’s Tenant Improvement Work, toprovide the Improvements Allowance as provided in Exhibit E, and to perform Landlord’s other obligations under this Lease, thePremises are accepted by Tenant in “as-is” condition and configuration without any representations or warranties by Landlord. Tenantagrees that it has inspected the Premises and the Building and has agreed to lease the Premises as a result of Tenant’s owninvestigations and other reviews, and not in reliance of any representation or warranty made by Landlord or by anyone on Landlord’sbehalf. Notwithstanding the foregoing, as of the Delivery Date (a) the Premises shall be clean and free of debris and the prior tenant’spersonal property (except for the FF&E) (b) the Premises shall not contain any Hazardous Substances in violation of applicable Lawsand Landlord represents that it has no actual knowledge that the Premises contains any Hazardous Substances, (c) Landlord representsthat it has no actual knowledge that the Premises in in violation of any applicable Laws including, without limitation, the Americanswith Disabilities Act, 42 U.S.C. § 12101, et seq., and any state and local accessibility laws, codes, ordinances and rules (collectively,and together with regulations promulgated pursuant thereto, the “ADA”), and (d) the Building Systems (defined below) shall be ingood working condition, operating as designed and suitable for general office use, and Landlord shall, at Landlord's sole cost andexpense, repair any latent defects in the Building Systems to the extent that Tenant notifies Landlord of such latent defects on or beforethe date that is six (6) months after the Delivery Date.5. Compliance with Laws.(a) Without limiting the generality of Section 6(i), Tenant, at Tenant's expense, shall promptly comply with all laws,rules, regulations and ordinances of all governmental authorities or agencies having jurisdiction over the Premises and of all insurancebodies (including, without limitation, the Board of Fire Underwriters) at any time duly issued or in force, applicable to the Premises orany part thereof or to Tenant's use thereof (“Laws”), except that Tenant shall have no obligation to comply with Laws requiring repairsor modifications to the Building structure, any Building System (defined below) or any portion of the Premises that Landlord isrequired to repair or maintain that are not required solely due to Tenant’s specific use of the Premises or Tenant’s negligence or willfulconduct.(b) Without limiting the generality of Section 6(i), Tenant shall commit no act of waste and shall, subject toLandlord’s obligations hereunder, take good care of the Premises. Subject to the provisions of Section 10(d), in the event that theBuilding (including, without limitation, the Premises) or any of the equipment affixed thereto or stored therein should be damaged as aresult of any act of Tenant, its agents, servants, employees, invitees or contractors, Tenant shall, within thirty (30) days after Landlord'swritten demand (accompanied by reasonably supporting documentation), pay to Landlord the cost of all required repairs, includingstructural repairs, to the extent such cost is not reimbursed by insurance that Landlord actually maintains or would not have beenreimbursed by insurance that Landlord is required to maintain hereunder. 10 6. Surrender; Alterations and Repairs. (a) At the expiration or other termination of this Lease, Tenant shall deliver the Premises with all improvementslocated thereon (except as otherwise herein provided) in good repair and condition, reasonable wear and tear resulting from thePermitted Use and damage due to casualty, condemnation and the acts or omissions of Landlord, its agents, employees or contractors,excepted; and shall deliver to Landlord all keys and access cards to the Premises. All fixtures, equipment (except as provided insubsection (b) below), improvements, alterations and installations which are attached to the Premises, and any additions andappurtenances made by or on behalf of Tenant to the Premises (whether temporary or permanent in character) or made in or upon thePremises by Landlord or Tenant shall be Landlord's property on termination or expiration of this Lease and shall remain on thePremises without compensation to Tenant, provided that Landlord, at its option, may by notice to Tenant given at the time Landlordapproves same, require Tenant to remove any such alterations, additions or improvements installed at Tenant's cost by Tenant or onTenant's behalf which are not typical office improvements and restore the portion(s) of the Premises affected thereby to their conditionas existed immediately prior to the installation thereof, reasonable wear and tear and damage due to casualty, condemnation and theacts or omissions of Landlord, its agents, employees or contractors, excepted. In addition, Tenant shall remove, at Tenant’s sole costand expense, all cabling (voice, data, telecommunications, VOIP, etc.) installed by Tenant at the time of such expiration or earliertermination and shall restore all resulting damage, failing which, Landlord shall have the right to remove all such cabling at the expenseof Tenant. (b) All furniture, trade fixtures and moveable equipment installed by Tenant may be removed by Tenant at thetermination of this Lease if Tenant elects, and shall be removed if required by Landlord at the termination of this Lease, and if notremoved as so required by such date shall, at the option of Landlord, become the property of Landlord. All such installations,removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the Premises or the BuildingSystems (defined below) or the structure of the Building. Any equipment, fixtures, goods or other property of Tenant not removed byTenant upon the termination of this Lease, or upon any quitting, vacating or abandonment of the Premises by Tenant, or upon Tenant'seviction, shall be considered abandoned and Landlord shall have the right to sell or otherwise dispose of the same in any manner, at theexpense of Tenant, and shall not be accountable to Tenant for any part of the proceeds of such sale, if any. Landlord may have anysuch property stored at Tenant's risk and expense. (c) Following the Commencement Date, no alterations, installations, additions or improvements (collectively,“Alterations”) shall be made by Tenant in or to the Premises or the Building without Landlord's prior written approval of the plans andspecifications therefor, such approval not to be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Tenantmay make cosmetic changes to the Premises that do not require any governmental permits ("Cosmetic Alterations") without Landlord'sconsent; provided that such Cosmetic Alterations (i) do not cost more than Sixty Thousand and No/100 Dollars ($60,000.00) annuallyin the aggregate, (ii) do not require any structural or other substantial modifications to the Premises, (iii) do not require any changes toor adversely affect the Building Systems (defined below), (iv) are not visible from outside the Premises, (v) do not trigger anyrequirement under applicable Laws that would require Landlord to make any alteration or improvement to the Premises, the Buildingor the Land, or (vi) do not require compliance with any Laws. In no event shall Tenant be permitted to install any Alterations that arevisible from outside the Premises including, without limitation, mailboxes/mail slots or doorbells, but excluding Tenant’s customaryreception area decorations and signage (subject to obtaining Landlord's prior written approval, which shall not be unreasonablywithheld, conditioned or delayed). Upon completion of the Alterations (other than Cosmetic Alterations), Tenant shall deliver a set ofas-built plans for the Alterations to Landlord. Tenant agrees to use best efforts to ensure that any work performed with respect to anyAlterations will not materially interfere with the use and enjoyment of the Building by other tenants and occupants. By11 approving any request for Alterations submitted by Tenant, Landlord does not (i) expressly or implicitly covenant or warrant that anyplans or specifications are accurate, safe or sufficient or that the same comply with any applicable laws, ordinances, building codes, orthe like, or (ii) consent to the imposition of any lien on the Premises for any work performed or materials delivered in connection withany such Alterations. Tenant is solely responsible for compliance with applicable laws, ordinances, building codes, and/or the like,and for obtaining all necessary permits and governmental approvals and for construction of said improvements in compliance withsame, including, without limitation, applicable design review commission or other governmental approval. In no event may Tenantinstall in or on the Premises, whether as, Alterations, decoration or otherwise, any works of art as to which removal, modification ordestruction is limited or prohibited by the Visual Artists Rights Act of 1990, as amended from time to time. Further, Tenant willindemnify, defend and hold harmless Landlord and the Premises from any loss, cost or expense, including legal fees, incurred byLandlord as a result of any defects in design, materials or workmanship resulting from such Alterations. Tenant will reimburseLandlord for Landlord’s reasonable out-of-pocket charges (including, without limitation, any professional fees incurred by Landlordfor expenses incurred by Landlord in reviewing and approving or disapproving plans and specifications for any Alterations (other thanCosmetic Alterations) proposed by Tenant.(d) All Alterations shall be performed by Tenant using, at Tenant’s election, Landlord's contractor(s) or contractors,subcontractors or mechanics approved by Landlord, such approval not to be unreasonably withheld, conditioned or delayed, all atTenant's expense and in such manner as Landlord may from time to time reasonably designate. With respect to any Alterationsaffecting the Building’s electrical, communications, plumbing, heating, ventilating, air-conditioning or other building systems(collectively, “Building Systems”), such Alteration must be reviewed and approved by Landlord's engineer at Tenant’s reasonableexpense. If Tenant engages any contractor set forth on the list of approved contractors furnished by Landlord to Tenant from time totime, Tenant shall not be required to obtain Landlord's approval for such contractor unless, prior to Tenant entering into a contract withsuch contractor or the commencement of work by the contractor, Landlord shall have notified Tenant that such contractor has beenremoved from the list. Before any Alterations are undertaken, Tenant must carry and maintain, at its expense, or Tenant must requireany contractor performing work on the Premises to carry and maintain, at no expense to Landlord, in addition to worker’scompensation insurance as required by applicable Law, builder’s risk insurance and commercial general liability insurance (including,without limitation, contractor’s liability coverage, contractual liability coverage, completed operations coverage, a broad form propertydamage endorsement and a contractor’s protective liability endorsement) providing on an occurrence basis a minimum combined singlelimit of not less than Two Million Dollars ($2,000,000.00) subject to commercially reasonable deductibles, or such other amount asLandlord may reasonably require from time to time which is consistent with limits then being required by other landlords ofcomparable buildings in the vicinity of the Building.(e) Any mechanic's lien filed against the Premises, the Building or the Land for work claimed to have been done for,or materials claimed to have been furnished to, Tenant (unless performed by Landlord) shall be discharged by Tenant within fifteen(15) days after Tenant shall have received notice thereof, at Tenant's expense, by payment, filing the bond required by law orotherwise. If Tenant fails to timely discharge the lien within such fifteen (15)-day period and such failure continues for five (5) daysafter written notice thereof from Landlord, Tenant shall be in default under this Lease without any notice or opportunity to cure. In theevent Tenant contests any lien or claim, Tenant shall prosecute the contest with reasonable diligence, and Tenant shall at all timeseffectively stay or prevent any official or judicial sale of the Premises, the Building or the Land and Tenant shall pay or otherwisesatisfy any judgment which may be entered against it and thereafter promptly procure and record satisfaction of the release of suchlien. If Tenant fails to discharge such lien within fifteen (15) days after a final determination against Tenant, Landlord after five (5)days’ notice to Tenant (or lesser time within which the Premises, the Building or the Land is threatened with any official or judicial saleor12 foreclosure), may procure the discharge of such lien by payment or otherwise, and all costs and expenses which Landlord may sustainthereby shall be paid by Tenant as Additional Rent hereunder. In the event that any action shall be brought against Landlord toenforce any such lien, Tenant shall pay any judgment that may be entered against Landlord, and, in addition thereto, shall pay all costsand expenses that may be incurred by Landlord in the defense of any such action, provided such judgment shall be final and no longersubject to appeal. Nothing contained herein shall be construed as constituting the permission or consent of Landlord for a mechanic orsubcontractor to file a lien against the Premises, Building or Land.(f) Landlord, upon the request of Tenant and at Tenant's expense, shall join in any applications for any permits,approvals or certificates required to be obtained by Tenant in connection with any approved or permitted Alterations (provided that theprovisions of the applicable Laws shall require that Landlord join in such application) and shall otherwise cooperate with Tenant inconnection therewith, provided that Landlord shall not be obligated to incur any cost or expense or liability in connection therewith.(g) Subject to the provisions of Section 10(d) hereof, Tenant agrees to indemnify, defend and hold harmlessLandlord from any and all costs, expenses, claims, causes of action, damages and liabilities of any type or nature whatsoever(including, but not limited to, reasonable attorneys' fees and costs of litigation) arising out of or relating to the making of anyAlterations by Tenant, unless caused in whole or in part by the gross negligence or willful misconduct of Landlord, its agents,employees or contractors.(h) In furtherance of the foregoing, Tenant covenants that all construction shall be done (i) diligently, in a good andworkmanlike manner using new materials of good quality, (ii) in accordance with all applicable Laws, (iii) pursuant to duly issuedpermits (including building permits) if required, (iv) in accordance with all reasonable and non-discriminatory rules and regulationsrelating to construction activities at the Building that may be imposed from time to time by Landlord, (v) without unreasonableinterference with Building operations or with the use and enjoyment of the Building by other tenants and their invitees, (vi) withoutcost to Landlord and (vii) otherwise in accordance with the provisions of this Lease.(i) Subject to Landlord’s obligations under this Lease, Tenant shall take good care of the Premises and keep themfree from waste and nuisance of any kind. Tenant shall keep the Premises, including the Alterations installed by Tenant, in goodcondition and shall undertake and be responsible for all day-to-day repairs and maintenance. Tenant shall not be in breach of itsobligations under this subsection 6(i) if Tenant performs the repairs or maintenance within fifteen (15) days after the occurrence of thedamage or injury requiring such repairs or maintenance or if due to the nature of a particular repair or maintenance obligation, morethan fifteen (15) days are reasonably required to complete it, Tenant begins work within the fifteen (15) day period and diligentlyprosecutes the work to completion; provided that in case of emergency, Tenant shall promptly commence and use all commerciallyreasonable efforts to complete such work as soon as reasonably practicable. If Tenant fails to commence the repairs described abovewithin the applicable time period, and such failure continues for five (5) days after written notice thereof from Landlord, Landlord mayat its option make such repairs, and Tenant shall, within thirty (30) days after Landlord's written demand (accompanied by reasonablysupporting documentation), pay Landlord for the cost thereof. The performance by Tenant of its obligations to maintain and makerepairs shall be conducted only by contractors and subcontractors approved by Landlord in writing, such approval not to beunreasonably withheld, conditioned or delayed.7. Negative Covenants of Tenant. Tenant agrees that it shall not, without Landlord's prior written consent:(a) Permit the accumulation of waste or refuse matter in or near the Premises except in containers provided therefor;13 (b) Mortgage, hypothecate, pledge or encumber this Lease in whole or in part;(c) Permit any signs, lettering or advertising matter to be erected or attached to the exterior of the Premises (or theinterior of the Premises if such items are visible from outside the Premises [provided, however, that any Tenant signs or logos visiblefrom Tenant's reception area may be permitted, subject to obtaining Landlord's prior written approval, which shall not be unreasonablywithheld, conditioned or delayed]), or to the Building, the Common Areas or the Land, except as provided under Section 9 orelsewhere in this Lease;(d) Encumber or obstruct the Common Areas surrounding the Premises nor cause the Common Areas to beencumbered or obstructed, nor encumber or obstruct any access ways to the Premises, nor cause the same to be encumbered orobstructed;(e) Record this Lease or a memorandum thereof;(f) Install or operate on the Premises any electrical or other equipment except for equipment that is commonly used inmodern offices or otherwise reasonably approved by Landlord; or(g) Permit or allow smoking upon the Premises or the Building by any of Tenant’s employees, officers, agents,contractors, guests, invitees or visitors.8. Affirmative Covenants of Tenant. Tenant covenants and agrees that Tenant will:(a) At any time and from time to time, execute, acknowledge and deliver to Landlord, or to any lender or prospectivepurchaser designated by Landlord, a tenant estoppel certificate in the form attached hereto as Exhibit F, (or such other form as may bereasonably required by a prospective purchaser or lender) within seven (7) business days of receipt of Landlord's request accompaniedby such certificate. Tenant agrees that the terms of this Lease shall supersede any inconsistent provisions contained in the estoppelcertificate. If Tenant fails to execute and deliver to Landlord such written instruments within three (3) business days after a secondnotice from Landlord, the statements in any such instrument tendered on behalf of the Tenant will be deemed to be conclusively madeby Tenant and true and correct in all respects; and(b) Faithfully observe and comply with the rules and regulations attached hereto as Exhibit C and such additionalreasonable and non-discriminatory rules and regulations as Landlord hereafter at any time or from time to time may communicate inwriting to Tenant, and which, in the reasonable judgment of Landlord, shall be necessary or desirable for the reputation, safety, care orappearance of the Building, or the preservation of good order therein, or the operation or maintenance of the Building, or theequipment thereof, or the comfort of tenants or others in the Building; provided, however, that (i) in the case of any conflict betweenthe provisions of this Lease and any such rule or regulation, the provisions of this Lease shall control and (ii) such additional rules andregulations shall not materially interfere with Tenant's access to and/or use and occupancy of the Premises or materially modifyTenant's rights or obligations hereunder. Nothing contained in this Lease shall be construed to impose upon Landlord any duty orobligation to enforce the rules and regulations or the terms, covenants or conditions in any other lease as against any other tenant, andLandlord shall not be liable to Tenant for violation of any rule or regulation by any other tenant, its employees, agents, visitors,invitees, subtenants or licensees; provided, however, that all rules and regulations shall be enforced in a consistent and non-discriminatory manner.9. Building Directory and Signage. Upon the commencement of the Lease, Landlord, at Landlord’s cost and expense, shallprovide (i) a Building-standard identification plaque identifying Tenant’s actual or trade name (as designated by Tenant) at the entranceto the Premises and (ii) a Building-standard listing identifying Tenant’s actual or trade name (as designated by Tenant) and thePremises suite number in the Building’s main14 lobby tenant directory. Any modifications to such Building-standard signage or listing shall be made at Tenant’s sole cost and expenseafter written approval by Landlord, such approval not to be unreasonably withheld, conditioned or delayed. Tenant shall not affix anyadditional signs to the Building or place any sign that can be seen from outside of the Building or the Premises (other than Tenant’scustomary reception area signage, which has been previously approved by Landlord, such approval not to be unreasonably withheld,conditioned or delayed). Tenant shall at all times keep and maintain all signs in good condition, proper operating order and incompliance with all applicable government regulations. Tenant shall not, without Landlord’s prior written consent: (i) make anychanges to Tenant’s entrance plaque; (ii) install any exterior lighting, decorations, painting, awnings, canopies and the like; or (iii) erector install any signs, window or door lettering, placards, decoration or advertising media of any type which is visible from the exteriorof the Premises (other than Tenant’s customary reception area signage and decorations). No handwritten signs shall be permitted underany circumstances. Upon termination of this Lease, Tenant shall remove any signs (other than the Building-standard identificationplaque and directory listing provided by Landlord) and repair any damage to the Building caused by the installation and removalthereof, or, at Landlord’s option, such signs shall become part of the realty and belong to Landlord without compensation to Tenantwith title passing to Landlord under this Lease as by a bill of sale.Notwithstanding the foregoing, throughout the Term, Tenant shall be permitted to install, maintain, repair, replaceand remove a sign displaying Tenant’s actual or trade name (as designated by Tenant) on the exterior façade of the Building, providedthat (i) such right is subject to the rights of other tenants in the Building which have prior rights to exterior signage as of the date of thisLease, (ii) Tenant is not in default hereunder beyond any applicable notice and cure period, (iii) Tenant and any Tenant Affiliateassignee and/or Tenant Affiliate subtenant of Tenant leases and occupies a minimum of 15,000 rentable square feet in the Building,(iv) Tenant shall obtain Landlord’s written approval of the size, location, and plans and specifications for such sign, such approval notto be unreasonably withheld, conditioned or delayed, and (v) Tenant shall obtain any necessary permits for said sign from MontgomeryCounty and the Montgomery County Parks and Planning Department and any and all other governing jurisdictions. After fabricationand prior to installation of said sign, Tenant shall present the same to Landlord for its written approval, which approval shall not bewithheld so long as the sign conforms to the approved plans and specifications. Tenant shall install its approved sign at a time mutuallyagreed upon by Landlord and Tenant, it being understood and agreed that Landlord shall have the right to supervise suchinstallation. Throughout the Lease Term, Tenant shall pay for all electricity (if any) consumed by said sign, and shall maintain saidsign in good condition and repair. In the event that Landlord performs improvements, repairs or maintenance on the Building whichrequire that Tenant’s sign be temporarily moved, such removal and reinstallation shall be at Tenant’s sole cost and expense. Upon theexpiration or termination of the Term of this Lease, Tenant, at its sole cost and expense, shall remove such sign and repair any damageto the Building resulting therefrom, and make all repairs necessary to return the area of the Building on which such sign was installedto its condition prior to the installation of Tenant’s sign. This right to exterior Building signage is personal to Tenant.10. Casualty and Insurance.(a) If the Building or Premises is totally destroyed by fire, tornado or other casualty, event or terrorist action or if theBuilding or Premises (including access thereto) is so damaged that Landlord determines that rebuilding or repairs cannot be completedwithin one hundred eighty (180) days after the date of such damage (a “Major Casualty”), Landlord or Tenant may at its optionterminate this Lease by written notice to the other within thirty (30) days following Landlord’s determination, in which event rent shallbe apportioned effective from the date of such damage. If the Building or Premises (including access thereto) is damaged by fire,tornado or other casualty, event or terrorist action which is not a Major Casualty or in the event of a Major Casualty but neitherLandlord nor Tenant elects to terminate this Lease, Landlord shall within one hundred15 twenty (120) days after the date of such damage commence the process of rebuilding or repairing the Building and/or Premises(including access thereto) and proceed with reasonable diligence to restore the Building and/or Premises (including access thereto) tonot less than substantially the same condition in which it was immediately prior to the casualty, except Landlord shall not be required torebuild, repair or replace any part of the furniture, equipment or fixtures and any other improvements which may have been placed byTenant in the Premises. Tenant agrees to reasonably cooperate with Landlord in connection with any such restoration and repair,including but not limited to the approval or execution of plans and specifications if required. Provided this Lease is not terminatedpursuant to this Section, Tenant will repair, restore and refixture the Premises to a substantially similar condition as existed prior to thecasualty, and otherwise in accordance with the terms and conditions of this Lease. Landlord shall have no obligation to restore in theevent of a casualty which is not a Major Casualty occurring during the last Lease Year of the Term of this Lease or any extensionthereof that Landlord determines that rebuilding or repairs cannot be completed within ninety (90) days after the date of such damageor if the proceeds of Landlord’s insurance recovered or recoverable as a result of the casualty and retained by Landlord are insufficientto fully pay for the cost of repairs or if Landlord is unable to secure required permits and approvals, and in such event, Landlord shallelect by written notice to Tenant to terminate this Lease rent shall be apportioned effective from the date of such damage. Provided thisLease is not terminated pursuant to this Section, Fixed Rent and Additional Rent shall equitably abate during the period of any repairsand restorations from the date of damage until the earlier to occur of (i) sixty (60) days after the date Landlord substantially completesits repair and restoration obligations under this Section or (ii) the date Tenant resumes use of the damaged portion(s) of the Premises forthe normal conduct of its business. If any mortgagee under a deed to secure debt, security agreement or mortgage requires theinsurance proceeds be applied against the mortgage debt, Landlord shall have no obligation to rebuild and this Lease shall terminateupon notice to Tenant, in which event rent shall be apportioned effective from the date of such damage. Except as otherwise providedherein, any insurance that may be carried by Landlord or Tenant against loss or damage to the Building or to the Premises shall be forthe sole benefit of the party carrying such insurance and under its sole control.(b) At all times commencing on and after the earlier of the Commencement Date or the date Tenant enters thePremises for any purpose, Tenant shall carry and maintain, at its sole cost and expense, the following insurance coverages:(i) commercial general liability insurance with a broad form endorsement, or then comparable equivalentISO forms and coverage, applicable to the Premises and its appurtenances including, without limitation, the Common Areas, providing,on an occurrence basis, a minimum combined single limit of Two Million Dollars ($2,000,000.00), including but not limited to,coverages for bodily injury, property damage, and contractual liability, and coverages for any and all injury resulting from any act oromission on the part of Tenant or Tenant's contractor's, licensees, agents, visitors or employees, on or about the Premises includingsuch claims arising out of the construction of improvements on the Premises, with no deductible in excess of Ten Thousand Dollars($10,000.00);(ii) workers compensation insurance covering all persons employed in connection with the construction ofany improvements by Tenant and the operation of its business upon the Premises in statutory limits and with employer’s liabilitycoverage limits not less than Five Hundred Thousand Dollars ($500,000.00) per accident, Five Hundred Thousand Dollars($500,000.00) for disease policy limit and Five Hundred Thousand Dollars ($500,000.00) for disease limit for each employee; and(iii) special form (or its then-comparable equivalent ISO form) property insurance written at replacementcost value and with an agreed amount endorsement sufficient to avoid coinsurance covering all of Tenant’s property in the Premisesand Alterations installed in the Premises. No deductible shall16 be in excess of Ten Thousand Dollars ($10,000.00). This insurance policy shall also insure direct or indirect loss of Tenant’s earningsattributable to Tenant’s inability to use fully or obtain access to the Premises or the Building.(iv) In the event Landlord, at any time during the term of the Lease, reasonably determines that Tenant'sinsurance coverage is inadequate, based upon the coverages being required by landlords of comparable buildings in the generalgeographic area of the Building, Landlord shall have the right to require Tenant to increase its insurance coverage to levels whichLandlord reasonably determines to be comparable to what is then being required by landlords of comparable buildings in the generalgeographic area of the Building. The insurance required under subsection (b)(i) above shall, to the extent permitted by law, name Landlord, Landlord’s propertymanager, mortgagees and ground lessors of the Land and the Building designated by Landlord in writing to Tenant and theirsuccessors and assigns as additional insureds (“Additional Insureds”) as their interests may appear. All insurance policies required to bemaintained by Tenant shall be written by insurance carriers licensed to do business in the state in which the Building is locatedreasonably acceptable to Landlord. With Landlord’s prior written approval, any insurance required of Tenant under this Lease may befurnished by Tenant under a blanket policy so long as and provided such policy: (i) strictly complies with all other terms and conditionscontained in this Lease; and (ii) contains an endorsement that: (A) identifies with specificity the particular address of the Premises asbeing covered under the blanket policy; and (B) expressly waives any pro rata distribution requirement contained in Tenant’s blanketpolicy covering the Premises. (c) Prior to the Commencement Date, and prior to the expiration date of any policy, Tenant shall furnish to Landlordevidence of Tenant’s purchase of such insurance and payment of premiums thereon to Landlord.(d) Landlord and Tenant shall each have included in all policies of property insurance respectively obtained by themwith respect to the Building or Premises a waiver by the insurer of all right of subrogation against the other (and, with respect toTenant's insurance, against the Additional Insureds) in connection with any loss or damage to real or personal property insured againsteven if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party maybe responsible. However, this release shall apply only if the releasor’s insurance policy contains a clause or endorsement providingthat any such release shall not adversely affect or impair such policy or prejudice the right or the releaser to recoverthereunder. Landlord and Tenant each agree that any property insurance policies carried by each of them respectively and covering thePremises or their contents will include such clauses or endorsements as long as the same shall be obtainable and, if extra cost shall becharged therefore, so long as the other party pays such extra cost. To the fullest extent permitted by law, Landlord and Tenant eachwaives all right of recovery against the other and each of their respective agents, servants, employees, partners, shareholders, andmembers, and, with respect to Tenant, against Landlord's property manager, and releases the other from liability for loss or damage tothe extent such loss or damage is covered or is required by this Lease to be covered, by insurance even if such loss or damage shallhave been caused by the fault or negligence of the other party or anyone for whom such party may be responsible.(e) Each insurance policy required to be maintained by Tenant under this Lease shall state that (i) with respect to theinterest of Landlord and the Additional Insureds the insurance maintained pursuant to each such policy shall not be invalidated by anyaction or inaction of Tenant and shall insure Landlord and the Additional Insureds regardless of any breach or violation of anywarranties, declarations, conditions or exclusions by Tenant, (ii) all provisions of each such insurance policy, except for the limits ofliability, shall operate in the same manner as if a separate policy had been issued to each person or entity insured thereunder,17 (iii) neither Landlord nor any of the Additional Insureds shall be liable for the premiums therefor, and (iv) as to liability insurancepolices, the insurance provided thereunder is primary insurance without any right of contribution from any other insurance which maybe carried by or for the benefit of Landlord and the Additional Insureds. Landlord makes no representation that the limits or forms ofcoverage of insurance specified in this Section 10 are adequate to cover Tenant’s property or obligations under this Lease.(f) Failure of Tenant to maintain any of the insurance required to be maintained under this Lease or to cause to beprovided in any insurance policy pursuant to the requirements set forth in this Section 10, which failure is not remedied within ten (10)days after written notice thereof from Landlord, shall constitute a default under this Lease without any further notice being required byLandlord. By requiring insurance herein, Landlord does not represent that coverage limits will necessarily be adequate to protectTenant and such coverage and limits shall not be deemed as a limitation on Tenant’s liability under the indemnities granted to Landlordin this Lease.(g) Landlord shall maintain (i) commercial general liability insurance with a broad form endorsement, or thencomparable equivalent ISO forms and coverage, applicable to the Building, the Land and its appurtenances including, withoutlimitation, the Common Areas, providing, on an occurrence basis, a minimum combined single limit of Two Million Dollars($2,000,000.00), including but not limited to, coverages for bodily injury, property damage, and contractual liability, and coverages forany and all injury resulting from any act or omission on the part of Landlord or Landlord’s contractor's, licensees, agents, visitors oremployees, on or about the Building and the Land including such claims arising out of the construction of improvements on theBuilding and the Land, with a commercially reasonable deductible, (ii) special form (or its then-comparable equivalent ISO form)property insurance written at replacement cost value and with an agreed amount endorsement sufficient to avoid coinsurance coveringthe Building and Land, including the Common Areas, on a full replacement cost basis with a commercially reasonable deductible,together with (iii) such other types of insurance coverage as are customarily maintained by owners of comparable office buildings inthe area in which the Building is located and such other insurance coverage as Landlord may elect in its reasonable discretion to carry.(h) Tenant shall give prompt notice to Landlord in case of fire or other casualty or accidents in the Premises or in theBuilding, or of defects therein or in the fixtures or equipment.11. Indemnification. Subject to Section 10(d) hereof, Tenant shall indemnify, defend and hold harmless Landlord and theAdditional Insureds, from and against any costs, expenses, claims, causes of action, damages and liabilities of any type or naturewhatsoever (including, but not limited to, reasonable attorneys' fees and costs of litigation) arising out of or relating to or in connectionwith any breach by Tenant of its obligations and agreements contained in this Lease or Tenant’s acts or the acts of its agents, servants,invitees, contractors or employees or otherwise occurring in or arising from the Premises, except to the extent such loss or liabilityresults from the negligent or wrongful acts or omissions of Landlord, its agents, servants, invitees, contractors or employees. Subject toSection 10(d) hereof, Landlord shall indemnify, defend and hold harmless Tenant, its officers, directors, employees and agents, fromand against any costs, expenses, claims, causes of action, damages and liabilities of any type or nature whatsoever (including, but notlimited to, reasonable attorneys' fees and costs of litigation) arising out of or relating to or in connection with any breach by Landlordof its obligations and agreements contained in this Lease or Landlord’s acts or the acts of its agents, servants, invitees, contractors oremployees, except to the extent such loss or liability results from the negligent or wrongful acts or omissions of Tenant, its agents,servants, invitees, contractors or employees.12. Non-Liability of Landlord. In furtherance of subsection 10(d) above, to the extent such loss or damage is covered or isrequired by this Lease to be covered by insurance, Landlord shall not be liable for (and18 Tenant shall make no claim for) any property damage which may be sustained by Tenant or any property other person, as aconsequence of the failure, breakage, leakage, inadequacy, defect or obstruction of the water, plumbing, steam, sewer, waste or soilpipes, roof, drains, leaders, gutters, valleys, downspouts, or the like or of the electrical, gas, power, conveyor, refrigeration, sprinkler,air conditioning or heating systems, elevators or hoisting equipment; or by reason of the elements or the presence of dust, allergens ormold; or resulting from the carelessness, negligence or improper conduct on the part of any other tenant of Landlord or Tenant's or anyother tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with,interruption of or failure of any services to be furnished or supplied by Landlord. Tenant shall give Landlord prompt written notice ofthe occurrence of any events set forth in this Section 12. 13. Remedies and Termination Upon Tenant Default.(a) In the event that:(i) Tenant shall default in the payment of (A) any Fixed Rent or (B) any Additional Rent or other chargepayable monthly hereunder by Tenant to Landlord, on any date upon which the same becomes due, and such default shall continue forfive (5) days after Landlord shall have given to Tenant a written notice specifying such default (provided that Landlord shall have noobligation to provide to Tenant, and Tenant shall be in default without the benefit of receiving, such notice of default more than twicein any Lease Year); or(ii) Tenant shall default in the payment of any other charge payable hereunder which is not due and payablehereunder on a monthly basis, on any date upon which the same becomes due, and such default shall continue for five (5) days afterLandlord shall have given to Tenant a written notice specifying such default; or(iii)Tenant shall default in the due keeping, observing or performing of any other covenant, agreement,term, provision or condition of this Lease on the part of Tenant to be kept, observed or performed, and such default shall continue andshall not be remedied by Tenant within thirty (30) days after Landlord shall have given to Tenant a written notice specifying the same,provided, however, that if, at the expiration of such thirty (30) day period, Tenant is diligently attempting to cure such default, thenTenant shall have such additional time as is reasonably necessary to cure such default; and provided further that Tenant shall be indefault, without notice or opportunity to cure, if Tenant fails to vacate and surrender possession of the Premises to Landlord on theExpiration Date or any earlier termination of this Lease in the manner required pursuant to the terms of this Lease; or(iv) Tenant or any guarantor of Tenant's obligations hereunder shall make an assignment for the benefit ofcreditors; or(v) Any petition shall be filed by or against Tenant or any guarantor of Tenant's obligations hereunder underany section or chapter of the Federal Bankruptcy Act, as amended from time to time, or under any similar law or statute of the UnitedStates or any State thereof; or Tenant or any guarantor of Tenant's obligations hereunder shall be adjudged bankrupt or insolvent inproceedings filed thereunder; and if an involuntary filing, such petition is not stayed or dismissed within sixty (60) days of being filed;or(vi) A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant or anyguarantor of Tenant's obligations hereunder and such appointment is not stayed or dismissed within sixty (60) days thereafter; or19 (vii) Tenant (A) shall abandon or desert the Premises for a period in excess of ten (10) days, and (B) fail tosatisfy any of its other obligations herein which failure is not remedied within any applicable notice and cure period hereunder; or(viii) Any lien, writ of execution, attachment or garnishment shall be levied against any interest of Tenant inthis Lease or the Premises, and such levy is not stayed or dismissed within sixty (60) days thereof.(b) Then Landlord shall have the right (but not any duty) to exercise one or more of the following remedies, as wellas any other remedies available at law or in equity:(i) Landlord may continue this Lease in full force and effect, and proceed to collect all rents when due.(ii) Landlord may upon written notice to Tenant, terminate Tenant’s right of possession (but not this Lease)and with process of law, enter upon and take possession of the Premises and expel or remove Tenant and any other person who maybe occupying said Premises or any part thereof, by entry, dispossessory suit or otherwise, without thereby releasing Tenant from anyliability hereunder, without terminating this Lease, and without being liable for prosecution or any claim of damages therefor, and, ifLandlord so elects, make such alterations, redecorations and repairs as, in Landlord’s judgment, may be necessary to relet the Premises,and Landlord may, but shall be under no obligation to do so, relet the Premises or any portion thereof for such term or terms (whichmay be for a term extending beyond the Term under this Lease) and at such rental or rentals and upon such other terms and conditionsas Landlord in its sole discretion may deem advisable, with or without advertisement, and by private negotiations. Upon each suchreletting, all rentals and other sums received by Landlord from such reletting shall be applied, first, to the payment of any indebtednessother than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, includingreasonable brokerage fees and reasonable attorneys’ fees and the costs of any alterations, repairs, redecorations and restoration whichTenant was obligated but failed to perform; third, to the payment of rent and other charges due and unpaid hereunder, including anamount equal to any deferred or abated rent under this Lease; and the residue, if any, shall be held by Landlord and applied in paymentof future rent as the same may become due and payable hereunder. If such rentals and other sums received from such reletting duringany month are less than the amount of rent to be paid during that month by Tenant hereunder, Tenant shall pay such deficiency toLandlord; and if such rentals and the sums received from such reletting during any month shall be more than the amount of rent to bepaid during that month by Tenant hereunder, Tenant shall have no right to, and shall receive no credit for, the excess except that suchexcess shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Suchdeficiency shall be calculated and paid monthly. No such reentry or taking of possession of the Premises by Landlord (whetherthrough entry, dispossessory suit or otherwise) shall be construed as an election on Landlord’s part to terminate this Lease unless awritten notice of such termination be given to Tenant. Notwithstanding any such reletting without termination, Landlord may at anytime elect by written notice to Tenant to terminate this Lease for such previous event of default.(iii) Landlord may, upon written notice to Tenant, terminate Tenant's rights under this Lease at any time, inwhich event Tenant shall surrender the Premises to Landlord and if Tenant fails to do so, Landlord may without prejudice to any otherremedy which it may have for possession or arrearages in the rent due hereunder, enter upon and take possession of the Premises andexpel or remove Tenant and any other person who may be occupying said Premises or any part thereof, by entry, dispossessory suit orotherwise, without thereby releasing Tenant from any liability hereunder and without being liable for prosecution or any claim ofdamages therefor.20 (iv) Landlord may terminate this Lease, in which case Tenant agrees to pay to Landlord, as liquidated andagreed upon final damages, an amount equal to the difference between (i) all Fixed Rent, Additional Rent and other sums that wouldbe payable under this Lease from the date of termination for what would have been the then unexpired balance of the term in theabsence of such termination, including an amount equal to any deferred or abated rent under this Lease, and (ii) the fair market rentalvalue of the Premises over the same period (net of all expenses and vacancy periods reasonably projected to be incurred in connectionwith the reletting of the Premises), with such differential discounted to present value using a discount rate equal to two percent (2%) inexcess of the “discount rate” set forth in the “Money Rates” column of the Wall Street Journal as of the date of termination. Nothingherein shall be construed to affect or prejudice Landlord’s right to prove, and claim in full, unpaid rent or any other amounts accruedprior to termination of this Lease.(v) Without any showing of need or the presence of any statutory or common law grounds, all of whichrequirements are hereby expressly waived, Landlord may have a receiver appointed to take possession of and relet the Premises, inaccordance with subsection 13(b)(ii). Tenant shall pay to Landlord on demand all reasonable costs Landlord incurs in connectiontherewith.(vi) Landlord may enter upon the Premises in a commercially reasonable manner, without being liable forprosecution or any claim of damages therefor, and cure the default, and Tenant agrees to reimburse Landlord within thirty (30) daysafter Landlord's written demand (accompanied by reasonably supporting documentation) for any out-of-pocket expenses including,without limitation, reasonable attorneys’ fees which Landlord may incur in effecting such cure. If Landlord at any time, by reason ofTenant's default, pays any sum to cure any default, the sum so paid by Landlord shall be due from Tenant to Landlord within thirty(30) days after Landlord's written demand (accompanied by reasonably supporting documentation), and shall bear interest at theDefault Rate from the date paid by Landlord until Landlord shall have been reimbursed by Tenant. Such sum, together with interestthereon, shall be Rent.(vii) Landlord shall have the right to setoff against and deduct from any amounts owed by Landlord toTenant under this Lease the amount of any payment due by Tenant to Landlord hereunder.(viii) Landlord may apply all or any part of the Security Deposit as provided in Section 29 of this Lease.14. Remedies Cumulative; Non-Waiver; Jury Trial Waiver. (a) The various rights, remedies, options and elections of Landlord and Tenant, expressed herein, are separate,distinct and cumulative, and the failure of Landlord or Tenant (as the case may be) to enforce strict performance by the other party ofthe conditions and covenants of this Lease, to exercise any election or option or to resort or have recourse to any remedy hereinconferred or the acceptance by Landlord or payment by Tenant of any installment of rent after any breach by Tenant or Landlord (asthe case may be), in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future byLandlord or Tenant (as the case may be) of any such conditions and covenants, options, elections or remedies, but the same shallcontinue in full force and effect.(b) TO THE EXTENT PERMITTED BY LAW, IT IS MUTUALLY AGREED BY AND BETWEENLANDLORD AND TENANT THAT THE RESPECTIVE PARTIES HERETO SHALL, AND THEY DO HEREBY, WAIVETRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BETWEEN THE PARTIESHERETO OR THEIR SUCCESSORS OR ASSIGNS ON ANY MATTERS ARISING OUT OF, OR IN ANY WAYCONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, AND/OR TENANT'S USEOF, OR OCCUPANCY OF,21 THE PREMISES. TENANT FURTHER AGREES THAT IT SHALL NOT INTERPOSE ANY COUNTERCLAIM ORCOUNTERCLAIMS IN A SUMMARY PROCEEDING OR IN ANY ACTION BASED UPON NON-PAYMENT OF RENTOR ANY OTHER PAYMENT REQUIRED OF TENANT HEREUNDER UNLESS SUCH COUNTERCLAIM ISMANDATORY UNDER APPLICABLE COURT RULES. THIS WAIVER IS MADE FREELY AND VOLUNTARILY,WITHOUT DURESS, AND ONLY AFTER EACH OF THE PARTIES HERETO HAS HAD THE BENEFIT OF ADVICEFROM LEGAL COUNSEL ON THE SUBJECT.15. Building Services.(a) Landlord shall provide or arrange for the following: (i) Electricity – Electricity for overhead lights and wall outlets sufficient to support normal office use,including customary office equipment, but in any event not less than 5.5 watts per rentable square foot in the Premises. Electricityconsumed within the Premises shall be included in Fixed Rent.(ii) HVAC – Heating, ventilation and cooling appropriate to the season and sufficient for normal use andcomfortable occupancy of the Premises and in compliance with applicable Laws, Monday through Friday during Business Hours and,by request given to Landlord not less than 24 hours prior to the requested service, on Saturday during Business Hours. To the extentthe same can be accommodated by the Building Systems, and upon twenty-four (24) hours’ prior request, Landlord shall provideBuilding HVAC to the Premises during non-Business Hours, for which Tenant shall pay to Landlord, as Additional Rent, within thirty(30) days of receiving Landlord’s invoice with a reasonably detailed cost breakdown, a Building-standard hourly service charge that,as of the Effective Date, is Sixty Dollars ($60.00) per hour (or portion thereof) and which may be adjusted by Landlord from time totime. If Tenant shall occupy a partial floor, the full floor charge shall apply if Tenant is the only tenant on such floor requesting theutilization of the Building HVAC at that time, but, at any time that two or more tenants on the same floor shall request the utilization ofBuilding HVAC for the same non-Business Hours, the full floor charge shall be divided proportionately among them. Such chargeshall constitute a direct charge to Tenant and not an Expense. If Tenant fails to pay when due any charges for non-Business HoursHVAC service, Landlord may cease providing such service to Tenant. In order to conserve resources and assist Landlord in operatingthe Building in an efficient manner, Tenant agrees that it will cause the HVAC plans for any tenant improvement work to be preparedin a manner that provides for separately zoned HVAC areas within portions of each floor comprising the Premises so that, by means ofan override switch or other form of control, Tenant can limit full HVAC service to such zones within the Premises that are actuallyoccupied by Tenant, its staff, employees, invitees and agents. Tenant agrees at all times to cooperate fully with Landlord and to abideby all the regulations and requirements which Landlord may prescribe for the proper functioning and protection of the HVACsystems. (iii) Lavatory – If the Premises constitute less than an entire floor of the Building, public restroom facilitiesin the core Common Area of such floor, including hot and cold running water.(iv) Snow and Ice Removal – Snow and ice removal for the sidewalks, parking areas and other outdoorCommon Areas in a reasonably expeditious manner on all business days.(v) Trash – Refuse removal on business days from a dumpster to be provided on-site to be used for normalpaper waste attendant to an office building and including all costs incurred in connection with waste product recycling, if suchrecycling services are provided at the Building.(vi) Deliveries – During Business Hours, facilities for loading, unloading, delivery and pick-up activitiesincluding access thereto.22 (vii) Elevators – Elevator service sufficient for customary office use (provided that at least one elevator shallbe in operation at all times).(viii) Windows – Cleaning (no less than annually) of the exterior window and glass of the Building.(ix) Janitorial - Janitorial services to the Common Areas and the Premises, Monday through Friday(excluding Holidays), in accordance with the specifications attached hereto as Exhibit G.(b) The costs of the services and utilities provided pursuant to subsection 15(a) are included in Expenses. UponTenant’s request, Landlord shall replace light bulbs and ballast in all Building-standard light fixtures located on the Premises, theBuilding-standard cost of which shall be reimbursed by Tenant within thirty (30) days of receiving Landlord’s invoice. If Tenant failsto timely pay Landlord’s invoice, Landlord may cease providing such service to Tenant. (c) Landlord reserves the right, without liability to Tenant and without constituting any claim of constructive eviction,to stop or interrupt any of the Building services described in subsection 15(a) above and to stop or interrupt the use of any Buildingfacilities at such times as may be necessary and for as long as may reasonably be required by reason of accidents, strikes, safetyconcerns or the making of repairs, alterations or improvements, or inability to secure a proper supply of fuel, gas, steam, water,electricity, telecommunications, cable, labor or supplies, or by reason of any other similar or dissimilar cause beyond the reasonablecontrol of Landlord. No such stoppage or interruption shall entitle Tenant to any diminution or abatement of rent or othercompensation nor shall this Lease or any of the obligations of Tenant be affected or reduced by reason of any stoppage or interruption;except that to the extent the Premises or a substantial portion thereof are rendered inaccessible or unusable for the Permitted Use formore than five (5) consecutive business days due to any stoppage or interruption of Building services, facility use or utilities due tonegligence or any other cause within the reasonable control of Landlord and Tenant ceases to conduct business in the Premises or onthe affected portion thereof, then the Fixed Rent and Additional Rent applicable to the Premises or the affected portion thereof (as thecase may be) shall abate from and after the date on which Tenant ceases to conduct business in the Premises or the affected portionthereof (as the case me be) until the affected service, utility or facility use has been restored. Landlord shall notify Tenant prior to anyanticipated service, utility or facility use interruption and Landlord shall diligently prosecute the repair, maintenance and restorationthereof to completion.(d) Tenant shall not make any alteration or addition to Building Systems located in or serving the Premises andTenant acknowledges and agrees that Tenant shall not have the right to install additional connections to the Building electricalsystem. Any such connections desired by Tenant and permitted by Landlord shall be effected by Landlord at Tenant's sole cost andexpense.(e) Except as expressly set forth in subsection 15(c) above, Landlord shall not be liable or responsible to Tenant forany loss or damage or expense which Tenant may sustain or incur by reason of any failure, inadequacy or defect in the character,quantity or supply of fuel, gas, steam, water, electricity, sewer, telecommunications, cable and other utilities and labor and servicesfurnished to the Premises which does not result from the negligence or any other cause within the reasonable control of Landlord..(f) Tenant shall have access to the Building and the Premises on a “24 hours per day/7 days per week” basis, exceptduring emergencies. Landlord shall provide the Building with a restricted entry access system for after-hours access to the Buildingand, as of the Delivery Date, shall provide Tenant with sixty-five (65) access cards free of charge. Any additional or replacement cardsshall be at Tenant’s Building-standard expense.23 (g) Landlord shall make (i) all structural repairs or replacements to the Building (which includes repairs to the roof,foundation, structural portions of the outside walls, structural members, floor slabs, service pipes, electrical lines, water lines and sewerlines leading to or from the Premises), (ii) all maintenance, repairs or replacements to exterior walls, windows and glass and all repairsto the Common Areas of the Building and the Land, (iii) all maintenance, repairs or replacements required to be made pursuant to anyLaws except as provided in subsection 5(b) of this Lease, (iv) all maintenance, repairs or replacements which may be needed to theBuilding Systems in the Common Areas and in or serving the Premises, to keep the Building Systems in good order and condition, and(v) repairs of damage to the Premises caused by Landlord, its agents, employees or contractors. All repairs, maintenance andreplacements made by Landlord shall be to the standard of a modern, first-class office building in the North Rockvillesubmarket. Landlord shall not be in breach of its obligations under this subsection 15(g) if Landlord performs the repairs, maintenanceor replacements within thirty (30) days after written notice by Tenant to Landlord of the need for such repairs, maintenance orreplacement or if due to the nature of a particular repair, maintenance or replacement obligation, more than thirty (30) days arereasonably required to complete it, Landlord begins work within the thirty (30) day period and diligently prosecutes the work tocompletion; provided that in case of emergency or a condition that prohibits Tenant from reasonable access to or the customaryconduct of its business at the Premises, Landlord shall promptly commence and use all commercially reasonable efforts to completesuch work as soon as reasonably practicable.(h) As used in this Lease, “Business Hours” means 8:00 a.m. to 6:00 p.m. on “business days” (which, for purposesof this Lease, shall mean all days other than Saturdays, Sundays and Building Holidays) and 8:00 a.m. to 1:00 p.m. on Saturdays (butexcluding Building Holidays), and “Building Holidays” means New Year's Day, Martin Luther King’s Birthday, President’s Day,Memorial Day, Fourth of July, Labor Day, Columbus Day, Veteran’s Day, Thanksgiving, the Friday after Thanksgiving, andChristmas Day, all as observed by the federal government.16. Subordination. (a) This Lease is subject and subordinate in all respects to any underlying leases, ground leases, licenses oragreements, and to all mortgages which may now or hereafter be placed on or affect such leases, licenses or agreements or the Land orthe Premises and also to all renewals, modifications, consolidations and extensions of such underlying leases, ground lease, licenses,agreements, and mortgages. Although no instrument or act on the part of Tenant shall be necessary to effectuate such subordination,Tenant shall, upon written demand, execute, acknowledge and deliver to Landlord any and all reasonable instruments and certificatesthat in the reasonable judgment of Landlord may be necessary or proper to confirm or evidence such subordination. If Tenant fails toexecute and deliver to Landlord any commercially reasonable subordination agreement so requested by Landlord within ten (10)business days of Landlord’s demand and such failure continues for five (5) days after written notice from Landlord, Tenant shall be indefault under this Lease without any further notice or opportunity to cure. Notwithstanding the generality of the foregoing provisions,Tenant agrees that any such mortgagee, lessor, licensor or party to an agreement under any such underlying lease, ground lease, licenseor agreement, respectively, shall have the right at any time to subordinate any such instruments to this Lease on such terms and subjectto such conditions as such party may deem appropriate. Tenant further covenants and agrees upon written demand by Landlord'smortgagee at any time, before or after the institution of any proceedings for the foreclosure of any such instruments, or sale of theBuilding pursuant to any such instruments, to attorn to such purchaser upon any such sale and to recognize such purchaser as Landlordunder this Lease provided such purchaser agrees to recognize this Lease and Tenant’s rights hereunder. The agreement of Tenant toattorn upon demand of Landlord's mortgagee contained in the immediately preceding sentence shall survive any such foreclosuresale. Tenant shall upon written demand at any time or times before or after any such foreclosure sale, execute, acknowledge anddeliver to Landlord's24 mortgagee any and all reasonable instruments and certificates that in the reasonable judgment of Landlord's mortgagee may benecessary or proper to confirm or evidence such attornment. If any underlying lease, ground lease, license or agreement to which thisLease is subject and subordinate terminates, or if any mortgage to which this Lease is subordinate is foreclosed, Tenant shall, uponrequest, attorn to the holder of the reversionary interest or to the mortgagee in possession, as the case may be. If any holder of amortgage requires an amendment or modification to this Lease, which modification or amendment will not cause any increase in costsor expense to Tenant hereunder or materially affect the rights and obligations of Tenant hereunder, Tenant agrees to so amend ormodify this Lease.(b) In the event of the enforcement by any ground lessor, mortgagee or holder of any security agreement (“SuccessorLandlord”) of the remedies provided for by law or by such ground lease, mortgage or security agreement, Tenant will automaticallybecome the tenant of such Successor Landlord without any change in the terms or other provisions of this Lease; provided, however,that such Successor Landlord or successor in interest shall not be bound by (a) any payment of Fixed Rent or Additional Rent for morethan one (1) month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under thisLease, (b) any amendment or modification of this Lease which reduces the rent payable hereunder, shortens the term of this Lease,reduces the size of the Premises, terminates or cancels this Lease, provides for the surrender of all or any portion of the Premises orgrants to Tenant the right to do any of the foregoing at its election, made without the written consent of such Successor Landlordunless effected unilaterally by Tenant pursuant to the express terms of this Lease, (c) any offset right that Tenant may have against anyformer Landlord relating to any event or occurrence before the date of attornment, including any claim for damages of any kindwhatsoever as the result of any breach by a former Landlord that occurred before the date of attornment; (d) any obligation (i) to payTenant any sum(s) that any former Landlord owed to Tenant unless such sums, if any, shall have actually been delivered to SuccessorLandlord by way of an assumption of escrow accounts or otherwise; (ii) with respect to any security deposited with a former Landlord,unless such security was actually delivered to such Successor Landlord; (iii) to commence or complete any initial construction ofimprovements in the Premises or any expansion or rehabilitation of existing improvements thereon; (iv) to reconstruct or repairimprovements following a fire, casualty or condemnation; or (v) arising from representations and warranties related to a formerLandlord; or (e) any consensual or negotiated surrender, cancellation or termination of this Lease, in whole or in part, agreed uponbetween former Landlord and Tenant, unless effected unilaterally by Tenant pursuant to the express terms of this Lease or consented toin writing by Successor Landlord.17. Landlord's Cure of Tenant's Default. If Tenant shall fail or refuse to comply with or perform any condition or covenant ofthis Lease, and such failure is not remedied within the applicable notice and cure period set forth herein, Landlord may, if Landlord soelects, carry out and perform such condition or covenant, at the cost and expense of Tenant, which cost and expense shall be payablewithin thirty (30) days after Landlord's written demand (accompanied by reasonably supporting documentation), or at the option ofLandlord shall be added to the installment of rent due thereafter, and shall be due and payable as such. This remedy shall be inaddition to such other remedies as Landlord may have hereunder by reason of the breach of Tenant of any of the covenants andconditions in this Lease contained.18. Notices. All notices, demands, requests or other communications hereunder shall be in writing, addressed to such party atits address provided in Section 20 of the Basic Lease Provisions or to such other address as may have been properly providedhereunder, and shall be delivered by (a) United States Postal Service, certified mail, return receipt requested, postage prepaid, or (b) byreputable overnight courier or reputable local hand delivery service providing for receipted delivery. Any such notice, demand, requestor other communication shall be deemed given when received or when receipt is refused or unclaimed, as25 indicated by the notations or records of (as applicable) the United States Postal Service or such overnight courier or local deliveryservice.19. Quiet Enjoyment. Landlord covenants that Tenant, upon keeping and performing, within any applicable notice and cureperiod hereunder, each and every covenant, agreement, term, provision and condition herein contained on the part and on behalf ofTenant to be kept and performed, shall have quiet enjoyment of the Premises without hindrance or molestation by Landlord or by anyother person lawfully claiming by, through or under Landlord, subject to the covenants, agreements, terms, provisions and conditionsof this Lease.20. Inspection and Entry by Landlord.(a) Tenant agrees to permit, at reasonable times and upon reasonable prior notice, Landlord and Landlord's agents,employees or other representatives, to show the Premises to any lessor under any underlying lease or ground lease or any mortgagee orany persons wishing to purchase the same, and Tenant agrees that on and after the ninth (9th) month next preceding the expiration ofthe term hereof, Landlord or Landlord's agents, employees or other representatives shall have the right to show the Premises to anyprospective tenant.(b) Landlord shall retain duplicate keys to all doors of the Premises and Landlord and its agents, employees andindependent contractors shall have the right to enter the Premises at reasonable hours to inspect and examine the Premises, to makepermitted or required repairs, additions, alterations and improvements, to exhibit the Premises as provided in subsection 20(a), to install,maintain, use, repair and replace pipes, cables, ductwork, conduits, utility lines and wires through hung ceiling space and column spacewithin the Premises, provided that such items are not installed in a location which materially interferes with the operation of Tenant’sbusiness unreasonably and adversely affects the appearance of Tenant’s reception area, and to inspect the Premises to ascertain thatTenant is complying with all of its covenants and obligations hereunder, all without being liable to Tenant in any manner whatsoeverfor any damages arising therefrom; provided, however, that Landlord shall, (i) except in case of emergency, afford Tenant such priornotification of an entry into the Premises as shall be reasonably practicable under the circumstances, (ii) conduct all such activities in acommercially reasonable manner (including, without limitation, sealing off areas under construction and either covering, or permittingremoval of Tenant’s Property in or from the area affected thereby) and (iii) be accompanied by an employee or agent of Tenant (ifTenant shall so desire). (c) Landlord shall have the right to bring into the affected portion of the Premises such tools and materials as may bedesirable for the performance of any such work permitted by and in accordance with subsection 20(b). During the time that the workis being carried on in or about the Premises Tenant shall not be entitled to any abatement or reduction of rent by reason thereof, norshall such be deemed to be an actual or constructive eviction. Upon completion of such work, Landlord shall remove its tools andmaterials and all debris from the affected area and leave it in a broom-clean condition, and repair any damage to the Premises orTenant’s Property caused by the work or such removal/cleanup. This clause shall not be deemed to be a covenant by Landlord nor beconstrued to create an obligation on the part of Landlord to make such inspection or repairs.21. Brokerage. Tenant and Landlord warrant and represent to each other that neither has dealt with any broker or brokersregarding the negotiation of this Lease, excepting only the Brokers. Landlord shall be responsible for the payment of commissionspayable to the Brokers pursuant to separate agreements with the Brokers. Tenant and Landlord agree to be responsible for and toindemnify, defend and save the other harmless from and against any claim for a commission or other compensation by any otherperson claiming to have negotiated with the indemnifying party with respect to the Premises or to have called the said Premises toTenant's attention or to have called Tenant to Landlord's attention.26 22. Landlord's Inability to Perform. Except as otherwise expressly provided herein, this Lease and the obligation of Tenant topay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excusedbecause of Landlord's inability to supply any service or material, or to perform any obligation, called for herein, by reason of any rule,order, regulation or preemption by any governmental entity, authority, department, agency or subdivision or for any delay which mayarise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble,unavailability or shortage of materials, or for any other cause beyond the reasonable control of Landlord.23. Condemnation.(a) If the whole of the Land, the Building or the Premises shall be acquired or condemned for any public or quasi-public use or purpose, this Lease and the Term shall end as of the date of the vesting of title with the same effect as if said date werethe Expiration Date. If only a part of the Land and not the entire Premises shall be so acquired or condemned then, (i) except ashereinafter provided in this subsection 23(a), this Lease and the Term shall continue in force and effect but, if a part of the Premises isincluded in the part of the Building so acquired or condemned, from and after the date of the vesting of title, the Fixed Rent andAdditional Rent shall be reduced in the proportion which the area of the part of the Premises so acquired or condemned bears to thetotal area of the Premises immediately prior to such acquisition or condemnation; (ii) whether or not the Premises shall be affectedthereby, Landlord, at Landlord's option, may give to Tenant, within sixty (60) days next following the date upon which Landlord shallhave received notice of vesting of title, a thirty (30) days' notice of termination of this Lease if Landlord shall elect to terminate leases(including this Lease), affecting at least twenty-five percent (25%) of the rentable area of the Building (excluding any rentable arealeased by Landlord or its affiliates); and (iii) if the part of the Building so acquired or condemned shall contain more than fifteenpercent (15%) of the total area of the Premises immediately prior to such acquisition or condemnation, or if, by reason of suchacquisition or condemnation, Tenant no longer has reasonable means of access to the Premises or is unable to reasonably use thePremises for the purpose intended, Tenant, at Tenant's option, may give to Landlord, within sixty (60) days next following the dateupon which Tenant shall have received notice of vesting of title, a thirty (30) days' notice of termination of this Lease. If any suchthirty (30) days' notice of termination is given, by Landlord or Tenant, this Lease and the Term shall come to an end and expire uponthe expiration of said thirty (30) days with the same effect as if the date of expiration of said thirty (30) days were the ExpirationDate. If a part of the Premises shall be so acquired or condemned and this Lease and the Term shall not be terminated pursuant to theforegoing provisions of this subsection 23(a), Landlord, at Landlord's expense, shall restore that part of the Premises not so acquired orcondemned to a self-contained rental unit. In the event of any termination of this Lease and the Term pursuant to the provisions of thissubsection 23(a), the Fixed Rent shall be apportioned as of the date of sooner termination and any prepaid portion of the Fixed Rent orAdditional Rent for any period after such date shall be refunded by Landlord to Tenant.(b) In the event of any such acquisition or condemnation of all or any part of the Land, the Building or the Premises,Landlord shall be entitled to receive the entire award for any such acquisition or condemnation, Tenant shall have no claim againstLandlord or the condemning authority for the value of any unexpired portion of the Term and Tenant hereby expressly assigns toLandlord all of its right in and to any such award. Nothing contained in this subsection 23(b) shall be deemed to prevent Tenant frommaking a separate claim in any condemnation proceedings for the then value of any Tenant's personal property and improvementsmade by Tenant, at its sole cost (other than Landlord’s Tenant Improvement Work), included in such taking and for any movingexpenses, provided such award shall be made by the condemning authority in addition to, and shall not result in a reduction of, theaward made by it to Landlord.27 (c) If the whole or any part of the Premises shall be acquired or condemned temporarily during the Term for anypublic or quasi-public use or purpose, Tenant shall give prompt notice thereof to Landlord and the Term shall not be reduced oraffected in any way and Tenant shall continue to pay in full the Fixed Rent and Additional Rent payable by Tenant hereunder withoutreduction or abatement, and Tenant shall be entitled to receive for itself any award or payments for such use, provided, however, that:(i) if the acquisition or condemnation is for a period not extending beyond the Term and if such award orpayment is made less frequently than in monthly installments, the same shall be paid to and held by Landlord as a fund which Landlordshall apply from time to time to the Fixed Rent payable by Tenant hereunder, except that, if by reason of such acquisition orcondemnation changes or alterations are required to be made to the Premises which would necessitate an expenditure to restore thePremises, then a portion of such award or payment considered by Landlord as appropriate to cover the expenses of the restoration shallbe retained by Landlord, without application as aforesaid, and applied toward the restoration of the Premises as provided in subsection23(a) hereof; or(ii) if the acquisition or condemnation is for a period extending beyond the Term, such award or paymentshall be apportioned between Landlord and Tenant as of the Expiration Date; Tenant's share thereof, if paid less frequently than inmonthly installments, shall be paid to Landlord and applied in accordance with the provisions of clause (i) above, provided, however,that the amount of any award or payment allowed or retained for restoration of the Premises shall remain the property of Landlord ifthis Lease shall expire prior to the restoration of the Premises.24. Assignment and Subletting.(a) Except as otherwise provided herein, Tenant shall not assign this Lease or sublet the whole or any part of thePremises, whether voluntarily or by operation of law, or permit the use or occupancy of the Premises by anyone other than Tenant, andshall not make, suffer or permit any such assignment, subleasing or occupancy, without the prior written consent of Landlord, suchconsent not to be unreasonably withheld, conditioned or delayed (except as otherwise provided in subsection 24(e) below), whichrestrictions shall be binding upon any and all assignees of this Lease and subtenants of the Premises. Tenant shall not pledge orhypothecate this Lease without Landlord's prior written approval, which may be withheld in Landlord's sole discretion. No assignmentor subletting shall result in a change in the Permitted Use. Except as otherwise provided herein, in the event Tenant desires to sublet, orpermit such occupancy of, the Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof toLandlord at least thirty (30) days prior to the proposed commencement date of such subletting or assignment, which notice shall setforth the name of the proposed tenant or assignee, the relevant terms of any sublease or assignment and copies of financial statementsand other relevant information bearing on the character of the proposed subtenant or assignee and its ability to observe and perform itsagreements and obligations.(b) Notwithstanding any assignment or subletting, permitted or otherwise, Tenant shall at all times remain directly,primarily and fully responsible and liable for the payment of the rent specified in this Lease and for compliance with all of its otherobligations under the terms, provisions and covenants of this Lease. If the Premises or any part of them are sublet and Tenant thendefaults under this Lease, Landlord, in addition to any other remedies provided in this Lease or provided by law, may except asotherwise provided herein, at its option, collect directly from the subtenant all rents due and becoming due to Tenant under suchsublease and apply such rent against any sums due to Landlord from Tenant under this Lease, and no such collection shall beconstrued to constitute a novation or release of Tenant from the further performance of Tenant’s obligations under this Lease.28 (c) In addition to Landlord’s right to approve of any subtenant or assignee, Landlord shall have the option, in its solediscretion, in the event of any proposed subletting (for all or substantially all of the balance of the Term) or assignment, to terminatethis Lease, or in the case of a proposed subletting of less than the entire Premises, to recapture the portion of the Premises to be sublet,as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant writtennotice within sixty (60) days following Landlord’s receipt of Tenant’s written notice as required above; provided, however, that ifLandlord exercises the foregoing option to terminate, Tenant shall have the option, by providing written notice to Landlord within five(5) business days after the receipt of Landlord's notice to terminate, to rescind its request for such assignment or sublease. If this Leaseshall be terminated with respect to the entire Premises pursuant to this subsection 24(c), the Term of this Lease shall end on the datestated in Tenant’s notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for theexpiration of the Term. If Landlord recaptures under this subsection only a portion of the Premises, then rent to be paid from time totime during the unexpired Term shall abate proportionately based on the proportion by which the approximate rentable square footageof the remaining portion of the Premises shall be less than that of the Premises as of the date immediately prior to suchrecapture. Tenant shall, at Tenant’s own cost and expense, discharge in full any Tenant commissions which may be due and owing asa result of any proposed assignment or subletting, whether or not the Premises are recaptured pursuant hereto and rented by Landlordto the proposed tenant or any other tenant. (d) Except as otherwise provided herein, in the event that Tenant sells, sublets, assigns or transfers this Lease, Tenantshall pay to Landlord as Additional Rent an amount equal to fifty percent (50%) of any Increased Rent (as defined below) when and assuch Increased Rent is received by Tenant. As used herein, “Increased Rent” shall mean the excess of (i) all rent and otherconsideration which Tenant is entitled to receive by reason of any sale, sublease, assignment or other transfer of this Lease, over (ii) therent otherwise payable by Tenant under this Lease (which in the case of a sublease, is allocable to the subleased portion of thePremises) at such time after making deductions for any commercially reasonable marketing expenses, tenant improvement allowances,cost of alterations, cash concessions, brokerage commissions, attorneys' fees and free rent actually paid or incurred by Tenant. Forpurposes of the foregoing, any consideration received by Tenant in form other than cash shall be valued at its fair market value asreasonably determined by Landlord in good faith.(e) Notwithstanding any other provision hereof, Tenant shall have no right to make (and Landlord shall have theabsolute right to refuse consent to) any assignment of this Lease or sublease of any portion of the Premises if at the time of eitherTenant’s notice of the proposed assignment or sublease or the proposed commencement date thereof, there shall exist any uncureddefault of Tenant or matter which will become a default of Tenant with passage of time unless cured, of which Tenant has been givennotice and which is not thereafter timely cured, or if the proposed assignee or sublessee is an entity: (i) with which Landlord is alreadyin negotiation as evidenced by the issuance of a written proposal; (ii) is already an occupant of the Building unless Landlord is unableto provide the amount or type of space required by such occupant; (iii) is a governmental agency; (iv) is incompatible with thecharacter of occupancy of the Building; or (v) would subject the Premises to a use which would: (A) involve increased personnel orwear upon the Building; (B) violate any exclusive right granted to another tenant of the Building; (C) require any addition to ormodification of the Premises or the Building in order to comply with building code or other governmental requirements; or, (D) effect amaterial violation of any provision of this Lease. Tenant expressly agrees that Landlord shall have the absolute right to refuse consentto any such assignment or sublease and that for the purposes of any statutory or other requirement of reasonableness on the part ofLandlord such refusal shall be deemed reasonable.(f) Except as otherwise provided herein, at the time Tenant requests Landlord’s consent to any assignment, pledge orsublease, Tenant shall pay to Landlord a processing fee to cover Landlord’s costs,29 including attorneys’ fees, incurred in investigating and considering any proposed or purported assignment or pledge of this Lease orsublease of any of the Premises, in the amount of One Thousand Five Hundred Dollars ($1,500.00) (which amount shall increase byfive percent per annum upon each anniversary of the Commencement Date), regardless of whether Landlord shall consent to, refuseconsent to such assignment, pledge or sublease. Any purported sale, assignment, mortgage, transfer of this Lease or subletting whichdoes not comply with the provisions of this Section 24 shall be void.(g) If Tenant is a non-publicly-traded corporation, partnership or trust, any transfer or transfers of or change orchanges within any twelve month period in the number of the outstanding voting shares of the corporation, the general partnershipinterests in the partnership or the identity of the persons or entities controlling the activities of such partnership or trust resulting in thepersons or entities owning or controlling a majority of such shares, partnership interests or activities of such partnership or trust at thebeginning of such period no longer having such ownership or control shall be regarded as equivalent to an assignment of this Lease tothe persons or entities acquiring such ownership or control and shall be subject to all the provisions of this Section 24 to the sameextent and for all intents and purposes as though such transfer of ownership or control was a direct assignment of this Lease.(h) Without limiting the other indemnities in favor of Landlord contained in this Lease, Tenant will defend,indemnify and hold Landlord harmless from and against any loss, damage, costs and expenses, including, without limitation, attorneys’fees, sustained or incurred by Landlord as a result of, or arising out of or in connection with any claims made by any actual orproposed assignee or sublessee or any broker, finder or other person claiming a commission or other compensation in connection withan assignment or subletting.(i) Notwithstanding the foregoing, Tenant shall have the right, without seeking or obtaining Landlord's prior writtenconsent, and without being subject to the provisions of subsections (a), (d), (e), (f) or (g) of this Section 24, assign Tenant's interest inthis Lease or sublease the Premises or any part thereof to any person that (i) as of the date of determination and at all times thereafterdirectly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with Tenant, (ii) is thesuccessor entity to Tenant by merger or consolidation or (iii) acquires all or substantially all of Tenant's ownership interests or assets;provided that Tenant shall notify Landlord in writing prior to (or if prior notice is prohibited by applicable Law or contractualobligation, promptly after) the effectiveness of such assignment or sublease and otherwise comply with the requirements of this Leaseregarding such assignment or sublease; and provided, further, that in the case of such an assignment, the entity that will be the Tenantunder this Lease after such assignment, together with Tenant if Tenant survives such assignment, has a combined net worth andcreditworthiness, as of the day immediately after such assignment, that is equal to or greater than the net worth and creditworthiness ofTenant, as of the date of this Lease. For purposes hereof, "control" requires both (a) owning (directly or indirectly) more than fiftypercent (50%) of the stock or other equity interests of another person and (b) possessing, directly or indirectly, the power to direct orcause the direction of the management and policies of such person.25. Environmental Laws.(a) Subject to Landlord’s obligations set forth in the next sentence of this subsection, Tenant, at its own cost andexpense, shall comply with all applicable environmental laws, rules and regulations of the federal, state, county and municipalgovernments and of all other governmental authorities having or claiming jurisdiction over the Premises or appurtenances thereto, orany part thereof, which are applicable to the Premises and/or the conduct of Tenant’s business at the Premises. Landlord, subject toinclusion of any expenses relating thereto in Expenses (if otherwise permitted under this Lease), shall comply with all applicableenvironmental laws, rules and regulations of the federal, state, county and municipal governments and of all30 other governmental authorities having or claiming jurisdiction over the Building, the Land or appurtenances thereto, or any partthereof, which are generally applicable to the Building, the Land and/or the portions of the Premises that Landlord is obligated to repairand maintain hereunder.(b) Tenant shall not generate, store, manufacture, refine, transport, treat, dispose of, or otherwise permit to be presenton or about the Premises, any Hazardous Substances, other than standard cleaning and office equipment and supplies used incompliance with all applicable Laws. As used herein, Hazardous Substances shall be defined as any “hazardous chemical,”“hazardous substance,” “hazardous waste” or similar term as defined in the Comprehensive Environmental ResponsibilityCompensation and Liability Act, as amended (42 U.S.C. 9601, et seq.), any rules or regulations promulgated thereunder, or in anyother present or future applicable federal, state or local law, rule or regulation dealing with environmental protection and human healthand safety and shall include petroleum and petroleum-based products, ureaformaldehyde and asbestos and asbestos-containingmaterials.(c) In the event Tenant receives any notice that a spill or discharge of any Hazardous Substance has occurred on orabout the Premises or into the sewer and/or waste treatment system operated by Landlord from any person or entity, including theUnited States Environmental Protection Agency (“EPA”) or any state or local environmental or health safety agency, then Tenant shallprovide immediate written notice of same to Landlord, detailing all relevant facts and circumstances.(d) Notwithstanding the provisions of Section 10(d) hereof, Tenant agrees to indemnify and hold harmless (usingcounsel reasonably acceptable to Landlord) Landlord, its affiliates and their respective officers, directors, employees, agents andrepresentatives, and each mortgagee of the Premises from and against any and all liabilities, damages, claims, losses, judgments, causesof action, costs and expenses (including the reasonable fees and expenses of counsel and the diminution in value of the Building,damages for the loss or restriction on use of rentable or usable space or of any amenity of the Building, damages arising from anyadverse impact on marketing of space in the Building, and sums paid in settlement of claims, attorneys' fees, consultant fees, and expertfees) which may be incurred by the Landlord or any such mortgagee or threatened against the Landlord or such mortgagee, relating toor arising out of any breach by Tenant of this Section 25, which indemnification shall survive the date of expiration or soonertermination of this Lease. This indemnification of Landlord, its affiliates and their respective officers, directors, employees, agents andrepresentatives, by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or anycleanup, remedial, removal, or restoration work required by any federal, state, or local governmental agency or political subdivisionbecause of Hazardous Substances present in the soil or ground water on or under the Building which results from such abreach. Without limiting the foregoing, if any activities or work undertaken by Tenant (whether or not approved or consented to byLandlord) results, directly or indirectly, in any Hazardous Substances contamination of the Premises and/or Building (including,without limitation, from sources present in the Building on the Effective Date), then Tenant shall be solely responsible, at Tenant’sexpense, for the remediation of such contamination in accordance with all applicable laws, codes and regulations; provided that theLandlord's approval of such actions, and the contractors to be used by Tenant in connection therewith, such approval not to beunreasonably withheld, conditioned or delayed, shall first be obtained and provided further that Landlord may elect, at Tenant’s cost, toundertake and/or manage the remediation activities. (e) Landlord, its affiliates, and their respective employees, representatives and agents shall have access to theBuilding during reasonable hours and upon reasonable notice to Tenant in order to conduct periodic environmental inspections andtests of the Building.(f) If (i) on the Effective Date, the Premises contains Hazardous Substances in violation of applicable Laws, or (ii)after the Effective Date, Landlord, its agents, employees or contractors causes the31 Premises to contain Hazardous Substances in violation of applicable Laws, then Landlord shall cause such Hazardous Substances to beremoved and/or abated in accordance with all applicable Laws and in a manner which minimizes disruption of Tenant's access to anduse and occupancy of the Premises, at no cost to Tenant (either directly or as an Expense).26.Parties Bound.(a) The covenants, agreements, terms, provisions and conditions of this Lease shall bind and benefit the respectivesuccessors, assigns and legal representatives of the parties hereto with the same effect as if mentioned in each instance where a partyhereto is named or referred to.(b) Tenant acknowledges and agrees that if Landlord shall be an individual, joint venture, corporation, limitedliability company, tenancy in common, firm or partnership (general or limited), there shall be no personal liability on such individual oron the members of such joint venture, corporation, limited liability company, tenancy in common, firm or partnership in respect of anyof the covenants or conditions of this Lease; rather, Tenant shall look solely to Landlord's interest in the Building (including the rents,insurance or condemnation proceeds and sale proceeds) for the collection of any judgment (or enforcement or any other judicialprocess) requiring the payment of money by Landlord with respect to any of the terms, covenants and conditions of this Lease to beobserved or performed by Landlord and no other property or assets of Landlord or any of its affiliates shall be subject to levy,execution or other enforcement procedures for the satisfaction of any obligation due Tenant or its successors or assigns.(c) The term “Landlord” as used in this Lease means only the owner, or the mortgagee in possession, for the timebeing of the Premises. In the event of any sale or sales of the Land, Building, or the Premises, said Landlord shall be and hereby isentirely freed and relieved of all covenants and obligations of Landlord hereunder accruing after the date of such sale, and it shall bedeemed and construed without further agreement between the parties or their successors in interest, or between the parties and thepurchaser, that the purchaser at any such sale has assumed and agreed to carry out any and all covenants and obligations of Landlordhereunder accruing after the date of said purchase or, to the extent of the knowledge of the purchaser, occurring prior to the date of saidpurchase.27. Tenant’s Bankruptcy or Insolvency. If at any time and for so long as Tenant shall be subjected to the provisions of theUnited States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at suchtime (each a “Debtor’s Law”):(a) Tenant, as debtor-in-possession, and any trustee or receiver of Tenant’s assets (each a “Tenant’s Representative”)shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Premises than accordedto Tenant in Section 24, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by theprovisions of such Debtor’s Law. Without limitation of the generality of the foregoing, any right of any Tenant’s Representative toassume or assign this Lease or to sublease any of the Premises shall be subject to the conditions that:(i) Such Debtor’s Law shall provide to Tenant’s Representative a right of assumption of this Lease whichTenant’s Representative shall have timely exercised and Tenant’s Representative shall have fully cured any default of Tenant underthis Lease.(ii) Tenant’s Representative or the proposed assignee, as the case shall be, shall have deposited withLandlord as security for the timely payment of rent an amount equal to three month’s rent and other monetary charges accruing underthis Lease, and shall have provided Landlord with adequate other assurance of the future performance of the obligations of the Tenantunder this Lease. Without limitation, such32 assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of the Landlord that Tenant’sRepresentative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations andadministrative expenses to assure Landlord that Tenant’s Representative will have sufficient funds to fulfill the obligations of Tenantunder this Lease; and, in the case of assignment, submission of current financial statements of the proposed assignee, audited by anindependent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amountsdetermined by Landlord to be sufficient to assure the future performance by such assignee of all of the Tenant’s obligations under thisLease.(iii) The assumption or any contemplated assignment of this Lease or subleasing any part of the Premises, asshall be the case, will not breach any provision in any other lease, mortgage, financing agreement or other agreement by whichLandlord is bound.(iv) Landlord shall have, or would have had absent the Debtor’s Law, no right under Section 24 to refuseconsent to the proposed assignment or sublease by reason of the identity or nature of the proposed assignee or sublessee or theproposed use of the Premises concerned.28. Miscellaneous.(a) This Lease is intended by the parties as a final expression of their agreement and as a complete and exclusivestatement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporatedherein. No course of prior dealing between the parties or their officers, employees, agents or affiliates is be relevant or admissible tosupplement, explain or vary any of the terms of this Lease. No representative, agent or employee of Landlord has been authorized tomake any representations or promises with reference to the leasing of the Premises or to vary, alter or modify the terms hereof. Noadditions, changes or modifications, renewals, or extensions hereof, shall be binding unless reduced to writing and signed by Landlordand Tenant.(b) The terms, conditions, covenants and provisions of this Lease shall be deemed to be severable. If any clause orprovision herein contained be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of anyapplicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remainin full force and effect.(c) The section headings in this Lease are for convenience only and are not to be considered in construing the same.(d) Time is of the essence with respect to all dates and time periods set forth in this Lease. Notwithstanding anythingto the contrary contained in this Lease, the expiration or earlier termination of this Lease shall not relieve Landlord or Tenant from theirrespective obligations accruing prior to the expiration or earlier termination, including, without limitation, any indemnities.(e) In the event that Tenant or anyone claiming through or under Tenant shall not vacate and surrender the Premiseson or before the Expiration Date (as it may be extended or renewed) as required by this Lease, such holdover tenancy shall be deemedto be a tenancy at sufferance and Landlord shall have all rights and remedies provided at law relating to such tenancy. During theperiod of holdover tenancy, Tenant shall be liable for a holdover rental charge for the Premises which charge shall be equal to one andone-half the Fixed Rent for the first sixty (60) days of such holdover, and two (2) times the Fixed Rent thereafter, and 100% of theAdditional Rent payable by Tenant hereunder during the Lease Year immediately preceding the Expiration Date. In addition, Tenantfurther agrees that if it fails to so surrender the Premises, Tenant (i) shall be liable to Landlord for any and all direct damages whichLandlord shall suffer by reason thereof, and (ii) if Tenant held33 over for more than thirty (30) days after the applicable Expiration Date (as it may be extended or renewed), Tenant shall indemnifyLandlord against all claims and demands made by any succeeding tenants against Landlord founded upon delay by Landlord indelivering possession of the Premises to such succeeding tenant by reason of Tenant’s holdover.(f) Neither Landlord nor Tenant shall be required to perform any of its obligations under this Lease, nor be liable forloss or damage for failure to do so, with the exception of each party’s obligation for the payment of any rent or other sums due underthe Lease, where such failure arises from Force Majeure. For purposes of this Lease, the term “Force Majeure” shall be deemed toinclude acts of God, strikes, lockouts, labor difficulties, explosions, sabotage, accidents, riots, civil commotions, acts of war, results ofany warfare or warlike conditions in this or any foreign country, fire and casualty, legal requirements, shortages or inability to obtainmaterials or equipment, energy shortage, or causes beyond the reasonable control of Landlord or Tenant, as the case may be. (g) No provision of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver be inwriting signed by the waiving party, nor shall any custom or practice which may evolve between the parties in the administration of theterms hereof be construed to waive or lessen the right of Landlord or Tenant to insist upon the performance by the other in strictaccordance with the terms hereof. The terms and conditions contained in this Lease shall apply to, inure to the benefit of, and bebinding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise hereinexpressly provided.(h) Words of any gender used in this Lease shall be held and construed to include any other gender, and words in thesingular number shall be held to include the plural, unless the context otherwise requires.(i) If there is a guarantor of Tenant's obligations hereunder, the obligations hereunder imposed upon Tenant shall bejoint and several obligations of Tenant and such guarantor and Landlord need not first proceed against Tenant before proceedingagainst such guarantor nor shall any such guarantor be released from its guaranty for any reason whatsoever, including withoutlimitation, in case of any amendments hereto, waivers hereof or failure to give such guarantor any notices hereunder.(j) All exhibits, attachments, riders and addenda referred to in this Lease are incorporated into this Lease and made apart hereof.(k) Landlord and Tenant each warrants and represents to the other that (i) it is duly incorporated or otherwiseestablished or formed and validly existing under the laws of its state of incorporation, establishment or formation, (ii) it has and is dulyqualified to do business in the state in which the Building is located, (iii) it has full corporate, partnership, trust, association or otherappropriate power and authority to enter into this Lease and to perform all its obligations hereunder, (iv) each person (and all of thepersons if more than one signs) signing this Lease on behalf of it is duly and validly authorized to do so and (v) neither (1) theexecution, delivery or performance of this Lease nor (2) the consummation of the transactions contemplated hereby will violate orconflict with any provision of documents or instruments under which it is constituted or to which it is a party. In addition, Landlordand Tenant each warrants and represents to the other that none of (A) it, (B) its affiliates or partners nor (C) to the best of its knowledge(without independent investigation), its members, shareholders or other equity owners or any of their respective employees, officers,directors, representatives or agents is a person or entity with whom U.S. persons or entities are restricted from doing business underregulations of the Office of Foreign Asset Control ("OFAC") of the Department of the Treasury (including those named on OFAC'sSpecially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, ExecutiveOrder Blocking Property and Prohibiting34 Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) or other similar governmental action.(l) This Lease shall be construed and interpreted in accordance with and governed by the laws of the state in whichthe Building is located. Should any provisions of this Lease require judicial interpretation, it is agreed that the court interpreting orconstruing the same shall not apply a presumption that the terms of any such provision shall be more strictly construed against oneparty or the other by reason of the rule of construction that a document is to be construed most strictly against the party who itself orthrough its agent prepared the same, it being agreed that the agents of all parties hereto have participated in the preparation of thisLease.(m) The term Landlord as used in this Lease so far as covenants or obligations on the part of Landlord are concernedshall be limited to mean and include only the owner or owners at the time in question of the Landlord's interest in the Building. Tenantacknowledges and agrees, for itself and its successors and assigns, that no trustee, director, officer, employee or agent of Landlord orany of its affiliates shall be personally liable for any of the terms, covenants or obligations of Landlord hereunder.(n) Each covenant of Landlord and Tenant under this Lease is independent of each other covenant under this Lease,and no default by either party in performance of any covenant shall excuse the other party from the performance of any other covenant.(o) Tenant shall deliver to Landlord, within ten (10) business days of Landlord’s written demand made not more thanonce per Lease Year (except in the event of a sale, financing or refinancing of the Building), copies of Tenant’s financial statements(most recent annual and year-to-date), including a balance sheet, income statement and cash flow statement, certified as true andcomplete by Tenant’s principal financial officer or Tenant’s outside auditor. Landlord agrees to hold such information in confidenceand not to disclose such information to anyone other than Landlord’s current lender or a lender in connection with a financing of theBuilding or a purchaser in connection with a sale of the Building.(p) Landlord reserves the right to change the name of the Building.(q) If either party commences an action, proceeding, demand, claim, action, cause of action or suit against the otherparty arising out of or in connection with this Lease, then the substantially prevailing party shall be reimbursed by the other party for allreasonable costs and expenses, including reasonable attorneys' fees and expenses, incurred by the substantially prevailing party in suchaction, proceeding, demand, claim, action, cause of action or suit, and in any appeal in connection therewith (regardless of whether theapplicable action, proceeding, demand, claim, action, cause of action, suit or appeal is voluntarily withdrawn or dismissed).(r) Tenant, for itself and all persons claiming through or under Tenant, hereby expressly waives any and all rightswhich are or may be conferred upon Tenant by any present or future law to redeem the Premises, or to any new trial in any action orejectment under any provision of law, after re-entry thereupon by Landlord, or after any warrant to dispossess or judgment inejectment. If Landlord shall acquire possession of the Premises by summary proceedings or in any other lawful manner withoutjudicial proceedings, it shall be deemed a “re-entry” as that term is used herein.(s) Any diminution or obstruction of light, air or view by any structure that may be erected on lands adjacent to theBuilding shall not affect this Lease or impose any liability on Landlord. Tenant shall not acquire any right or easement for the use ofany door or passageway in any portion of the Building, except the easement of necessity for ingress and egress, if any, in the doors andpassageway(s) directly connecting with the Premises.35 (t) Intentionally deleted.(u) Tenant will give the owners or holders of any ground lease, mortgage, deed of trust or security agreementencumbering the Building and/or the Land (“Lienholder”), by registered mail, a copy of any notice of default Tenant serves onLandlord, provided that Landlord or Lienholder previously notified Tenant (by way of notice of assignment of rents and leases orotherwise) of the address of Lienholder. Tenant further agrees that if Landlord fails to cure such default within the time provided inthis Lease, then Tenant will provide written notice of such failure to Lienholder and Lienholder will have an additional thirty (30) dayswithin which to cure the default. Lienholder shall have no obligation to cure (and shall have no liability or obligation for not curing)any breach or default by Landlord, except to the extent that Lienholder agrees or undertakes otherwise in writing. If the default cannotbe cured within the additional thirty (30) day period, then Lienholder will have such additional time as may be necessary to effect thecure if, within the thirty (30) day period, Lienholder has commenced and is diligently pursuing the cure (including without limitationcommencing foreclosure proceedings if necessary to effect the cure).(v) [intentionally deleted](w) Landlord and Tenant acknowledge and agree that the terms of this Lease and the negotiations which led to theexecution of this Lease are confidential in nature. Neither Landlord nor Tenant, except as may be required by law or in connectionwith an actual or proposed sale or financing of the Building and/or the Land or an actual or proposed assignment of this Lease orsublease of the Premises or any portion hereof, shall communicate the terms or any other aspect of the transaction with, nor deliver allor any portion of this Lease to, any person or entity other than persons or entities providing professional services or advice to Landlordor Tenant respectively.29. Security.(a) Security Deposit. Concurrently with the execution and delivery of this Lease by Tenant, Tenant shall depositwith Landlord a sum equal to Seventy-Five Thousand Two Hundred Eight Dollars ($75,208.00) as a security deposit (the “SecurityDeposit”). The Security Deposit shall be held as security for the performance and observance by Tenant of all of its obligations underthe terms, conditions and covenants of this Lease throughout the Term of this Lease. If Tenant performs and observes all of the terms,conditions and covenants of this Lease which are required to be performed and observed by it, Landlord shall return the SecurityDeposit, or balance thereof then held by Landlord, to Tenant after the Expiration Date or after Tenant surrenders possession of thePremises, whichever is later. In the event of a default by Tenant in the payment of rent or the performance or observance of any of theother terms, conditions or covenants of this Lease, then Landlord may, at its option and without notice, apply all or any part of theSecurity Deposit in payment of such rent or to cure any other such default; and if Landlord does so, Tenant shall, upon request, depositwith Landlord the amount so applied so that Landlord will have on hand at all times throughout the Term of this Lease the full amountof the Security Deposit. Landlord shall not be required to hold the Security Deposit as a separate account, but may commingle it withLandlord’s other funds. The use, application or retention of the Security Deposit or any portion thereof by Landlord shall not preventLandlord from exercising any other right or remedy provided by this Lease or by law (it being intended that Landlord shall not first berequired to proceed against the Security Deposit) and shall not operate as a limitation on any recovery to which Landlord mayotherwise be entitled.In the event of a sale or any other transfer of the Building, Landlord shall have the right to transfer the Security Deposit to its purchaserand Landlord shall thereupon be released by Tenant from all responsibility for the return of such deposit; and Tenant agrees to looksolely to such purchaser for the return of such deposit. In the event of an assignment of this Lease, the Security Deposit shall bedeemed to be held by Landlord as a deposit36 made by the assignee, and Landlord shall have no further responsibility for the return of such deposit to the assignor.(b) Notwithstanding anything to the contrary set forth in this Section 29, provided that (i) Tenant has not assigned itsinterest in this Lease (other than pursuant to an assignment not requiring Landlord’s consent), (ii) no default beyond any applicablenotice and cure period hereunder shall have occurred, (iii) there is not then occurring any event or occurrence of which Tenant hasbeen given notice by Landlord and which if not cured within the applicable time period set forth in this Lease would constitute adefault beyond any applicable notice and cure period and which is not so cured (collectively, the "Reduction Requirements"), as of thelast day of the thirty-first (31st) month of the Lease Term, the Security Deposit shall be reduced by $37,604.00 (the "ReductionAmount”), promptly after receipt of Tenant's written request therefor, Landlord shall return to Tenant the Reduction Amount;provided, however, that in no event shall the Security Deposit be reduced to less than $37,604.00.30. Parking. Tenant, its permitted subtenants, licensees, invitees, agents, contractors, subcontractors and employees shall bepermitted to use parking spaces on the Land or Building not in excess of 3.0 spaces per 1,000 rentable square feet in the Premises fromtime to time; initially, forty-eight (48) spaces. All such spaces, and use of parking spaces (whether or not designated by Landlord as“visitor parking”) for visitor parking by Tenant’s invitees, are available on a first-come, first-served, non-exclusive basis, to all tenantsin the Building, shall be unmarked and unreserved, and shall be free of charge throughout the Lease Term (as it may be extended orrenewed). Notwithstanding the foregoing, out of such allotment, Landlord shall provide two (2) designated reserved spaces in theBuilding’s covered parking area which shall also be free of charge. In the event Tenant requests signage to designate such reservedspaces as being specifically reserved for use by Tenant, such signage shall be a Tenant’s sole cost and expense. At such time andunder such circumstances as Landlord deems appropriate, Landlord may provide attendant parking or such other system ormanagement of parking as it deems necessary or desirable. Notwithstanding anything contained herein, if any governmental regulationor ordinance is enacted or amended after the Effective Date of this Lease so as to require a modification in Tenant's number of parkingspaces, Landlord reserves the right to make such modification without modifying in any way the rent due hereunder or any otherobligations of Tenant. Tenant shall not use parking for overnight storage of vehicles. Landlord assumes no responsibility and shall notbe liable for any vehicle damage or theft to vehicles located in the parking lot, theft of personal property or personal injury sustained byany person in or about the parking lot.[SIGNATURE PAGE FOLLOWS]37 LEASE AGREEMENT SIGNATURE PAGE(9600 Blackwell Road - Suite 210)IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound, have duly executed this Lease as of theEffective Date. LANDLORD: TNREF III 9600 Blackwell, LLC,a Delaware limited liability company By: /s/ Fung LinName: Fung LinTitle: Principal Date: February 1, 2016 TENANT: Regenxbio Inc., a Delaware corporation By: /s/ Kenneth MillsName: Kenneth MillsTitle: President & CEO Date: January 28, 2016 38 EXHIBIT APLAN OF THE PREMISES A-1 EXHIBIT BCOMMENCEMENT MEMORANDUMThis Memorandum is given by TNREF III 9600 Blackwell, LLC ("Landlord") to Regenxbio Inc. ("Tenant"):1. Landlord and Tenant have entered into a Lease Agreement dated , 2016 (the "Lease"), pursuant to whichLandlord leases to Tenant and Tenant leases from Landlord certain premises known as Suite 2 within the building located at 9600Blackwell Road, Rockville, Maryland (the "Premises"). All capitalized terms used herein and not otherwise defined herein shall havethe same meanings given to them in the Lease.2. Landlord and Tenant hereby confirm that:(a) The Commencement Date of the Lease Term is ;(b) The Expiration Date of the Lease Term is ;(c) The Rent Commencement Date under the Lease is ;(d) The suite number of the Premises is ;(e) The rentable square footage of the Premises is ;(f) The rentable square footage of the Building is ;(g) Tenant’s Proportionate Share of Excess Expenses is .3. Tenant confirms that:(a) It has accepted possession of the Premises;(b) The improvements required to be furnished by Landlord under the Lease have been completed (subject to anycorrective work or punchlist items of which Tenant has notified Landlord in accordance with the Lease);(c) Landlord has fulfilled all of its duties of an inducement nature;(d) No modifications have been made to the Lease after it was signed by Landlord and Tenant; and(e) Except as provided in Paragraph 6 of the Basic Lease Provisions to the Lease, there are currently no set-offs orcredits against Rent, and except as provided in Section 2(a) of the Lase, no Rent has been prepaid.4. This Memorandum is intended only to confirm the matters herein set forth and does not otherwise modify or supplement theLease.C-1 LANDLORD: TNREF III 9600 Blackwell, LLC,a Delaware limited liability company By: Name: Title: Date: , 2016 TENANT: Regenxbio Inc., a Delaware corporation By: Name: Title: Date: , 2016C-2 EXHIBIT CRULES AND REGULATIONSTenant shall faithfully observe and comply with the following Rules and Regulations:1.Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or window of the Premises withoutobtaining Landlord’s prior written consent, which consent Landlord shall not unreasonably withhold, condition or delay, whichconditions may include requiring Tenant to provide a copy of any such keys. Tenant shall bear the cost of any lock changes orrepairs required by Tenant. 2.The Lease outlines the number of keys furnished to Tenant. Any additional keys required by Tenant must be obtained fromManagement Office at a reasonable Building-standard cost to be established by Landlord.3.All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises, unlesselectrical holdbacks have been installed.4.Landlord reserves the right to close and keep locked all entrance and exit doors during hours when the Building is closed.Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving thePremises if it is after the Business Hours for the Building. Any tenant, its employees, agents or any other person entering theBuilding at any time when it is so locked, or any time when it is considered to be after Business Hours for the Building, will berequired to use their access card to gain entry into the Building. The Landlord and his agents shall in no case be liable fordamages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob,riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building during the continuanceof same by any means it deems appropriate for the safety and protection of life and property.5.Landlord shall have the right to reasonably prescribe the weight, size and position of all safes and other heavy property broughtinto the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thicknessas is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe orproperty in any case. All damage done to any part of the Building, its contents, occupants or visitors by moving or maintainingany such safe or other property shall be the sole responsibility of Tenant and any expense of said damage or injury shall be borneby Tenant.6.No furniture, freight, packages, supplies, equipment or merchandise will be brought into or removed from the Building or carriedup or down in the elevators, except upon prior notice to the Management Office, and in such reasonable manner, in such specificelevator, and between such hours as shall be designated by Landlord. Tenant shall provide the Management Office with no lessthan 24 hours prior notice of the need to utilize an elevator for any such purpose, so as to provide Landlord with a reasonableperiod to schedule such use and to install padding or take other actions or prescribe procedures as are appropriate to protectagainst damage to the elevators or other parts of the Building. In no event shall Tenant’s use of the elevators for any suchpurpose be permitted during the Building’s Business Hours.7.Subject to the terms and conditions of the Lease, Landlord shall have the right to control and operate the public portions of theBuilding, the public facilities, the heating and air conditioning, and any other facilities furnished for the common use of tenants,in such manner as is customary for comparable buildings in the vicinity of the Building.C-3 8.The requirements of Tenant will be attended to only upon application at the Building office location designated byLandlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under specialinstruction from Landlord. 9.Tenant shall not unreasonably disturb, or solicit, or canvass any occupant of the Building and shall cooperate with Landlord orLandlord’s agents to prevent same.10.The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they wereconstructed, and no foreign substance of any kind whatsoever shall be thrown therein.11.Tenant shall not overload the floor of the Premises, and except for Cosmetic Alterations, shall not mark, drive nails or screws, ordrill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord’s consent.12.Except for vending machines intended for the sole use of Tenant’s employees and invitees, no vending machine or machines ofany description other than fractional horsepower office machines shall be installed, maintained or operated upon the Premiseswithout the written consent of Landlord.13.Tenant shall not use or keep in or on the Premises of the Building any kerosene, gasoline or other flammable or combustible fluidor material except for typical quantities of office and cleaning supplies provided they are stored and used in accordance withapplicable Laws.14.Tenant shall not use any method of heating or air conditioning other than that which is supplied by Landlord, without the priorwritten consent of Landlord.15.Tenant shall not use, keep, or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit orallow the Premises to be occupied or used in a manner reasonably offensive or objectionable to Landlord or other occupants ofthe Building by reason of noise, odors, or vibrations, or interfere in any way with other Tenants or those having business therein.16.Tenant shall not bring into or keep within the Building or the Premises any animals (other than bona fide service animals), birds,or any vehicles including bicycles.17.Cooking shall not be done or permitted by any tenant on the Premises, nor shall the Premises be used for the storage ofmerchandise, for lodging or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, UnderwritersLaboratory-approved equipment and microwave ovens may be used on the Premises for heating food and brewing coffee, tea,hot chocolate and similar beverages, provided that such use is in accordance with applicable federal, state and city laws, codes,ordinances, rules and regulations, and does not cause odors outside the Premises which are objectionable to Landlord and otherTenants.18.Landlord will reasonably approve where and how telephone and telegraph wires are to be introduced to the Premises. No boringor cutting for wires shall be allowed without the consent of Landlord, such consent not to be unreasonably withheld, conditionedor delayed. The location of telephone, call boxes and other office equipment affixed to the Premises shall be subject to thereasonable approval of Landlord.19.Landlord reserves the right to exclude or expel from the Building any person who, in the reasonable judgment of Landlord, isintoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rulesand Regulations.C-4 20.Tenant, its employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls,stairways or elevators, and shall use the same only as a means of ingress and egress for the Premises. 21.Tenant shall not waste electricity, water or air conditioning and agrees to reasonably cooperate with Landlord (at no material out-of-pocket cost to Tenant) to ensure the most effective operation of the Building’s heating and air conditioning system, and shallrefrain from attempting to adjust any controls. Such cooperation includes the closing of interior blinds, disallowing the sunraysto shine directly into areas adjacent to exterior windows.22.Tenant shall store all trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes orreceptacles if material is of such nature that it may not be disposed of in the ordinary and customary manner of removing anddisposing of trash and garbage in the city in which the Building is located without violation of any law or ordinance governingsuch disposal. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for suchpurposes at such times as Landlord shall designate.23.Tenant shall comply with all safety, fire protection and evacuation procedures and regulations, as reasonably established byLandlord on a non-discriminatory basis with respect to all similarly situated tenants, or as promulgated by any governmentalagency with jurisdiction over the Building or its operations.24.Subject to Section 11 of the Lease, Tenant shall assume any and all responsibility for protecting the Premises from theft, robberyand pilferage, which includes keeping doors locked and other means of entry to the Premises closed when the Premises are notoccupied.25.Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants. This shallnot prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Buildings.26.No awnings or other projects shall be attached to the outside walls of the Building without the prior written consent ofLandlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or doorof the Premises without prior written consent of Landlord. All electrical ceiling fixtures hung in offices or spaces along theperimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color reasonably approved by Landlord.27.The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways and otherpublic places in the Building shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles beplaced on the windowsills.28.The washing and/or detailing of or the installation of windshields, radios, telephones in or general work on automobiles shall notbe allowed on the Premises.29.Food vendors shall be allowed in the Building upon receipt of a written request from the Tenant. The food vendor shall serviceonly the tenants that have a written request on file in the Management Office. Under no circumstance shall the food vendordisplay their products in a public or common area including corridors and elevator lobbies. Any failure to comply with this ruleshall result in immediate permanent withdrawal of the vendor from the Building.C-5 30.Tenant shall reasonably comply with requests by the Landlord concerning informing their employees of items of importance tothe Landlord relating to the Building and its operations. 31.Tenant shall comply with any non-smoking ordinance adopted by any applicable governmental authority. In addition, Landlordreserves the right to designate, in Landlord’s sole discretion, the only outside areas of the Premises where smoking shall bepermitted.Subject to Section 8(b) of the Lease, Landlord reserves the right at any time to change or rescind any one or more of these Rules andRegulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s judgment may from time to time benecessary for the Management, safety, care and cleanliness of the Premises and Building, and for the preservation of good ordertherein, as well as for the convenience of other occupants and tenants. Landlord shall not be responsible to Tenant or to any otherperson for the non-observance of the Rules and Regulations and Tenant shall agree to abide by these rules as a condition of itsoccupancy of the Premises. C-6 EXHIBIT DSPECIAL STIPULATIONS1. Option to Renew. Tenant shall have the right to extend the term of this Lease for all of the Premises for one (1) additional five (5)year lease term (the "Renewal Term"), upon the following conditions:a. Tenant is not in default beyond applicable notice and cure period either at the time Tenant exercises such renewal option orat the commencement of the Renewal Term, nor has it been in default beyond applicable notice and cure periods more than two (2)times within the immediately preceding two (2) year period;b. Tenant has not previously assigned the Lease or sublet more than 25% of the Premises other than pursuant to an assignmentor sublease not requiring Landlord’s consent;c. Tenant has delivered to Landlord written notice of its intention to exercise this option not less than nine (9) months (normore than 365 days) prior to the end of the Lease Term;d. All lease terms for the Renewal Term shall be the same as in the Lease, except that the Annual Fixed Rent and Landlordconcessions, if any, for the Renewal Term shall be at the then current “fair market rental rate” for renewal transactions for similar spacein comparable office buildings in the North Rockville, Maryland submarket (the “Market”), taking into consideration all then marketconcessions (including, without limitation, tenant allowances and free rent), as negotiated in good faith between willing landlords andtenants under no compulsion. The fair market rental rate shall be determined as follows:(1) For a period of thirty (30) days after receipt of Tenant's notice, Landlord and Tenant shall negotiate in good faiththe fair market rental rate;(2) If the parties are unable to agree on the new fair market rental rate, then Landlord and Tenant shall each select anappraiser in the person of an experienced real estate broker, each of whom must have at least ten (10) years commercial leasingexperience in the Market, within forty-five (45) days after Landlord's receipt of Tenant's notice;(3) The two appraisers shall confer to see if they can agree on the fair market rental rate for space in the Market as ofthe time the applicable Renewal Term is to begin; and, if they reach agreement, the rate upon which they agree shall become the newFixed Rent for the first year of the Renewal Term;(4) If the two appraisers cannot reach agreement, then each shall designate the rate which he or she believes is theappropriate new fair market rental rate. Unless either Landlord agrees to the rate specified by Tenant's appraiser or vice versa, the twoappraisers shall agree on a third appraiser, who shall have no less than the minimum experience required of the initial two appraisers,within fifteen (15) days after both appraisers have been designated;(5) The third appraiser shall determine which of the two appraisals for the new fair market rental rate more accuratelyrepresents the new fair market rental rate which the third appraiser believes is the appropriate new fair market rental rate. Upon suchdetermination, the new fair market rental rate selected by the third appraiser shall be used and be binding on Landlord and Tenant;(6) If Landlord or Tenant fails to comply with the time guidelines in this section, then the fair market rental ratesubmitted by the other shall automatically apply and be binding on Landlord and Tenant; and-1 (7) Each party shall bear the expense of its own appraiser and shall divide equally the expense of the third appraiser.f. If the new fair market rental rate has not been determined or agreed to as provided in this Section prior to the end of theLease Term, the Lease shall be extended for the Renewal Term at an interim Annual Fixed Rent rate equal to the rate in effect duringthe last month of the Lease Term and upon such determination of or agreement to the new fair market rental rate, the Annual FixedRent shall be retroactively adjusted. The renewal option is personal to Tenant and any Tenant Affiliate-assignee of Tenant and is non-transferable other than such Tenant Affiliate-assignee.2. Right of First Offer. After the initial lease-up of the Additional Space (hereinafter defined) and during the Lease Term (includingany renewals thereof), Tenant shall have a continuous first right of offer to lease any available office space on the second floor (the"Additional Space") in the Building at 100% of the fair market rental rate for new or expansion space (as determined by Landlordacting in good faith) for the Additional Space as of the date of delivery of the Additional Space to the Tenant, provided:a. This right of first offer is subordinate to the rights of (i) any current tenant in the Additional Space to renew, extend orotherwise negotiate a new lease or extension for the Additional Space; (ii) all future tenants in such space, to renew or extend theirleases; and (iii) existing tenants in the Building which may have prior rights to the Additional Space as of the Effective Date of thisLease;b. Tenant is not in default beyond applicable notice and cure period under this Lease, either at the time the Additional Spacebecomes available or at the time Tenant is to take occupancy of the Additional Space;c. Tenant has not previously assigned the Lease or sublet more than 25% of the Premises other than pursuant to an assignmentor sublease not requiring Landlord’s consent;d. [intentionally deleted];e. Tenant must lease all of the Additional Space offered;f. Tenant exercises its right of first offer as provided in this Section by delivering to Landlord written notice of such exercisewithin five (5) business days after Landlord has notified Tenant that the Additional Space is available, which notice shall state theanticipated delivery date of the Additional Space and Landlord’s determination of the fair market rental rate therefor;g. The addition of the Additional Space to the Premises shall be upon all the terms and conditions of the Lease as modified bythe delivery date set forth in Landlord’s offer notice to Tenant and the determination of the fair market rental rate therefor as providedherein, and shall be coterminous with the then Lease Term; andh. This right of first offer must be exercised with at least three (3) years remaining in the then Lease Term unless Tenantconcurrently exercises the Option to Renew pursuant to Section 1 of this Exhibit D.If Tenant fails to comply with each of the above conditions within the time specified, all time periods herein for Tenant being of theessence, then this right of first offer will lapse and be of no further force and effect, and Landlord shall have the right to lease all or anypart of the offered Additional Space to a third party under the same or any other terms and conditions, whether or not such terms andconditions are more or less favorable than those offered to Tenant. D-2 This right of first offer to lease the Additional Space is personal to Tenant and any Tenant Affiliate-assignee of Tenant and is non-transferable other than such Tenant Affiliate-assignee.3. Early Termination Option. Tenant shall have the right to terminate the Lease with respect to all of the Premises at the end of thesixty-seventh (67th) full month of the Term (the “Early Termination Date”), subject to the following: (a) Tenant delivers a writtennotice (“Termination Notice”) to Landlord of its intention to terminate at least nine (9) months prior to the Early Termination Date, timebeing of the essence; (b) Tenant is not in default beyond any applicable notice and cure period under the Lease from the time the EarlyTermination Notice is delivered until the Early Termination Date; and (c) Tenant delivers to Landlord a payment (“Termination Fee”)equal to the following unamortized costs incurred by Landlord in this transaction, to include the Improvements Allowance, abatedFixed Rent, reasonable attorneys’ fees, and brokerage commissions, calculated on a straight line basis, including interest thereon fromthe Commencement Date until the Early Termination Date, at the rate of eight percent (8%) per annum. Landlord shall advise Tenantby written notice of the amount of the Termination Fee within ten (10) days of receipt of the Termination Notice (which notice shallinclude a reasonably detailed calculation of such amount) and Tenant shall pay the Termination Fee within thirty (30) daysthereafter. If Tenant fails to timely comply with any of the provisions of this Section, at Landlord’s sole option, Tenant's TerminationNotice shall be deemed ineffective and the Lease shall expire on its otherwise scheduled termination date. D-3 EXHIBIT EWORK LETTERIn consideration of the mutual covenants and agreements contained in this Lease and in this Exhibit E, Landlord and Tenant do herebyexpressly agree as follows:1. Tenant's Authorized Representative. Tenant designates Jerome Jackson ("Tenant's Authorized Representative") as the personauthorized to represent Tenant in issues related to this Exhibit.2.Tenant’s Work. Except as set forth in Section 4 of the Lease, Landlord shall not have any obligation whatsoever with respect to thefinishing of the Premises for Tenant's use and occupancy, and the Premises shall be delivered in its “as is” condition. Any connectionsto pipes, ducts and conduits for the mechanical, electrical and plumbing systems in the Building shall be made by Tenant, at Tenant'ssole cost and expense. All of the work to be performed in initially finishing and completing the Premises (collectively, "Tenant'sWork") shall be performed by Tenant pursuant to this Exhibit E and Section 6 (and all other applicable provisions including insurance,damage and indemnification provisions) of the Lease and such work shall be deemed to be alterations for all purposes of the Lease;provided, however, that all such work involving structural, electrical, mechanical, glass/glazing, fire protection or plumbing work, theheating ventilation and air conditioning system of the Premises or the Building, and the roof of the Building shall, at Landlord'selection, be performed by Landlord's designated contractor or subcontractor at Tenant's expense (provided the cost therefor isreasonable and competitive). Tenant acknowledges that Tenant's Work is being accomplished for its own account, Landlord havingno responsibility or obligation in respect thereof other than (i) ensuring that any work performed by Landlord's designated contractor orsubcontractor as provided in the preceding sentence is timely and properly performed and (ii) providing the Improvements Allowance,all in accordance with the requirements of this Exhibit E.3. Costs.(a) Subject to application of the Improvements Allowance, Tenant shall pay to Landlord a construction supervision fee in theamount of one percent (1%) of the total hard costs of Tenant’s Work. Any amounts payable by Tenant to Landlord pursuant to thisExhibit shall be considered additional rent subject to the provisions of the Lease.(b) Landlord shall provide Tenant an allowance (the "Improvements Allowance") equal to the product of Forty-Five and00/100 Dollars ($45.00), multiplied by the number of square feet of rentable area in the Premises (i.e., $725,220.00). TheImprovements Allowance is provided in order to help Tenant finance the hard and soft costs of Tenant's Work (including, withoutlimitation, demolition and hard construction costs; materials and sales taxes thereon; architectural, engineering and design fees;construction management fees (including Landlord’s construction supervision fee); premiums for insurance and bonds; costs of utilities;and costs of permits and inspections; but not including costs of furniture, fixtures or cabling except as hereinafterprovided). Notwithstanding the foregoing, Tenant may request that up to Five and 00/100 Dollars ($5.00) per square foot of rentablearea in the Premises (i.e., $80,580.00) be applied to its moving expenses, and purchase and installation of furniture, fixtures andcabling. Landlord shall have no duty to advance any portion of the Improvements Allowance until satisfaction of the followingcondition: there shall have been no Event of Default under the Lease. Within thirty (30) days of written request of Tenant (whichrequests may be made no more than once every thirty (30) days), Landlord shall pay Tenant, or at Tenant's option Tenant’scontractors, directly for the reasonable expenses incurred in constructing such tenant improvements to the extent of the ImprovementsAllowance, provided: (A) such request is accompanied by a copy of the invoice for such expenses; (B) copies of all bills, vouchers,change orders and other information relating to the expenses forE-1 which reimbursement is being sought as may be requested by Landlord shall be made available to Landlord by Tenant; (C) the workand materials for which payment is requested are in complete accordance with the final working drawings approved by Landlord; (D)the work for which payment is requested has been performed both by a contractor and in accordance with a construction contractapproved by Landlord; and (E) the work and materials for which payment is requested have been physically incorporated into thePremises, free of any security interest, lien or encumbrance fully in accordance with Article IX of the Lease. Notwithstanding anythingabove to the contrary, Landlord shall not be required to reimburse Tenant for any invoice received after the second (2nd) LeaseYear. Tenant shall not be entitled to any credit, cash or otherwise, for any unused portion of the Improvements Allowance.4. Schedule. If any plans and drawings are prepared by Landlord's architect or engineer, such plans and drawings will be prepared onTenant's behalf and Tenant shall be solely responsible for the timely completion of all plans and drawings and for their compliancewith all Laws. Tenant shall submit to Landlord for review and approval, a “Space Plan” (i.e., a space plan drawn to scale, which shallinclude, as Landlord reasonably deems necessary, all partition types and locations; all doors and hardware requirements; all lightfixtures and exit lights; all finish materials including glass, wall and floor finishes; all special ceiling conditions; all cabinetry andmillwork with elevations and details; all modifications to existing base building HVAC equipment, all electrical receptacles; all dataand voice locations; all floor load requirements which exceed eighty (80) pounds per square foot live load and twenty (20) pounds persquare foot dead load; and the seating capacity of all conference rooms and furniture workstation areas; and all other informationLandlord reasonably requests). Within seven (7) business days after delivery of the Space Plan to Landlord, Landlord shall eitherapprove such Space Plan or notify Tenant of the specific item(s) of such Space Plan of which Landlord disapproves and a detaileddescription of the reason(s) for such disapproval. If Landlord disapproves the Space Plan, Tenant shall revise and resubmit same toLandlord for approval (the “Revised Space Plan”). If Landlord does not respond to the Space Plan or the Revised Space Plan withinfive (5) business days after receipt of a second notice from Tenant requesting Landlord to approve same, such Space Plan or RevisedSpace Plan shall be deemed approved by Landlord as most recently submitted. The above process shall be repeated until such time asLandlord has approved the Revised Space Plan. Following Landlord’s approval or deemed approval of the Space Plan or the RevisedSpace Plan, Tenant shall submit to Landlord “Final Construction Drawings” (i.e., the architectural, mechanical and engineeringworking drawings that define the total scope of work to be performed by Tenant, based on and consistent with the Space Plan orRevised Space Plan as approved by Landlord and in sufficient detail to secure required permits from the local jurisdiction and thatinclude, without limitation: key plan; all legends and schedules; construction plan; reflected ceiling plan; telephone and electrical outletlocation plan; finish plan; and all architectural details, elevations and specifications necessary to construct the Premises). Within ten(10) business days after delivery of the Final Construction Drawings to Landlord, Landlord shall either approve such FinalConstruction Drawings or notify Tenant of the specific item(s) of such Final Construction Drawings of which Landlord disapprovesand a detailed description of the reason(s) for such disapproval. If Landlord disapproves the Final Construction Drawings, Tenantshall revise and resubmit same to Landlord for approval (the “Revised Final Construction Drawings”). If Landlord does not respond tothe Final Construction Drawings or the Revised Final Construction Drawings within five (5) business days after receipt of a secondnotice from Tenant requesting Landlord to approve same, such Final Construction Drawings or Revised Final Construction Drawingsshall be deemed approved by Landlord as most recently submitted. The above process shall be repeated until such time as Landlordhas approved or is deemed to have approved the Revised Final Construction Drawings. The deadlines specified in this Paragraph shallapply whether plans and drawings are prepared by Landlord's architect or engineer or an architect or engineer selected by Tenant. Alldeadlines must be met in order to allow Landlord sufficient time to review plans and drawings and discuss with Tenant any changesthereto which Landlord believes to be necessary or desirable. The parties intend for each such deadline to be the applicable deadline,even if any such deadline is before the date the Lease is executed. All of Tenant’s plans shall be prepared by a licensed architect and,if applicable, aE-2 licensed engineer, as reasonably approved by Landlord. Landlord hereby approves OPX as Tenant’s architect and AHA as Tenant’sengineer.5. Approval. Landlord’s approval rights as to the Final Construction Drawings shall be limited to a review thereof to confirm that: (i)they are consistent with the Space Plan or Revised Space Plan as approved by Landlord, and (ii) the improvements comply with allapplicable Laws. Such approval shall not constitute either (a) approval of any delay caused by Tenant or a waiver of any right orremedy that may arise as a result of such delay, or (b) Landlord's representation that such approved plans, drawings or changes complywith all Laws. Any deficiency in design or construction, although same had prior approval of Landlord, shall be solely theresponsibility of Tenant. All materials and equipment furnished by Tenant shall be new or like new and all work shall be done in afirst class workmanlike manner.6. General Requirements.(a) Tenant construction shall proceed only on the basis of the Final Construction Drawings or Revised Final ConstructionDrawings as approved or deemed approved by Landlord. Tenant may request changes to such Final Construction Documents orRevised Final Construction Drawings. Any changes shall be subject to Landlord’s approval, which approval shall not beunreasonably withheld, conditioned or delayed, to the extent Landlord’s approval was originally required with respect thereto pursuantto Paragraph 5 above. Upon approval (or deemed approval) of the Final Construction Drawings or Revised Final ConstructionDrawings, Landlord shall not be entitled to subsequently disapprove any changes therein unless such changes result in a materialchange to, material deviation from or material addition to the improvements identified in the Final Construction Drawings or RevisedFinal Construction Drawings previously approved or deemed approved by Landlord. Within five (5) business days after delivery of arequested change to the approved or deemed approved Final Construction Drawings or Revised Final Construction Drawings toLandlord, Landlord shall either approve such requested change or notify Tenant of the specific item(s) of such requested change ofwhich Landlord disapproves and a detailed description of the reason(s) for such disapproval. If Landlord disapproves the requestedchange to the approved or deemed approved Final Construction Drawings or Revised Final Construction Drawings, Tenant shallrevise and resubmit same to Landlord for approval (the “revised requested change”). If Landlord does not respond to the requestedchange or the revised requested change to the approved or deemed approved Final Construction Drawings or Revised FinalConstruction Drawings within three (3) business days after receipt of a second notice from Tenant requesting Landlord to approvesame, such requested change or the revised requested change shall be deemed approved by Landlord as most recently submitted. Anymaterial changes that occur during actual construction that are not approved by Landlord shall require alterations at Tenant's expense torestore compliance with the Final Construction Drawings or Revised Final Construction Drawings as previously approved or deemedapproved by Landlord. No drawings are considered "approved" unless they bear Landlord's signature of approval or are deemedapproved as provided in Paragraph 4 or 6 hereof.(b) Landlord shall have no obligation or responsibility to Tenant in respect of minor deviations in the actual dimensions of thePremises. Tenant shall have the affirmative obligation to conduct an on site verification of all measurements and dimensions prior toletting any contracts for the performance of Tenant's Work and prior to ordering the fabrication of any trade fixtures.(c) Upon Landlord's approval or deemed approval of the Final Construction Drawings or Revised Final ConstructionDrawings, Tenant shall submit the following to Landlord:1. Names of general contractor (including main office name, address, phone and fax, and, as soon as it becomesavailable, project manager name, direct phone, fax, cell phone and email address, superintendent and field supervisor name, directphone, job phone, cell phone, fax and email address) and allE-3 subcontractors (with full contact information for office and field supervision as listed above for general contractor), all of which shallbe subject to Landlord's reasonable approval;2. [intentionally deleted];3. Contractor's/subcontractors' bond (provided that no bond shall be required of DPR or Hitt if used by Tenant as thegeneral contractor);4. insurance coverage as required by Article 10 of the Lease or Paragraph 13 of this Exhibit as applicable;5. Payment for Tenant's Work to be performed by Landlord at Tenant's expense, if any;6. Copy of building permit(s);7. Completion schedule from Tenant's contractor;8. Proof of utility application/deposit to Landlord;9. [intentionally deleted]; and10.Written acknowledgment by Tenant and its contractor that the Rules and Procedures for Contractors attached asSchedule I to this Exhibit E shall be adhered to during the performance of Tenant's Work.7. Time for Commencement and Completion of Tenant's Work. Tenant will perform and complete Tenant's Work in compliance withthe Rules and Procedures for Contractors attached as Schedule I to this Exhibit E.8. Non-Interference. Any construction or other work that produces excessive noise or otherwise unreasonably interferes with othertenants of the Building shall be performed at times other than Building Hours. Landlord may stop any construction or other work thatunreasonably interferes with the activities of other tenants of the Building during Building Hours.9. Obligations of Tenant Before Lease Term Begins. Tenant shall perform promptly such of its monetary and other obligationscontained in this Exhibit and the Lease as are to be performed by it whether the same accrue before or after the Lease CommencementDate.10.Completion of Tenant's Work. At such time as Tenant's Work shall be completed, Tenant, at its sole cost and expense and withoutcost to Landlord shall:(a) Furnish evidence satisfactory to Landlord that all of Tenant's Work has been completed and paid for in full, that any andall liens therefor that have been or might be filed have been discharged of record (by payment, bond, order of a court of competentjurisdiction or otherwise) or waived, and that no security interests relating thereto are outstanding;(b) Reimburse Landlord for the cost of any Tenant's Work done for Tenant by Landlord;(c) Furnish to Landlord all permits and approvals with respect to Tenant's Work that may be required from any governmentalauthority and any board of fire underwriters or similar body for the use and occupancy of the Premises;(d) Furnish Landlord with two (2) sets of complete "as built" drawings (including, but not limited to, mechanical, electrical,plumbing, fire-protection, fire-alarm and architectural as-built drawings) and CADD files of the Premises;(e) Furnish to Landlord certificates of the insurance required by Article 10 of the Lease;E-4 (f) Furnish an affidavit from Tenant's architect certifying that all work performed in the Premises is in accordance with theFinal Construction Drawings or Revised Final Construction Drawings previously approved or deemed approved by Landlord asmodified by any Landlord-approved changes thereto;(g) Furnish all guaranties and/or warranties in accordance with this Exhibit; and(h) Furnish a certified HVAC Test and Balance Report (reasonably satisfactory to Landlord).11. Work Standards. All of Tenant's Work shall be done and installed in compliance with all Laws.12. Permits. As expeditiously as possible following Landlord's approval or deemed approval of the Final Construction Drawings orRevised Final Construction Drawings, Tenant shall file all applications, plans and specifications, pay all fees and obtain all permits,certificates and other approvals required by the jurisdiction in which the Building is located and any other authorities havingjurisdiction in connection with the commencement and completion of Tenant's Work, and diligently and in good faith pursue same sothat all permits and approvals are issued as soon as practicable. If minor modifications are at any time required by governmentauthorities to any such plans or specifications, then Tenant shall make such modifications. Tenant shall permit Landlord (and Landlordagrees) to assist Tenant in obtaining all such permits and other items. Tenant shall obtain a Non-Residential Use and OccupancyPermit and all other approvals required for Tenant to use and occupy the Premises and to open for business to the public. Copies of allbuilding permits/occupancy permits are to be forwarded to Landlord.13. Contractor Insurance. Tenant's contractors and subcontractors shall be required to provide, in addition to the insurance required ofTenant pursuant to Article XIII of the Lease, the following types of insurance:(a) Builder's Risk Insurance. At all times during the period between the commencement of construction of Tenant's Work andthe date (the “Opening Date”) on which Tenant opens the Premises for business with the public with a valid certificate of occupancy(or use and occupancy permit, as applicable) in place, Tenant shall maintain, or cause to be maintained, casualty insurance in Builder'sRisk Form covering Landlord, Landlord's architects, Landlord's contractor or subcontractors, Tenant and Tenant's contractors, as theirinterest may appear, against loss or damage by fire, vandalism, and malicious mischief and other such risks as are customarily coveredby the so called "broad form extended coverage endorsement" upon all Tenant's Work in place and all materials stored at the site ofTenant's Work, and all materials, equipment, supplies and temporary structures of all kinds incident to Tenant's Work and builder'smachinery, tools and equipment, all while forming a part of, or on the Premises, or when adjacent thereto, while on drives, sidewalks,streets or alleys, all on a completed value basis for the full insurable value at all times. Said Builder's Risk Insurance shall contain anexpress waiver of any right of subrogation by the insurer against Landlord, its agents, employees and contractors.(b) Worker's Compensation. At all times during the period of construction of Tenant's Work, Tenant's contractors andsubcontractors shall maintain in effect statutory worker's compensation as required by the jurisdiction in which the Building is located.14. Contractor Liability. Subject to Sections 10(d) and 11 of the Lease, Tenant assumes the responsibility and liability for any and allinjuries or death of any or all persons, including Tenant's contractors and subcontractors, and their respective employees, and for anyand all damages to property to the extent caused by, or resulting from or arising out of any act or omission on the part of Tenant, itscontractors or subcontractors or their respective employees. Tenant's contractors or subcontractors or their respective employees, in theprosecution of Tenant's Work, and with respect to such work, agree to indemnify and save free and harmless Landlord from andagainst all losses and/or expenses, including reasonable legal fees and expenses which they may suffer orE-5 pay as the result of any damage to the Building or claims or lawsuits due to, because of, or arising out of any and all such injuries ordeath and/or damage, whether real or alleged; and Tenant and Tenant's contractors and/or subcontractors or their respective insurancecompanies shall assume and defend at their own expense all such claims or lawsuits. Tenant agrees to insure this assumed liability inits policy of Broad Form Commercial General Liability insurance and the certificate of insurance or copy of the policy that Tenant willpresent to Landlord shall so indicate such contractual liability coverage.15. Coordination. Landlord and Tenant shall reasonably cooperate to coordinate its respective work so that such work shall notmaterially interfere with, or unreasonably delay the completion of, the work being performed by Tenant or other lessees in theBuilding. Tenant shall schedule and coordinate with Landlord the construction of Tenant's Work (and the means and times of accessto and from the Premises by Tenant and Tenant's contractors, subcontractors, deliverymen and agents) so as not to materially interferewith the normal operations of the Building or the operations of or construction for other tenants in the Building. All use of elevators issubject to reasonable scheduling by Landlord and governmental restrictions.16. Roof. Landlord retains the sole right to disallow any and all roof penetrations by Tenant and roof installation of equipment and/orstructures by Tenant.17. Loads. No item shall be mounted on or hung from the interior or exterior of the Building by Tenant without Landlord's priorwritten reasonable approval. If Tenant desires to mount or hang anything, Tenant shall notify Landlord of the loads involved and shallpay all costs involved to mount or hang same.18. Ducts. Subject to the requirements of Section 20 of the Lease, Tenant shall permit Landlord or its agent to install, maintain, repairand replace in the ceiling space and/or under the concrete slab, adjacent to demising partitions and free standing columns, electrical,water or other lines and/or ducts that may be required to serve the Common Areas or others in the Building.19. Contractor Responsibilities. It shall be Tenant's responsibility to cause each of Tenant's contractors and subcontractors to:(a) Maintain continuous industry-standard protection of any premises adjacent to the Premises in such a manner (including theuse of lights, guardrails, barricades and dust proof partitions where required) as to minimize the occurrence of any damage to saidadjacent premises by reason of the performance of Tenant's Work.(b) Secure all parts of Tenant's Work against accident, storm, and any other hazard. However, no barricades or otherprotective device shall extend more than two (2) feet beyond the Premises. In addition to the foregoing, Tenant's barricade or otherprotective device shall be reasonably attractive in appearance, shall extend across the frontage and full height of the Premises and shallbe of materials reasonably approved by Landlord. Such partition shall not materially interfere with Landlord's completion of CommonAreas of the Building.(c) If Tenant's construction is not complete so that the public is protected, Landlord at its sole discretion may require Tenant toshield the Premises from the public view, or Landlord may erect a temporary barrier across the entire storefront and charge Tenant onehundred dollars ($100) per linear foot of barrier.(d) Comply strictly with the Rules and Procedures for Contractors set forth in Schedule I to this Exhibit E, and Tenant agreesto be responsible for any violations thereof.E-6 (e) Remove and dispose of, at Tenant's sole cost and expense, at least daily and more frequently as Landlord may direct, alldebris and rubbish caused by or resulting from Tenant's Work, and upon completion, to remove all temporary structures, surplusmaterials, debris and rubbish of whatever kind remaining on any part of the Building or in proximity thereto which was brought in orcreated in the performance of Tenant's Work (including stocking refuse). If at any time Tenant's contractors and subcontractors shallneglect, refuse or fail to remove any debris, rubbish, surplus materials, or temporary structures, and such failure is not promptlyremedied after email or telephonic notice thereof to Tenant's Authorized Representative, Landlord at its sole option may remove thesame at Tenant's expense without further notice.(f) Entry into areas unrelated to the performance of Tenant's Work is prohibited.(g) Obtain a warranty from Tenant’s general contractor that Tenant's Work will be free from any defects in workmanship andmaterials for a period of one (1) year from the date of substantial completion thereof. Replacement or repair of such work shallinclude, without charge, all expenses and damages in connection with such removal, replacement, or repair of all or any part of suchwork, or any part of the Building which may have been damaged or disturbed thereby. All warranties or guarantees as to materials orworkmanship or with respect to Tenant's Work shall be contained in the contract or subcontract, which shall provide that saidguarantees or warranties shall inure to the benefit of both Landlord and Tenant and be directly enforceable by either of them. Tenantcovenants to give to Landlord any assignment or other assurance necessary to effect such right of direct enforcement.20. Utilities. In connection with utility service to the Premises, all applications, deposits, installation charges and arrangement for thesame (except those provided by Landlord) shall be the sole responsibility of Tenant. From and after the Lease Commencement Date,all utility charges shall be paid pursuant to the terms of the Lease. E-7 SCHEDULE I TO EXHIBIT ERULES AND PROCEDURES FOR CONTRACTORS BUILDING RULES AND REGULATIONSAGREEMENT FOR INTERIOR CONSTRUCTION Project: 9600 Blackwell Road Construction Projects Contractor/Sub-contractors, Suppliers, Material Men, etc., shall be advised of the following building rules and regulations concerningtheir proper conduct with1n the building. All referenced material, labor, services, taxes, after hours costs, shipping, permits, fees orconstruction and/or other reference processes performed by Contractor, shall be hereinafter referred to as "Work" WhenAlA Document A107 is the contract, the "Owner," "Landlord" and "Building Management" may be one and the same.It is the General Contractor's responsibility to ensure everyone reads and understands these rules and regulations. Ignorance ofsome is not a waiver of liability or responsibility. Failure to comply with any of these rules may result in your contract being cancelledand/or your people being asked to leave the job site. The General Contractor is ultimately responsible for the conduct of his Sub-contractors. The signature block on the last page of th1s Agreement shall ad as the written approval and a representative of theBuilding Management has executed acceptance of all requirements after it. Building Engineers on site areBrian Winston phone# (202) 286-7519Terry Wetzel phone# (202) 507- 13891.It is the intent of these Rules and Regulations to encompass all applicable labor material and equipment necessary tocompletely finish the Work described by Building Management in a workmanlike manner.Where the Contractor wishes to make substitutions for items specifically called out on drawings, specifications, etc., Contractorshall submit in writing to the architect and/or Building Management: samples, technical data, performance data, etc., asrequired. Such material shall be submitted far enough in advance to allow time for review and written approval withoutcausing delay in the Work. Any substitutions used without written approval shall be subject to rejection and replacement atContractor's expense. The entire system to which the substitution applies and all Work installed in connection withthe substitution must function as a unit as originally intended.Contractor shall pay for cost of any change in Work due to improper checking and coordination by Contractor. Contractorshall also be responsible for all additional costs in the re- coordination of trades and replacement of material.E-I-1Building Rules & RegulationsInterior ConstructionPage 2 2.If the Contractor defaults or persistently fails and/or neglects to carry out the Work and/or correct any Work rejected bythe Building Management, in accordance with the Contract Documents and/or Building Rules and Regulations Agreement, the Owner, after twenty-four (24) hours written notice to the Contractor, without prejudice to anyother remedy he may have, may make good such deficiencies. Owner may also deduct thecost thereof including compensation for additional services made necessary from the payment then or thereafter due theContractor. The Owner may terminate the Contract and take possession of the site and of all materials, equipment,tools, construction equipment and machinery thereon owned by the Contractor and finish the Work by whatever method he deems expedient . If the remaining balance of the Contract Sum is greater than the expense of finishing the Work, theexcess shall be paid to the Contractor. If the remaining balance is less than the expense of finishing the Work, theContractor shall pay the difference to the Owner. 3.Prior to starting any work in the building, Contractor, at its sole expense, should have a current Policy of PublicLiability Insurance naming TNREF Ill 9600 Blackwell, LLC, the tenant if applicable and CBRE, Inc. as additionallyinsured, on file with the Management Office. Policy will insure against lass, injury, death or damage of persons or property,including the premises and the building arising out of such Work, with the limits of not less than $3,000,000 peroccurrence for bodily injury and $3,000,000 per occurrence for property damage. Building Management based on thenature of the Work being performed may increase said amount. Also, Contractor must keep current insurance certificates on allSub-contractors. Any Contractor/Sub contractor performing work found not to have current insurance will be immediatelyordered off the premises. General Contractors shall list the following as additionally insured:4.Contractors working in or about the property must have prior written approval from the Building Management before any typeof Work may commence. A list of subcontractors must be provided to CBRE Management and proper notice will be given to the building engineers before construction begins. Any persons not on the approved Contractor list will bedenied access to the property - no exceptions. This list will include phone numbers and contacts for eachContractor/Sub-contractor, including home and emergency telephone numbers.5.An initial walk through of the job will be conducted prior to construction. The Contractor's superintendent, the buildingengineer will review rules and regulations, as well as check for existing conditions of the premises. A superintendent must be onsite at all limes when construction work is being performed.6.Prior to the commencement of Work, the Contractor shall provide Building Management with a projected schedule showingthe major items of Work with the dates of their start and finish with significant milestones for Management to inspect. Aprojected date of final completion shall also be included. This date shall be the time when all trades have completed their Work,the suite has been Certified by the City as ready for occupancy, and the job is ready to be turned over to the tenant or BuildingManagement.7.All Contractors must be licensed in the state in which the Work is performed, and have work experience in commercial properties. Written documentation/certification and previous job references are required prior to thecommencement of any type of Work.E-I-2Building Rules & RegulationsInterior ConstructionPage 3 8.Where applicable, permits must be obtained from the City Building Department or other governing agency prior to thecommencement of Work. Permits must be posted at the job site in accordance to the governing body. Allconstruction Work will require a permit. An officer of CBRE, Inc. must approve any exceptions in writing. Approvalof drawings, details, schedules, etc., by the Building Management shall not relieve the Contractor from the responsibilityfor compliance with local, county, state or federal laws, rules, ordinances, or Rules and Regulations of commissions, boards, orother authorities having jurisdiction. 9.All Contractors shall keep the premises and improvements free and clear of all liens arising out of or claimed byreason of any Work performed, materials furnished or obligations incurred. The Contractor is responsible for the paymentof all bills for labor and materials furnished by, or to the Sub-Contractors and himself on this project, and the Contractorwill also deliver to the Owner a Waiver of Liens from himself and each if his Sub-Contractors, if any, and at such time he willcertify that he is submitting such lien waivers for all Sub-Contractors involved.10.No one shall be allowed to endanger the buildings, its premises or its occupants in any manner whatsoever. Ifsuch a situation occurs, the Contractor, Sub-Contractor, supplier, etc. shall immediately take steps to correct and eliminate thehazardous condition. In the event that the Contractor's personnel foil to perform in a satisfactory manner,the Building Management reserves the right to immediately take steps to remedy the hazard at the Contractor's expense.11.It is imperative that good business/professional conduct be maintained by all Contractors' personnel while they are on theproperty and that they are properly dressed for the environment they are working in and the job being done. Contractorshall not employ any unfit person or anyone not skilled in the task assigned to him. Respect must be shown to the buildingtenants at all times. Rude and obscene behavior, including foul and abusive language, will not be tolerated. Offenderswill be asked to remove themselves from the premises and shall not be permitted to return.12.Contractor is not permitted to post any sign on the job site advertising the name of the Contractor or Sub-Contractor.13.All Contractors' personnel will enter and exit through a designated entrance and possibly a designated freight elevator. Useof building main floor, lobbies, or elevator lobbies is prohibited for storing material even on a temporary basis. Specific building moving and freight policies are established and must be reviewed with Building Management. Whereapplicable such freight policies may include fines for breaking such policies.14.The Building Management prior to the commencement of the project must approve hours in which the Work willcommence and end each day. No variation to the agreed upon hours will be permitted unless authorization is obtained fromthe Building Management. The Contractor's Rules and Regulations as stated herein will further limit hours. BuildingManagement must be notified of "after hours" Work in advance. (See Security Access Instructions for details) "Afterhours" work is defined to be before 8am and after 5pm. All Contractors working over the weekend and after the normalhours shall provide the Management Office a list of workers prior to the worker being on site or they willbe denied access. The list should also include an estimated time the Contractors will be working, the location of the workto be done and a 24- hour emergency contact for the Supervisor of the Work.E-I-3Building Rules & RegulationsInterior ConstructionPage 4 15.All deliveries are to be accepted, moved and delivered to the contracted suite by 8:00 a.m., stocking will not be allowedduring business hours. When accepting deliveries, Masonite must be laid to protect floor finishes. It is the Contractor'sresponsibility to keep public areas clean at all times. 16.All construction waste and debris shall be removed between the hours of 6:00 p.m. to 8:00a.m. No construction waste ordebris may be placed in the building dumpster /compactor. The Contractor will provide for removal of waste anddebris from the building at his own expense. If a dumpster is required (space allowing), the location shall be authorized by the Building Management and will meet the Management's standard relating to safety andaesthetics daily. It will be the responsibility of the Contractor to keep the area around the container neat and orderly daily. Itwill be important to assure that a trail of debris in not left between the Work areas and refuse container.17.Construction personnel shall at all times maintain the highest level of project cleanliness. All construction debrisshall be removed through the service elevator or stairs on a daily basis and shall never be allowed to produce a fire hazard.In the event that the Contractor fails or refuses to keep the demised premises free of accumulated waste, theManagement Office reserves the right to enter said premises and remove the debris at the Contractor's expense. Inaddition, all public areas, i.e., corridors, Restrooms, janitor's closets, etc. shall be maintained and kept free of construction debris,dust, etc.Specific Restrooms will be designated for Contractor use. Anyone found using Restrooms other than specified or janitorialclosets will be subject to dismissal. No one is permitted to use the janitorial closets without Management's permission. Upon completion of each tenant improvement, the Contractor will be responsible for restoring the facility toits original state. All carpeted corridors will be protected by carpel mask (Polytech brand only) flush with the base,from the point of entry to the job site to the Restroom. Walk-off mats will be placed at allocations where Contractorsenter public areas of the building. These walk-off mats will be maintained and cleaned daily or more frequently ifrequired, so that construction material is not transferred unto any other areas of the building. Any flammable or hazardousmaterials (i.e., paint) may only be stored on premises with permission of the Management Office who shall designate anarea for such storage.18.Pre-filters shall be installed over all return air openings on floors under construction. If buildingfilters or equipment requires replacement or cleaning due to construction dust, the Contractor will be charged.19.The Contractor should cover air transfers when working next to tenanted space to control thetransmission of dust and dirt. Covering must be removed at the completion of daily construction. Keep alltenant entrance and exit doors closed to restrict the movement of dust or dirt. Close off temporary openings withpolyurethane. Due to local fire codes, no openings may be made on a tenanted floor to the corridor unless the doorwill be made on a tenanted floor to the corridor doors must remain closed unless materials are being delivered. All HVACfilters in fan rooms shall also be delivered in operable condition at time of completion (thus a temporary filter should beadded to the existing filter).20.Electrical Panels must be closed up at the end of each working day. (Interior panels can be covered orbarricaded). Doors to all electrical rooms must remain locked when not occupied or protected by barrier. No storageis allowed in the electrical room. DO NOT TAPE OVER LOCKS TO LEAVEE-I-4Building Rules & RegulationsInterior ConstructionPage 5 DOOR OPEN OR USE ANY MECHANICAL DEVICE TO PROP OPEN. REPEATED VIOLATIONS WILL BEFINED $150.00 PER EVENT. INITIAL. 21.Any and all safety equipment, such as traffic control, flagmen, barricades, rigging, fire extinguishers,first aid supplies, etc., as may be necessary or required by any agency having jurisdiction,shall be the sole responsibility of and at the expense of Contractor. It is the responsibility of the Contractor toprotect all individuals surrounding the Work area. All liability shall be the responsibility of the Contractor. Contractor/Sub-contractor shall inaugurate and maintain an accident prevention program and an employee safety-training program. Proof of compliance with Cal OSHA rule SB 198 shall be maintained and followed. All employees on the job,regardless of whose direct payroll they are on, shall be required to respond to safety instructions from the Contractor'ssupervision. Persons who do not respond shall be removed from the job.22.All Contractors are to take precautions to prevent the accidental tripping of the fire alarm system. The smoke detectors must becovered during working hours and uncovered at the end of the working day. False alarms shall be fines at: First offense $200 Second offense: $300 Third offense: $500 INITIAL 23.No gasoline operated devices, i.e., concrete saws, coring machines, welding machines, etc., shall be permitted within the building premises. All work requiring such devices shall be by means of electrically operated substitutes.24.All approved gas and oxygen canisters shall be properly chained and supported to eliminate all potential hazards. At thecompletion of use, said containers shall be removed from the building.25.Please contact the Management Office to schedule work on the following building systems: 24-hours in advance (Anydisruption of services will be scheduled at the Management Office's discretion.) a.Domestic water. b.fire alarm or speaker. c.Electrical tie-ins to base building or the addition of equipment to any are otherthan the tenant suite except sub panels located within the tenant premises. d.Sprinkler system. e.Any work that will take place outside the demised tenant space. f.Any tie-ins that may affect other tenant spaces.Note: If a utility or building alarm is turned off for Contractors work, Contractor must notify the Management Officeupon completion so the system can be turned back on as soon as possible.E-I-5Building Rules & RegulationsInterior ConstructionPage 6 26.Construct on personnel are not permitted to block open stairway doors. These doors provide the fire protection requiredby code. Continued violation of this provision shall be subject to a $ fine. Janitorial doors shall be kept closed at alltimes on occupied tenant floors. INITIAL. 27.No graffiti or vandalism will be tolerated. Any individual caught in the act shall be immediately removed from the premisesand will not be allowed to return. In addition, all repairs will be at the Contractors expense.28.No tobacco smoking or chewing will be permitted in the building. No radios or other sound producing equipment will bepermitted in the building.29.Since Work will occur while other businesses in the building are operating, noise is a major consideration. Therefore,excessive noise, which may disturb tenants, will force us to halt Work temporarily. No hammer drilling, core drilling orany tenant disturbances will be allowed between the hours of 8:00 a.m. and 5:00 p.m., Monday through Friday. It is theresponsibility of the Contractor to instruct all construction personnel that noise will be minimized at all times. The BuildingManagement shall determine acceptable noise level.30.Wet paint sign must be posted in all public areas when appropriate.31.The odors, which arise when various construction procedures are done, can cause discomfort to the tenants of the building. Examples of these odor concerns are carpet adhesive, wallpaper sizing,wood stains and finishes and painting. (Specified Paint is Frazee Environcoat or the equivalent) These activities whichsometimes produce odor problems for tenants in the building will be done during evening non-business hours, as approvedby the Building Manager. Also, the engineering staff should be alerted to arrange for added ventilation.32.Contractor shall provide temporary electrical devices within the demised premises for their Sub contractor's use. Contractorwill not be permitted to run extension cords through public space on occupied floors or through occupied tenant spaces.33.The Contractor shall use reasonable measures to minimize energy consumption in the constructionarea when possible. The Building shall pay for normal electrical consumption during the construction process. All lightsand equipment must be extinguished at the end of the Contractor's business day. In the event that the Contractor continues to leave lights and equipment on during off-hours, the Management Office reserves the right to receive just compensation for excessive electrical consumption.34.Contractor/Sub-contractor may park in designated spaces only. Any vehicles found in unauthorized spaces willbe subject to posted parking rates. Specific instructions should be obtained from each Building Management.35.No work is to be performed, nor materials stored in any area other than suite under construction withoutprior written authorization. No staging of trucks or materials will be allowed areas that may affect traffic flow to the adjoiningproperties.E-I-6Building Rules & RegulationsInterior ConstructionPage 7 36.Rubber wheels are required on all vehicles transporting materials in the Building. 37.All equipment and material will be designed and attached for seismic loading in accordance with governmental agencies havingjurisdiction over the work.38.The following briefly describes the standard billing provisions, unless specified otherwise in the tenant lease, the followingformat will be followed: a) shall submit, within calendar days of execution of this agreement, a schedule of values forcontractor work broken down by trade, quantity of items and subcontractor. b) shall, once a month, submit a copy of the payment request accompanied by unconditional lien releasesfrom the general contractor and all subcontractors who have previously filed preliminary notices with an acceptanceletter of completed work from . A copy of the schedule of values must support each request.By executing this Agreement, the Contractor represents that he has or will, prior to commencement of Work, determine and verify all field measurements, field construction criteria, materials, catalogue numbers and similardata and that he has checked and coordinated all drawings, specifications, etc.The Contractor accepts and is willing to perform all Work in a workmanlike manner and in accordance with standardpractice. Any extra cot based on drawings or changes shall be brought to the attention of Building Management in writing and if notmentioned, it will be assumed that no extra cost is involved for making a change, deviation or omission from the original drawings,details or specifications.The undersigned acknowledges receipt and acceptance of the Contractor's Rules and Regulations as stated. Theundersigned will take full responsibility for; 1.Communicating Rules and Regulations to all Contractor's personnel and Subcontractors; 2.Enforcing Rules and Regulations in regards to employees of Contractor and Sub-contractors. Signed by: ContractorDate: Title: Company: Signed by: Authorized CBRE, Inc. RepresentativeDate: E-I-7 EXHIBIT FESTOPPEL CERTIFICATEPlease refer to the documents described in Schedule I attached hereto (the “Lease Documents”) including the “Lease” thereindescribed. The undersigned (the “Tenant”), hereby certifies that it is the lessee/tenant under the Lease. Tenant hereby furtheracknowledges that it has been advised that the Lease may be assigned to a purchaser of, and/or collaterally assigned in connection witha proposed financing secured by, the property on which the Premises under the Lease are located, and certifies both to the landlordunder the lease (the “Landlord”) and to any and all prospective purchasers (the “Purchasers”) and any and all current and/orprospective mortgagees of such property, including any trustee on behalf of any holders of notes or other similar instruments, and anyholders from time-to-time of such notes or other instruments, and their respective successors and assigns (collectively the“Mortgagees”) that as of the date hereof:1. The information set forth in Schedule I hereto is true and complete.2. Tenant is in occupancy of the Premises and the Lease is in full force and effect and, except by such writings as areidentified on Schedule I hereto, has not been modified, assigned, supplemented, or amended since its original execution, nor are thereany other agreements between Landlord and Tenant concerning the space rented under the Lease, whether oral or written.3. To Tenant’s knowledge, all conditions and agreements under the Lease to be satisfied or performed by Landlord have beensatisfied and performed.4.To Tenant’s knowledge, Tenant is not in default under the Lease Documents; Tenant has not received any notice of defaultunder the Lease Documents; and, to Tenant’s knowledge, there are no events which have occurred that with the giving of notice or thepassage of time or both, would result in a default by Tenant under the Lease Documents.5.Tenant has not paid any rents or sums due under the Lease more than thirty (30) days in advance of the date due under theLease and except as provided in the Lease, Tenant has no rights of setoff, counterclaim, concession or other rights of diminution of anyrent or sums due and payable under the Lease.6. To Tenant’s knowledge, there are no uncured defaults on the part of Landlord under the Lease Documents; Tenant has notsent any notice of default under the Lease Documents to the Landlord, and, to Tenant’s knowledge, there are no events which haveoccurred that, with the giving of notice or the passage of time or both, would result in a default by Landlord thereunder, and at thepresent time, to Tenant’s knowledge, Tenant has no claim against Landlord under the Lease Documents.7. Except as expressly set forth in Part G of Schedule I, there are no provisions for, and Tenant has no rights with respect to,renewal or extension of the initial term of the Lease; termination options, leasing or occupying additional space or purchasing thepremises.8. Tenant covenants and agrees that after receipt of notice of the sale of the property it will promptly cause a new certificate ofinsurance to be issued naming the new landlord and its managing agent and lender as additional insureds.9. The undersigned has the authority to execute and deliver this Estoppel Certificate on behalf of Tenant and acknowledgesthat all Purchasers will rely on this Estoppel Certificate in purchasing the property and allF-1 Mortgagees will rely upon this Estoppel Certificate in extending credit to Landlord or Landlord’s successors in interest.10. This Estoppel Certificate shall be binding upon the successors, assigns, and representatives of the undersigned and anyparty claiming through or under the undersigned and shall inure to the benefit of all Purchasers and Mortgagees.IN WITNESS WHEREOF, Tenant has duly executed this Estoppel Certificate this day of , 20 . (Name of Tenant)By: Name: Title: F-2 SCHEDULE I TO TENANT ESTOPPEL CERTIFICATELease Documents, Lease Terms and Current StatusA. Date of Lease:B. Parties:1. Landlord:2. Tenant:d/b/a:C. Premises: Suite located on floor(s) containing approximately rentable square feetD. Modifications, Assignments, Supplements or Amendments to Lease:E. Commencement Date:F. Expiration of Current Term:G. Right to renew, to extend, to terminate, to rent or occupy additional space or to purchase any portion of the property:H. Security Deposit Paid to Landlord: $ I. Current Fixed Rent (Annualized): $ J. Amount of Most Recent Rent Payment: $ K. Tenant’s Bankruptcy or other Insolvency Actions: F-I-1 EXHIBIT GJANITORIAL SPECIFICATIONSI.GENERAL SPECIFICATIONS (a)Clean all areas of the building interior including entrance lobby, corridors, loading docks, stairwells, lavatories, andelevators. Not included are: stores, garages, and elevator shafts. (b)Employees of Landlord’s cleaning contractor ("Contractor") shall be neat and clean in appearance and properly identified. (c)Employees of the Contractor shall abide by all building regulations and safety rules. (d)Employees of the Contractor shall not. eat, drink, or smoke on duty. They shall not disturb paper on desks, open drawersor cabinets, use telephones, televisions, or radios. (e)Competent supervisory personnel shall be employed, and they will, at a minimum, have completed a supervisory trainingcourse. (f)The supervisor will report to the Tenant or his agent any maintenance conditions such as leaky faucets, stopped toilets anddrains, broken fixtures, etc. The supervisor will also report any unusual happenings in the building noticed or called tohis/her attention by Contractor's employees. (g)Necessary, appropriate, tested and approved machinery and cleaning supplies for the satisfactory performance of serviceswill be provided by Landlord and Tenant shall have no responsibility therefore. (h)Utilities will be provided by Landlord without charge. (i)A log book will be maintained in the building in which a record shall be made of any events requiring the Landlord's orTenant's attention. (j)All office cleaning, as possible, will be performed behind locked doors. (k)Upon completion of work, the Contractor will leave all sinks and equipment storage areas in a neat and orderly condition;all unnecessary lights out, and all doors locked. (I)Regular weekly inspection of the building shall be performed by a representative of the Contractor's management staff withthe Tenant's representative. This is in addition to the regular nightly inspection to be performed by the supervisor.II.DAILY CLEANING (a)Entrance lobby will be thoroughly cleaned. Lobby glass and metal will be cleaned and dusted. Directory glass will bedamp cleaned and wiped. Lobby walls will be dusted and kept free from fingerprints and smudges. Floor and entrancesarc to be dust mopped as needed, buffed and refinished as necessary to maintain a clean and glossy appearance.G-1 (b)Elevators •All elevators will be vacuumed. •All stainless steel and metal will be cleaned. •All elevator tracks will be vacuumed. •Elevator button panels and elevator doors will be cleaned. •Carpets will be spotted. (c)Bathrooms •Clean all mi1rnrs. •Washbasins and bright work with non-abrasive cleanser. •Clean urinals. •Wash toilet seats and bowls using disinfectant in water. •Mop floor using disinfectant in water. •Damp wipe and clean walls and partitions. They m-e Lo be free of hand prints and dust. •Refill hand soap, towels, tissues, and sanitary napkin dispensers. •Clean ventilating louvers. •Power scrub floors with germicidal solution monthly. (d)Offices and Corridors •Dusting. All furniture office equipment and appliances, windowsill, etc. will be dusted with a treated cloth or staticduster. This shall include all horizontal surfaces up to seven (7) feet height and enough vertical surfaces within eachweek. Desks and tables not cleared of paper and work materials will only be dusted where desk is exposed. •Dust Mopping. After furniture dusting is completed, all non-carpeted floor areas will be dust mopped with a treateddust mop with special attention being given to areas under desks and furniture to prevent accumulation of dust anddirt. •Vacuuming. All rugs and carpet<; in office areas, as well as public spaces are to be vacuumed daily in all hightraffic areas. •Waste cans -Ashtrays. Waste cans and ashtrays will be emptied and wiped clean. Waste cans shall be damp wiped asnecessary. Plastic liners where used will be changed as needed. Waste not in can will not be removed unless clearlymarked -"Trash." •Spot Cleaning Carpets. All carpeted areas will be inspected for spots and stains will be removed nightly. Wheredifficult spots are encountered, the Tenant will be notified.G-2 •Wet Mopping. All floors and stairwells will be checked daily and wet mopped in areas that so need to be. •Tile Floors. All tile floors will be inspected, buffed, and kept in dust free condition at all times. •Water Coolers/ Water Fountains. Water coolers will he cleaned and polished.III.WEEKLY CLEANING (a)Vacuuming. All other areas, i.e. under chairs and desks, out or the way traffic areas will he attended to. (b)Stairways and Landings. Dust mop with a treated yarn mop. Spot cleaning of walls and doors. (c)Light Fixtures. The external area of a light fixture will be inspected and kept dust free.IV.MONTHLY (a)Offices and Corridors •Air Conditioning Grills. All areas around air conditioner and return air grills will be cleaned. •Hand Rails, Fire Points. And any other miscellaneous hardware will be cleaned. •Doors. All doorplates, kick plates, brass and metal fixtures within the building will be wiped.V.SEMI-ANNUALLY (a)Venetian blinds will be damp wiped. (b)Exterior light fixtures will be damp wiped.G-3Exhibit 10.34This Employment Agreement (this “Agreement”) is entered into as of February 16, 2016, by and between Curran Simpson (the“Employee”) and REGENXBIO Inc., a Delaware corporation (the “Company”). 1.Position. (a)During your employment with the Company pursuant to this Agreement, you will hold the title of Senior VicePresident, Technical Operations. As the Senior Vice President, Technical Operations, you shall report directly tothe President and Chief Executive Officer. By signing this Agreement, you agree to perform the duties and fulfillthe responsibilities normally inherent in the position of Senior Vice President Technical Operations and suchother duties and responsibilities as may from time to time reasonably be assigned to you. (b)You agree that, to the best of your ability and experience, you will at all times loyally and conscientiouslyperform all of the duties and obligations required of and from you pursuant to the express and implicit termshereof, and to the reasonable satisfaction of the Company. During the term of your employment with theCompany, you further agree that (i) you will devote substantially all of your business time and attention to thebusiness of the Company, (ii) the Company will be entitled to all of the benefits and profits arising from orincident to all such business services, (iii) you will not render commercial or professional services of any natureto any person or organization outside of the Company without the prior written approval of the Board, and (iv)you will not directly or indirectly engage or participate in any business that is competitive in any manner with thebusiness of the Company. Notwithstanding the above, you may continue, on your own time, at your ownexpense and so as to not interfere with your duties and responsibilities at the Company to (i) subject to the priorapproval of the Company’s Chief Executive Officer, serve as a member of an advisory board or board ofdirectors of other companies that are not competitive in any manner with the Company, (ii) accept speaking orpresentation engagements in exchange for honoraria, and (iii) participate in civic, educational, charitable orfraternal organizations. This Agreement does not prevent you from owning no more than one percent (1%) ofthe outstanding equity securities of a corporation whose stock is listed on a national stock exchange and is acompetitor or potential competitor of the Company. 2.Offer Letter. This Agreement shall supersede and replace the offer letter you entered into with the Company, dated,August 3, 2015, other than the Proprietary Information and Inventions Agreement, which shall continue in full force andeffect. 3.Compensation. (a)Base Salary. You will be paid a monthly salary at a rate of $29,166.67, which is equivalent to $350,000.00 onan annualized basis, which will be paid bi-weekly in accordance with the Company’s standard payrollprocedures.  (b)Incentive Bonus. You shall be eligible for an annual incentive bonus with a target amount equal to 35% of yourBase Salary (the “Annual Target Bonus”). Such bonus (if any) shall be awarded based on criteria established inadvance by the Board or the Compensation Committee of the Board (the “Compensation Committee”). Anyincentive bonus earned by you for any fiscal year shall only be paid to you only if you remain employed by theCompany through the payment date for the bonus. The Company shall determine when to pay to you anyearned incentive bonus, but shall in no event pay such bonus more than 2½ months following the close of thefiscal year for which it is earned. The determinations of the Board or the Compensation Committee withrespect to such bonus shall be final and binding. (c)Annual Review. Your compensation will be reviewed by the Board or Compensation Committee annually.For purposes of this Agreement, “Cause” shall mean (i) the conviction of, or the entering a plea of guilty or nocontest (or pleading or accepting deferred adjudication or receiving unadjudicated probation) to or for, anyfelony or any crime involving moral turpitude, (ii) the commission of a material breach of any of the covenants,terms and provisions of this Agreement or the Proprietary Information and Inventions Agreement you will enterinto as a condition of your employment, (iii) the commission of an act of fraud, embezzlement, misappropriation,willful misconduct or breach of fiduciary duty against the Company or other similar conduct materially harmfulor potentially materially harmful to the Company’s best interest, as determined by the Board, in its reasonablesole discretion, (iv) the failure to perform assigned duties or responsibilities as the Senior Vice President,Technical Operations (other than a failure resulting from Disability (as defined below)); provided, however, thatyou shall be given written notice of, and shall have a ten (10) day period following such notice to cure a failureor refusal under this subclause (iv)), or (v) the violation of any federal or state law or regulation applicable to theCompany’s business.For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, withoutyour written consent: (i) a significant reduction in your duties or responsibilities or your removal from theposition contemplated by this Agreement; (ii) a significant reduction (thirty percent (30%) or more) in your basesalary as in effect immediately prior to such reduction; or (iii) a significant reduction in the type or level ofemployee benefits to which you are entitled that results in a significant reduction to your overall benefitspackage, as determined by the Company’s Board of Directors in its sole discretion; or (iv) relocation of yourprincipal workplace by more than 35 miles from the primary office where you performed services prior to therelocation. Good reason will not be deemed to occur unless you give the Company written notice of thecondition within 90 days after the condition comes into existence and the Company fails to remedy the conditionwith 30 days after receiving said notice. 4.Benefits. As an employee of the Company, you will also be eligible to receive certain employee benefits including paidtime off and medical, dental, life, and long term disability insurance. You will also be eligible to participate in our 401(k)savings plan. 5.At-Will Employment; Proprietary Information and Inventions Agreement. Employment with the Company is forno specific period of time. Your employment with the Company is “at will,” meaning that either you or the Companymay terminate your employment at any time and for any reason, with or without cause. In addition, you should note thatthe Company may modify your job2 title, salary or benefits at its discretion. You agree and affirm that your continued employment with the Company iscontingent upon your agreement to comply with the Proprietary Information and Inventions Agreement, previouslyexecuted, a copy of which is attached hereto as Exhibit A. 6.Indemnification. The Company shall indemnify you to the fullest extent allowed by law, in accordance with the termsof the Company’s Certificate of Incorporation and Bylaws. You shall become a party to the Company’s standardIndemnification Agreement. 7.Evidence of Employment Eligibility. For purposes of federal immigration law, you will be required to provide to theCompany documentary evidence of your identity and eligibility for employment in the United States. Suchdocumentation must be provided to us within three (3) business days of your Start Date, or our employment relationshipwith you may be terminated. 8.Company Handbook. As a Company employee, you will be expected to abide by the Company's rules of operationand standards of conduct. Specifically, you will be required to sign an acknowledgment that you have read and that youunderstand such rules and standards, which are set forth in the Company Handbook. 9.Termination of Employment and Severance Benefits. (a)Preconditions. Any other provision of this Agreement notwithstanding, the remaining Subsections of thisSection 9 shall not apply unless each of the following requirements is satisfied: (i)You have executed a general release of all known and unknown claims that you may then have againstthe Company or persons affiliated with the Company in a form prescribed by the Company, withoutalterations. You shall execute and return the release on or before the date specified by the Company inthe prescribed form. The release deadline shall in no event be later than sixty (60) days after yourtermination of employment (the “Release Deadline”). If the 60 day period described in the priorsentence spans two calendar years, then the payments will begin on the first payroll period, followingexpiration of the revocation period, in the second calendar year. If you fail to return the release on orbefore the Release Deadline, or if you revoke the release, then you shall not be entitled to the benefitsdescribed in this Section 9; and (ii)You have returned all property of the Company in your possession. (b)Termination of Employment. Except for the severance benefits provided below, the Company’s obligationsunder this Agreement may be terminated upon the occurrence of any of the following events: (i)The Company’s determination in good faith that it is terminating you for Cause (“Termination forCause”); (ii)The Company’s determination that it is terminating you without Cause, which determination may bemade by the Company at any time at the Company’s sole discretion, for any or no reason (“TerminationWithout Cause”); (iii)Thirty (30) days following delivery by you of a written notice to the Company stating that you areelecting to terminate your employment with the Company (“Voluntary Termination”);3 (iv)Following your death or Disability (as defined below); or (v)Your determination in good faith that you are electing to terminate your employment with the Companyfor Good Reason. (c)Severance Benefits. You shall be entitled to receive severance benefits upon termination of employment only asset forth in this Section 9(c): (i)Voluntary Termination. In the event of a Voluntary Termination you shall not be entitled to receivepayment of any severance benefits. You will receive payment(s) for all salary and unpaid vacationaccrued as of the date of your Voluntary Termination and your benefits will be continued under theCompany’s then existing benefit plans and policies to the extent permitted under such plans and policiesand in accordance with such plans and policies in effect on the date of your Voluntary Termination andin accordance with applicable law. (ii)Involuntary Termination/No Change in Control. If your employment is terminated under Section9(b)(ii) or (v) above (such termination, an “Involuntary Termination”), you, or your estate orrepresentative, if applicable, will be entitled to receive payment of severance benefits on the date ofyour Involuntary Termination (the “Severance Benefits”). The Severance Benefits shall consist ofsalary continuation for nine (9) months of monthly Base Salary amounts; provided that if you becomeemployed during this period, then the Company’s obligation to pay Severance Benefits shall ceaseupon commencement of your new employment. If you elect to continue your health insurancecoverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following theSeparation, then the Company shall pay your monthly premium under COBRA until the earliest of (A)the date that is nine (9) months following your Involuntary Termination (the “Continuation Period”),(B) the expiration of your continuation coverage under COBRA and (C) the date when you are offeredsubstantially equivalent health insurance coverage in connection with new employment or self-employment. Notwithstanding anything to the contrary above, if deemed necessary or advisable by theCompany in its sole discretion to avoid adverse tax consequences to the Company or any employeethereof, such COBRA premium payments will be treated as taxable compensation income to you,subject to all applicable withholdings. (iii)Involuntary Termination/ Change in Control. If your employment is terminated in an InvoluntaryTermination immediately prior to or in the eighteen months following a Change in Control, you, oryour estate or representative, if applicable, will be entitled to receive payment of severance benefits onthe date of your Involuntary Termination (the “Change in Control Severance Benefits”). The Changein Control Severance Benefits shall consist of salary continuation for twelve (12) months’ of monthlyBase Salary plus a monthly amount equal to your Annual Target Bonus divided by twelve (12). If youelect to continue your health insurance coverage under the Consolidated Omnibus BudgetReconciliation Act (“COBRA”) following the Separation, then the Company shall pay your monthlypremium under COBRA until the earliest of (A) the date that is twelve (12) months following yourInvoluntary Termination (the “Continuation Period”), (B) the expiration of your continuation coverageunder COBRA and (C) the date when you are offered substantially equivalent health insurancecoverage in connection with new employment or self-4 employment. Notwithstanding anything to the contrary above, if deemed necessary or advisable by theCompany in its sole discretion to avoid adverse tax consequences to the Company or any employeethereof, such COBRA premium payments will be treated as taxable compensation income to you,subject to all applicable withholdings. If immediately prior to or following a Change in Control (asdefined in the Company’s 2015 Equity Incentive Plan), your employment with the Company (or theCompany’s successor) is terminated in an Involuntary Termination during the remaining vesting periodof the options then outstanding as of the date of closing of the Change in Control (the “Options”), thenone hundred percent (100%) of the unvested shares subject to the Options shall automatically vest. (iv)Termination for Cause. In the event of your Termination for Cause, you will receive payment(s) forall salary and unpaid vacation accrued as of the date of your Termination for Cause. (v)Termination by Reason of Death or Disability. In the event that your employment with the Companyterminates as a result of your death or Disability (as defined below), you or your estate or representativewill receive all salary and unpaid vacation accrued as of the date of your death or Disability, allseverance benefits payable under Section 9(b)(ii) above (only to the extent that you were entitled tosuch benefits before your death) and any other benefits payable under the Company’s then existingbenefit plans and policies, to the extent permitted under such plans and policies and in accordance withsuch plans and policies in effect on the date of death or Disability and in accordance with applicablelaw. For purposes of this Agreement, “Disability” shall mean that you have been unable to performyour duties hereunder as the result of physical or mental incapacity lasting at least forty-five (45)consecutive calendar days or ninety (90) calendar days during any consecutive twelve-month period,after which time such incapacity is determined to be permanent by a physician chosen by the Companyand its insurers and acceptable to you or to your legal representative (with such agreement onacceptability not to be unreasonably withheld). 10.Tax Matters. (a)Withholding. All forms of compensation referred to in this Agreement are subject to reduction to reflectapplicable withholding and payroll taxes and other deductions required by law. (b)Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from theCompany. You agree that the Company does not have a duty to design its compensation policies in a mannerthat minimizes your tax liabilities, and you will not make any claim against the Company or the Board related totax liabilities arising from your compensation. (c)280G. Notwithstanding anything contained in this Agreement to the contrary, if any of the payments or benefitsreceived or to be received by you pursuant to this Agreement when taken together with payments and benefitsprovided to you under any other plans, contracts, or arrangements with the Company (all such payments andbenefits, the “Total Payments”), would be subject to any excise tax imposed under Code Section 4999 (togetherwith any interest or penalties, the “Excise Tax”), then such Total Payments will be reduced to the extentnecessary so that no portion thereof will be subject to the Excise Tax; provided,5 however, that if you would receive in the aggregate greater value (as determined under Code Section 280G andthe regulations thereunder) on an after tax basis if the Total Payments were not subject to such reduction, then nosuch reduction will be made. To effect the reduction described herein, if applicable, the Company will firstreduce or eliminate the payments and benefits provided under this Agreement. All calculations required to bemade under this Section will be made by the Company’s independent public accountants, subject to the right ofyour representative to review the same. 11.Miscellaneous Provisions. (a)Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governedby the laws of the State of Maryland, without giving effect to the principles of conflicts of law. (b)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, butall of which together will constitute one and the same instrument. (c)Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdictionto be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without suchprovision. (d)Acknowledgment. You acknowledge that you have had the opportunity to discuss this matter with and obtainadvice from your private attorney, have had sufficient time to read, and have carefully read and fully understand,all the provisions of this Agreement, and are knowingly and voluntarily entering into this Agreement. (e)Arbitration. Any controversy or claim arising out of this Agreement and any and all claims relating to theEmployee’s Employment with the Company shall be settled by final and binding arbitration. The arbitrationshall take place in Washington, D.C., or, at the Employee’s option, the County in which the Employee primarilyworked when the arbitrable dispute or claim first arose. The arbitration shall be administered by the AmericanArbitration Association under its National Rules for the Resolution of Employment Disputes. Any award orfinding shall be confidential. The Employee and the Company agree to provide one another with reasonableaccess to documents and witnesses in connection with the resolution of the dispute. The Employee and theCompany shall share the costs of arbitration equally. Each party shall be responsible for its own attorneys’ fees,and the arbitrator may not award attorneys’ fees unless a statute or contract at issue specifically authorizes suchan award. This Section 11(e) shall not apply to claims for workers’ compensation benefits or unemploymentinsurance benefits. This Section 11(e) also shall not apply to claims concerning the ownership, validity,infringement, misappropriation, disclosure, misuse or enforceability of any confidential information, patent right,copyright, mask work, trademark or any other trade secret or intellectual property held or sought by either theEmployee or the Company (whether or not arising under the Proprietary Information and Inventions Agreementbetween the Employee and the Company).[The remainder of this page intentionally left blank]6IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorizedofficer, as of the day and year first above written. REGENXBIO INC. EMPLOYEE By: /s/ Kenneth T. Mills By: /s/ Curran Simpson Name: Kenneth T. Mills Date: February 16, 2016 Title: President & CEO 7EXHIBIT APROPRIETARY INFORMATION AND INVENTIONS AGREEMENT8 Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S‑8 (No. 333-206984) of REGENXBIO Inc. of our report datedMarch 3, 2016 relating to the financial statements, which appears in this Form 10‑K./s/ PricewaterhouseCoopers LLPMcLean, VirginiaMarch 3, 20162 Exhibit 31.1CERTIFICATIONI, Kenneth T. Mills, certify that:1.I have reviewed this Annual Report on Form 10-K of REGENXBIO Inc. for the year ended December 31, 2015;2.Based on my knowledge, this report does not contain any untrue statements 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; b.[Paragraph omitted in accordance with SEC Release Nos. 33-8238; 34-47986; IC-26068; June 5, 2003]; 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.5.The registrant’s other certifying officer(s) 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 3, 2016 /s/ Kenneth T. Mills Kenneth T. MillsPresident and Chief Executive Officer(Principal Executive Officer)  Exhibit 31.2CERTIFICATIONI, Vittal Vasista, certify that:1.I have reviewed this Annual Report on Form 10-K of REGENXBIO Inc. for the year ended December 31, 2015;2.Based on my knowledge, this report does not contain any untrue statements 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; b.[Paragraph omitted in accordance with SEC Release Nos. 33-8238; 34-47986; IC-26068; June 5, 2003]; 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.5.The registrant’s other certifying officer(s) 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 3, 2016 /s/ Vittal Vasista Vittal VasistaChief Financial Officer(Principal Financial and Accounting Officer)  Exhibit 32.1CERTIFICATIONIn connection with the Annual Report of REGENXBIO Inc. (the “Registrant”) on Form 10-K for the annual period ended December 31, 2015 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kenneth T. Mills, President, Chief Executive Officer and Director ofthe Registrant, and Vittal Vasista, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002, that to their respective knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theRegistrant. Date: March 3, 2016 /s/ Kenneth T. Mills Kenneth T. Mills President and Chief Executive Officer(Principal Executive Officer) Date: March 3, 2016 /s/ Vittal Vasista Vittal Vasista Chief Financial Officer(Principal Financial and Accounting Officer)This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any otherpurpose. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant andfurnished to the United States Securities and Exchange Commission or its staff upon request.This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before orafter the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. 

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