Regenxbio Annual Report 2017

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017or☐☐TRANSITION 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) 9600 Blackwell Road, Suite 210Rockville, 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 ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 ☒ No ☐Indicate 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 ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained,to the best 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. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer☐ Accelerated filer☒ Non-accelerated filer☐(Do not check if a smaller reporting company)Smaller reporting company☐ Emerging growth company☒If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒As of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock heldby non-affiliates was approximately $505.0 million, based on the closing price of the registrant’s common stock on The Nasdaq Global Select Market on June 30, 2017 of $19.75 pershare. 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 individualsbased on public filings and other information known to the registrant have been excluded since such persons may be deemed affiliates. This determination of executive officer oraffiliate status is not necessarily a conclusive determination for other purposes.As of March 2, 2018, there were 31,655,093 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCESpecified portions of the registrant’s proxy statement with respect to the registrant’s 2018 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, 2017, are incorporated by reference into Part III of this Annual Report on Form 10-K. Table of Contents REGENXBIO INC.Form 10-KTable of Contents Page Part I Information Regarding Forward-Looking Statements 1 Industry and Market Data 2Item 1. Business 3Item 1A. Risk Factors 40Item 1B. Unresolved Staff Comments 83Item 2. Properties 84Item 3. Legal Proceedings 84Item 4. Mine Safety Disclosures 84 Part II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 85Item 6. Selected Financial Data 88Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 89Item 7A. Qualitative and Quantitative Disclosures about Market Risk 102Item 8. Financial Statements and Supplementary Data 102Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 102Item 9A. Controls and Procedures 102Item 9B. Other Information 103 Part III Item 10. Directors, Executive Officers and Corporate Governance 104Item 11. Executive Compensation 104Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 104Item 13. Certain Relationships and Related Transactions, and Director Independence 104Item 14. Principal Accountant Fees and Services 104 Part IV Item 15. Exhibits and Financial Statements Schedules 105Item 16. Form 10-K Summary 105Index to Consolidated Financial Statements 106Exhibit Index 137Signatures 140 Table of Contents PART IINFORMATION REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, asamended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements express a belief,expectation or intention and are generally accompanied by words that convey projected future events or outcomes such as “believe,” “may,” “will,”“estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would” or by variations of suchwords or by similar expressions. We have based these forward-looking statements on our current expectations and assumptions and analyses made by us inlight of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe areappropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to anumber of risks, uncertainties, assumptions and other important factors, including, but not limited to: •the timing of enrollment, commencement and completion of our clinical trials; •the timing and success of preclinical studies and clinical trials conducted by us and our development partners; •the timely development and launch of new products; •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 and technology; •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 our expenses and revenue; •our expectations regarding regulatory developments in the United States and foreign countries; and •the use or sufficiency of our cash and cash equivalents and needs for additional financing.You should carefully read the factors discussed in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and elsewhere in this Annual Report on Form 10-K and in our other filings with the U.S. Securities and Exchange Commission(SEC) for additional discussion of the risks, uncertainties, assumptions and other important factors that could cause our actual results or developments todiffer materially and adversely from those projected in the forward-looking statements. The actual results or developments anticipated may not be realized or,even if substantially realized, they may not have the expected consequences to or effects on us or our businesses or operations. Such statements are notguarantees of future performance and actual results or developments may differ materially and adversely from those projected in the forward-lookingstatements. These forward-looking statements speak only as of the date of this report. Except as required by law and the rules of the SEC, we do not undertakeany obligation, and specifically decline any obligation, to update or revise any forward-looking statements, whether as a result of new information, futureevents or otherwise.As used in this Annual Report on Form 10-K, the terms “REGENXBIO,” “we,” “us,” “our” or the “Company” mean REGENXBIO Inc. and itssubsidiaries, on a consolidated basis, unless the context indicates otherwise.NAV, REGENXBIO and the REGENXBIO logos are our registered trademarks. Any other trademarks appearing in this Annual Report on Form 10-Kare the property of their respective holders.1Table of Contents 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. We have notindependently verified industry, market and competitive position data from third-party sources, but we believe the sources of such information to be reliable.While we 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.2Table of Contents ITEM 1.BUSINESSOverviewWe are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our gene therapyproduct candidates are designed to deliver genes to cells to address genetic defects or to enable cells in the body to produce therapeutic proteins orantibodies that are intended to impact disease. Through a single administration, our gene therapy product candidates are designed to provide long-lastingeffects, potentially significantly altering the course of disease and delivering improved patient outcomes.Our product candidate RGX-314 is for the treatment of wet age-related macular degeneration (wet AMD), a leading cause of total and partial visionloss in the United States, Europe and Japan. We began enrollment in the Phase I clinical trial for RGX-314 for the treatment of wet AMD in May 2017 andhave completed dosing of three cohorts of six patients each, a total of 18 patients, in the Phase I clinical trial. We expect to present topline data from thePhase I clinical trial in late 2018.Our product candidate RGX-501 is for the treatment of homozygous familial hypercholesterolemia (HoFH), a severe genetic disease characterized bypremature and aggressive plaque buildup, life threatening coronary artery disease (CAD) and aortic valve disease predominantly due to abnormalities in thefunction or expression of the low-density lipoprotein receptor (LDLR) gene. We, together with trial sponsor the University of Pennsylvania (Penn), beganenrollment in the Phase I/II clinical trial for RGX-501 in March 2017. We have completed dosing of the first cohort of three patients and have dosed twopatients in the second cohort. We expect to present topline data from the Phase I/II clinical trial in late 2018.We are also developing product candidates to address the neurological symptoms of two severe genetic lysosomal storage diseases,Mucopolysaccharidosis Type I (MPS I) and Mucopolysaccharidosis Type II (MPS II). MPS I is caused by deficiency of α-l-iduronidase (IDUA) and MPS II iscaused by deficiency of iduronate-2-sulfatase (IDS), both of which are enzymes that are responsible for breakdown of cellular waste products. Deficiencies inthese enzymes lead to a number of physical symptoms and patients with severe forms of these diseases also exhibit significant cognitive decline. Theinvestigational new drug applications (INDs) filed with the U.S. Food and Drug Administration (the FDA) for RGX-111 and RGX-121, our product candidatesfor MPS I and MPS II, respectively, are active. We expect to begin enrollment in a Phase I clinical trial for RGX-111 and a Phase I/II clinical trial for RGX-121in mid-2018.In addition to our lead product candidates, we have also funded, and plan to continue to fund, preclinical research on potential product candidateprograms that may become part of our internal product development pipeline. We have partnered with a number of leading academic institutions and willcontinue to seek partnerships with innovative institutions to develop novel NAV gene therapy product candidates. We expect to announce an additional leadproduct candidate in the second half of 2018.Our gene therapy product candidates deliver genes to cells using adeno-associated virus (AAV) vectors, which are non-replicating viral deliveryvehicles that are not known to cause disease. Our product candidates all utilize viral vectors from our proprietary gene delivery platform, which we call ourNAV Technology Platform. Our NAV Technology Platform consists of exclusive rights to AAV7, AAV8, AAV9, AAVrh10 and over 100 other novel AAVvectors (NAV Vectors). We currently have exclusive rights to over 100 patents and patent applications worldwide covering our NAV Vectors, includingcomposition of matter claims for AAV7, AAV8, AAV9 and AAVrh10, as well as methods for their manufacture and therapeutic uses. We believe this patentportfolio forms a strong foundation for our current programs and with our ongoing research and development, we expect to continue to expand this robustpatent portfolio.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.In addition to our internal product development efforts, we also selectively sublicense our NAV Vectors to other biotechnology companies, which werefer to as NAV Technology Licensees. As of December 31, 2017, our NAV Technology Platform was being applied in the development of more than 20partnered product candidates by 10 NAV Technology Licensees.3Table of Contents Our internal and partnered product development program pipeline is shown below. 4Table of Contents 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. We believe that the broad applicability of our NAV Technology Platform and any clinical successes of thetreatments utilizing NAV Vectors will create new internal and partnered pipeline opportunities.Our company was formed from a successful collaboration that began in February 2009 between FOXKISER LLP, Penn and James Wilson, M.D., Ph.D.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 positions us to succeed in developing and bringing to market, independently or withour development partners, unique, best-in-class gene therapy treatments for a range of severe diseases with significant unmet medical needs.Our StrategyOur mission is to improve lives through the curative potential of gene therapy. We are seeking to develop, manufacture, commercialize and licenseproduct candidates across multiple therapeutic areas and target organs while continuing to expand our NAV Technology Platform. To achieve our mission,we are pursuing the following 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 monogenic 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. In diseases not caused by a single gene defect, in vivo gene therapyhas the potential to replace the need for frequent treatments by enabling the body to produce therapeutic proteins or antibodies consistently toimpact the course of disease. We believe our NAV Technology Platform is proving to be a significant advancement over earlier AAV vectors indelivering these therapies. Based on data derived from third-party clinical studies and animal models using our NAV Vectors, we believe ourNAV 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 retinal, metabolic and neurodegenerative diseases.Both wet AMD and HoFH are diseases with high unmet clinical need and current treatments that are sub-optimal. We have enrolled 18 patientsin a Phase I clinical trial for RGX-314 and we expect to present topline data from the Phase I clinical trial in late 2018. We have enrolled fivepatients in a Phase I/II clinical trial for RGX-501 and we expect to present topline data from the Phase I/II clinical trial in late 2018. The INDsfor RGX-111 for the treatment of MPS I and RGX-121 for the treatment of MPS II are active. We expect to initiate a Phase I clinical trial forRGX-111 and a Phase I/II clinical trial for RGX-121 for the treatment of MPS II in mid-2018. If we are successful in achieving proof-of-conceptin the Phase I or Phase I/II clinical trials for these diseases, we will pursue further development, including registration trials andcommercialization of such product candidates. •Establish gene therapy franchises in and beyond our current core therapeutic areas of retinal, metabolic and neurodegenerative diseases.After human proof-of-concept is achieved in a disease, we believe we will be able to apply what we have learned and use our NAV TechnologyPlatform to more rapidly develop new product candidates for many similar diseases. Once an appropriate vector and route of administration fora particular disease type have been established, we believe a new gene can be inserted into the appropriate vector and the established route ofadministration can be used for other similar diseases. To date, our strategy of focusing on retinal, metabolic and neurodegenerative diseases hasbeen informed by significant animal, and in some cases human clinical, data that indicate specific NAV Vectors are particularly effective in thecells where these types of diseases manifest. Targeting tissues where diseases manifest is critical to impacting the course of diseases with ourNAV gene therapy treatments (NAV Gene Therapy). This approach underpins our strategy for our neurodegenerative disease franchise, forexample, where we applied knowledge from IND-enabling studies of RGX-111 for MPS I to enable a rapid follow-on IND filing for RGX-121,our MPS II program. We believe that this approach may also be applicable to metabolic and retinal diseases, as well as many other therapeuticareas, and will allow us to efficiently generate product candidates for diseases in and beyond our current areas of therapeutic focus, includingthe additional lead product candidate we expect to designate in the second half of 2018.5Table of Contents •Further grow the potential of our NAV Technology Platform through strategic in-licensing and sublicensing of new programs. We plan togrow the potential of our NAV Technology Platform through licensing. For example, we are pursuing in-licensing for programs we deem to bethe most promising research programs using our NAV Vectors. We intend to continue to selectively sublicense our NAV Technology Platformfor specific vector and indication combinations to additional NAV Technology Licensees. Strategic sublicensing allows us to maintain ourinternal product development focus in our core disease indications and therapeutic areas while still expanding the NAV Gene Therapypipeline, developing a greater breadth of treatments for patients, providing additional technological and potential clinical proof-of-concept forour NAV Technology Platform, and creating potential additional revenue. •Leverage the NAV Technology Platform in the expression of therapeutic proteins, antibodies and gene editing. Our treatment for wet AMDinvolves the novel, one-time administration of our NAV AAV8 vector encoding a gene for a monoclonal antibody fragment, which has thepotential to enable a patient’s retinal cells to continuously produce therapeutic antibodies. To maintain efficacy, the current standard of carefor the treatment of wet AMD requires repetitive and inconvenient intraocular injections of marketed therapeutic proteins or antibodies,typically ranging from every four to eight weeks in frequency. There are many diseases where the existing standard of care involves frequentadministration of marketed therapeutic proteins or antibodies and we believe there are other patient populations that would benefit from NAV-based treatments designed to enable different cells in the body of patients to produce therapeutic proteins or antibodies. In addition, it has beendemonstrated by several researchers that our NAV Technology Platform can be efficiently adapted to deliver different genome editingcomponents to address the specific treatment needs of many disease targets. We may aim to invest in research and development in these areas orexplore collaborations with strategic partners that have capabilities in the development of therapeutic antibodies, proteins and gene editing. •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. We have licensed exclusive rights to a broadportfolio of certain fundamental AAV gene therapy patents and patent applications. In securing these rights, we have focused on obtainingrobust rights for those intellectual property assets we believe will be most important in providing us with a competitive advantage with respectto AAV gene therapy treatments. We plan to continue to seek to protect and enhance the proprietary technology, inventions, and improvementsthat are commercially important to the development of our business.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.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. We believe gene therapytreatments can also be designed to enable the body to continuously produce therapeutic proteins or antibodies or be efficiently adapted todeliver different genome editing components to address the specific treatment needs of many disease targets. •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. •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. •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.6Table of Contents Our NAV Gene Therapy Product CandidatesWe have developed an internal pipeline of product candidates across the therapeutic areas of retinal, metabolic and neurodegenerative diseases.Below is a table summarizing our current internal development programs.Retinal DiseasesWe are developing applications of our NAV Technology Platform to treat acquired and inherited 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 we believe is an ideal target for gene therapy due to its relatively immunoprivileged state, small size andrelative physical isolation from the rest of the body. We believe NAV Vectors can safely and effectively target a diverse set of retinal cells, including retinalpigment epithelium (RPE) cells and photoreceptors, enabling production of high levels of protein with the potential to impact a broad range of diseases.Additionally, the molecular basis of many retinal diseases is becoming well-understood and many retinal diseases are monogenic diseases whosecomplementary deoxyribonucleic acid (DNA) has already been successfully cloned. Diagnosis of many forms of inherited blindness is becoming quicker andsimpler due to improved research and the application of technology to characterize the variable, unique patterns of different retinal diseases. We believe ourNAV Gene Therapy may have improved profiles for achieving therapeutic efficacy where highly efficient gene delivery to the retina is required.Third party studies have reported safety and efficacy of subretinal injection of AAV2 in clinical trials for a retinal disease called Leber congenitalamaurosis type 2 (LCA2). Other programs have studied the safety and efficacy profile of AAV2 to treat neovascularization in wet AMD. For LCA2, retinalfunction was restored by reconstituting gene function in the RPE. However, for most retinal degeneration disorders, photoreceptor cells are the primary celltype involved and have historically been a more difficult cellular target in the retina for AAV gene therapy. We believe our NAV Technology Platform willbe more efficient at gene delivery into many retinal cell types, particularly photoreceptor cells, than earlier generation AAV vectors such as AAV2. Data frommice, 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 cells and photoreceptors, when compared to other AAVs. For instance, in most retinal cells, NAV-mediated gene delivery reaches maximallevels of expression much sooner than AAV2-mediated delivery in these animal studies. Furthermore, in the same set of retinal cells, NAV Vectors achieveequivalent expression to AAV2 at a dose that is ten times less. Our NAV Technology Platform has been used successfully in a gene therapy approach inanimal models of achromatopsia, LCA2, autosomal recessive retinitis pigmentosa, x-linked retinoschisis and wet AMD.7Table of Contents 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, which is the functional center of the retina. A subset of AMD patients have wet AMD, which is characterized by loss of vision due to excess fluidaccumulation from new blood vessel formation. Fluid leakage following this excess fluid accumulation can result in physical changes in the structure of theretina and adverse changes in vision. As this process progresses, blindness can result from atrophy and scar formation.Wet AMD is a leading cause of total and partial vision loss in the United States, Europe and Japan. Wet AMD consists of approximately 10% of allcases of AMD, but accounts for approximately 90% of the vision loss associated with AMD. As indicated by the name, the risk for developing AMD increaseswith age and we anticipate the diagnosis rate will continue to increase as the population continues to trend towards an aging population. In the United States,the prevalence of wet AMD is estimated to be nearly 600,000 individuals and there may be over two million individuals living with wet AMD in the UnitedStates, Europe and Japan combined. In developed countries, an estimated two-thirds of people with AMD have been diagnosed, of whom about two-thirds aretreated.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 reduce fluid accumulation and, on average, improve vision in the majority of patients with wet AMD.Currently, there are three anti-VEGFs that are commonly used for the treatment of wet AMD. All of these therapies, however, require repetitive andinconvenient intraocular injections, typically ranging from every four to eight weeks in frequency, to maintain efficacy. Patients often experience vision losswith reduced frequency of treatment and due to a variety of factors, including inconvenience and discomfort associated with frequent injections in the eye,patient compliance is a significant concern with anti-VEGF therapies.We are aware of multiple gene therapy product candidates developed previously to address the unmet medical need described above for wet AMD bytargeting VEGF inhibition using AAV2 as the gene therapy vector. We believe published clinical trials for wet AMD gene therapy illustrate the safety of thesubretinal delivery approach and the potential to reduce injection frequency using gene therapy. We also believe the data from these clinical trials mayindicate that some patients may benefit from greater inhibition of VEGF activity and that utilizing NAV Technology could allow us to achieve better VEGFinhibition than our competitors using AAV2 to treat wet AMD.RGX-314RGX-314 is our product candidate for the treatment of wet AMD. RGX-314 is being developed as a novel, one-time subretinal treatment for wet AMDthat includes the NAV AAV8 vector encoding a gene for a monoclonal antibody fragment. The expressed protein is designed to neutralize VEGF activity,modifying the pathway for formation of new leaky blood vessels and retinal fluid accumulation. After delivery of RGX-314, we believe retinal cells willcontinue to produce the anti-VEGF protein.Clinical Development of RGX-314Enrollment in the Phase I clinical trial of subretinally administered RGX-314 in the United States in patients with wet AMD began in May 2017. Thetrial is an ascending dose design with a formal safety assessment of each dose group by an independent data safety monitoring board (DSMB) prior to doseescalation. The trial design allows for enrollment of up to 18 patients across three dose levels (3 × 10^9 genome copies (GC)/eye, 1 × 10^10 GC/eye, and 6 ×10^10 GC/eye). Each cohort consists of six patients who have a documented need and history of response to anti-VEGF therapies. Primary endpoints includeadverse events (AEs), certain laboratory measures (including immunological parameters), evaluation of best-corrected visual acuity (BCVA), retinal fluid onspectral domain ocular coherence tomography (SD- OCT), presence of RGX-314 protein in aqueous fluid and other outcome measures. The primary purposeof the clinical trial is to evaluate the safety and tolerability of RGX-314 at 24 weeks after a single dose of RGX-314 administered by subretinal delivery.Following completion of the primary study period, it is expected that subjects will enter the follow-up period and will continue to be assessed until week 106to assess long term safety and durability of effect.8Table of Contents We have fully enrolled three dose cohorts, a total of 18 patients, in the Phase I clinical trial for RGX-314. Treatments have been administered at foursites in the United States. The procedure has been completed via automated delivery by trained retina surgeons using a vitrectomy machine within an hour orless in most cases. As we reported in January 2018, based on the first 12 patients dosed, we had observed RGX-314 to be generally well-tolerated by patients.At that time, we also shared an interim look at the RGX-314 protein expression data at the four-week timepoint on the first two cohorts of patients. In thesefirst two cohorts, evidence of dose-dependent RGX-314 protein expression, as measured by enzyme-linked immunosorbent assay, or an ELISA, was observed.We expect to present topline data from the RGX-314 Phase I clinical trial in late 2018, which will include both primary and secondary endpoint data.Preclinical Proof of Concept for RGX-314Our RGX-314 product candidate was designed to optimize a vector candidate to have the potential to express high levels of anti-VEGF. In order toevaluate the potential for RGX-314 for the treatment of wet AMD, the optimized RGX-314 product candidate was assessed in both mouse and non-humanprimate (NHP) models. Dose-dependent reduction of both the number of new retinal blood vessels and the incidence of retinal detachments related toexudation caused by vascular proliferation in the retina was also observed in two different VEGF-dependent animal models of wet AMD. In the study below,NHPs were injected subretinally with RGX-314 and expression of anti-VEGF was measured in the aqueous humor of treated animals. Ocular anti-VEGFprotein expression was rapid in onset and levels remained consistent in all animals and doses tested, indicating the potential for consistent sustainedexpression of anti-VEGF after a one-time, subretinal administration of RGX-314.(1)Wielechowski et al. 2016 Poster session presented at the meeting of the American Society of Gene & Cell Therapy, Washington, DCOther Retinal Disease ProgramsIn addition to our RGX-314 program, we have also funded, and plan to continue to fund, preclinical research on potential retinal disease productcandidate programs that may become part of our internal product development pipeline. Our goal is to develop a gene therapy franchise in retinal diseases, aswell as explore further applications of NAV Technology. We have partnered with a number of leading academic institutions and will continue to seekpartnerships with innovative institutions.9Table of Contents 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 measurable levels of expression sufficient to correct diseasesymptoms. In subjects where measurable 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 a trial conducted at St. Jude Children’s Research Hospital for thetreatment of hemophilia B using AAV8 in which some patients were able to discontinue prophylactic FIX injections. In 2016, the same group reported in astudy update that the treatment was shown to be durable for over five years and that long-lasting efficacy results were reported in the patients treated.Subsequently, two additional groups have reported human proof-of-concept using AAV8-mediated gene therapy to deliver and express a gene in the liver forthe treatment of hemophilia B.Our academic collaborators have also demonstrated in a MPS I feline model that liver-directed IDUA gene delivery using AAV8 resulted in persistent,normal levels of IDUA in the blood. In most cases, the treatment also resulted in cross-correction (cells that are transduced with vector can release enzyme,which is taken up by non-transduced cells) in most tissues including complete resolution of disease pathology in some tissues normally not responsive toenzyme 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 is on a severe lipid disorder, HoFH.RGX-501 for the Treatment of HoFH Caused by LDLR MutationsOverview of HoFHHoFH is a monogenic disorder caused predominantly by abnormalities in the function or expression of the LDLR gene. LDLR plays an important rolein the regulation of cholesterol by facilitating uptake and degradation of low-density lipoprotein (LDL) in the liver. LDL is the primary carrier of cholesterolin the blood and has been implicated in the development of plaque buildup in the arteries. HoFH patients have very low levels or are completely deficient ofLDLR, resulting in very high blood cholesterol levels which are typically greater than 500 milligrams per deciliter (mg/dl). This leads to premature andaggressive plaque buildup, life threatening CAD and aortic valve disease. Patients with HoFH develop progressive atherosclerosis, or narrowing andblockage of the arteries beginning at an early age, which leads to a high incidence of heart attacks in children and teenagers, among other severe symptoms. Ifuntreated, HoFH patients usually die of causes related to CAD or aortic valve disease before the age of 30.Published medical literature suggests that the worldwide prevalence of HoFH is estimated to be as high as 1 in 200,000. Based on disease severity andmolecular characteristics, we estimate there are approximately 11,000 individuals globally who are primary candidates for gene therapy treatment of HoFH.Multiple studies have compared HoFH patients based on LDLR activity and have shown small differences in residual activity can lead to significantreductions 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 filtering 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. The FDA has approved two drugs as add-on therapy specifically for HoFH: lomitapide andmipomersen. Both result in a reduction of LDL-C, but their use is associated with an array of adverse events that may affect tolerance and long-termadherence. These therapies do not provide a cure for the disease and their use is limited due to tolerability and drug availability. Despite the implementationof an aggressive multi-drug therapy approach, the LDL-C levels of HoFH patients remain elevated and mean life expectancy remains at approximately 32years. Other available treatments include PCSK9 inhibitors. PCSK9 inhibitors are designed to bind to a protein called PCSK9 and inhibit PCSK9 frombinding to LDLR on the liver surface. In the absence of PCSK9, there is more LDLR on the surface of the liver to remove LDL-C from the blood. We believethat the emergence of PCSK9 inhibitors as therapy10Table of Contents will increase the opportunity and awareness for the profile of RGX-501 by helping to identify more patients who may benefit from its product profile. Aclinical trial evaluating a PCSK9 inhibitor demonstrated that its effectiveness relies on patients having functional LDLR. We believe that a substantial unmetmedical need remains for the population of HoFH patients who are LDLR negative or severely deficient in LDLR function. We believe that RGX-501, byrestoring or increasing LDLR function, may enhance the impact of PCSK9 inhibitors in the treatment of many patients with high cholesterol and asprescribers explore combination therapies. With all current therapies, even in combination, providing sub-optimal treatment for patients, a better solution isneeded. We believe HoFH is a promising disease target for gene therapy.RGX-501RGX-501 is our product candidate for the treatment of HoFH, which is designed to use the AAV8 vector to deliver the human LDLR gene to livercells. We believe that the liver is the preferred target organ for gene therapy of HoFH since LDLRs produced in the liver contribute to greater than 90% of thecapture and breakdown of LDL, making the liver by far the most important LDLR producing organ. Additionally, the liver is also the only organ capable ofexcreting cholesterol from the body, a function that is critical to the maintenance of cholesterol balance. Finally, studies have shown that livertransplantation in HoFH patients corrects the disease, providing strong support that correction of hepatic LDL receptor activity by gene therapy is sufficientfor metabolic correction of the disease.We have received orphan drug product designation from the FDA for RGX-501.Clinical Development of RGX-501Enrollment in the Phase I/II clinical trial of intravenously administered RGX-501 in the United States in patients with HoFH began in March 2017.The trial is a single ascending dose design with a formal safety assessment by an independent DSMB prior to dose escalation. The trial design calls forenrollment of up to 12 subjects with dosing at a single center. Patient follow-up is being conducted at a number of sites globally. The primary endpoint is asafety assessment. The secondary endpoints are reduction in LDL-C and other outcome measures. Based on previous clinical trials and recent approvals inHoFH, we believe reduction in LDL-C is an endpoint that is an acceptable measure on which regulatory approval could be based.We have enrolled five patients in the Phase I/II clinical trial for RGX-501, three in the first dose cohort and two in the second dose cohort. As wereported in January 2018, based on the first three patients dosed, we had observed RGX-501 to be generally well-tolerated by patients. One subject in the firstcohort experienced a drug-related SAE within 24 hours of dosing of hypotension associated with a mild inflammatory response, which resolved within a fewhours of onset. The nature and time frame of the SAE is distinct from expected and known immune responses to AAV therapy. The patient recovered quicklyfrom the SAE without significant sequalae.We expect to present topline data from the RGX-501 Phase I/II clinical trial in late 2018, which will include both primary and secondary endpointdata.11Table of Contents 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).Other Metabolic Disease ProgramsIn addition to our RGX-501 program, we have also funded, and plan to continue to fund, preclinical research on potential metabolic disease productcandidate programs and programs to address the systemic manifestations of a number of diseases that may become part of our internal product developmentpipeline. Our goal is to develop a gene therapy franchise in metabolic diseases, as well as explore further applications of NAV Technology. We havepartnered with a number of leading academic institutions and will continue to seek partnerships with innovative institutions.Neurodegenerative DiseasesWe are focused on developing NAV Gene Therapy for diseases with significant unmet medical need that involve neurodegeneration in the brain andspinal cord—which together comprise the central nervous system (CNS). We believe our NAV Technology Platform has optimal features for gene delivery tothe CNS. In addition, our programs involve novel strategies for improved delivery of NAV Gene Therapy 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 the brain to address neurodegenerativedisorders that require gene delivery to larger areas. Although there are some examples in animal models in which focal delivery can be therapeutic, thesetechniques 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, one of our NAV Vectors, AAV9, has produced evidence of potentially unique and beneficial properties for gene delivery in the CNS byhaving the ability to cross the blood-brain barrier. As a result, treatments may be delivered via intravenous injection to target the CNS. One of our NAVTechnology Licensees is currently using this approach in a clinical trial for the treatment of spinal muscular atrophy (SMA) Type I, which has shownevidence of lower motor neuron transduction.12Table of Contents 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 clinically relevant morbidity and an estimated 10% to 20%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.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 is designed to use the AAV9 vector to deliver the human IDUA gene to the CNS.Delivery of the enzyme that is deficient within cells in the CNS could provide a permanent source of secreted IDUA beyond the blood-brain barrier, allowingfor long-term cross-correction of cells throughout the CNS. We believe this strategy could also provide rapid IDUA delivery to the brain, potentiallypreventing the progression of cognitive deficits that otherwise occurs in MPS I patients.We have received orphan drug product designation and rare pediatric disease designation from the FDA for RGX-111.13Table of Contents Planned Clinical Development of RGX-111The IND for RGX-111 is active and we plan to initiate a Phase I clinical trial of RGX-111 based gene delivery via CNS administration in mid-2018 insubjects with MPS I. The clinical trial is a single ascending dose design and a formal safety assessment of the first dose group will be conducted by anindependent DSMB prior to dose escalation. The trial design calls for enrollment of up to five subjects with MPS I. The first subject must be greater than 18years of age, and all subsequent subjects will be greater than or equal to six years of age. All subjects must have documented evidence of early-stageneurocognitive deficits due to MPS I. The primary endpoint will be a safety assessment. The secondary endpoints include the effect of RGX-111 onbiomarkers of IDUA activity in the CSF, serum and urine and the effect of RGX-111 on neurocognitive deficits, as well as other outcome measures.We expect to present an interim update from the RGX-111 Phase I clinical trial in late 2018.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, and similar findings have also been observed in a canine model of MPS I. These findings provide proof of concept ofAAV9 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).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 of IDS. IDS is another enzymeresponsible for the breakdown of polysaccharides heparan sulfate and dermatan sulfate in the lysosomes of cells, resulting in a progressive, multisystemdisorder with a similar phenotype to MPS I. In severe forms of the disease, early developmental milestones may be met, but developmental delay is readilyapparent by 18 to 24 months. Developmental progression begins to plateau between three and five years of age, with regression reported to begin around sixand a half years. By the time of death, most patients with CNS involvement are severely mentally handicapped and require constant care.14Table of Contents MPS II is estimated to occur in approximately 1 in 100,000 to 1 in 170,000 births. Based on global population, this equates to approximately 500 to1,000 MPS II patients born each year worldwide.Current Therapies for MPS IIIn 2006, recombinant IDS (Elaprase), an ERT, was approved by the FDA for the treatment of MPS II and has subsequently been approved for useinternationally. However, ERT does not treat CNS manifestations of MPS II, since the enzyme cannot cross the blood-brain barrier. Specific treatment toaddress the neurological manifestations of MPS II and prevent or stabilize cognitive decline remains a significant unmet medical need. Overall, thelimitations of ERT leave a significant unmet need for a method to safely achieve long-term IDS reconstitution in the CNS for MPS II patients experiencingneurological complications.RGX-121RGX-121 is our product candidate for the treatment of MPS II, which is designed to use the AAV9 vector to deliver the human IDS gene to the CNS.Delivery of the enzyme that is deficient within cells in the CNS could provide a permanent source of secreted IDS beyond the blood-brain barrier, allowingfor long-term cross-correction of cells throughout the CNS. We believe this strategy could also provide rapid IDS delivery to the brain, potentially preventingthe progression of cognitive deficits that otherwise occur in MPS II 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 have been able to build upon the learnings and experience generated in our RGX-111 program to rapidly and efficiently focus ourdevelopment efforts for RGX-121.We have received orphan drug product designation and rare pediatric disease designation from the FDA for RGX-121.Planned Clinical Development of RGX-121The IND for RGX-121 is active and we plan to initiate a Phase I/II clinical trial of RGX-121 based gene delivery via CNS administration in mid-2018in subjects with MPS II. The clinical trial is a single ascending dose design and a formal safety assessment of the first dose group will be conducted by anindependent DSMB prior to dose escalation. The trial design calls for enrollment of up to six subjects with MPS II. Subjects in the study must be greater thanor equal to four months of age and less than five years of age. All subjects must have documented evidence of neurocognitive deficits due to MPS II or have arelative diagnosed with severe MPS II who has the same IDS mutation as the subject. The primary endpoint will be a safety assessment. The secondary andexploratory endpoints include the effect of RGX-121 on biomarkers of IDS activity in the CSF, serum and urine and effect of RGX-121 on neurocognitivedeficits, as well as other outcome measures.We expect to present an interim update from the RGX-121 Phase I/II clinical trial in late 2018. 15Table of Contents 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)Human Gene Therapy: Delivery of an adeno-associated virus vector into cerebrospinal fluid attenuates central nervous system disease inmucopolysaccharidosis Type II mice, Christian Hinderer, et al. (August 2016).Other Neurodegenerative Disease ProgramsIn addition to our RGX-111 and RGX-121 programs, we have also funded, and plan to continue to fund, preclinical research on potentialneurodegenerative disease product candidate programs that may become part of our internal product development pipeline. Our goal is to develop a genetherapy franchise in neurodegenerative diseases, as well as explore further applications of NAV Technology, and we believe there are a number ofneurodegenerative diseases that may be addressable using a similar approach to our RGX-111 and RGX-121 programs. We have partnered with a number ofleading academic institutions and will continue to seek partnerships with innovative institutions to remain at the leading edge of the gene therapy field.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 specifies the vector or vectors and disease indication or indications as well as whether the sublicense is exclusive or non-exclusive. Indetermining whether to sublicense, we first evaluate whether the disease indication is of interest to us in which case we may develop a therapeutic for thedisease indication internally using our NAV Technology Platform. If it is not, we consider the size of the potential market and unmet need, competition,licensee development history and capabilities and licensee’s ability to pay in evaluating whether to enter into a license agreement. As of December 31, 2017,our NAV Technology Platform was being applied in the development of more than 20 partnered product candidates by 10 NAV Technology Licensees, mostunder a license to specific NAV Vectors for specific indications.16Table of Contents Our license agreements include upfront fees, annual maintenance fees, milestone fees based on licensee candidate progression, and low-single to low-double digit royalties on sales. Such royalties are subject to customary reductions, such as if the licensee must obtain a license from a third party to avoidinfringement of such third party’s rights in order to exercise its rights under the license granted by us. We are obligated to make payments to our licensorswith respect to the revenues we receive from our licensees for these sublicenses, in accordance with the terms of our agreements with our licensors.As of December 31, 2017, our NAV Technology Licensees had eight clinical stage programs using NAV Vectors. The chart below provides anoverview of the development status of the programs of our NAV Technology Licensees.AveXis, Inc.AveXis, Inc. License to Treat Spinal Muscular Atrophy, as Amended. In January 2018, we entered into an amendment to our 2014 license agreementwith AveXis, Inc. (AveXis). Under the amendment, we granted AveXis an exclusive, worldwide commercial license, with rights to sublicense, to anyrecombinant AAV vector in our intellectual property portfolio during the term of the license agreement for the treatment of SMA in humans by in vivo genetherapy. Under the original AveXis license agreement, we had granted AveXis a license relating only to the NAV AAV9 vector.17Table of Contents Additionally, the amendment modifies the terms and conditions of the license agreement relating to assignment. Under the amended assignmentprovision, AveXis is permitted to transfer the license agreement without our consent in connection with a change of control of AveXis, subject to thetransferee or successor agreeing in writing to be bound by the terms of the license agreement and the payment to us of certain fees due upon such change ofcontrol, as described below. Under the original 2014 license agreement, any assignment by AveXis without our prior written consent had been prohibited.The amendment also provides that, solely upon the written request of AveXis, we may, in our sole discretion after receipt of such request, provide certaincollaboration services to AveXis regarding the development and commercialization of gene therapy product candidates for the treatment of SMA.Pursuant to the amendment, in consideration for the additional rights granted thereunder and in addition to the payments and royalties owed under theoriginal 2014 license agreement, AveXis paid to us a fee of $80.0 million upon entry into the amendment. In addition, AveXis will pay to us (i) $30.0 millionon the first anniversary of the effective date of the amendment, (ii) $30.0 million on the second anniversary of the effective date of the amendment and(iii) potential commercial milestone payments of up to $120.0 million. In the event of a change of control of AveXis, to the extent that any fee described in(i) or (ii) above, or the first $40.0 million of milestone payments described in (iii) above, has not yet been paid to us, AveXis will be obliged to pay any suchunpaid fee to us upon the change of control. Additionally, for any product developed for the treatment of SMA using the NAV AAV9 vector, we will continueto receive mid-single to low double-digit royalties on net sales as defined in the original 2014 license agreement, and for any product developed for thetreatment of SMA using a NAV vector other than NAV AAV9, we will receive a low double-digit royalty on net sales.AveXis, Inc. License to Treat Rett Syndrome and Amyotrophic Lateral Sclerosis. In June 2017, we entered into an exclusive license agreement withAveXis for the development and commercialization of products to treat Rett Syndrome and amyotrophic lateral sclerosis (ALS) caused by mutations in thegene that produces the copper zinc superoxide dismutase 1 (SOD1) enzyme using AAV9. Under the license agreement, we granted AveXis an exclusive,sublicensable worldwide license under the licensed intellectual property to make, have made, use, import, sell and offer for sale licensed products in thetreatment of Rett Syndrome and ALS caused by mutations in the SOD1 gene using AAV9. In consideration for the license, AveXis paid us an up-front fee of$6.0 million, and is required to pay annual maintenance fees, milestone fees of up to $36.0 million, a low double digit royalty percentage on net sales oflicensed products, subject to reduction in specified circumstances, and a lower mid-double digit percentage of any sublicense fees AveXis receives fromsublicensees for the licensed intellectual property rights.Process Development and ManufacturingWe believe that we have the internal capabilities and access to the resources necessary to enable us to successfully commercialize NAV Gene Therapyproducts following regulatory approval, if any, by developing scalable processes to manufacture such products efficiently and at commercial quantity.AAV Vector ProductionWe have invested significantly in our internal capabilities and infrastructure, including build out and opening of our advanced manufacturing andanalytics lab, the first phase of which is complete. Our internal team possesses deep knowledge of AAV characterization and production, as well as significantexperience and expertise in biologics process development (upstream, purification and formulation), scale-up and production at large scale. We believe ourcapabilities and infrastructure will enable us to continue to be leaders in development of scalable, proprietary production methods for NAV Gene Therapyproducts. We have established internal capability to produce NAV Vectors across multiple platforms and at a scale of up to 200 liters.We have also entered into agreements with multiple leading biologics contract manufacturing organizations (CMOs) for production of material undercurrent Good Manufacturing Practice (cGMP) requirements to support our current and future clinical trials, as well as potential future commercialization ofour product development programs. We select our CMOs based on capability, capacity and expertise, and we believe our CMOs are capable of meetingglobal regulatory standards for clinical and commercial material supply. We believe partnering with multiple leading CMOs provides us with flexibility anddiversity in suppliers, as well as access to potential future capacity to accommodate the scale that may be required for future clinical trials andcommercialization.We have entered into a strategic partnership with FUJIFILM Diosynth Biotechnologies (FUJIFILM) for the manufacture of our lead productcandidates, which will support late-stage clinical development and early commercialization. Under the terms of the agreement with FUJIFILM, we gainguaranteed capacity for the supply of NAV AAV drug substance manufactured under cGMP at large scale—up to 2,000L—for three years, with the option toextend the agreement for an additional three years. FUJIFILM facilities are compliant with global regulatory standards in support of the initiation ofworldwide clinical trials for our lead product candidates.18Table of Contents In addition, we believe we have established a robust supply chain for our key raw materials to ensure both high quality standards and assurance of rawmaterial supply as we advance our programs. We believe our management team retains significant expertise in managing a diverse network of CMOs andsuppliers and that this expertise will enable us to execute on our manufacturing strategy in connection with our external partners.Proprietary MethodsWe have obtained rights to all of the proprietary technology underlying our NAV Technology Platform through our Platform Licenses (describedbelow) and our sponsored research agreements (SRAs), under which we have exclusively licensed rights to certain manufacturing-related patents and non-exclusively licensed rights to certain know-how owned or developed by Penn. This intellectual property encompasses areas including scalable AAVproduction methods, methods of increasing the packaging yield of AAV and methods of purification of AAV vectors.We have examined several methods of larger-scale manufacturing of AAV which have been optimized to yield high titer and quality vectors. However,further improvements to the efficiency and simplicity of the process may remain important to address future needs for commercial applications. Ourproduction methods utilize linearly scalable unit operations which produce robust yield and purity of the target vector.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 that 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 and has been demonstrated to scaleinto a cGMP setting with comparable yields and product quality. Our future process development activities will build upon this platform to target higheryield of vector without impacting the product purity profile.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.Gene Therapy Overview and History of Earlier Generation AAVHistorically, the primary challenge for gene therapy has been the delivery of genes into cells. Genes are made of DNA, which is a large, highly chargedmolecule that is difficult to transport across a cell membrane and deliver to the nucleus, where it can be transcribed and translated into protein. The geneticmaterial needs to be delivered efficiently and to the desired target tissues and cell types, which will vary depending on the disease to be treated. Based on thisneed, 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 frequencybecause they have demonstrated the greatest efficiency in gene delivery to date. This efficiency exists because viral vectors are derived from naturallyoccurring viruses whose normal life-cycle relies 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.19Table of Contents 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; •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.20Table of Contents 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 technology, 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.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.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 at the same dose.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.21Table of Contents 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.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.22Table of Contents Platform License Agreements and Other 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 retinal, metabolic and neurodegenerativediseases. 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 “Commercial Licenses to NAV Technology Licensees” located elsewhere in this Annual 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 James M. Wilson,M.D., Ph.D. This license was amended in September 2014 and April 2016. In February 2009, we also entered into an SRA with Penn (the 2009 SRA) underwhich we funded the nonclinical research of Dr. Wilson relating to AAV gene therapy and obtained an option to acquire an exclusive worldwide license incertain intellectual property created pursuant to such 2009 SRA. In December 2014, we entered into another SRA with Penn funding related nonclinicalresearch of Dr. Wilson (the 2014 SRA). We entered into an additional SRA (the 2013 SRA) with Penn in November 2013 which was funded entirely by ourNAV Technology Licensee, Dimension Therapeutics, Inc. (since acquired by Ultragenyx Pharmaceutical 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 “Platform License Agreements andOther Licenses—Platform Licenses—GlaxoSmithKline LLC” located elsewhere in this Annual Report on Form 10-K. Our license agreement with Pennprovides that should the rights Penn licensed to GSK ever revert to Penn, such rights shall automatically be included in our license agreement with Penn.The Penn license agreement, as amended, also provides us with a non-exclusive, worldwide license to use all data and information generated in theperformance of clinical research relating to the RGX-501 clinical trial and 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 September 2014; or •is related to the AAV technology platform discovered by Dr. Wilson at Penn after September 2014 pursuant to the 2009 SRA, the 2014SRA, the 2013 SRA or subsequent amendment to a sponsored research agreement; and •is owned by Penn; and •is necessary or useful for the practice of the licensed patent rights.23Table of Contents 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, 2017, we have incurred expenses of $3.3 million to Penn under the license agreement, excluding the equity interest issued to Pennas upfront consideration at the inception of the agreement. There are no future potential milestones to be paid under the license agreement. Our Penn licenseagreement, as amended, will terminate with respect to licensed products in a field of use other than the treatment of familial hypercholesterolemia (FH) on aproduct-by-product and country-by-country basis on the date each particular licensed product ceases to be covered by at least one valid claim, issued orpending, under the licensed patent rights. With respect to licensed products for treating FH, our Penn license agreement, as amended, will terminate on aproduct-by-product and country-by-country basis on the later of (i) the date the licensed product for treating FH ceases to be infringed or covered by a validclaim, issued or pending, under the licensed patent rights, and (ii) seven years following the first sale of such licensed product for treating FH. We canterminate this 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, as amended, we fund research at Penn and pay certain intellectual property legal and filing expenses and receive therights to the research results, if any. Under the Penn license agreement, as amended, and the 2014 SRA, as amended, all patentable inventions conceived,created, or conceived and reduced to practice pursuant to the 2014 SRA, together with patent rights represented by or issuing from the U.S. patents and patentapplications, including provisional patent applications, automatically become exclusively licensed to us and all research results are automatically licensedto us as know-how. Under the 2009 SRA, as amended, in consideration for our funding of research at Penn, we received an option to acquire a worldwidelicense on commercially reasonable terms to practice all patentable inventions conceived, created, or reduced to practice pursuant to the 2009 SRA, togetherwith patent rights represented by or issuing from the U.S. patents and patent applications, including provisional patent applications. Under our 2014 SRAwith Penn, as amended, we have agreed to fund research at Penn through 2020. We expect to continue to fund work at Penn and receive rights to the results ofthe research we fund.GlaxoSmithKline LLC. In March 2009, we entered into a license agreement with GSK, which was amended in April 2009, in order to secure theexclusive rights to patents and patent applications covering NAV Technology that GSK had previously licensed from Penn (subject to certain rights retainedby GSK and Penn). Under this GSK license agreement, we receive an exclusive, worldwide sublicense under the licensed patent rights to make, have made,use, import, sell and offer for sale products covered by the licensed patent rights anywhere in the world. Our rights under this GSK license agreement aresubject to certain rights retained by GSK for the benefit of itself and other third parties, including rights relating to: domain antibodies; RNA interference andantisense drugs; internal research purposes and GSK’s discovery research efforts with non-profit organizations and GSK collaborators; AAV8 for the treatmentof hemophilia B; AAV9 for the treatment of Muscular Dystrophy, congestive heart failure suffered by Muscular Dystrophy patients and cardiovasculardiseases by delivery of certain genes; and non-commercial research in the areas of Muscular Dystrophy, hemophilia B, congestive heart failure suffered byMuscular Dystrophy patients, and other cardiovascular disease. Under the terms of the license agreement, we issued to GSK 1,085,824 shares of our commonstock. We are obligated to pay GSK: •up to $1.5 million in aggregate milestone payments, $0.5 million of which have been accrued or paid as of December 31, 2017; •low- to mid-single digit royalty percentages on net sales of licensed products;24Table of Contents •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.As of December 31, 2017, we have incurred expenses of $7.1 million to GSK under the license agreement, excluding the equity interest issued to GSKas upfront consideration at the inception of the agreement. Under our GSK license agreement, we are required to use commercially reasonable efforts todevelop and commercialize licensed products. Our GSK license agreement will terminate upon the expiration, lapse, abandonment or invalidation of the lastlicensed claim to expire, lapse, become abandoned or unenforceable in all the countries of the world where the licensed patent rights existed. However, if nopatent ever issues from patent rights licensed from GSK, this license agreement will terminate a specified number of years after the first commercial sale of thefirst licensed product in any country. We may terminate this license agreement for any reason upon a specified number of days’ written notice. GSK canterminate 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.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. This license was amended in November 2016. Under this Minnesota license agreement, asamended, we receive an exclusive license under the licensed patent rights to make, have made, use, offer to sell or sell, offer to lease or lease, import orotherwise offer to dispose or dispose of products covered by the licensed patent rights in all fields of use in any country or territory in which a licensed patenthas been issued and is unexpired or a licensed patent application is pending.Under the terms of the Minnesota license agreement, as amended, we are obligated to pay Minnesota: •an upfront payment of $0.1 million; •up to $0.1 million 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, 2017, we have incurred expenses of $0.3 million 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.25Table of Contents Intellectual PropertyOur success depends in part on our ability to obtain and maintain intellectual property protection for our product candidates, core technologies andother know-how, to operate without infringing on the rights of others and to prevent others from infringing our rights. We strive to protect and enhance theproprietary technology, inventions, and improvements that are important to our business, including by seeking, maintaining and defending patent rights. Wealso rely on trade secrets relating to our technology platform and on know-how, continuing technological innovation and in-licensing opportunities todevelop, strengthen and maintain our position in the field of gene therapy. Additionally, we intend to rely on regulatory protection afforded through orphandrug designations, data exclusivity and market exclusivity as well as patent term extensions, where available.We anticipate that our patent portfolio will continue to expand as a result of our SRAs with academic institutions, including the 2014 SRA with Penn,and our commercial licenses to NAV Technology Licensees. For further information regarding our commercial sublicenses, please see “Commercial Licensesto NAV Technology Licensees” located elsewhere in this Annual Report on Form 10-K.Product CandidatesAs of December 31, 2017, our patent portfolio included a total of two issued U.S. patents and eight pending International Patent applications filedpursuant to the Patent Cooperation Treaty (PCTs) relating to our product candidates, which are summarized below: •RGX-314: Two PCTs for which any issued U.S. or European patent would expire in 2037; •RGX-501: One issued U.S. patent that will expire in 2026, including patent term adjustment and one PCT, for which any issued U.S. orEuropean patent would expire in 2036; •RGX-111: One issued U.S. patent that will expire in 2034; and •RGX-111/RGX-121: Five PCTs for which any issued U.S. or European patent would expire in 2034, 2036 or 2037.NAV TechnologyWe 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. As of December 31, 2017, our licensed patent portfolio included 10 issued U.S.patents and four European patents relating to the AAV7, AAV8, AAV9 and AAVrh10 vectors and uses thereof. These patents have terms that will expire aslate as 2026.Our licensed patent portfolio includes composition of matter claims for novel AAV vectors having certain other capsids and AAV capsids that haveamino acid sequences that are at least 95% identical to such capsids.Our 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); •methods of detecting an AAV nucleotide sequence useful in diagnostics; and •methods of manufacture of recombinant AAV, including patents and applications directed to scalable AAV production methods; methods ofincreasing the packaging yield, transduction efficiency, and gene transfer efficiency of an AAV, and methods of purification of viral vectors,such as AAV vectors.26Table of Contents CustomersOur revenue for the fiscal years ended December 31, 2017, 2016 and 2015 consisted of license revenue, reagent sales and grant revenue. One customer,which was based in the United States (AveXis), accounted for approximately 68% of our total revenue for the year ended December 31, 2017. No othercustomer accounted for more than 15% of revenue in 2017. Two customers, both of which were based in the United States, accounted for approximately 68%of our total revenue for the year ended December 31, 2016. No other customer accounted for more than 15% of revenue in 2016. Three customers, two ofwhich were based in the United States and one of which was based in Ireland, accounted for approximately 79% of our total revenue for the year endedDecember 31, 2015. No other customer accounted for more than 15% of revenue in 2015. Future license revenue is uncertain due to the contingent nature ofour licenses granted to third-parties and may fluctuate significantly from period to period. Refer to Note 2, “Summary of Significant Accounting Policies—Segment and Geographical Information,” in the Notes to Consolidated Financial Statements for financial data pertaining to our segment and geographicoperations.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.We incurred $57.2 million, $45.5 million and $17.3 million in research and development expenses in the years ended December 31, 2017, 2016 and2015, 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 Abeona Therapeutics Inc., AppliedGenetic Technologies Corporation, BioMarin Pharmaceutical Inc., bluebird bio, Inc., Sangamo Therapeutics, Inc., Sanofi Genzyme, Spark Therapeutics, Inc.and uniQure N.V. as well as several companies addressing other methods for modifying genes and regulating gene expression. Additionally, we havesublicensed our NAV Technology Platform for developing gene therapies in various disease indications to our NAV Technology Licensees. Not only mustwe compete with other companies that are focused on gene therapy products using earlier generation AAV technology and other gene therapy platforms, butany products that we may commercialize will have to compete with existing therapies and new therapies that may become available in the 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: •Wet AMD. Marketed competition for wet AMD largely consists of anti-VEGF therapies developed by Roche/Genentech, Inc. (Lucentis,Avastin) and Regeneron Pharmaceuticals, Inc. (Eylea). •HoFH. There are several companies with marketed products for the treatment of HoFH, including Aegerion Pharmaceuticals, Inc. (Juxtapid),Amgen Inc. (Repatha) and Kastle Therapeutics (Kynamro). •MPS I. There is one principal competitor with a marketed product for the treatment of MPS I, Sanofi Genzyme (Aldurazyme). •MPS II. The principal marketed competition for MPS II is a systemic enzyme replacement therapy, which is marketed by Shire plc (Elaprase).27Table of Contents 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 United States, biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act(FD&C Act), 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 PHSAct and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, recordkeeping, distribution, reporting, advertising and other promotional practices involving biological products. Applications to the FDA are required beforeconducting clinical testing of biological products, and each clinical study protocol for a gene therapy product is reviewed by the FDA and, in some instances,the U.S. National Institutes of Health (the NIH), through its Office of Biotechnology Activities’ Recombinant DNA Advisory Committee (RAC). FDAapproval also must be obtained before marketing biological products. The process of obtaining regulatory approvals and the subsequent compliance withappropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not beable to obtain the required regulatory approvals.Within the FDA, the Center for Biologics Evaluation and Research (CBER) regulates gene therapy products. CBER works closely with the NIH and itsRAC, which makes recommendations to the NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societal issuesrelated to proposed and ongoing gene therapy protocols. The FDA and the NIH have published guidance documents with respect to the development andsubmission of gene therapy protocols. The FDA also has published guidance documents related to, among other things, 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, scientific, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restrictingor prohibiting 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 will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courtschanged, 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 United States 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;28Table of Contents •performance of adequate and well-controlled human clinical studies according to the FDA’s requirements for good clinical practice (GCP) andadditional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of theproposed 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, as well as information on the chemistry, manufacturing and controls toensure product identity and quality, and proposed labeling; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength,quality and purity and, if applicable, the FDA’s current good tissue practice (GTP), for the use of human cellular 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.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 generally alsomust be reviewed by an institutional biosafety committee (IBC), a local institutional committee that reviews and oversees basic and clinical researchconducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment. Some studiesalso employ a DSMB, which operates with independence from the study sponsor and has access to unblinded study data during the course of the study andmay halt a study for ethical reasons such as undue safety risks.29Table of Contents 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. However, in the case of some productsfor rare, severe or life-threatening diseases, the initial human 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 approval and labeling. Post-approval clinical studies, sometimes referred to as Phase IV clinical studies,may be conducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patientsin the intended therapeutic indication, particularly for long-term safety follow-up. In some cases, Phase IV studies may be required by the FDAas a condition of approval. The FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a15-year period, including a minimum of five years of annual examinations followed by ten years of annual queries, either in person or byquestionnaire, 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 expedited reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threateningsuspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase I, Phase II and Phase III clinical studies maynot be completed successfully within any specified period, if at all. The FDA or the sponsor or its DSMB may suspend a clinical study at any time on variousgrounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend orterminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if thebiological 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, our ability to recruit sufficient numbers of study subjects for any trial, orthat the data generated in these studies will be acceptable to the FDA to support marketing approval. The NIH and the FDA have a publicly accessibledatabase, the Genetic Modification Clinical Research Information System, which includes information on gene transfer studies and serves as an electronictool 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, 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 conductedto demonstrate that the biological product candidate 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. Under the Prescription Drug User Fee Act (PDUFA), the BLA must beaccompanied by a substantial user fee payment unless an exception or waiver applies. 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 grant30Table of Contents deferrals 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 upon marketing. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will notapprove the BLA without 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 REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing 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 PDUFA is to review 90% of standard BLAs in 10 months 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. Two months are added to these time periods for newmolecular entities. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from timeto time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additionalinformation, or clarification regarding information already provided in the submission, constituting a major amendment to the BLA.31Table of Contents 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 United States, or more than 200,000 individuals inthe United States and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in theUnited States for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested beforesubmitting a BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publiclyby the FDA. Orphan product designation 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 that product for the disease or condition for which it has suchdesignation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the samedrug or biological product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the productwith orphan 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.Orphan drug products are also eligible for Rare Pediatric Disease Designation if greater than 50% of patients living with the disease are under age 18.A priority review voucher will be given to the sponsor of a product with a Rare Pediatric Disease Designation at the time of product approval that istransferable to another company.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, includingprecision drugs or biological products, that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation ifthey are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Trackdesignation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biologic mayrequest the FDA to designate the drug or biologic as a Fast Track product at any time during the clinical development of the product. Also under the FastTrack program, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application is submitted, if thesponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that theschedule is acceptable, and the sponsor pays any required 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 additional benefits when preliminary clinicalevidence demonstrates that such product may have substantial improvement on one or more clinically significant endpoints over existing therapies. The FDAwill seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design andconduct a development program as efficiently as possible. In addition, gene therapies, including genetically modified cells, that lead to a durablemodification of cells or tissues, may be eligible for regenerative medicine advanced therapy (RMAT) designation. Products with an RMAT designation areeligible for the benefits of Breakthrough Therapy in addition to allowing the sponsor the ability to participate in meetings with the FDA to discuss whetheraccelerated approval would be appropriate based on surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit. Any productis eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significantimprovement in the treatment, diagnosis or prevention of a serious or life-threatening disease or condition compared to marketed products. Specific priorityreview programs exist for material threat medical countermeasures, rare pediatric diseases and tropical diseases. The FDA will attempt to direct additionalresources to the evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the review, inaccordance with FDA guidance. Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety andeffectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive acceleratedapproval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect ona surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible32Table of Contents morbidity. As a condition of approval, the FDA will require that a sponsor of a drug or biological product receiving accelerated approval perform adequateand well-controlled post-marketing clinical studies to confirm the clinical benefit of the medicine. In addition, the FDA currently requires as a condition foraccelerated approval pre-submission of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Trackdesignation, Breakthrough Therapy or RMAT designation, priority review and accelerated approval do not change the standards for approval. Rather, theseprograms 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 and related medical communication requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling(known as “off-label use”), the requirement to balance promotion information on efficacy with important safety information and limitations on 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 or conditions of approval, such as adding newindications and additional labeling claims, are also subject to further FDA review and approval.33Table of Contents 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.A biological product can obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted in the case of a biologic approvedunder a BLA, adds six months to existing exclusivity periods. This six-month exclusivity, which runs from the end of other exclusivity protection, may begranted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.The Patient Protection and Affordable Care Act (PPACA) signed into law on March 23, 2010, includes a subtitle called the Biologics PriceCompetition and Innovation Act of 2009, which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeablewith, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize duplicative testing. Biosimilarity, which requiresthat there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can beshown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the referenceproduct and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administeredmultiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks ofdiminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structure ofbiological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being workedout 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.34Table of Contents 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, patients, purchasers and formulary managers on the other. 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 federal healthcare programs that are false or fraudulent. Federal Anti-KickbackStatute violations 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; •the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to reportannually to the Centers for Medicare & Medicaid Services (CMS) information related to payments and other transfers of value to physiciansand teaching hospitals, and ownership and investment interests held by physicians 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 these state and foreignlaws differ from federal law and from each other 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 UnitedStates 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.35Table of Contents 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, 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.U.S. Foreign Corrupt Practices ActThe U.S. Foreign Corrupt Practices Act (FCPA), to which we are subject, prohibits corporations and individuals from engaging in bribery andcorruption when dealing with foreign government officials. It is illegal to pay, offer to pay, promise or authorize the payment of money or anything of value,directly or indirectly, to any foreign government official, political party or political candidate in an attempt to secure an improper advantage in order toobtain or retain business or to otherwise influence a foreign official in his or her official capacity. Equivalent laws have been adopted in other countries thatimpose similar obligations.Government Regulation Outside of the United StatesIn addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things,clinical studies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contaminationrisks, their use may be restricted in some countries.Whether or not we obtain FDA approval 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 United States have a similar process thatrequires the submission of a clinical study application much like the IND prior to the commencement of human clinical studies. In the European Union, forexample, an application for authorization of a clinical trial must be submitted to the competent regulatory authorities and a request for a related positiveopinion must be submitted to the competent Ethics Committees in the European Union Member States in which the clinical trial takes place, much like theFDA and the IRB, respectively. Once the clinical trial has been approved by the competent regulatory authorities and a positive opinion has been providedby the competent Ethics Committees in accordance with the European Union and the European Union Member State requirements, the corresponding clinicalstudy may 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 European Medicines Agency (the EMA), commonly referred to as the EMA Regulation. Regulation1394/2007/EC lays down specific rules concerning the authorization, supervision and pharmacovigilance of gene therapy medicinal products, somatic celltherapy medicinal products and tissue engineered products. Manufacturers of advanced therapy medicinal products must demonstrate the quality, safety andefficacy of their products to the EMA which provides an opinion regarding the application for marketing authorization. The European Commission grants orrefuses marketing authorization after the EMA has delivered its opinion.36Table of Contents 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, preclinicaltests 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 in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of suchcondition authorized for marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by thecondition. Further guidance on such criteria is provided in European Commission Regulation (EC) No. 847/2000 of 27 April 2000 laying down theprovisions for implementation of the criteria for designation of a medicinal product as an orphan medicinal product and definitions of the concepts “similarmedicinal product” and “clinical superiority”. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers andfollowing grant of a marketing authorization, the EMA and the European Union Member States’ competent authorities are not permitted to accept anotherapplication for a marketing authorization, or grant a marketing authorization or accept an application to extend an existing marketing authorization, for thesame therapeutic indication of a similar medicinal product for ten years following grant or authorization. The application for orphan drug designation mustbe submitted before the application for marketing authorization. The applicant may receive a fee reduction for the marketing authorization application if theorphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drugdesignation does not convey any 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 United States, medicinal products authorized in the European Union may be subject to post-authorizationobligations, including the obligation to conduct Phase IV trials.37Table of Contents 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.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 2, 2018, we employed 139 full-time employees, including 99 in research and development and 40 in executive, general andadministrative functions. We have never had a work stoppage, and none of our employees are represented by a labor organization or under any collectivebargaining arrangements. 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 9600 Blackwell Road, Suite 210, Rockville, MD 20850, and ourtelephone number is (240) 552-8181.38Table of Contents Available InformationWe file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Exchange Act. The public may read andcopy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtaininformation on the operation of the Public Reference Room by calling the SEC at 1‑800‑SEC‑0330. Also, the SEC maintains a website that contains reports,proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain anydocuments that we file with the SEC at www.sec.gov.The public also may view and download copies of our SEC filings free of charge at our website, www.regenxbio.com. Our website and the informationcontained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this AnnualReport on Form 10-K. Investors should also note that we use our website, as well as SEC filings, press releases, public conference calls and webcasts, toannounce financial information and other material developments regarding our business. We use these channels, as well as the social media channels listedon our website, to communicate with investors and members of the public about our company. It is possible that the information that we post on these socialmedia channels could be deemed material information. Therefore, we encourage investors, the media and others interested in our company to review theinformation that we post on these social media channels. 39Table of Contents ITEM 1A.RISK FACTORSYou should carefully consider the risk factors set forth below as well as the other information contained in this Annual Report on Form 10-K and inour other public filings in evaluating our business. Any of the following risks could materially and adversely affect our business, financial condition orresults of operations. In addition, these risks could cause actual results and developments to differ materially and adversely from those projected in theforward-looking statements contained in this Annual Report on Form 10-K (please read the Information Regarding Forward-Looking Statements appearingat the beginning of this Form 10-K). The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to usor that we currently view to be immaterial may also materially adversely affect our business, financial condition or results of operations. In thesecircumstances, the market price of our common stock would likely decline and you could lose all or part of your investment.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. Only a few gene therapy products have been approved in the United States, the European Union or elsewhere.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 U.S. Food and Drug Administration (the FDA), the European Medicines Agency (the EMA) and otherregulatory authorities and the criteria these regulators use to determine the quality, safety and efficacy of a product candidate vary substantially according tothe type, complexity, novelty and intended use and market of such product candidates. The regulatory approval process for novel product candidates such asours can be significantly more expensive and take longer than for other, better known or more extensively studied product candidates. Only a few genetherapy products have been approved in the United States, the European Union or elsewhere. It is difficult to determine how long it will take or how much itwill cost to obtain regulatory approvals for our product candidates in the United States, the European Union or elsewhere, or how long it will take tocommercialize our product candidates. Furthermore, approvals by one regulatory authority may not be indicative of what other regulatory authorities mayrequire for approval, and approvals of ex vivo gene therapy products may not be indicative of what may be required for approval of in vivo gene therapyproducts.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, according to NIH,the RAC will only publicly review clinical trials if the trials cannot be evaluated by standard oversight bodies and pose unusual risks. Although the FDAdecides whether individual gene therapy protocols may proceed, the RAC public review process, if undertaken, can delay the initiation of a clinical trial,even if the FDA has reviewed the trial design and details and approved its initiation. Conversely, the FDA can put an investigational new drug application(IND) on a clinical hold even if the RAC has provided a favorable review or an exemption from in-depth, public review. If we were to engage an NIH-fundedinstitution to conduct a clinical trial, that institution’s institutional biosafety committee as well as its institutional review board (IRB) would need to reviewthe proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by othersmay cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates.In the European Union, the EMA’s Committee for Advanced Therapies (CAT) is responsible for assessing the quality, safety and efficacy of advancedtherapy medicinal products. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for a gene therapy medicinalcandidate that is submitted to the EMA. The development and evaluation of a gene therapy medicinal product must be considered in the context of therelevant European Union guidelines, and we may be required to comply with new guidelines concerning the development and marketing authorization forgene therapy medicinal products.40Table of Contents Additionally, we may seek regulatory approval in territories outside the United States and the European Union, which may have their own regulatoryauthorities along with frequently changing requirements or guidelines. The regulatory review committees and advisory groups in the United States, theEuropean Union and elsewhere, and any new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additionalstudies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of ourproduct candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult withthese regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development ofcertain of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would haveexpected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market coulddecrease our ability to generate product revenue, and our business, financial condition, results of operations and prospects would be materially harmed.Our business depends substantially on the success of our lead product candidates. If we are unable to obtain regulatory approval for, or successfullycommercialize, our lead product candidates, our business will be materially harmed.Our lead product candidates are in the early stages of development and will require substantial clinical development and testing, manufacturingbridging studies and process validation and regulatory approval prior to commercialization. Successful continued development and ultimate regulatoryapproval of our lead product candidates is critical for our future business success and our ability to generate product revenue. We have invested, and willcontinue to invest, a significant portion of our financial resources in the development of our lead product candidates. We will need to raise sufficient fundsfor, and successfully complete, our clinical trials of our lead product candidates in appropriate subjects. The future regulatory and commercial success ofthese product candidates is subject to a number of risks, including the following: •we may not have sufficient financial and other resources or patient availability to complete the necessary 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 payors asa 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 other adverse effects for reasons that may or may not be related to ourNAV Technology 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 the expected conditions, our lead product candidates will likely compete with other treatments then available,including the off-label use of products already approved for marketing and 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.41Table of Contents Of the large number of biologics and drugs in development in the biopharmaceutical 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, even if we are able to obtain the requisite financing to continue to fundour development programs, we cannot assure you that our lead product candidates will be successfully developed or commercialized. If we or any of ourfuture development partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize, our lead productcandidates, 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. RGX-111, RGX-121, RGX-314 and RGX-501 are our only clinical programs and 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 for multiple programs, which would materiallyharm our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical,financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.We have tested only two of our product candidates in our own clinical trials.Gene therapy development has inherent risks. Only two of our product candidates, RGX-314 and RGX-501, have ever been used in a clinical trial, ourlead product candidates have limited preclinical results 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 current or planned clinical trials will be successful, and any safety concerns observed in any one of our current orplanned clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications.In addition, failure of one or more of our viral vectors, whether in our 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.42Table of Contents Because we are developing product candidates for the treatment of certain diseases in which there is little clinical experience and we are using newendpoints or methodologies, there is increased risk that the FDA, the EMA or other regulatory authorities may not consider the endpoints of our clinicaltrials 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 or other regulatory bodies may not consider the clinical trial endpoints toprovide clinically meaningful results (reflecting a tangible benefit to patients). In addition, the resulting clinical data and results may be difficult to analyze.Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoints to adegree of statistical significance. Further, even if we do achieve the pre-specified criteria, we may produce results that are unpredictable or inconsistent withthe results of the non-primary endpoints or other relevant data. The FDA also weighs the benefits of a product against its risks, and the FDA may view theefficacy results in the context of safety as not being supportive of regulatory approval. The EMA and other regulatory authorities in the European Union andother countries may make similar comments with respect to these endpoints and data.The results from our preclinical studies or clinical trials for our product candidates may not support as broad a marketing approval as we seek, and theFDA, the EMA or other regulatory authorities may require us to conduct additional clinical trials or evaluate subjects for an additional follow-up period.While we believe our product candidates should be applicable for the treatment of patients with certain conditions, the results from our preclinical andplanned clinical trials may not support as broad of a marketing approval as we seek. Even if we obtain regulatory approval for our product candidates, wemay be required by the FDA, the EMA or other regulatory bodies to conduct additional clinical trials to support approval of our product candidates forpatients diagnosed with different mutations of the respective diseases to which our product candidates relate. This could result in our experiencingsignificant increases in costs and substantial delays in obtaining, or never obtaining, marketing approval for our product candidates to treat patients. Theinability to market our product candidates to treat patients for the intended indications would materially harm our business, financial condition, results ofoperations 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 clinical trialsdepends on our ability to recruit patients to participate as well as completion of required follow-up periods. If patients are unwilling to participate in our genetherapy studies because of negative publicity from adverse events related to the biotechnology or gene therapy fields, competitive clinical trials for similarpatient populations, clinical trials in products employing our vectors or our platform, the need and length of time required to discontinue other treatment orfor other reasons, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of our product candidates may be delayed,perhaps significantly. For example, due to the novel mechanism of our product candidates, we may implement a screening and clinical protocol that isinnovative for gene therapy clinical trials, including requiring the discontinuation of some current therapies for a certain period of time before treatmentadministration. These delays could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our productcandidates 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;43Table of Contents •need and length of time required to discontinue other potential treatment options; •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; •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 marketing approvalsworldwide. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinicaltrials required by the FDA, the EMA or other regulatory authorities. Our ability to successfully initiate, enroll and complete a clinical trial in any foreigncountry 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 commencement and 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, including as a result of a serious adverse event or after an inspection of our clinical trialoperations or 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;44Table of Contents •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.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.Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials.Results from preclinical studies or early stage clinical trials are not necessarily predictive of future clinical trial results, and interim results of a clinicaltrial are not necessarily indicative of final results. Our product candidates and our NAV Technology Licensees’ product candidates may fail to show thedesired safety and efficacy in clinical development despite positive results in preclinical studies or having successfully advanced through initial clinicaltrials. The clinical trial process may fail to demonstrate that any of our product candidates or our NAV Technology Licensees’ product candidates are safe forhumans and effective for indicated uses. This failure may cause us or the relevant NAV Technology Licensee to abandon the relevant product candidate,which could materially and adversely affect our business, financial condition, results of operations and prospects.There is a high failure rate for drugs and biologic products proceeding through clinical trials. Many companies in the biotechnology andpharmaceutical industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing andearlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or preventregulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policyduring the period of our product candidate development. Success in preclinical testing and early clinical trials does not ensure that later clinical trials willgenerate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. The design of a clinical trial candetermine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial iswell advanced. Our company has limited experience in designing clinical trials and we may be unable to design and execute a clinical trial to supportregulatory approval. Any of these factors could materially and adversely affect our business, financial condition, results of operations and prospects.45Table of Contents Our NAV Technology Platform, our product candidates or NAV Technology Licensees’ product candidates, and the process for administering suchproduct candidates may cause undesirable side effects or have other properties that could delay or prevent regulatory approval of product candidates,limit the commercial potential or result in significant negative consequences following any potential marketing 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. While new recombinant vectors have been designed to reduce these side effects,gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk ofdelayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components ofproducts used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologicreaction early after administration which could substantially limit the effectiveness of the treatment. In previous clinical trials involving AAV vectors forgene therapy, some subjects experienced the development of a T-cell response, whereby after the vector is within the target cell, the cellular immune responsesystem triggers the removal of transduced cells by activated T-cells. If our vectors demonstrate a similar effect, we may decide or be required to halt or delaypreclinical development 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 regulatory authorities could order us to cease further developmentof, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that all future serious adverse events arenot product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or arerequired, to delay, suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of such product candidates may beharmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harmour ability to develop other product candidates and may harm our business, financial condition and prospects significantly.Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and MitigationStrategy (REMS) and other regulatory authorities could impose other specific obligations as a condition of approval to ensure that the benefits of our productcandidates outweigh their risks, which could delay approval of our product candidates. A REMS may include, among other things, a medication guideoutlining the risks of the product for distribution to patients; a communication plan to health care practitioners or patients; and elements to assure safe use,which can severely restrict the distribution of a product by, for example, requiring that health care providers receive particular training and obtain specialcertification prior to prescribing and dispensing the product, limiting the healthcare settings in which the product may be dispensed, and subjecting patientsto monitoring and enrollment in a registry. If the FDA requires us to adopt a REMS for our products and we are unable to comply with its requirements, theFDA may deem our products to be misbranded and we may be subject to civil money penalties. The European Commission, the EMA and other regulatoryauthorities may, following grant 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.46Table of Contents We may be unable to obtain orphan drug designation or exclusivity for some product candidates. If our competitors are able to obtain orphan drugexclusivity for products that constitute the same drug and treat the same indications as our product candidates, we may not be able to have competingproducts approved by the applicable regulatory authority for a significant period of time.Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patientpopulations as 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 arare disease or condition, which is defined under the Food, Drug and Cosmetic Act as having a patient population of fewer than 200,000 individuals in theUnited States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drugwill be recovered from sales in the United States. In the European Union, following the opinion of the EMA’s Committee for Orphan Medicinal Products, theEuropean Commission grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment ofa life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, orphandesignation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chroniccondition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment indeveloping 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 United States and 10 years in theEuropean Union. The exclusivity period in the United States can be extended by six months if the BLA sponsor submits pediatric data that fairly respond to awritten request from 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 criteriafor orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may berevoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficientquantity of the product 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.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 United States, even after an orphan drug is approved, the FDA maysubsequently approve 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 isshown to be safer, more effective or makes a major contribution to patient care. In the European Union, marketing authorization may be granted to a similarmedicinal product 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 studies and clinical trials, we cannot predict when, or if, we will obtain regulatory approval tocommercialize a product candidate and the approval may be for a narrower 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.47Table of Contents Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations inthe form of narrow indications, warnings or a REMS. These regulatory authorities may require precautions or contra-indications with respect to conditions ofuse or they may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve thelabeling claims that are necessary or desirable for the successful commercialization of our product candidates. Any of the foregoing scenarios couldmaterially harm the commercial prospects for our product candidates and materially harm our business, financial condition, results of operations andprospects.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 (the EEA)) of a companion diagnostic device, since it may be necessary to use FDA-cleared or FDA-approved, orCE-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. The FDA has articulated a policyposition that, when safe and effective use of a therapeutic product depends on a diagnostic device, the FDA generally will require approval or clearance of thecompanion diagnostic device at the same time that FDA approves the therapeutic product. The FDA’s guidance allows for two exceptions to the general ruleof concurrent drug/device approval, namely, when the therapeutic product is intended to treat serious and life-threatening conditions for which no alternativeexists, and when a serious safety issue arises for an approved therapeutic agent, and no FDA-cleared or FDA-approved companion diagnostic test is yetavailable. It is unclear how the FDA will apply this policy to our current or future gene therapy product candidates. Should the FDA deem genetic tests usedfor diagnosing patients for our therapies to be in vitro companion diagnostics requiring FDA clearance or approval, we may face significant delays orobstacles in obtaining approval of a BLA for our product candidates.In the European Union, companion diagnostics are subject to the European Union Directive on in vitro diagnostic medical devices and itsimplementation in the European Union Member States. Recently revised European Union laws on in vitro diagnostics will apply beginning in 2022 andprovide stricter requirements for in vitro diagnostic medical devices and impose additional obligations on manufacturers of in vitro diagnostic medicaldevices that may impact the development and authorization of our product candidates in the European Union. For example, the new regulation extends therequirement for performance assessment procedures and requires greater involvement of notified bodies in the development of in vitro diagnostic medicaldevices. This may result in additional regulatory and premarket requirements to market new in vitro diagnostic medical devices. Companies producing invitro diagnostic medical devices will be required to have a responsible person to oversee regulatory compliance. In addition, the new regulation modifies therisk classification of in vitro diagnostic medical devices in a manner that could increase the number of products classified in higher risk classes that aresubject to stricter regulation.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, or obligations imposed as a condition for marketing authorization byother regulatory authorities, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or containrequirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the quality, safety and efficacy ofthe product. For example, in the United States, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a productto meet the specifications in the BLA. FDA guidance advises that patients treated with some types of gene therapy undergo follow-up observations forpotential adverse events for as long as 15 years. The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approvalfor certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with the FDArules and are subject to FDA review, in addition to other potentially applicable federal and state laws.In the European Union, the advertising and promotion of our product candidates may be subject to laws governing promotion of medicinal products,interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individualEuropean Union Member States may apply to the advertising and promotion of medicinal products. These laws require that promotional materials andadvertising in relation to medicinal products comply with the product's Summary of Product Characteristics (SmPC), as approved by the competentauthorities. The SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product. It forms anintrinsic and integral part of the marketing authorization granted for the medicinal product. Promotion of a medicinal product that does not comply with theSmPC is considered to constitute off-label promotion. The off-label promotion of medicinal products is prohibited in the European Union. The applicablelaws also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of the rules governing the promotion of medicinalproducts in the European Union could be penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict theadvertising and promotion of our products to the general public and may also impose limitations on our promotional activities with health care professionals.48Table of Contents 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.In the European Union, marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversightby the EMA and the competent authorities of the individual European Union Member States both before and after grant of the manufacturing and marketingauthorizations. This includes control of compliance with cGMP rules. We and our third party manufacturers would be required to ensure that all of ourprocesses, methods, and equipment are compliant with cGMP. Failure by us or by any of our third party partners, including suppliers, manufacturers anddistributors, to comply with European Union laws and the related laws of individual European Union Member States governing the conduct of clinical trials,manufacturing approval, marketing authorization of medicinal products and marketing of such products following authorization may result in administrative,civil or criminal penalties.In addition, European Union legislation related to pharmacovigilance, or the assessment and monitoring of the safety of medicinal products, providesthat the EMA and the competent authorities of the European Union Member States have the authority to require companies to conduct additional post-approval clinical efficacy and safety studies. The legislation also governs the obligations of marketing authorization holders with respect to additionalmonitoring, adverse event management and reporting. Under the pharmacovigilance legislation and its related regulations and guidelines, we may berequired to conduct ongoing assessments of the risks and benefits of marketed products, including the possible requirement to conduct additional clinicalstudies, which may be time-consuming and expensive and could materially decrease our profitability.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 United States or abroad. If we are slow or unable to adapt to changes inexisting requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketingapproval that we may have obtained and we may not achieve or sustain profitability, which would materially harm our business, financial condition, resultsof operations and prospects.49Table of Contents 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 United States, which would limit our market opportunities and harm our business.Approval of a product candidate in the United States 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 United States will be subject to foreign regulatory requirements governing clinical trials andmarketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also mustapprove the manufacturing and marketing of the product candidates in those countries. Approval procedures vary among jurisdictions and can involverequirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies orclinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in thatcountry. In some cases, the price that we intend to charge for our products, if approved, is also subject to approval. We intend to submit a marketingauthorization application to EMA for approval of our product candidates by the European Commission in the European Union. However, obtaining suchapproval from the European Commission following the opinion of EMA is a lengthy and expensive process. Even if a product candidate is approved, theFDA or the European Commission, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on theproduct labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities incountries outside of the United States and the European Union also have requirements for approval of product candidates with which we must comply prior tomarketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays,difficulties and costs for us and could delay or prevent the introduction 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.50Table of Contents 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 normally incurlosses for the foreseeable 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, 2017, 2016 and 2015, were $73.2 million,$63.0 million and $22.8 million, respectively. As of December 31, 2017, we had an accumulated deficit of $187.8 million. We historically have financed ouroperations primarily through private and public offerings of our equity securities and sublicensing rights to our NAV Technology Platform. We have devotedsubstantially all of our efforts to licensing our NAV Technology Platform and to research and development, including preclinical and clinical developmentof our product candidates, as well as to building out our team. We expect that it could be several years, if ever, before we commercialize a product candidate.We license certain intellectual property related to our NAV Technology Platform to third parties. Our NAV Technology Licensees have multiple preclinicalstudies and clinical trials in progress. However, no NAV Technology Licensee has an approved or commercialized gene therapy product based on suchlicensing program. We expect to normally generate only limited revenue, if any, from our current NAV Technology Licensees and any future NAVTechnology Licensees in the near term. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Thenet losses we incur may fluctuate significantly from quarter to quarter. We anticipate 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 and clinical development of our 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 additional activities relating to manufacturing, including building out additional laboratory and manufacturing capacity; •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; •expand our medical affairs efforts; •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 product candidates, commencing and completing clinical trials of productcandidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we may obtainmarketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may nevergenerate 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.51Table of Contents We may 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 expect to require substantial future capital in order to complete research studies, preclinical and clinical development for our current productcandidates and any future product candidates, and potentially commercialize these product candidates. We expect our spending levels to increase inconnection with our preclinical and clinical trials of our product candidates. 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 incuradditional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with ourcontinuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate certain of ourlicensing activities, our research and development programs or other operations.Our operations have consumed significant amounts of cash since inception. As of December 31, 2017, our cash, cash equivalents and marketablesecurities were $176.4 million. We expect that our cash, cash equivalents and marketable securities as of December 31, 2017 will enable us to fund ouroperating expenses and capital expenditure requirements for at least the next 12 months from the date of this report, based on our current business plan.Our future capital requirements will depend on many factors, including: •the timing of enrollment, commencement and completion of our clinical trials; •the results of our clinical trials; •the results of our preclinical studies for our 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 productcandidates; •the costs associated with building out additional laboratory and manufacturing capacity, if any; •the costs, timing and outcome of regulatory review of our product candidates; •the costs of future product sales, medical affairs, marketing, manufacturing and distribution activities for any of our product candidates forwhich 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 or collaborations 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, and no products have been commercialized by us or our NAV Technology Licenseesusing our NAV Technology Platform to date. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.52Table of Contents 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 normally generating only limited revenue fromour NAV Technology Platform sublicensing in the near future. To date, a significant portion of our revenues have been generated from the sublicensing ofrights to our NAV 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 agreements with our licensor partners, including GlaxoSmithKline LLC (GSK) and the University of Pennsylvania(Penn); •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, the sale of licensed reagents to third-parties for use in research and development and grant revenue generated through research anddevelopment grant programs offered by the U.S. federal government and the European Union. We expect grant revenue to be minimal in future periods, as wecurrently do not expect to receive any new grant awards. We do not dedicate resources to sales efforts for reagents. Accordingly, future revenue from reagentsales is uncertain and may fluctuate significantly from period to period. We do not anticipate generating revenues from our and our NAV TechnologyLicensees’ product candidate sales for the next several years, if ever. Our ability to generate future revenues from product candidate sales depends heavily onour, or our NAV Technology Licensees’, success in: •completing research studies and preclinical and clinical development of 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 regulatory and marketing approval is obtained 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;53Table of Contents •qualifying for adequate coverage and reimbursement by government and third-party payors for 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 product candidates, if approved; •obtaining market acceptance of 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.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.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.Our company was formed in July 2008. Our operations to date have predominantly focused on organizing and staffing our company, businessplanning, raising capital, acquiring our technology, administering and expanding our NAV Technology Platform sublicensing, identifying potential productcandidates, undertaking research, preclinical studies and clinical trials of our product candidates and establishing licensing arrangements and collaborations.We have not yet fully demonstrated the ability to continue expansion of our NAV Technology Platform sublicensing efforts, complete and report clinicaltrials of our product candidates, obtain marketing approvals, manufacture a commercial-scale product or conduct sales and marketing activities necessary forsuccessful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if wehad a longer operating history.In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. Wehave been transitioning from a company with a licensing and research focus to a company that is also capable of supporting clinical development activitiesand we may need to transition to supporting commercial activities in the future. We may not be successful in these transitions.Changes in accounting standards and disagreements by the SEC, the Financial Accounting Standards Board (FASB) or various other bodies with respectto the interpretations, estimates and judgments required for the preparation of our financial statements could result in the restatement of our financialstatements 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, FASB and various other bodies formed to interpret and create appropriate accounting principles andguidance. In the event that these rules change with respect to a matter that is or may become relevant to our business, such as revenue recognition, assetimpairment and fair value determinations, inventories, business combinations and intangible asset54Table of Contents valuations, leases and litigation, or in the event that one of these bodies disagrees with our accounting recognition, measurement or disclosure or any of ouraccounting interpretations, estimates or assumptions, it may have a significant effect on our reported results and may retroactively affect previously reportedresults. The need to restate our financial results could, among other potential adverse effects, result in us incurring substantial costs, affect our ability totimely file our periodic reports until such restatement is completed, divert the attention of our management and employees from managing our business,result in material changes to our historical and future financial results, result in investors losing confidence in our operating results, subject us to securitiesclass action litigation, and cause our stock price to decline.If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy 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 and provide a management report on internal control over financial reporting. When we are no longer an emerging growth company, as defined inthe Jumpstart Our Business Startups Act of 2012 (the JOBS Act), our management report on internal control over financial reporting will need to be attestedto by our independent registered public accounting firm. We have not had, and do not expect to have, our independent registered public accounting firmattest to our management report on internal control over financial reporting while we are an emerging growth company. Had our independent registeredpublic accounting firm performed an evaluation of the effectiveness of our internal control over financial reporting in accordance with Section 404, it ispossible that material weaknesses may have been identified.If we have, or fail to identify, a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis, theaccuracy and timing of our financial reporting may be adversely affected and our financial statements may be materially misstated. In addition, our internalcontrol over financial reporting will not prevent or detect all errors and fraud. Because of the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will bedetected.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, the SEC or other regulatory authorities, which could require additionalmanagement attention and which could adversely affect our business.Changes in U.S. federal, state and local or foreign tax laws, interpretations of existing tax laws, or adverse determinations by tax authorities, couldincrease our tax burden or otherwise adversely affect our financial condition or results of operations.We are subject to taxation at the U.S. federal, state and local levels and in foreign jurisdictions. Our future tax rates and cash flows could be affected bychanges in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in the composition ofearnings in jurisdictions with differing tax rates, changes in determinations regarding the jurisdictions in which we are subject to taxation, and our ability torepatriate earnings from foreign jurisdictions. From time to time, governments may make substantive changes to their tax rules and the application thereof,which could result in materially higher corporate taxes than would be incurred under existing tax laws and could otherwise adversely affect our financialcondition or results of operations.We are subject to ongoing and periodic tax audits. An unfavorable outcome from any tax audit could result in higher tax costs, penalties or interest, oradjustments to our tax credits or net operating losses (NOLs), which could adversely affect our financial condition or results of operations.We have incurred substantial net losses since inception and expect to normally incur losses for the foreseeable future. Under the Internal RevenueCode of 1986, as amended (the Code), we can carry forward our NOLs and other unused tax attributes, such as tax credits, to offset our future taxable income,if any, until such NOLs or other tax attributes are used or expire. If we undergo an “ownership change,” generally defined as a greater than 50% change byvalue in our equity ownership over a three-year period, the Code would limit our ability to use carryovers of our pre-ownership change NOLs, tax credits andcertain other tax attributes to reduce our tax liability for periods after the ownership change. Therefore, an ownership change could result in increased U.S. taxliability for us if we generate taxable income in a future period.55Table of Contents In December 2017, the Tax Cuts and Jobs Act of 2017 (the TCJA) was signed into law, which significantly reforms the Code. The TCJA, among otherthings, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%,limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for NOLs to80% of current year taxable income, elimination of NOL carrybacks, one-time taxation of offshore earnings at reduced rates regardless of whether they arerepatriated, elimination of U.S. tax on foreign earnings (subject to certain significant exceptions), immediate deductions for certain new investments insteadof deductions for depreciation expense over time, and modification or repeal of many business deductions and credits, including the orphan drug tax credit.The overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to whatextent various states will conform to the TCJA. The impact of the TCJA on our securityholders is also uncertain and could be adverse. Prospective investorsshould consult with their legal and tax advisors with respect to the TCJA and the potential tax consequences of investing in or holding our securities.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., could 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 AAV vectors discovered at Penn in the laboratory of James M. Wilson. This license agreement has been amendedfrom time to time. In February 2009, we also entered into a sponsored research agreement (the 2009 SRA with Penn, under which we funded the nonclinicalresearch of Dr. Wilson relating to AAV gene therapy and obtained an option to acquire an exclusive worldwide license in certain intellectual property createdpursuant to the 2009 SRA. In December 2014, we entered into another sponsored research agreement (the 2014 SRA) with Penn, under which we fund relatednonclinical research of Dr. Wilson. The 2009 SRA and the 2014 SRA have each been amended from time to time.Under the 2014 SRA, as amended, we fund nonclinical research at Penn and pay certain intellectual property legal and filing expenses and receive therights to the research results. 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, automatically becomeexclusively licensed to us under our existing licensing agreement with Penn and all research results are automatically licensed to us as know-how in ourexisting license agreement. Under our 2014 SRA with Penn, as amended, we have agreed to fund research at Penn through 2020. We expect to seek to amendthe 2014 SRA in order to continue to fund work and receive rights to the results of the research we fund at Penn. Although we are currently developing ourinternal nonclinical research and development capabilities, a loss of our relationship with Penn or Dr. Wilson could materially harm our business.We rely on third parties to conduct certain aspects of our clinical trials. If these third parties do not meet our deadlines or otherwise conduct the trials asrequired, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercializeour product candidates when expected or at all.We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. We are dependent on third parties to conduct theclinical trials for RGX-501 and certain aspects of our clinical trials for other product candidates and, therefore, the timing of the initiation and completion ofthese trials may be controlled by such third parties and may occur on substantially different timing from our estimates. Specifically, we rely on Penn toconduct our Phase I/II clinical trial for RGX-501 and we may also rely on CROs, medical institutions, clinical investigators, consultants or other third partiesto conduct our trials in accordance with our clinical protocols and regulatory requirements.There is no guarantee that Penn or any other third party on which we rely for administration and conduct of our clinical trials will devote adequatetime and resources to such trials or perform as contractually required. If any such third party fails to meet expected deadlines, fails to adhere to our clinicalprotocols or otherwise performs in a substandard manner, our clinical trials may be extended, delayed, or terminated, which could materially harm ourbusiness. Additionally, if any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on subjects enrolled inour ongoing clinical trials unless we are able to transfer those subjects to another qualified clinical trial site. Furthermore, principal investigators for ourclinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with suchservices. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at theapplicable clinical trial site may be jeopardized, which could result in substantial delays in our clinical trials and materially harm our business.56Table of Contents We have in the past, and in the future may, enter into licensing agreements or collaborations with third parties licensing parts of our NAV TechnologyPlatform for the development of product candidates. If these licensing arrangements or collaborations 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 current and future licensees and collaborators, including our NAV Technology Licensees, dedicateto the development or commercialization of product candidates or of products utilizing licensed components of our NAV Technology Platform. Our ability togenerate revenues from these arrangements will depend on our and our licensees’ and collaborators’ abilities to successfully perform the functions assigned toeach of us in these arrangements. In addition, our licensees and collaborators have the ability to abandon research or development projects and terminateapplicable agreements. Moreover, an unsuccessful outcome in any clinical trial for which our licensee or collaborator is responsible could be harmful to thepublic perception and prospects of our NAV Technology Platform or product candidates.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 suffer adverse effects,including death; •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; •licensees or collaborators may breach their reporting, payment, intellectual property or other obligations to us, which could prevent us fromcomplying with our contractual obligations to GSK and Penn; •disagreements with licensees or 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;57Table of Contents •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 license agreement orcollaboration. If we do not receive the payments we expect under these agreements, our development of product candidates could be delayed and we mayneed additional resources to develop our product candidates. In addition, if one of our licensees or collaborators terminates its agreement with us, we mayfind it more difficult to attract new licensees or collaborators and the perception of us in the business and financial communities could be harmed. Each of ourlicensees and collaborators is subject to similar risks with respect to product development, regulatory approval and commercialization, and any such riskcould result in its business being harmed, which could adversely affect our collaboration.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.We may not be successful in finding strategic collaborators for continuing development of certain of our product candidates or successfullycommercializing our product candidates.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.58Table of Contents 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 rely on third parties, including contractors, to research, develop and manufacture our product candidates, we must, at times, share tradesecrets 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, are inadvertentlyincorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, onour know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure would impair ourcompetitive 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 collaborate with, or may collaborate with in the future, will sometimes be granted rights to publish data arising out of such collaboration, provided that weare notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectualproperty rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication.We may 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 ManufacturingProducts intended for use in gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result indelays in our development or commercialization programs, limit the supply of our products or otherwise harm our business.We currently have development, manufacturing and testing agreements with third parties to manufacture supplies of our product candidates, inaddition to our internal manufacturing laboratory. Several factors could cause production interruptions, including equipment malfunctions, facilitycontamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations ofsuppliers.Our product candidates require processing steps that are more complex than those required for most chemical pharmaceuticals. Moreover, unlikechemical pharmaceuticals, the physical and chemical properties of biologics such as ours generally cannot be fully characterized. As a result, assays of thefinished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, we employ multiple steps to control ourmanufacturing process to assure that the process works and the product candidate is made strictly and consistently in compliance with the process. Problemswith the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lotfailures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other applicable foreign standards or specifications with consistent and acceptable production yields and costs.In addition, the FDA, the EMA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product togetherwith the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA or other foreign regulatory authoritiesmay require that we not distribute a lot until the competent authority authorizes its release. Slight deviations in the manufacturing process, including thoseaffecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Lot failures orproduct recalls could cause us to delay clinical trials or product launches which could be costly to us and otherwise harm our business, financial condition,results of operations and prospects.We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to operate ourmanufacturing process which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.59Table of Contents 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 ourmanufacturing agreements with third parties be terminated for any reason, there may be a limited number of manufacturers who would be suitablereplacements and it could take a significant 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.Before we can begin to commercially manufacture our product candidates in third-party or our own facilities, we must obtain regulatory approval fromthe FDA, which includes a review of the manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriateEuropean Union regulatory authorities and may be required by other foreign regulatory authorities. The timeframe required to obtain such approval orauthorization is uncertain. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with cGMP, andperform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out ofcompliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while wework to identify suitable replacement vendors, contract laboratories or suppliers. The cGMP requirements govern quality control of the manufacturingprocess and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, recordkeeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements,we would be subject to possible regulatory action and may not be permitted to sell any products 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 most of the material for our planned preclinical and clinical programs. We currently rely, andexpect to continue to rely, on third parties for the production of our preclinical study and planned clinical trial materials and, therefore, we can control onlycertain aspects of their activities.We rely on additional third parties to manufacture ingredients of our product candidates and to perform quality testing, and reliance on these thirdparties 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, EMA or other regulatory authority action, including injunction, recall, seizure ortotal or partial suspension of product manufacture or manufacturing authorization.Failure to comply with ongoing manufacturing regulatory requirements could cause us to suspend production or put in place costly or time-consumingremedial measures.Regulatory authorities may, at any time following approval of a product for sale, audit the manufacturing facilities for such product. If any suchinspection or audit identifies a failure to comply with applicable regulations, or if a violation of product specifications or applicable regulations occursindependent of such an inspection or audit, the relevant regulatory authority may require remedial measures that may be costly or time-consuming toimplement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of amanufacturing facility. Any such remedial measures imposed upon us or any of our third-party manufacturers could materially harm our business, financialcondition, results of operations and prospects.60Table of Contents If we or any of our third party-manufacturers fail to comply with applicable cGMP regulations, regulatory authorities can impose regulatory sanctionsincluding, among other things, refusal to approve a pending application for a new product candidate or suspension or revocation of a pre-existing approval.Such an occurrence may cause our business, financial condition, results of operations and prospects to be materially harmed.Additionally, if supply from a manufacturing facility is interrupted, there could be a significant disruption in commercial supply of our products. Analternative manufacturer would need to be qualified, through a supplement to its regulatory filing, which could result in further delay. Regulatory authoritiesalso may require additional trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs andcould result in a delay in our desired clinical and commercial timelines.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 and 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 and other components required in our manufacturing process are derived from biologic sources. Such raw materials aredifficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derivedsubstances in the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinicalmaterial, which could materially 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 generate sufficient productrevenue to sustain our business. We compete with many companies that currently have extensive, experienced and well-funded medical affairs, marketingand sales operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third parties to assist us withthe sales and marketing efforts of our product candidates. Without an internal team or the support of a third party to perform marketing and sales 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.61Table of Contents 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 only a few gene therapy products approved to date in the United States, the European Union orelsewhere. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or themedical community. In particular, our success will depend upon physicians who specialize in the treatment of genetic diseases targeted by our productcandidates, prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are familiarand for which greater clinical data may be available. More restrictive government regulations or negative public opinion would harm our business, financialcondition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for anyproducts we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death seenin other trials using other vectors. Serious adverse events related to clinical trials we conduct, clinical trials involving our NAV Technology Platformconducted by others or any gene therapy products, even if such adverse events are not ultimately attributable to the relevant product candidates or products,may result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our productcandidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand 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, theEMA and other regulatory authorities, the commercial success of our product candidates will depend, in part, on the acceptance of physicians, patients andhealth care payors of gene therapy products in general, and our product candidates in particular, as medically necessary, cost-effective and safe. Any productthat we commercialize may not gain acceptance by physicians, patients, health care payors and others in the medical community. If these products do notachieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptanceof 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; •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 harmed andour business may suffer.62Table of Contents 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 United States, the European Union and elsewhere may turn out to be lower than expected, may not be otherwise amenable totreatment with our products or patients may become increasingly difficult to identify and access, all of which would harm our business, financial condition,results of operations 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 the conditionsour lead product candidates are intended to treat, will likely diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell death.Lastly, certain patients’ immune systems might prohibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting thetreatment 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 prices 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. We may not be able to provide data sufficient to gain acceptance with respect tocoverage and reimbursement. If coverage and reimbursement are not available, or are available only at limited levels, we may not be able to successfullycommercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize a sufficient returnon our investment.There is significant uncertainty related to third-party coverage and reimbursement of newly approved products, including potential one-time genetherapies. In the United States, third-party payors, including government payors such as the Medicare and Medicaid programs, play an important role indetermining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare and Medicaid programs increasingly are used asmodels for how private payors and government payors develop their coverage and reimbursement policies. Currently, no gene therapy product has beenapproved for coverage and reimbursement by the Centers for Medicare & Medicaid Services (CMS), the agency responsible for administering the Medicareprogram. It is difficult to predict what CMS will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there isno body of established practices and precedents for these types of products. We cannot be assured that Medicare or Medicaid will cover any of our products,if approved, or provide reimbursement at adequate levels to realize a sufficient return on our investment. Moreover, reimbursement agencies in the EuropeanUnion may be more conservative than CMS. It is difficult to predict what third-party payors will decide with respect to the coverage and reimbursement forour product candidates.Outside the United States, international operations generally are subject to extensive government price controls and other market regulations, andincreasing emphasis on cost-containment initiatives in the European Union and other countries may put pricing pressure on us. In many countries, the pricesof medical products are subject to varying price control mechanisms as part of national health systems. It also can take a significant amount of time afterapproval of a product to secure pricing and reimbursement for such product in many counties outside the United States. In general, the prices of medicinesunder such systems are substantially lower than63Table of Contents in the United States. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additionalforeign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, inmarkets outside the United States, the reimbursement for our products may be reduced compared with the reimbursement in the United States and may beinsufficient to generate commercially reasonable product revenues.Moreover, increasing efforts by government and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause suchorganizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequatepayment for our product candidates. Payors increasingly are considering new metrics as the basis for reimbursement rates, and the existing data forreimbursement based on some of these metrics is limited. Therefore, it may be difficult to project the impact of these evolving reimbursement metrics on thewillingness of payors to cover candidate products that we or our partners are able to commercialize. We expect to experience pricing pressures in connectionwith the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations andadditional legislative changes.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 lead product candidates, if approved, must be adequate to support our commercial infrastructure. Thedownward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become intense. As aresult, increasingly high barriers are being erected to the entry of new products. If we are unable to obtain adequate levels of reimbursement, our ability tosuccessfully 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 United States, in particular in the European Union, a variety of risksassociated with international operations could materially harm our business.We expect that we will be subject to additional risks in commercializing our product candidates outside the United States, any of which couldmaterially harm our business, which could include: •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 United States; •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.Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for any of our product candidates, ifapproved, which would adversely affect our revenue and results of operations.We expect that coverage and reimbursement of drugs and biologics may be increasingly restricted in the United States and internationally. Theescalating cost of health care has led to increased pressure on the health care industry to reduce costs. In particular, pricing by biopharmaceutical companiesrecently has come under increased scrutiny and continues to be subject to intense political and public debate in the United States and abroad. Governmentand private third-party payors have proposed health care reforms and cost reductions of drugs and biologics. A number of federal and state proposals tocontrol the cost of health care have been made in the United States. Specifically, there have been several recent U.S. Congressional inquiries and proposedfederal and state bills designed to, among other things, bring more transparency to pricing, review the relationship between pricing and manufacturer patientprograms and reform government program reimbursement methodologies. In some international markets, the government controls drug and biologic pricing,which can affect profitability.64Table of Contents We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments.However, future price controls or other changes in pricing regulation or negative publicity related to the pricing of drugs and biologics generally couldrestrict the amount that we are able to charge for our future products, if any, which could adversely affect our revenue and results of operations.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.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, the loss of any of whose services may adversely impact the achievement of ourobjectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, asall of our employees are “at will” employees. We currently do not have “key person” insurance on any of our employees. The loss of the services of one ormore of our current employees, consultants and advisors might impede the achievement of our research, development, licensing and commercializationobjectives.Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel is, and willcontinue to be, critical to our success. There currently is a shortage of skilled individuals with substantial gene therapy experience, which we believe is likelyto continue. As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate canbe high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnologycompanies and academic institutions for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials orapplications for marketing approval may make it more challenging to recruit and retain qualified personnel. The inability to recruit, or loss of services of anyof our key executives, employees, consultants or advisors may impede the progress of our research, development, licensing and commercialization objectivesand materially harm our business, financial condition, results of operations and prospects.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.65Table of Contents 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 United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular,sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct,kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing 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 business conduct applicable to all of our employees, but it is not always possible toidentify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these lawsor regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have asignificant impact on our business, financial condition, results of operations and prospects, including the imposition of significant fines or other sanctions.Healthcare legislative reform measures may materially harm our business and results of operations.In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory initiatives regarding thehealthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities or affect our abilityto profitably sell any product candidates for which we obtain marketing approval. For example, in March 2010, the Patient Protection and Affordable CareAct, as amended by the Health Care and Education Reconciliation Act (PPACA), was passed. PPACA made major changes in how healthcare is delivered andreimbursed, and increased access to health insurance benefits to the uninsured and underinsured population of the United States.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.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, or the rules adopted under PPACA, is unknown at this time. Furthermore, PPACA may be modified, repealedor replaced with new regulations, and the full impact of any such modification, repeal or replacement is unknown at this time. For example, the TCJA repealsthe individual mandate of PPACA beginning in 2019, which may reduce the number of individuals covered by health benefits. We cannot predict theultimate content, timing or effect of any potential PPACA modification, repeal or replacement or any other healthcare reform legislation, or the effect of suchpotential changes on our business.Additional changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, rulesregarding prescription drug benefits under the health insurance exchanges, rules regarding fraud and abuse, and enforcement. Continued implementation ofPPACA, or the repeal or replacement of PPACA, and the passage of additional laws and regulations may result in the expansion of new programs such asMedicare payment for performance initiatives, and may impact existing government healthcare programs, such as by improving the physician qualityreporting system and feedback program.66Table of Contents Other legislative changes have been proposed and adopted in the United States since PPACA was enacted. For example, the Budget Control Act of2011, among other things, created the Joint Select Committee on Deficit Reduction, or the Joint Committee, to recommend proposals in spending reductionsto Congress. The Joint Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering thelegislation’s automatic reduction to several government programs, including Medicare payments to healthcare providers of up to 2.0% per fiscal year,starting in 2013. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments toseveral categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from threeto five years. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts thatfederal and state governments and other third-party payors will pay for healthcare products and services, which could result in reduced demand for ourproduct candidates or additional pricing pressures and thereby adversely affect our business, financial condition and results of operations.Various states, such as California, have also taken steps to consider and enact laws or regulations that are intended to increase the visibility of thepricing of biopharmaceutical products with the goal of reducing the prices at which such products can be sold. Because these various actual and proposedlegislative changes are intended to operate on a state-by-state level rather than a national one, we cannot predict what the full effect of these legislativeactivities may be on our business in the future.Additionally, in the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biologicproducts that are demonstrated to be “highly similar” or “biosimilar or interchangeable” with an FDA-approved biologic product. This new pathway couldallow competitors to reference data from biologic products already approved after 12 years from the time of approval. This could expose us to potentialcompetition by lower-cost biosimilars even if we commercialize a product candidate faster than our competitors.The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement ofmedicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers havedifferent priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, thehealthcare budgetary constraints in most European Union Member States have resulted in restrictions on the pricing and reimbursement of medicines byrelevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and marketproducts, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability tocommercialize any products for which we obtain marketing approval. Furthermore, healthcare legislative reform measures in countries outside the UnitedStates and the European Union may materially delay or restrict our business activities or otherwise materially harm our business.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.In the United States, the research, manufacturing, distribution, sale and promotion of drugs and biologics are potentially subject to regulation byvarious federal, state and local authorities in addition to the FDA, including CMS, other divisions of the U.S. Department of Health and Human Services (e.g.,the Office of Inspector General), the U.S. Department of Justice offices of the U.S. Attorney, and state and local governments.If we obtain the approval of the FDA, the European Commission or other regulatory authorities for any of our product candidates and begincommercializing those products in the United States or outside the United States, 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 HealthCare Program Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician Payments Sunshine Act and regulations, and similar lawsin foreign jurisdictions. These laws will impact, among other things, our proposed sales, marketing and educational programs. In addition, we may be subjectto patient privacy laws by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, butare 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. Liability may be establishedunder the federal Anti-Kickback Statute without proving actual knowledge of the statute or specific intent to violate it;67Table of Contents •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. PPACA provides and recent government cases against pharmaceutical and medical device manufacturers support theview 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.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, presently governed by the provisions of the Data Protection Directive, will bereplaced with the General Data Protection Regulation (GDPR). GDPR will impose several requirements relating to the consent of the individuals to whom thepersonal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and usingthird party processors in connection with the processing of the personal data. GDPR will also impose strict rules on the transfer of personal data out of theEuropean Union to the United States. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EuropeanUnion Member States may result in fines and other administrative penalties. GDPR will introduce substantial fines for breaches of the data protection rules.GDPR was adopted in April 2016 and is expected to become enforceable in 2018. Once it is enforceable, GDPR may increase our responsibility and liabilityin relation to personal data that we process. To comply with the new data protection rules imposed by GDPR we may be required to put in place additionalmechanisms ensuring compliance. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.68Table of Contents 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 maintain product liability insurance coverage, this insurance may not be adequate to cover all liabilities that we may incur. Weanticipate that we will evaluate the need to increase our insurance coverage each time we commence a clinical trial and may from time to time purchaseadditional coverage for clinical trials. We may need to increase our product liability insurance coverage if we successfully commercialize any productcandidates. Insurance coverage is increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in an amountadequate to satisfy any liability that may arise.If we, our development partners, including our NAV Technology Licensees, or our third-party manufacturers or suppliers fail to comply withenvironmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could materially harm the successof our business.We, our development partners, including our NAV Technology Licensees, and our third-party manufacturers and suppliers are subject to numerousenvironmental, health and safety laws and regulations, including those governing laboratory procedures and the generation, handling, use, storage, treatment,manufacture, transportation and disposal of, and exposure to, hazardous materials and wastes, as well as laws and regulations relating to occupational healthand safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biologic and radioactive materials. Our operationsand the operations of our development partners and third-party manufacturers and suppliers also produce hazardous waste products. We cannot eliminate therisk of contamination or injury from these materials. In the event of contamination or injury resulting from the use of hazardous materials by us, ourdevelopment partners or our third-party manufacturers or suppliers, we could be held liable for any resulting damages, and any liability could exceed ourresources. We also could incur significant costs associated with civil or criminal fines and penalties.Although we maintain workers’ compensation insurance for certain costs and expenses we may incur due to work-related injuries to our employees,this insurance may not provide adequate coverage against potential liabilities. Although we maintain insurance for claims that may be asserted against us inconnection with our storage or disposal of biologic, hazardous or radioactive materials, this insurance may not be adequate to cover all liabilities that we mayincur in connection with such claims.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.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. A severe or prolongedeconomic downturn 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. For example, the global financial crisis of 2007-2008 and the ongoing European economiccrisis caused extreme volatility and disruptions in the capital and credit markets. A weak or declining economy could strain our suppliers, possibly resultingin supply disruption, or cause delays in payments for our services by third-party payors or our future collaborators. Any of the foregoing could harm ourbusiness and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could harm our business.69Table of Contents Additionally, in June 2016, a majority of United Kingdom (UK) voters voted for the UK to exit the European Union (Brexit) and in March 2017, theUK government provided official legal notification to the European Union that the UK will exit the European Union. The timing and completion of Brexit issubject to judicial and parliamentary developments in the UK, as well as any legal challenges. The economic effects of Brexit will depend on any agreementsthe UK makes to retain access to European Union markets either during a transitional period or more permanently. Brexit could adversely affect Europeanand worldwide economic or market conditions and could contribute to instability in global financial markets. Brexit is likely to lead to legal uncertainty andpotentially divergent national laws and regulations as the UK determines which European Union laws to replace or replicate. Any of these effects of Brexit,and any other effects we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cashflows.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 or supply facilities and materially harm ourbusiness, financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using allor a significant 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 adequate in the event of a serious disaster or similar event. Our third party manufacturing and supply facilities, as well assubstantially all of our current supply of product candidates, are located in a small number of geographic locations, and should a natural disaster, poweroutage or other event occur that affects one of our third party manufacturing or supply facilities, manufacturing or supply delays may result should we needto transfer manufacturing or supply operations to another facility. We may incur substantial expenses as a result of the limited nature of our disaster recoveryand business continuity plans, which could materially harm our business, financial condition, results of operations and prospects.Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result ina 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 in 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 years ended December 31, 2017 and 2016 consisted of license revenue, grantrevenue and the sale of licensed reagents to third-parties for use in research and development. One customer accounted for approximately 68% of our totalrevenue for the year ended December 31, 2017. No other customer accounted for more than 10% of revenue for the year ended December 31, 2017. Twocustomers accounted for approximately 68% of our total revenue for70Table of Contents the year ended December 31, 2016. No other customer accounted for more than 10% of revenue for the year ended December 31, 2016. Future license revenueis uncertain due to the contingent nature of our licenses granted to third-parties. We expect grant revenue to decrease in the future as we are not currentlyseeking any further grant awards. We do not dedicate resources to sales efforts for reagents and, accordingly, future revenue from sales of reagents is uncertainand 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 are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary to thedevelopment of our technology and products, including technology related to our manufacturing process and our gene therapy product candidates. Theseand other licenses may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in whichwe may wish to license our platform or develop or commercialize our technology and products in the future. As a result, we may not be able to preventcompetitors from developing and commercializing competitive products in territories not included in all of our licenses. For example, under our licenseagreement with GSK, GSK retained certain exclusive and non-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.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 United States. Any exercise by the government of such rights could harm ourcompetitive position, 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 United States 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 United States and abroad related to many of our novel technologies and product candidates thatare important 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.71Table of Contents We are a party to intellectual property license agreements with GSK and Penn, each of which is important to our business, and other entities and weexpect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements willimpose, various diligence, development and commercialization timelines, milestone payments, royalties and other obligations on us. If we or our licenseesfail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, inwhich event we would not be able to market 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 United States 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 United States and other jurisdictions are typically notpublished until 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 anyowned or any licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.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 Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Amendments) to conduct research and clinical trials and may be able to circumvent our patents by developing similar or alternative technologies orproducts 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 United States and abroad. For example, in June 2017, a third party filed an opposition with the European Patent Office challenging thevalidity of a European patent owned by Penn for the AAV8 vector, which we have exclusively licensed. Such challenges may result in loss of exclusivity orin patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar oridentical technology and products, or limit the duration of the patent protection of our technology and product candidates. Given the amount of timerequired for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly aftersuch candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializingproducts 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.72Table of Contents 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; •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 develop our product candidates. Because our programs mayrequire the use of intellectual property or other proprietary rights held by third parties, the growth of our business may depend, in part, on our ability toacquire, 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 identify as necessary for our technology platformand product candidates. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companiesmay pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have acompetitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition,companies that perceive us to be a competitor may be unwilling to license rights to us. We also may be unable to license or acquire third party intellectualproperty rights on terms that would allow us to make an appropriate return on our investment.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 may provide us with an option to negotiate a license to any of the institution’s rights in technologyresulting from the collaboration, and under our relationship with Penn, any patentable inventions developed under our 2014 SRA automatically accrue to ourexisting license with Penn. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that areacceptable 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 pursueour 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 (the USPTO) and various patent agencies outside of the United States over the lifetime of our licensed patents and/orapplications and any 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 agencieswith respect to our licensed patent rights. The USPTO and various non-U.S.73Table of Contents patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process.We employ reputable law firms and other professionals to help us comply and we are also dependent on our licensors to take the necessary action to complywith 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 byother means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patentor patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able toenter 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 United States could be less extensive than those in the UnitedStates. Although our license agreements with Penn and GSK grant us worldwide rights, certain of our in-licensed U.S. patent rights lack corresponding foreignpatents or patent applications. For example, under our license agreement with Minnesota, our rights are limited to those countries and territories, includingthe United States, in which a licensed patent has been issued and is unexpired or a licensed patent application is pending. In addition, the laws of someforeign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not beable to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patentprotection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, butenforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rightsmay 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 United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an allegedfailure to meet any of several statutory requirements, including subject-matter eligibility, novelty, non-obviousness, written description or enablement.Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material topatentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies inthe United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review andequivalent proceedings in foreign jurisdictions. Such proceedings could result in the revocation or cancellation of or amendment to our patents in such a waythat they no longer cover our NAV Technology Platform or our product candidates. The outcome following legal assertions of invalidity andunenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which thepatent examiner and we or our licensing partners were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity orunenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patentprotection 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 and74Table of Contents outside the United States are less willing or unwilling to protect trade secrets. We seek to protect our proprietary technology and processes, in part, byentering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We cannot guarantee that we have entered intosuch agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. We also seek to preserve theintegrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of ourinformation technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may bebreached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independentlydiscovered 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 enforce or to otherwise assert their patent rightsagainst us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceableand infringed, which could materially harm our ability to license our technology platform or commercialize our lead product candidates or any future productcandidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity 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 present clear and convincing evidence as to the invalidityof any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are foundto infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continuelicensing, developing, manufacturing and marketing our product candidates and technology. However, we may not be able to obtain any required license oncommercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other thirdparties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced,including by court order, to cease licensing, developing, manufacturing and commercializing the infringing technology or product candidates. In addition,we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or otherintellectual property right. A finding of infringement could prevent us from licensing our technology platform or manufacturing and commercializing ourproduct candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated theconfidential 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.75Table of Contents 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 that affect the way patent applications are prosecuted and also may affectpatent litigation. These also include provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allow third-partysubmission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTOadministered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patentapplication generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTOrecently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent lawassociated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on 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 theuncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which couldmaterially 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 United States (the SupremeCourt). On March 20, 2012, the Supreme Court issued a decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (Prometheus), a caseinvolving patent claims directed to a process of measuring a metabolic product in a patient to optimize a drug dosage for the patient. According to theSupreme Court, the addition of well-understood, routine or conventional activity such as “administering” or “determining” steps was not enough to transforman otherwise patent-ineligible natural phenomenon into patent-eligible subject matter. On July 3, 2012, the USPTO issued a guidance memo to patentexaminers indicating that process claims directed to a law of nature, a natural phenomenon or a naturally occurring relation or correlation that do not includeadditional elements or steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied and the claimamounts to significantly more than the natural principle itself should be rejected as directed to not patent-eligible subject matter. On June 13, 2013, theSupreme Court issued its decision in Association for Molecular Pathology v. Myriad Genetics, Inc. (Myriad), a case involving patent claims held by Myriadrelating to the breast cancer susceptibility genes BRCA1 and BRCA2. Myriad held that an isolated segment of naturally occurring DNA, such as the DNAconstituting the BRCA1 and BRCA2 genes, is not patent eligible subject matter, but that complementary DNA, which is an artificial construct that may becreated from RNA transcripts of genes, may be patent eligible.The USPTO has issued a number of guidance memoranda to instruct USPTO examiners on the ramifications of the Prometheus and Myriad rulings andthe application of the Myriad ruling to natural products and principles including all naturally occurring nucleic acids. The USPTO’s guidance may be furtherupdated in view of developments in the case law and in response to public feedback. Patents for certain of our product candidates contain claims related tospecific DNA sequences that are naturally occurring and, therefore, could be the subject of future challenges made by third parties. In addition, the recentUSPTO guidance could make it impossible for us to pursue similar patent claims in patent applications we may prosecute in the future.76Table of Contents 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 Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up tofive years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of apatent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, amethod for using it or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing toexercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expirationof relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection affordedcould be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors mayobtain approval of competing 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 registered trademarks with the USPTO for the marks “NAV” and “REGENXBIO,” as well as for the REGENXBIO logos. Our trademarks ortrade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect ourrights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. Attimes, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to marketconfusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarksthat incorporate variations of our registered or unregistered trademarks or trade names. Over the long-term, if we are unable to establish name recognitionbased on our trademarks and trade names, then we may not be able to compete effectively and our business may be harmed. Our efforts to enforce or protectour proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result insubstantial costs and diversion of resources and could harm our financial condition or results of operations.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 current or future license partners or 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 current or future license partners or collaborators, might not have been the first to file patent applications covering certain of our ortheir inventions;77Table of Contents •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.Risks Related to Ownership of Our Common StockThe price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock.Our stock price is likely to be volatile. In recent years, the stock market in general, and the market for biotechnology or pharmaceutical companies inparticular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility,our stockholders may not be able to sell their shares of our common stock at or above the price they paid for their shares. The market price of our commonstock could be subject to wide fluctuations in response to various factors, many of which are beyond our control. These factors include those discussedelsewhere in this “Risk Factors” section and others such 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.78Table of Contents 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 cause us to incur substantial costs to defend suchclaims and divert our management’s attention and resources, which could seriously harm our business, financial condition, results of operations andprospects.Our quarterly operating results may fluctuate substantially, which may cause the price of our common stock to fluctuate substantially.We expect our quarterly operating results to be subject to fluctuations. Our net income or loss and other operating results may be affected by numerousfactors, including: •any variations in the level of expenses related to our NAV Technology Platform and lead product candidates; •the addition or termination of any clinical trials; •any regulatory or clinical developments affecting our lead product candidates, any future product candidates or our NAV TechnologyLicensees’ product candidates; •our execution of any collaborative, licensing or similar arrangements, including with our NAV Technology Licensees, and the timing of anypayments we may make or receive under these arrangements; and •the nature and terms of any stock-based compensation grants and any intellectual property infringement lawsuits in which we may becomeinvolved.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. We believethat quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.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 additional analysts do not commence coverage of us, the trading price of our stock may decrease. Additionally, if one or more of the analysts covering ourbusiness downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we couldlose visibility in the market for our stock, which in turn could cause our stock price to decline.Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.We may seek to raise additional capital through public or private equity offerings, debt financings, strategic partnerships, licensing arrangements orother means. We have an effective shelf registration statement on file with the SEC, which could allow us to access capital in a timely manner. To the extentthat we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing mayinvolve covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, makecertain investments or engage in certain merger, consolidation, or asset sale transactions. In addition, if we seek funds through arrangements withcollaborative partners, these arrangements may require us to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorableto us.We have broad discretion in the use of our cash and cash equivalents and may not use them effectively.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.79Table of Contents Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be ourstockholders’ sole source of gain.We have never declared or paid cash dividends on our capital stock, and we currently intend to retain all of our future earnings, if any, to finance thedevelopment and growth of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. Therefore, ourstockholders are not likely to receive any dividends on our common stock for the foreseeable future or at all and their ability to receive a return on theirinvestment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate oreven maintain the price at which our stockholders have purchased it.Our executive officers, directors and principal stockholders own a significant percentage of our stock and maintain the ability to exert substantialinfluence over matters subject to stockholder approval.Our executive officers, directors, holders of more than five percent of our capital stock and their respective affiliates beneficially own a significantpercentage of our outstanding capital stock. As a result, these stockholders may be able to exert substantial influence over all matters submitted to ourstockholders for approval, as well as our management and affairs. For example, these stockholders may be able to control elections of directors, amendmentsof our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. This concentration of voting power coulddelay or prevent an acquisition of our company on terms that other stockholders may desire or result in management of our company with which our publicstockholders disagree.Substantial future sales of shares by existing stockholders, including pursuant to our equity incentive plans, or the perception that such sales may occur,could cause our stock price to decline, even if our business is performing well.If our existing stockholders, particularly our directors and executive officers and the entities affiliated with our current and former directors, sellsubstantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell substantial amounts of our commonstock, the trading price of our common stock could decline.Shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans will becomeeligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the SecuritiesAct of 1933, as amended. Additionally, some of our existing stockholders have demand and piggyback rights to require us to register with the SEC up to acertain number of shares of our common stock. If we register these shares of common stock, the stockholders would be able to sell those shares freely in thepublic market, subject to Rule 144 transfer restrictions applicable to affiliates. We registered 5,057,458 shares of common stock held by certain of ourstockholders in a registration statement on Form S-3 filed with the SEC on December 16, 2016 and declared effective as of January 6, 2017. Suchstockholders are able to freely trade such shares of common stock.Furthermore, certain of our employees, directors, officers or affiliates have entered into Rule 10b5‑1 plans providing for transactions of our securitiesfrom time to time. Under a Rule 10b5‑1 plan, a broker executes trades pursuant to parameters established by the securityholder when entering into the plan,without further direction from the securityholder. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneouslywith, or immediately after significant events involving us. A Rule 10b5‑1 plan may be amended or terminated in some circumstances. If any additional sharesof our common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline. We do notundertake to report the entry into, or the amendment or termination of, any Rule 10b5‑1 plans adopted by our employees, directors, officers or affiliates in thefuture, except to the extent required by law.An active trading market for our common stock may not be sustained.Shares of our common stock began trading on The Nasdaq Global Select Market on September 17, 2015. Given the limited trading history of ourcommon stock, there is a risk that an active trading market for our shares may not continue to develop or be sustained. If an active market for our commonstock does not continue to develop or is not sustained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares,or at all.80Table of Contents If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt orassume contingent liabilities and subject us to other risks.We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual propertyrights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including: •increased operating expenses and cash requirements; •the assumption of additional indebtedness or contingent liabilities; •assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating newpersonnel; •the diversion of our management's attention from our existing product programs and initiatives in pursuing such a strategic merger oracquisition; •retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; •risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products orproduct candidates and regulatory approvals; and •our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition oreven to offset the associated acquisition and maintenance costs.In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquireintangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities andthis inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.We incur substantial costs as a result of operating as a public company, and our management is required to devote substantial time to complianceinitiatives.As a public company, we incur, and particularly after we are no longer an emerging growth company, we will incur further, significant legal,accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implementedby the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure andfinancial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these complianceinitiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consumingand costly. For example, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance asa public company.Pursuant to Section 404, we are 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. In an effort to achieve compliance with Section 404 within the prescribed period, we have incurred costs associated withthe documentation and evaluation of our internal control over financial reporting. In this regard, we have dedicated internal resources, engaged outsideconsultants and adopted a detailed work plan to assess and document the adequacy of internal control over financial reporting. We will need to continue toimprove our control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reportingand improvement process for internal control over financial reporting. This continuous process is both costly and challenging and despite our efforts, there isa risk that we will not be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required bySection 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.81Table of Contents Provisions in our restated certificate of incorporation and amended and restated bylaws and under Delaware law might discourage, delay or prevent achange in control 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. Among other things, these provisions: •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 or our directors, officersor employees.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 judicial forum fordisputes with us, our directors, officers or other employees. Alternatively, if a court were to find the choice of forum provision contained in our restatedcertificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in otherjurisdictions, which could adversely affect our business and financial condition.82Table of Contents Our business could be negatively affected as a result of the actions of activist stockholders.Proxy contests have been waged against many companies in the biopharmaceutical industry over the last several years, and proxy advisory firms mayrecommend changes to our business operations, provisions in our restated certificate of incorporation or amended and restated bylaws, or the composition ofour board of directors or its committees. If faced with a proxy contest or other type of shareholder activism, or a proxy advisory firm recommendation that isadverse to a management proposal, we may not be able to respond successfully to the contest or dispute, which would be disruptive to our business. Even ifwe are successful, our business could be adversely affected by such a contest or dispute involving us or our partners because: •responding to proxy contests or other actions by activist stockholders, or adverse proxy advisory firm recommendations, can be costly andtime-consuming, disrupting operations and diverting the attention of management and employees; •perceived uncertainties as to future direction may result in the loss of potential acquisitions, collaborations or licensing opportunities, and maymake it more difficult to attract and retain qualified personnel and business partners; and •if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively and timelyimplement our strategic plan and create additional value for our stockholders.These actions could cause our stock price to decrease and experience periods of increased volatility.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, as defined in the JOBS Act. Under the JOBS 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 nonbinding advisory stockholder vote on executive compensation and anygolden parachute payments not previously approved, exemption from the requirement of auditor attestation on our internal control over financial reportingand exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or asupplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). Therefore,the information that we provide stockholders may be different than what is available with respect to other public companies.Investors could find our common stock less attractive if we rely on these exemptions, which may make it more difficult for investors to compare ourbusiness with other companies in our industry. If some investors find our common stock less attractive as a result, there may be a less active trading market forour common stock and our stock price may be more volatile. In addition, it may be difficult for us to raise additional capital as and when we need it. If we areunable 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 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 billion or more during such fiscal year; (3) the date on which we issue more than $1 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. 83Table of Contents ITEM 2.PROPERTIESOur corporate headquarters are currently located in Rockville, Maryland. We occupy approximately 19,000 square feet of office space at this locationunder a lease that expires in September 2023, renewable for an additional five-year term. We also occupy approximately 46,000 square feet of office andlaboratory space elsewhere in Rockville, Maryland under a lease that expires in September 2021, renewable for two additional three-year terms. Additionally,we occupy approximately 4,000 square feet of office space in New York, New York under a lease that expires in October 2020. We believe that our existingfacilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonableterms. ITEM 3.LEGAL PROCEEDINGSFrom time to time, we are party to various lawsuits, claims or other legal proceedings that arise in the normal course of our business. We do not believethat we are currently party to any pending legal actions that could reasonably be expected to have a material adverse effect on our business, financialcondition, results of operations or cash flows. ITEM 4.MINE SAFETY DISCLOSURESNot applicable. 84Table of Contents PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common stock is traded on The Nasdaq Global Select Market under the symbol “RGNX.” The following table sets forth, for the periods indicated,the range of high and low sale prices of our common stock as reported by Nasdaq. Year Ended December 31, 2017 High Low First quarter $24.15 $16.30 Second quarter $22.95 $16.30 Third quarter $33.85 $17.60 Fourth quarter $36.10 $24.35 Year Ended December 31, 2016 High Low First quarter $17.31 $8.50 Second quarter $13.77 $7.71 Third quarter $16.47 $7.07 Fourth quarter $24.55 $13.61 On March 2, 2018, the last reported sale price for our common stock on The Nasdaq Global Select Market was $29.40 per share.85Table of Contents 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, 2017, with the cumulative total return of (a) the Nasdaq Biotechnology Index (^NBI) and (b) the Nasdaq Composite Index(^IXIC), over the same period. This graph assumes the investment of $100 on September 17, 2015 in our common stock, the Nasdaq Biotechnology Index andthe Nasdaq Composite Index and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on September 17, 2015 of $30.45per 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 for anyerrors or omissions in such information. HoldersAs of March 2, 2018, there were seven holders of record of our common stock. The actual number of stockholders is greater than this number of recordholders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number ofholders of record also does not include stockholders whose shares may be held in trust by other entities.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.86Table of Contents Securities Authorized for Issuance Under Equity Compensation PlansThe information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of thisAnnual Report on Form 10-K.Use of Proceeds from Public Offering of Common StockOn September 22, 2015, we closed our initial public offering (IPO) whereby we sold 7,245,000 shares of our common stock 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 our common stock sold pursuant to the underwriters’option to purchase additional shares of our common stock. The offer and sale of the shares were registered under the Securities Act of 1933, as amended (theSecurities Act) pursuant to a Registration Statement on Form S-1 (File No. 333-206430), which was declared effective by the SEC on September 16, 2015.The offering commenced as of September 16, 2015 and did not terminate before all of the securities registered in the registration statement were sold. Thesyndicate 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 raised approximately $145.2 million in net proceeds after deducting underwritingdiscounts and commissions and other offering expenses. No payments were made by us to directors, officers or persons owning 10% or more of our commonstock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors ascompensation 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.87Table of Contents ITEM 6.SELECTED FINANCIAL DATAThe following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” the consolidated financial statements and related notes and other financial information included in this Annual Reporton Form 10-K.We derived the consolidated financial data for the years ended December 31, 2017, 2016 and 2015 and the consolidated balance sheet data as ofDecember 31, 2017 and 2016 from our audited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. Wederived the consolidated financial data for the years ended December 31, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015,2014 and 2013 from our audited consolidated financial statements that are not included elsewhere in this Annual Report on Form 10-K. Historical results arenot necessarily indicative of the results to be expected in future periods. Years Ended December 31, 2017 2016 2015 2014 2013 (in thousands, except per share data) Consolidated Statement of Operations and Comprehensive LossData: Revenues License revenue $10,385 $4,303 $5,025 $4,355 $1,055 License revenue from related party — — 2,000 220 2,700 Reagent sales — 213 257 326 368 Grant revenue 8 73 306 1,219 1,964 Total revenues 10,393 4,589 7,588 6,120 6,087 Expenses Costs of revenues Licensing costs 1,703 861 1,405 885 151 Costs of reagent sales 6 98 98 122 173 Research and development 57,224 45,482 17,279 4,961 5,051 General and administrative 27,229 23,590 11,912 3,851 5,474 Other operating expenses (income) 116 (102) 31 (17) 14 Total operating expenses 86,278 69,929 30,725 9,802 10,863 Loss from operations (75,885) (65,340) (23,137) (3,682) (4,776)Other Income (Expense) Investment income 2,716 1,938 346 — — Interest expense — — (20) (321) (611)Total other income (expense) 2,716 1,938 326 (321) (611)Loss before income taxes (73,169) (63,402) (22,811) (4,003) (5,387)Income Tax Benefit — 435 — — — Net loss $(73,169) $(62,967) $(22,811) $(4,003) $(5,387)Basic and diluted net loss per common share $(2.45) $(2.38) $(2.59) $(1.82) $(2.50)Weighted-average basic and diluted common shares 29,878 26,409 9,173 2,643 2,320 December 31, 2017 2016 2015 2014 2013 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $46,656 $24,840 $54,116 $1,121 $1,119 Marketable securities 129,738 134,126 162,251 — — Working capital (deficit) 153,560 83,702 113,809 (6,158) (2,446)Total assets 198,677 172,732 221,380 3,491 2,510 Total liabilities 15,648 10,995 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 371,500 276,357 269,147 10,518 10,885 Total stockholders’ and membersʼ equity (deficit) 183,029 161,737 216,808 (18,291) (13,921)88Table of Contents ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSYou should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited financialstatements and the notes thereto included elsewhere in this Annual Report on Form 10-K. In addition, you should read the “Risk Factors” and “InformationRegarding Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual resultsto differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.OverviewWe are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our gene therapyproduct candidates are designed to deliver genes to cells to address genetic defects or to enable cells in the body to produce therapeutic proteins that areintended to impact disease. Through a single administration, our gene therapy product candidates are designed to provide long-lasting effects,potentially significantly altering the course of disease and delivering improved patient outcomes.Overview of Product CandidatesWe have developed an internal pipeline of product candidates across the therapeutic areas of retinal, metabolic and neurodegenerative diseases. •RGX-314: Our lead product candidate RGX-314 is for the treatment of wet age-related macular degeneration (wet AMD), a leading cause oftotal and partial vision loss in the United States, Europe and Japan. We began enrollment in the Phase I clinical trial for RGX-314 for thetreatment of wet AMD in May 2017 and have completed dosing of three cohorts of six patients each, a total of 18 patients, in the Phase Iclinical trial. We expect to present topline data from the Phase I clinical trial in late 2018. •RGX-501: We are developing RGX-501 for the treatment of homozygous familial hypercholesterolemia (HoFH), a severe genetic diseasecharacterized by premature and aggressive plaque buildup, life threatening coronary artery disease and aortic valve disease predominantly dueto abnormalities in the function or expression of the low-density lipoprotein receptor. We, together with trial sponsor the University ofPennsylvania (Penn), began enrollment in the Phase I/II clinical trial for RGX-501 in March 2017. We have completed dosing of the first cohortof three patients and have dosed two patients in the second cohort. We expect to present topline data from the Phase I/II clinical trial in late2018. •RGX-111: We are developing RGX-111 for the treatment of the neurological symptoms of Mucopolysaccharidosis Type I (MPS I), a severegenetic lysosomal storage disease caused by deficiency of α-l-iduronidase (IDUA), an enzyme required for breakdown of cellular wasteproducts. The investigational new drug (IND) application filed with the U.S. Food and Drug Administration (the FDA) for RGX-111 for thetreatment of MPS I is active and we expect to begin enrollment in a Phase I clinical trial in mid-2018. •RGX-121: We are developing RGX-121 for the treatment of the neurological symptoms of Mucopolysaccharidosis Type II (MPS II), a severegenetic lysosomal storage disease with a similar phenotype to MPS I. MPS II is caused by deficiency of iduronate-2-sulfatase (IDS), an enzymethat is also responsible for breakdown of cellular waste products. The IND application filed with the FDA for RGX-121 for the treatment of MPSII is active and we expect to begin enrollment in a Phase I/II clinical trial in mid-2018.In addition to our lead product candidates, we have also funded, and plan to continue to fund, preclinical research on potential product candidateprograms that may become part of our internal product development pipeline. We have partnered with a number of leading academic institutions and willcontinue to seek partnerships with innovative institutions to develop novel NAV gene therapy product candidates. We expect to announce an additional leadproduct candidate in the second half of 2018.Overview of Our NAV Technology PlatformIn addition to our internal product development efforts, we also selectively sublicense our proprietary adeno-associated virus gene therapy deliveryplatform (NAV Technology Platform) to other leading biotechnology companies, which we refer to as NAV Technology Licensees. As of December 31, 2017,our NAV Technology Platform was being applied in the development of more than 20 partnered product candidates by 10 NAV Technology Licensees.Sublicensing allows us to maintain our internal product development focus on our core disease indications and therapeutic areas while still expanding theNAV gene therapy pipeline, developing a greater breadth of treatments for patients, providing additional technological and potential clinical proof-of-concept for our NAV Technology Platform, and creating potential additional revenue.89Table of Contents Financial OverviewRevenueWe classify our revenue into three categories: license revenue, grant revenue and reagent sales. To date, we have primarily generated 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 sales of licensed reagents to customers for use in research and development as well as fromgrant programs. 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 materially 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) annual maintenance fees, (iv) sublicense fees, (v) payments based on the achievement of certainmilestones by the licensee and (vi) royalties on product sales. Future license revenue is highly dependent on the successful development andcommercialization of products by our licensees, which is uncertain, and revenue may fluctuate significantly from period to period. Additionally, we maynever receive revenue under a license agreement that contemplates option fees, sublicense fees, milestone payments or future royalties on product sales,given the contingent nature of these payments.Grant RevenueGrant revenue is generated through research and development grant programs offered by the U.S. federal government and the European Union. Weexpect grant revenue to be minimal in future periods, as we do not currently expect to receive any new grant awards.Reagent SalesReagent sales consist of the sales of licensed reagents to third-parties for use in research and development. We do not dedicate resources to sales effortsfor reagents. Accordingly, future revenue from sales of reagents is uncertain and may fluctuate significantly from period to period.Operating 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 indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costsbetween research and development and general and administrative categories based on employee headcount and the nature of work performed by eachemployee.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, and royalties and production costs that areincluded in costs of reagent sales. Future costs of revenue are uncertain due to the nature of our license agreements and reagent sales, and significantfluctuations 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;90Table of Contents •fees paid to consultants and other third-parties who support our product candidate development; •other costs in seeking regulatory approval of our product candidates; and •allocated facility-related costs, depreciation expense and other 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 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: •a Phase I clinical trial to evaluate the safety and efficacy of our RGX-314 program for the treatment of wet AMD; •a Phase I/II clinical trial to evaluate the safety and efficacy of our RGX-501 program for the treatment of HoFH; •a Phase I clinical trial to evaluate the safety and efficacy of our RGX-111 program for the treatment of MPS I; •a Phase I/II clinical trial to evaluate the safety and efficacy of our RGX-121 program for the treatment of MPS II; •preclinical research and development for additional product candidates addressing other diseases in the retinal, metabolic andneurodegenerative therapeutic areas; •continued investment in advanced manufacturing analytics and process development activities; and •continued acquisition and manufacture of clinical trial materials in support of our anticipated clinical trials.The following table summarizes our research and development expenses incurred during the years ended December 31, 2017, 2016 and 2015 (inthousands): Years Ended December 31, 2017 2016 2015 Direct Expenses RGX-314 $5,883 $7,798 $1,213 RGX-501 4,394 5,868 58 RGX-111 2,847 6,074 5,018 RGX-121 5,768 4,196 459 Total direct expenses: 18,892 23,936 6,748 Unallocated Expenses Unallocated external expenses 10,187 6,216 4,855 Personnel-related 23,377 13,225 5,122 Facilities and depreciation expense 3,547 1,255 245 Other unallocated 1,221 850 309 Total unallocated expenses 38,332 21,546 10,531 Total research and development $57,224 $45,482 $17,279We typically utilize our employee and infrastructure resources across our development programs. We do not allocate personnel and other internalcosts, such as facilities and other overhead costs, to specific product candidates or development programs.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, commercial, finance, legaland administrative 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 commercial and general corporate activities. We expect that our general and administrative expense will continue toincrease as we continue to develop, and potentially commercialize, our product candidates.91Table of Contents Other Income (Expense)Other income primarily includes investment income. Investment income consists of interest income earned on cash equivalents and marketablesecurities. Cash equivalents are comprised of money market mutual funds and marketable securities primarily are comprised of corporate debt securities.Critical Accounting Policies and Significant Judgments and EstimatesThis Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which we haveprepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements requires us to make estimatesand assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financialstatements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis.We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differfrom these estimates under different assumptions or conditions.Our significant accounting policies and recently announced accounting pronouncements, including the expected impact of such announcements, arefully described in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. We believe that thefollowing accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements andunderstanding and evaluating our reported financial results.Revenue RecognitionWe 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.License RevenueThe 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 as revenue when we deliver the license provided there are no undelivered elements in the arrangement and wehave met all of the necessary criteria for revenue recognition. When we determine an option to exercise a commercial license is substantive, we recognize theoption fee as revenue upon exercise and delivery of the underlying commercial license, provided there are no undelivered elements in the arrangement andwe have met all of the necessary criteria for revenue recognition. Annual maintenance fees do not represent a separate deliverable aside from the delivery ofthe license. We recognize annual maintenance fees as revenue under our license agreements when the price is fixed or determinable and collectability isreasonably assured, provided that we have satisfied all other revenue recognition criteria, which is typically upon each anniversary date of the underlyinglicense 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.92Table of Contents 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), which wassubsequently acquired by Ultragenyx Pharmaceutical Inc., that were recognized as revenue prior to September 30, 2015. We granted various commerciallicenses, and options to obtain future commercial licenses, to Dimension prior to September 30, 2015. As of September 30, 2015, we no longer considerDimension to be a related party. Accordingly, revenue earned and recognized from Dimension subsequent to September 30, 2015 is no longer included inrevenue from related party in the consolidated statements of operations and comprehensive loss.Please refer to Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a discussion ofnew revenue standards which we will adopt on January 1, 2018 and which could materially affect our current revenue recognition policies for licenserevenue.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.Grant RevenueWe recognize revenue related to government grants in the period during which the related costs are incurred and the related services are rendered,provided that we have met the applicable performance obligations under the grants. If we are the principal participant and primary obligor in the contractualarrangements, we record the funds we receive under the grants as revenue. If we are not the principal participant or primary obligor, we record the grantproceeds as a reduction to research and development expense.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.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. Expenses thatare paid in advance of performance are deferred as a prepaid expense and expensed as the services are provided.Examples of estimated accrued research and development expenses include fees paid to: •contract research organizations in connection with preclinical development and clinical studies; •contract manufacturing organizations and other vendors related to process development and manufacturing of materials for use in preclinicaldevelopment and clinical studies; and •service providers for professional service fees such as consulting and other research and development related services.93Table of Contents 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 CompensationOur stock-based compensation expense primarily relates to stock options and restricted stock units issued to employees, directors and non-employeeadvisors under our equity incentive plans.Our stock-based awards are subject to either service or performance-based vesting conditions. We recognize compensation expense for awards toemployees and directors with service-based vesting conditions based on the estimated grant date fair value of the awards on a straight-line basis over therequisite service period, which is generally the vesting term. We record compensation expense for awards to non-employees with service-based vestingconditions based on the then-current fair value at each financial reporting date prior to the measurement date over the requisite service period of the award,which is generally the vesting term, on a straight-line basis. We recognize compensation expense for employee awards with performance-based vestingconditions based on the estimated grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement ofthe performance condition is probable. We recognize compensation expense for non-employee awards with performance-based vesting conditions based onthe then current fair value at each financial reporting date prior to the measurement date over the requisite service period using the accelerated attributionmethod 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 diseases and/or are focused on treating diseases in our development pipeline or our licensees’ pipelines. We ensure that the companiesselected have a sufficient trading history to provide meaningful data to estimate the expected volatility of our common stock over the expectedterm of stock options we have granted. We plan to continue to use the guideline peer group volatility information until the historical volatilityof our common 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 SEC StaffAccounting Bulletin Nos. 107 and 110, as our common stock has only been publicly traded since September 2015. We expect to use thesimplified method until we have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term; and •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; andThe fair value of restricted stock units is determined based on the fair value of our common stock on the date of the grant.For all periods through December 31, 2016, we estimated forfeitures of share-based awards based on our historical analysis of actual forfeitures.Through that date, we had minimal forfeitures of stock options and restricted stock units, and accordingly, we assumed no forfeiture rate for all awardsgranted and accounted for actual forfeitures in the period they occurred. On January 1, 2017, we adopted ASU 2016-09, Compensation—Stock Compensation(Topic 718): Improvements to Employee Share-Based Payment Accounting and elected to no longer estimate forfeitures of share-based awards and willcontinue to account for any forfeitures as they occur. Since we had previously assumed no forfeiture rate for all share-based awards granted prior to theadoption of this standard, there was no retrospective impact to stock-based compensation expense upon the adoption of standard. 94Table of Contents 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 initial public offering (IPO), there were significant assumptions and estimates required indetermining the fair value of our common stock. Valuation estimates were prepared by management in accordance with the framework of the AmericanInstitute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, as well as throughindependent third-party valuations and were approved by our Board of Directors. Valuation estimates were based on a variety of factors including ourfinancial position and historical financial performance, our stage of development, the valuations of comparable publicly traded companies, marketplace andmacro-economic factors, the illiquid nature of our common stock, arm’s-length sales of our preferred equity securities, the rights and preferences of ourpreferred equity securities and the prospects of a liquidity event such as an IPO, among others. After the completion of our IPO in September 2015, the fairvalue of our common stock used to determine the exercise price and fair value of stock options and restricted stock units is based on the closing price of ourcommon stock on the date of grant.Income TaxesAs of December 31, 2017, we had federal net operating loss (NOL) carryforwards of $126.7 million, U.S. state NOL carryforwards of $167.8 million andresearch and development credit carryforwards of $21.3 million which may be available to offset future income tax liabilities and expire at various datesbeginning in 2035.Under the provisions of the Internal Revenue Code, the NOL and credit carryforwards are subject to review and possible adjustment by the InternalRevenue Service and state tax authorities. NOL and credit carryforwards may become subject to an annual limitation in the event of certain cumulativechanges in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the InternalRevenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset futuretaxable income or tax liabilities. The amount of the annual limitation is 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 IPOin September 2015 and our follow-on public offering in March 2017, which may have resulted in a change in control as defined by Sections 382 and 383 ofthe 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 consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference betweenthe financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.Valuation allowances 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 notbe realized.We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets, including our NOL and creditcarryforwards. Based on our history 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 have provided a full valuation allowance for deferred tax assets as of December 31, 2017 and 2016.The Tax Cuts and Jobs Act of 2017 (the TCJA) was signed into law in December 2017, and has resulted in significant changes to the U.S. corporateincome tax system. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from atop marginal rate of 35% to a flat rate of 21%, elimination, reduction or limitation of certain domestic deductions and credits, limitation of the deduction fornet operating losses to 80% of current year taxable income, elimination of NOL carrybacks, one-time taxation of offshore earnings at reduced rates regardlessof whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain significant exceptions), immediate deductions for certain newinvestments instead of deductions for depreciation expense over time, and modification or repeal of many business deductions and credits, including theorphan drug tax credit. The changes resulting from the TCJA are effective beginning in 2018; however, the impact to our deferred tax assets and liabilities asa result of these changes has been accounted for as of December 31, 2017.95Table of Contents Recent Accounting PronouncementsSee Note 2 “Recent Accounting Pronouncements” in the notes to the consolidated 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.Results of OperationsComparison of the Years Ended December 31, 2017 and 2016 Years Ended December 31, 2017 2016 Change (in thousands) Revenues License revenue $10,385 $4,303 $6,082 Reagent sales — 213 (213)Grant revenue 8 73 (65)Total revenues 10,393 4,589 5,804 Expenses Costs of revenues Licensing costs 1,703 861 842 Costs of reagent sales 6 98 (92)Research and development 57,224 45,482 11,742 General and administrative 27,229 23,590 3,639 Other operating expenses (income) 116 (102) 218 Total operating expenses 86,278 69,929 16,349 Loss from operations (75,885) (65,340) (10,545)Other Income Investment income 2,716 1,938 778 Total other income 2,716 1,938 778 Loss before income taxes (73,169) (63,402) (9,767)Income Tax Benefit — 435 (435)Net loss $(73,169) $(62,967) $(10,202) License Revenue. License revenue increased by $6.1 million, from $4.3 million for the year ended December 31, 2016 to $10.4 million for the yearended December 31, 2017. This increase is primarily attributable to two commercial licenses we granted in 2017, including a license to AveXis, Inc. (AveXis)in June 2017 which carried an up-front fee of $6.0 million, as well as $1.9 million of license revenue recognized upon the achievement of milestones bylicensees during 2017. During the year ended December 31, 2016, we recognized $3.1 million of license revenue related upfront fees and option fees forcommercial licenses granted during the period, and no milestones were achieved by licensees during the period.Research and Development Expense. Research and development expenses increased by $11.7 million, from $45.5 million for the year endedDecember 31, 2016 to $57.2 million for the year ended December 31, 2017. This increase is primarily attributable to the following: •an increase of $10.2 million for personnel costs as a result of increased employee headcount of research and development personnel, includinga $2.4 million increase in stock-based compensation expense; •an increase of $2.5 million for laboratory costs and externally sourced process development and manufacturing of material to be used inclinical trials for our lead product candidates; and •an increase of $2.3 million for facilities and equipment used by research and development personnel, including a $1.9 million increase indepreciation expense allocated to research and development functions, primarily as a result of our advanced manufacturing and analyticslaboratory which opened in early 2017.The increase in research and development expenses was partially offset by a decrease of $4.0 million for externally sourced preclinical research anddevelopment services related to our lead product candidates and the advancement of our technology and other potential product candidates.96Table of Contents General and Administrative Expense. General and administrative expenses increased by $3.6 million, from $23.6 million for the year ended December31, 2016 to $27.2 million for the year ended December 31, 2017. This increase is primarily attributable to the following: •an increase of $2.3 million for personnel costs as a result of increased employee headcount of general and administrative personnel, including a$1.2 million increase in stock-based compensation expense; and •an increase of $0.6 million for professional services, including legal, accounting and other advisory services, primarily attributable tocommercial consulting services.Comparison of the Years Ended December 31, 2016 and 2015 Years Ended December 31, 2016 2015 Change (in thousands) Revenues License revenue $4,303 $5,025 $(722)License revenue from related party — 2,000 (2,000)Reagent sales 213 257 (44)Grant revenue 73 306 (233)Total revenues 4,589 7,588 (2,999)Expenses Costs of revenues Licensing costs 861 1,405 (544)Costs of reagent sales 98 98 — Research and development 45,482 17,279 28,203 General and administrative 23,590 11,912 11,678 Other operating expenses (income) (102) 31 (133)Total operating expenses 69,929 30,725 39,204 Loss from operations (65,340) (23,137) (42,203)Other Income (Expense) Investment income 1,938 346 1,592 Interest expense — (20) 20 Total other income (expense) 1,938 326 1,612 Loss before income taxes (63,402) (22,811) (40,591)Income Tax Benefit 435 — 435 Net loss $(62,967) $(22,811) $(40,156) License Revenue. License revenue, including license revenue from related party, decreased by $2.7 million, from $7.0 million for the year endedDecember 31, 2015 to $4.3 million for the year ended December 31, 2016. This decrease is primarily attributable to fewer commercial licenses granted by usin 2016 than in 2015. Research and Development Expense. Research and development expenses increased by $28.2 million, from $17.3 million for the year endedDecember 31, 2015 to $45.5 million for the year ended December 31, 2016. This increase is primarily attributable to the following: •an increase of $8.0 million for personnel costs as a result of increased employee headcount, including a $1.0 million increase in stock-basedcompensation expense, as well as recruiting costs associated with the hiring of key research and development personnel; •an increase of $6.6 million for externally sourced manufacturing process development and manufacturing of material to be used in clinicaltrials for our lead product candidates; •an increase of $6.3 million for externally sourced preclinical research and development services related to our internal product candidates andthe advancement of our technology and other potential product candidates;97Table of Contents •an increase of $3.7 million for clinical trial activities primarily associated with RGX-501; and •an increase of $2.5 million for consulting and other professional services related to preclinical, manufacturing, clinical and regulatoryactivities.General and Administrative Expense. General and administrative expenses increased by $11.7 million, from $11.9 million for the year endedDecember 31, 2015 to $23.6 million for the year ended December 31, 2016. This increase is primarily attributable to the following: •an increase of $8.4 million for personnel costs as a result of increased employee headcount, including a $3.1 million increase in stock-basedcompensation expense, as well as recruiting costs associated with the hiring of general corporate personnel; •an increase of $1.0 million for professional fees related to legal, accounting and advisory services, primarily attributable to commercialconsulting services, investor and media relations and fees associated with directors; •an increase of $0.9 million for facilities, including depreciation expense, allocated to general and administrative personnel, as a result ofincreased employee headcount and leased office space; and •an increase of $0.5 million for insurance expenses as a result of general growth and operating as a public company.Investment Income. Investment income increased by $1.6 million, from $0.3 million for the year ended December 31, 2015 to $1.9 million for the yearended December 31, 2016. This increase is attributable to significantly higher investments in marketable securities in 2016 as a result of net cash proceedsreceived in 2015 from the sale and issuance of Series C convertible preferred stock (Series C Preferred Stock) and Series D convertible preferred stock (SeriesD Preferred Stock) prior to our IPO, and from the sale and issuance of common stock in our IPO.Liquidity and Capital ResourcesAs of December 31, 2017, we had cash, cash equivalents and marketable securities of $176.4 million, which were primarily derived from the sale ofpreferred stock and common stock, as described below. Additionally, we have supplemented our cash flows with fees received from granting commerciallicenses to our proprietary technology to other biotechnology and pharmaceutical companies. We expect that our cash, cash equivalents and marketablesecurities as of December 31, 2017, will enable us to fund our operating expenses and capital expenditure requirements for at the least the next 12 monthsfrom the date of this report, based on our current business plan.In January 2015, we completed the sale and issuance of 4,631,774 shares of Series C Preferred Stock, par value $0.0001 per share, at a per share priceof $6.477 for aggregate gross proceeds of $30.0 million, including $26.2 million of cash proceeds and the conversion $3.8 million of debt by FOXKISERLLP. In May 2015, we completed the sale and issuance of 7,366,849 shares of Series D Preferred Stock, par value $0.0001 per share, at a per share price of$9.5699 generating aggregate gross proceeds of $70.5 million.In September 2015, we completed our IPO in which we sold 7,245,000 shares of our common stock (inclusive of 945,000 shares of our common stocksold pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price of $22.00 per share. The aggregate net proceeds from theoffering were $145.2 million, net of underwriting discounts and commissions and offering expenses payable by us. Upon the closing of the IPO, alloutstanding shares of convertible preferred stock converted into 16,298,045 shares of our common stock. In March 2017, we closed a follow-on public offering in which we sold 3,700,000 shares of our common stock at a price of $20.50 per share. Inconnection with the offering, we granted the underwriters an option to purchase up to 555,000 additional shares of our common stock at the public offeringprice. The underwriters exercised the option in full and purchased the additional shares in April 2017. The aggregate net proceeds from the offering, inclusiveof the underwriters’ option exercise, were $81.5 million, net of underwriting discounts and commissions and offering expenses payable by us.In January 2018, we amended our March 2014 license agreement with AveXis which modified its terms and conditions and provided additionalintellectual property rights to AveXis. In consideration for the additional rights granted under the amended license, AveXis paid the Company $80.0 millionupon the effective date of the amendment. In addition, AveXis will pay to us (i) $30.0 million on the first anniversary of the effective date of the January2018 Amendment, (ii) $30.0 million on the second anniversary of the effective date of the January 2018 Amendment and (iii) potential commercial milestonepayments of up to $120.0 million.98Table of Contents We have incurred losses since our inception and, as of December 31, 2017, had an accumulated deficit of $187.8 million. We anticipate that we willcontinue to normally incur losses for at least the next several years. We expect that our research and development and general and administrative expenseswill continue to increase for the foreseeable future. As a result, we will need significant additional capital to fund our operations, which we may obtainthrough one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaborationarrangements.Cash Flows Years Ended December 31, 2017 2016 2015 (in thousands) Net cash used in operating activities $(57,992) $(48,558) $(22,515)Net cash provided by (used in) investing activities (4,790) 19,163 (163,800)Net cash provided by financing activities 84,598 119 239,310 Net increase (decrease) in cash and cash equivalents $21,816 $(29,276) $52,995 Operating ActivitiesNet cash used in operating activities increased by $9.4 million during the year ended December 31, 2017 from the year ended December 31, 2016. Netcash used in operating activities increased by $26.0 million during the year ended December 31, 2016 from the year ended December 31, 2015. Theseincreases are primarily attributable to increased employee headcount and significant increases in research and development and general and administrativeexpenses as the Company continues the development and advancement of its lead product candidates.For the year ended December 31, 2017, our net cash used in operating activities of $58.0 million consisted of a net loss of $73.2 million, offset by$14.3 million in adjustments for non-cash items and changes in working capital of $0.9 million. Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $10.6 million, depreciation and amortization expense of $2.7 million and net amortization of premiums on marketable debtsecurities of $1.8 million. The change in working capital was primarily attributable to an increase in accounts payable and accrued expenses and othercurrent liabilities of $4.5 million, partially offset by an increase in prepaid expenses of $3.6 million. The increase in accounts payable and accrued expensesand other current liabilities is largely driven by increases in personnel costs and other operating expenses incurred and payable as of December 31, 2017. Theincrease in prepaid expenses and other current assets is largely driven by an increase in preclinical, manufacturing and clinical trial activities which we werebilled for as of December 31, 2017 but are applicable to future periods of performance.For the year ended December 31, 2016, our net cash used in operating activities of $48.6 million consisted of a net loss of $63.0 million, offset by $9.2million in adjustments for non-cash items and changes in working capital of $5.2 million. Adjustments for non-cash items primarily consisted of stock-basedcompensation expenses of $7.0 million and net amortization of premiums on marketable debt securities of $2.0 million. The change in working capital wasprimarily attributable to an increase in accounts payable and accrued expenses and other current liabilities of $4.1 million, an increase in deferred rent of $1.3million and a decrease in accounts receivable of $1.1 million, and was partially offset by an increase in prepaid expenses and other current assets of $0.9million.For the year ended December 31, 2015, our net cash used in operating activities of $22.5 million consisted of a net loss of $22.8 million and changesin working capital of $3.0 million, offset by $3.3 million in adjustments for non-cash items. The change in working capital is primarily attributable to adecrease in related party payables of $3.8 million and an increase in prepaid expenses and other current assets of $1.8 million, and was partially offset by anincrease in accounts payable and accrued expenses and other current liabilities of $2.8 million. Adjustments for non-cash items primarily consisted of stock-based compensation expenses of $2.9 million and net amortization of premiums on marketable debt securities of $0.3 million.Investing ActivitiesFor the year ended December 31, 2017, net cash used in investing activities consisted of $68.6 million to purchase marketable securities and $7.2million to purchase property and equipment, offset by $71.0 million in sales and maturities of marketable securities.For the year ended December 31, 2016, net cash provided by investing activities primarily consisted of $72.6 million in sales and maturities ofmarketable securities, partially offset by $45.1 million to purchase marketable securities and $8.1 million to purchase property and equipment.99Table of Contents For the year ended December 31, 2015, net cash used in investing activities consisted of $163.3 million to purchase marketable securities and $0.5million to purchase property and equipment.Financing ActivitiesFor the year ended December 31, 2017, net cash provided by financing activities primarily consisted of $81.5 million in aggregate net proceeds from afollow-on public offering of our common stock, net of underwriting discounts and commissions and offering expenses paid by us during the period, and $3.0million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan.For the year ended December 31, 2016, net cash provided by financing activities primarily consisted of $0.2 million in proceeds received from theexercise of stock options issued to employees.For the year ended December 31, 2015, net cash provided by financing activities primarily consisted of $26.0 million in net proceeds from the sale ofSeries C Preferred Stock, $68.0 million in net proceeds from the sale of Series D Preferred Stock and $145.2 million in net proceeds from the sale of commonstock in our IPO.Future Funding RequirementsTo date, we have primarily generated revenue through license agreements with strategic partners 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, for which we do not expect significant future revenue. We do not expect to generate significant recurringrevenue unless and until we obtain regulatory approval for and commercialize our product candidates. In addition, we expect our expenses to increase inconnection with our ongoing development activities, particularly as we continue to expand the research, development and clinical trials of, and seekregulatory approval for, our product candidates. In addition, subject to obtaining regulatory approval for our product candidates, we expect to incursignificant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additionalfunding in connection with our continuing operations.We expect that our cash, cash equivalents and marketable securities as of December 31, 2017 will enable us to fund our operating expenses and capitalexpenditure requirements for at least the next 12 months from the date of this report, based on our current business plan. We intend to devote the majority ofour current capital to clinical development and regulatory approval of our product candidates. Because of the numerous risks and uncertainties associatedwith the development and commercialization of gene therapy product candidates, we are unable to estimate the amount of increased capital outlays andoperating expenditures necessary to complete the development of product candidates. Additionally, our estimates are based on assumptions that may proveto be wrong, and we may use our available capital resources sooner than we currently expect.Our future capital requirements will depend on many factors, including: •the timing of enrollment, commencement and completion of our clinical trials; •the results of our clinical trials; •the results of our preclinical studies for our 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 productcandidates; •the costs associated with building out additional laboratory and manufacturing capacity, if any; •the costs, timing and outcome of regulatory review of our product candidates; •the costs of future product sales, medical affairs, marketing, manufacturing and distribution activities for any of our product candidates forwhich 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;100Table of Contents •our current licensing agreements or collaborations 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, and no products have been commercialized by us or our NAV Technology Licenseesusing our NAV Technology Platform to date. 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.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 underlyingintellectual property to third-parties; the fees are based on a percentage of the sublicense fees received from the sublicensees. Milestone fees are payable byus upon our future achievement of certain development and regulatory milestones. Royalty fees are based on a percentage of net sales of licensed products.Maintenance costs are reimbursements to the licensors for maintaining licensed patents. These amounts are not fixed and determinable and therefore are notincluded in the table below.We have entered into a number of long-term operating leases for office and laboratory space in Rockville, Maryland and New York, New York. As ofDecember 31, 2017, 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 $9,599 $2,172 $4,607 $2,341 $479 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. 101Table of Contents ITEM 7A.QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKInterest 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. Currently, we do not hedge these interest rate exposures. We have established policies and procedures tomanage exposure to fluctuations in interest rates. If market interest rates were to increase immediately and uniformly by 100 basis points, or one percentagepoint, from levels at December 31, 2017, we estimate that the impact on the net fair value of our interest-sensitive marketable securities would have resultedin a hypothetical decline of $0.7 million.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 funds denominated in U.S. dollars. Our marketable securities consist primarily ofcorporate debt securities. We limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investmentportfolio. Our investments in marketable securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses, net of anyrelated tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’equity until realized. A decline in the fair value below cost of available-for-sale securities that is deemed other-than-temporary is charged to results ofoperations, resulting in the establishment of a new cost basis for the security.One customer accounted for approximately 68% of our total revenue for the year ended December 31, 2017. No other customer accounted for morethan 10% of revenue in 2017. 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 Consolidated Financial Statements andare incorporated herein. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone 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, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure thatinformation required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls andprocedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act isaccumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allowtimely decisions regarding required disclosure.102Table of Contents Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, our disclosure controlsand procedures were effective at a reasonable assurance level.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, ourprincipal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles and includes those policies and procedures that: •Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; •Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of ourmanagement and directors; and •Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that couldhave a material effect on the financial statements.Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internalcontrol over financial reporting as of December 31, 2017, based on criteria for effective internal control over financial reporting established in InternalControl — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management’sassessment of the effectiveness of our internal control over financial reporting included testing and evaluating the design and operating effectiveness of ourinternal controls. In our management’s opinion, we have maintained effective internal control over financial reporting as of December 31, 2017, based oncriteria established in the COSO 2013 framework.This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transitionperiod established by rules of the SEC for emerging growth companies.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) thatoccurred during the year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control overfinancial 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. 103Table of Contents PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item will be included in our proxy statement for the 2018 annual meeting of stockholders to be filed with the SECwithin 120 days of the fiscal year ended December 31, 2017 (2018 Proxy Statement) under the headings “Election of Directors,” “Executive Officers,”“Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.We maintain a code of business conduct that qualifies as a “code of ethics” under Item 406 of the SEC’s Regulation S-K and applies to each of ourdirectors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or personsperforming similar functions. The code of business conduct is available in the corporate governance section of our corporate website at www.regenxbio.com.Any amendment or waiver of the “code of ethics” provisions of the code of business conduct for an executive officer or director may be granted only by ourBoard of Directors or a committee thereof and must be timely disclosed as required by applicable law. We intend to satisfy the disclosure requirementsregarding any such amendment or waiver applicable to any principal executive officer, principal financial officer, principal accounting officer or controller,or persons performing similar functions, in a report filed with the SEC on Form 8-K or on our corporate website at www.regenxbio.com. ITEM 11.EXECUTIVE COMPENSATIONThe information required by this item will be included in our 2018 Proxy Statement under the headings “Corporate Governance,” “DirectorCompensation” and “Executive Compensation” and is incorporated herein by reference. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item will be included in our 2018 Proxy Statement under the headings “Executive Compensation” and “SecurityOwnership of Certain Beneficial Owners and Management” and is incorporated herein by reference. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item will be included in our 2018 Proxy Statement under the headings “Certain Relationships and Related PartyTransactions” and “Corporate Governance” and is incorporated herein by reference. ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this item will be included in our 2018 Proxy Statement under the heading “Ratification of Appointment of IndependentRegistered Public Accounting Firm” and is incorporated herein by reference. 104Table of Contents 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 Consolidated 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. ITEM 16.FORM 10-K SUMMARYNot applicable. 105Table of Contents REGENXBIO INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 107Consolidated Financial Statements: Consolidated Balance Sheets 108Consolidated Statements of Operations and Comprehensive Loss 109Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 110Consolidated Statements of Cash Flows 111Notes to Consolidated Financial Statements 112 106Table of Contents Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of REGENXBIO Inc.:Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of REGENXBIO Inc. and its subsidiaries as of December 31, 2017 and 2016, and therelated consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for eachof the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). Inour opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accountingprinciples generally accepted in the United States of America.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether dueto error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of ouraudits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis forour opinion./s/ PricewaterhouseCoopers LLPMcLean, VirginiaMarch 6, 2018We have served as the Company’s auditor since 2015. 107Table of Contents REGENXBIO INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share data) December 31, 2017 December 31, 2016 Assets Current assets Cash and cash equivalents $46,656 $24,840 Marketable securities 114,122 64,714 Accounts receivable 473 1,032 Prepaid expenses 5,334 1,775 Other current assets 1,412 1,010 Total current assets 167,997 93,371 Marketable securities 15,616 69,412 Property and equipment, net 13,977 9,324 Restricted cash 225 225 Other assets 862 400 Total assets $198,677 $172,732 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $4,832 $1,543 Accrued expenses and other current liabilities 9,605 8,126 Total current liabilities 14,437 9,669 Deferred rent, net of current portion 1,211 1,326 Total liabilities 15,648 10,995 Commitments and contingencies (Note 6) Stockholders’ equity Preferred stock; $0.0001 par value; 10,000 shares authorized, and no shares issued and outstanding at December 31, 2017 and December 31, 2016 — — Common stock; $0.0001 par value; 100,000 shares authorized at December 31, 2017 and December 31, 2016; 31,295 and 26,477 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 3 3 Additional paid-in capital 371,497 276,354 Accumulated other comprehensive loss (715) (33)Accumulated deficit (187,756) (114,587)Total stockholders’ equity 183,029 161,737 Total liabilities and stockholders’ equity $198,677 $172,732 The accompanying notes are an integral part of these consolidated financial statements. 108Table of Contents REGENXBIO INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except per share data) Years Ended December 31, 2017 2016 2015 Revenues License revenue $10,385 $4,303 $5,025 License revenue from related party — — 2,000 Reagent sales — 213 257 Grant revenue 8 73 306 Total revenues 10,393 4,589 7,588 Expenses Costs of revenues Licensing costs 1,703 861 1,405 Costs of reagent sales 6 98 98 Research and development 57,224 45,482 17,279 General and administrative 27,229 23,590 11,912 Other operating expenses (income) 116 (102) 31 Total operating expenses 86,278 69,929 30,725 Loss from operations (75,885) (65,340) (23,137)Other Income (Expense) Investment income 2,716 1,938 346 Interest expense — — (20)Total other income (expense) 2,716 1,938 326 Loss before income taxes (73,169) (63,402) (22,811)Income Tax Benefit — 435 — Net loss $(73,169) $(62,967) $(22,811)Other Comprehensive Income (Loss) Unrealized gain (loss) on available-for-sale securities, net of reclassifications and income tax expense (682) 686 (719)Total other comprehensive income (loss) (682) 686 (719)Comprehensive loss $(73,851) $(62,281) $(23,530)Reconciliation of net loss to net loss applicable to common stockholders Net loss $(73,169) $(62,967) $(22,811)Net accretion and dividends on convertible preferred stock — — (1,747)Net gain on extinguishment of convertible preferred stock — — 759 Net loss applicable to common stockholders $(73,169) $(62,967) $(23,799)Basic and diluted net loss per common share $(2.45) $(2.38) $(2.59)Weighted-average basic and diluted common shares 29,878 26,409 9,173 The accompanying notes are an integral part of these consolidated financial statements. 109 Table of ContentsREGENXBIO INC.CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)(in thousands) Series A Series B Series C Series D Total Accumulated Total Convertible Convertible Convertible Convertible Convertible Additional Other Stockholders’ Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Common Stock Paid-in Comprehensive Accumulated Equity Shares Amount Shares Amount Shares Amount Shares Amount Stock Shares Amount Capital Loss Deficit (Deficit) Balances atDecember 31, 2014 2,393 $3,963 1,906 $8,630 — $— — $— $12,593 2,645 $— $10,518 $— $(28,809) $(18,291)Issuance of Series Cconvertible preferred stock, net oftransaction costs of$187 — — — — 4,047 26,021 — — 26,021 — — — — — — Issuance of Series Cconvertible preferred stock for theconversion ofoutstanding related party debt — — — — 585 3,792 — — 3,792 — — — — — — Issuance of Series Dconvertible preferred stock, net oftransaction costs of$2,502 — — — — — — 7,367 67,998 67,998 — — — — — — Loss (gain) onextinguishment of convertiblepreferred stock — 1,317 — (2,076) — — — — (759) — — 759 — — 759 Accretion(decretion) ofconvertible preferred stock — (2,280) — 1,338 — 187 — 2,502 1,747 — — (1,747) — — (1,747)Conversion ofconvertible preferredstock into common stockupon initial public offering (2,393) (3,000) (1,906) (7,892) (4,632) (30,000) (7,367) (70,500) (111,392) 16,298 2 111,390 — — 111,392 Issuance of commonstock upon initial public offering, netof transaction costs of $14,206 — — — — — — — — — 7,245 1 145,183 — — 145,184 Discount on relatedparty promissory notes — — — — — — — — — — — 13 — — 13 Exercise of stockoptions — — — — — — — — — 125 — 107 — — 107 Stock-basedcompensationexpense — — — — — — — — — — — 2,921 — — 2,921 Unrealized loss onavailable-for-sale securities — — — — — — — — — — — — (719) — (719)Net loss — — — — — — — — — — — — — (22,811) (22,811)Balances atDecember 31, 2015 — — — — — — — — — 26,313 3 269,144 (719) (51,620) 216,808 Exercise of stockoptions — — — — — — — — — 163 — 179 — — 179 Stock-basedcompensationexpense — — — — — — — — — — — 7,031 — — 7,031 Unrealized gain onavailable-for-sale securities, net ofreclassifications and income taxexpense — — — — — — — — — — — — 686 — 686 Net loss — — — — — — — — — — — — — (62,967) (62,967)Balances atDecember 31, 2016 — — — — — — — — — 26,477 3 276,354 (33) (114,587) 161,737 Issuance of commonstock upon public offering, netof transaction costs of $5,738 — — — — — — — — — 4,255 — 81,489 — — 81,489 Exercise of stockoptions — — — — — — — — — 516 — 2,493 — — 2,493 Issuance of commonstock underemployee stock purchaseplan — — — — — — — — — 48 — 556 — — 556 Stock-basedcompensationexpense — — — — — — — — — — — 10,605 — — 10,605 Unrealized loss onavailable-for-sale securities, net ofreclassifications and income taxexpense — — — — — — — — — — — — (682) — (682)Net loss — — — — — — — — — — — — — (73,169) (73,169)Balances atDecember 31, 2017 — $— — $— — $— — $— $— 31,295 $3 $371,497 $(715) $(187,756) $183,029 The accompanying notes are an integral part of these consolidated financial statements. 110 Table of Contents REGENXBIO INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2017 2016 2015 Cash flows from operating activities Net loss $(73,169) $(62,967) $(22,811)Adjustments to reconcile net loss to net cash used in operating activities Stock-based compensation expense 10,605 7,031 2,921 Net amortization of premiums and accretion of discounts on marketable debt securities 1,815 2,004 311 Depreciation and amortization 2,686 544 80 Net realized gains on sales of marketable securities (479) — — Non-cash consideration received for licenses granted (420) — — Other non-cash adjustments 73 (399) 24 Changes in operating assets and liabilities Accounts receivable 561 1,073 (265)Prepaid expenses (3,559) (755) (992)Other current assets (402) (159) (851)Other assets (135) (139) (168)Accounts payable 2,621 186 590 Accrued expenses and other current liabilities 1,897 3,873 2,221 Due to related party under services agreement — — (34)Other related party payables — — (3,761)Advance payments — (127) (26)Deferred rent (86) 1,277 246 Net cash used in operating activities (57,992) (48,558) (22,515)Cash flows from investing activities Purchases of marketable securities (68,634) (45,072) (163,278)Maturities of marketable securities 70,224 72,586 — Sales of marketable securities 780 23 — Purchases of property and equipment (7,160) (8,149) (522)Restricted cash — (225) — Net cash provided by (used in) investing activities (4,790) 19,163 (163,800)Cash flows from financing activities Proceeds from exercise of stock options 2,493 179 107 Proceeds from issuance of common stock under employee stock purchase plan 556 — — Proceeds from public offering of common stock, net of underwriting discounts and commissions 81,994 — — 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 Issuance costs for public offering of common stock (445) (60) — Net cash provided by financing activities 84,598 119 239,310 Net increase (decrease) in cash and cash equivalents 21,816 (29,276) 52,995 Cash and cash equivalents Beginning of period 24,840 54,116 1,121 End of period $46,656 $24,840 $54,116 Supplemental cash flow information Cash paid for interest $— $— $7 Supplemental disclosures of non-cash investing and financing activities Purchases of property and equipment in accounts payable and accrued expenses $254 $1,181 $96 Non-cash consideration received for licenses granted $420 $— $— Issuance costs for public offering of common stock in accounts payable and accrued expenses $— $33 $— 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 The accompanying notes are an integral part of these consolidated financial statements. 111 Table of Contents REGENXBIO INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of BusinessREGENXBIO Inc. (the Company) is a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of genetherapy. The Company’s proprietary adeno-associated virus (AAV) gene delivery platform (NAV® Technology Platform) consists of exclusive rights to over100 novel AAV vectors, including AAV7, AAV8, AAV9 and AAVrh10. The Company’s NAV Technology Platform is being applied by the Company, as wellas by third-party licensees (NAV Technology Licensees), in the development of product candidates for a variety of diseases with unmet needs. The Companywas formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland.Initial Public OfferingOn September 22, 2015, the Company completed its initial public offering (IPO) in which it sold 7,245,000 shares of common stock (inclusive of945,000 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 $145.2 million, net of underwriting discounts and commissions and offeringexpenses payable by the Company. Upon the closing of the IPO, all outstanding shares of convertible preferred stock converted into 16,298,045 shares ofcommon stock.Follow-on Public OfferingOn March 27, 2017, the Company completed a follow-on public offering in which it sold 3,700,000 shares of common stock at a price of $20.50 pershare. In connection with the offering, the Company granted the underwriters an option to purchase up to 555,000 additional shares of common stock at thepublic offering price. The underwriters exercised the option in full and purchased the additional shares on April 26, 2017. The aggregate net proceedsreceived by the Company from the offering, inclusive of the underwriters’ option exercise, were $81.5 million, net of underwriting discounts andcommissions and offering expenses payable by the Company.Liquidity and RisksAs of December 31, 2017, the Company had generated an accumulated deficit of $187.8 million since inception. As the Company continues to incurlosses, transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and achieving alevel of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, theCompany will continue to need to raise additional capital. As of December 31, 2017, the Company had cash, cash equivalents and marketable securities of$176.4 million, which management believes is sufficient to fund operations for at least the next 12 months from the date these consolidated financialstatements were issued.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 clinical manufacturing to the commercial production of products. 2. Summary of Significant Accounting PoliciesBasis of Presentation and Principles of ConsolidationThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the UnitedStates of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the AccountingStandards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompanybalances and transactions have been eliminated in consolidation.112 Table of Contents Foreign Currency TransactionsThe functional currency of the Company and its consolidated subsidiaries is the U.S. dollar. Transaction gains and losses that arise from exchange ratefluctuations on transactions denominated in a currency other than the U.S. dollar are included in the consolidated statements of operations andcomprehensive loss as incurred.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 differ materially 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 theseconsolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including:expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates and whether historicaltrends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimatefuture outcomes 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 consolidated financial statements. Estimates are used in the following areas, amongothers: stock-based compensation expense, accrued research and development expenses and other accrued expenses, income taxes and the fair value offinancial instruments.ReclassificationsCertain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassificationsare not material and have no effect on previously reported financial position, results of operations and cash flows.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, 2017, 96% of the Company’s revenue was generated from customers located in the U.S. For the year endedDecember 31, 2016, 90% of the Company’s revenue was generated from customers located in the U.S. For the year ended December 31, 2015, 78% and 21%of the Company’s revenue was generated from customers located in the U.S. and Europe, respectively. Country of origin for revenue is determined by theCompany based on the country of domicile of licensees for license revenue, the country in which reagent sales are delivered to for reagent sales and thelocation of grantors for government grant revenue. The substantial majority of the Company’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.Restricted CashRestricted cash includes money market mutual funds used to collateralize an irrevocable letter of credit as required by the Company’s lease agreementfor its office space in New York, New York.Marketable SecuritiesThe Company’s marketable securities are classified as available-for-sale and are carried at fair value. Marketable securities with remaining maturitydates exceeding 12 months which are not intended to be sold prior to maturity for use in current operations are classified as non-current. Unrealized gains andlosses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate componentof stockholders’ 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.113 Table of Contents 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, and amounts may exceed federally insuredlimits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cashequivalents are held. The Company’s marketable securities primarily consist of fixed income corporate debt securities and may subject the Company toconcentrations of credit risk. The Company has adopted an investment policy which limits potential concentrations of investments and establishes minimumacceptable credit ratings, thereby reducing credit risk exposure. Management believes that it is not exposed to significant credit risk related to accountsreceivable due to the credit quality and history of collections from its significant customers. The Company has no financial instruments with off-balancesheet risk of loss.The following table summarizes those customers who represented at least 10% of revenue or accounts receivable for the periods presented: Revenue Accounts Receivable Years Ended December 31, December 31, 2017 2016 2015 2017 2016 Customer A 68% * * * * Customer B * * * * 57%Customer C(1) * * 41% * * Customer D * 24% * * * Customer E * * * 42% 19%Customer F * * 16% * * Customer G * * 22% 32% * Customer H * 44% * * * Customer I * * * 21% * *Represented less than 10%(1)Represents a related party prior to September 30, 2015Accounts ReceivableAccounts receivable consist of amounts due to the Company resulting from the Company’s licensing arrangements, reagent sales and grant programs.Receivables are stated net of an allowance for doubtful accounts, if deemed necessary based on the Company’s evaluation of collectability using specificidentification of account balances and historical information regarding write-offs. Account balances are charged off against the allowance when the potentialfor recovery is considered remote. The Company has not recorded an allowance for doubtful accounts as of December 31, 2017 or 2016.114 Table of Contents 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. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets, which areas 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 undiscounted cash flows that the assets are expected togenerate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assetsexceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. No impairment losses have beenrecorded during the years ended December 31, 2017, 2016 and 2015.Cost Method InvestmentsCost method investments consist of non-marketable equity holdings and are stated at cost. The Company accounts for its investments in other entitiesusing the cost method if its ownership interest is below 20% and the Company does not have significant influence over the operations of the entity. As ofDecember 31, 2017, cost method investments consisted of shares of common stock of Prevail Therapeutics Inc. (Prevail) acquired in connection with acommercial license granted to Prevail in August 2017. Cost method investments had a carrying value of $0.4 million as of December 31, 2017 and areincluded in other assets on the consolidated balance sheet. The Company did not have any cost method investments as of December 31, 2016.Declines in the fair value of cost method investments below their carrying value that are deemed to be other-than-temporary are reflected in theconsolidated statements of operations and comprehensive loss as realized losses. In estimating other-than-temporary impairment losses, managementconsiders, among other things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near-termprospects of the issuer and the intent and ability of the Company to retain its investments in the issuer for a period of time sufficient to allow for theanticipated recovery in fair value. The Company has not identified any events or changes in circumstances that would have an adverse effect on the fair valueof its cost method investments. Accordingly, no other-than-temporary impairment losses were recorded for the years ended December 31, 2017, 2016 and2015.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.115 Table of Contents 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. The fair values of the Company’s Level 2 instruments are based on quoted market prices or broker or dealer quotations for similar assets. Theseinvestments are initially valued at the transaction price and subsequently valued utilizing third party pricing providers or other market observable data.Please refer to Note 4 for further information on the fair value measurement of the Company’s financial instruments.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 Platform. Additionally, the Company has generated limited revenue fromsales of licensed reagents to customers for use in research and development as well as grant programs.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. The terms of the Company’s license agreements require delivery of an intellectual property license for use of the Company’sintellectual property in research and/or commercial development of product candidates for various diseases. License agreements generally have a term equalto the life of the intellectual property, but are terminable at the option of the licensee. Non-refundable payments to the Company under these arrangementsmay include: (i) up-front license fees, (ii) option fees to obtain additional 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 licensees and (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 arrangement116 Table of Contents consideration. As of December 31, 2017 and 2016, all of the options included in the Company’s license agreements have been determined to be substantive,and none of the options are priced at a significant and incremental discount. Option fees are recognized as revenue upon exercise and delivery of theunderlying commercial license, provided there are no undelivered elements in the arrangement and the necessary criteria under ASC 605 for revenuerecognition 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.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 12 for information regarding license revenue from related party.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.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.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.117 Table of Contents 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 material changes from the Company’s original estimates in any of the periodspresented.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 and restricted stock units, tobe recognized in the consolidated statement 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 stock option awards to employees and directors using the Black-Scholes option-pricing model, whichrequires the 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.For the years ended December 31, 2016 and 2015, the Company was also required to estimate forfeitures of share-based awards at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from its estimates. For all periods through December 31, 2016, a forfeiture rate of zerowas been used to calculate stock-based compensation expense due to the lack of historical information necessary to estimate forfeitures. To the extent thatactual forfeitures differ from the Company’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were revised.On January 1, 2017, the Company adopted ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting. Under the new standard, the Company has elected not to estimate forfeitures of share-based awards and to account for forfeitures as theyoccur. The adoption of this standard required retrospective application, however, since the Company had previously assumed a forfeiture rate of zero on allshare-based awards there was no impact to the consolidated financial statements as a result of the adoption of this standard.118 Table of Contents 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 consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statementand tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances areprovided, 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 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.The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017 and 2016, theCompany had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidatedstatements of operations and comprehensive loss.Net Loss Per ShareThe 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 to be participating securities. The holders of convertible preferred stock outstanding prior tothe IPO were entitled to receive preferential dividends in the event that a dividend was to be paid to the holders of common stock, and did not have acontractual obligation to share in the losses of the Company. As such, the Company’s net losses for the year ended December 31, 2015 were not allocated tothese participating securities. In connection with the IPO, all outstanding shares of convertible preferred stock were automatically converted into shares ofcommon 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. Contingently convertible sharesin which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net loss per share until thecontingency has been fully met. For purposes of the diluted net loss per share calculation, convertible preferred stock, outstanding stock options, outstandingrestricted stock units and withholdings under the employee stock purchase plan are considered to be common stock equivalents but have been excluded fromthe calculation of diluted net loss per share, as their effect would be anti-dilutive. Accordingly, basic and diluted net loss per share were the same for allperiods presented.Comprehensive LossThe Company’s comprehensive loss includes its net loss as well as net unrealized gains and losses on available-for-sale securities, net of income taxeffects and reclassification adjustments for realized gains and losses.Recent Accounting PronouncementsRecently adoptedIn March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, which is intended to simplify several aspects of the accounting for share-based payment awards including income tax consequences,classification of awards as either equity or liabilities and classification within the statement of cash flows. Additionally, the standard allows companies toelect not to estimate forfeitures of share-based awards for purposes of recognizing stock-based compensation expense, and account for forfeitures as theyoccur. The Company adopted this standard effective January 1, 2017, and upon adoption, has elected not to estimate forfeitures of share-based awards, whichrequires retrospective application in the consolidated financial statements. The Company has estimated a forfeiture rate of zero on all share-119 Table of Contents based awards granted since its inception and the adoption of this standard had no material impact on the Company’s tax provision or classification of theCompany’s share-based awards. Accordingly, the application of this standard had no material impact on the Company’s financial position or results ofoperations.Not yet adoptedIn May 2014, the FASB issued ASU 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 2015-14, Revenue from Contracts with Customers (Topic 606), which deferred the effective date of the guidance under ASU 2014-09 by one year.In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations andLicensing, which clarifies various aspects of Topic 606, including the identification of performance obligations and the implementation of licensingguidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and PracticalExpedients, which clarifies various additional aspects of Topic 606, including the assessment of collectability, presentation of sales taxes and other similartaxes collected from customers, the measurement date for transactions with non-cash consideration as well as transitional issues and other technicalcorrections regarding the adoption of new standards under Topic 606. In December 2016, the FASB issued ASU 2016-20, Technical Corrections andImprovements to Topic 606, Revenue from Contracts with Customers, which clarifies various additional narrow aspects of Topic 606. The standards areeffective for annual and interim reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periodsbeginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has elected not to early adopt thesestandards. The Company believes that the adoption of Topic 606 will have a material impact on the Company’s revenue recognition policies and disclosuresfor license revenue and will result in the acceleration of revenue related to annual maintenance fees payable by licensees through the contractual terms of theagreements. Additionally, management believes that the accelerated recognition of revenue from maintenance fees expected to be received from licensees infuture periods results in a significant financing component to the license, since such consideration is associated with performance obligations satisfied uponthe delivery of the intellectual property license(s) at the onset of the agreements. As a result, the portion of the maintenance fees associated with the financingcomponent will be recognized as interest income over the term of the license rather than license revenue. The changes to revenue recognition resulting fromthe adoption of Topic 606 will also impact the timing of recognition of sublicense fees payable by the Company to its licensors. The Company expects toutilize the modified retrospective method of application for the adoption of Topic 606. Under this method, the cumulative impact of the adoption throughDecember 31, 2017 will be recorded through retained earnings on January 1, 2018, the adoption date. While the Company believes that the application ofTopic 606 may have a material impact upon adoption, management has not yet finalized its analysis of the quantitative effects on the Company’s financialposition or results of operations.In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifieswhen modification accounting should be applied for changes to terms or conditions of a share-based award. The standard is effective for annual and interimperiods beginning after December 15, 2017, with early adoption permitted, and is to be applied prospectively upon adoption. The Company does not believethe application of this standard will have a material impact on the Company’s financial position or results of operations.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The standard requires that the statement ofcash flows explain the change during the period in the total of cash, cash equivalents and restricted cash. As a result, amounts generally described asrestricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on thestatement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted, and is tobe applied retrospectively to each period presented. The Company does not believe the application of this standard will have a material impact on theCompany’s financial position or results of operations.In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments, which amends the accounting for credit losses for most financial assets and certain other instruments. The standard requires that entities holdingfinancial assets and net investment in leases that are not accounted for at fair value through net income be presented at the net amount expected to becollected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present thenet carrying value at the amount expected to be collected on the financial asset. The standard is effective for annual and interim periods beginning afterDecember 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. The Company does not believe theapplication of this standard will have a material impact on the Company’s financial position or results of operations.120 Table of Contents In 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 12 monthsregardless of classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The standard iseffective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is evaluating theapplication of this ASU, but has not yet determined the potential effects it may have on the Company’s consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities, which supersedes the current guidance to classify equity securities with readily determinable fair values into differentcategories and requires equity securities to be measured at fair value with changes in the fair value recognized through net income (loss). In February 2018,the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition andMeasurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU 2016-01. The standards are effective for annual and interimperiods beginning after December 15, 2017. The Company does not believe the application of these standards will have a material impact on the Company’sfinancial position or results of operations. 3. Marketable SecuritiesThe following tables present a summary of the Company’s marketable securities, which consist solely of available-for-sale securities (in thousands): AmortizedCost UnrealizedGains UnrealizedLosses Fair Value December 31, 2017 Corporate bonds $130,018 $2 $(282) $129,738 $130,018 $2 $(282) $129,738 AmortizedCost UnrealizedGains UnrealizedLosses Fair Value December 31, 2016 Corporate bonds $133,424 $82 $(298) $133,208 Common equity securities 300 618 — 918 $133,724 $700 $(298) $134,126 Common equity securities reported as of December 31, 2016 consisted of shares of common stock of Audentes Therapeutics, Inc. (Audentes). TheCompany obtained these shares in connection with a license granted to Audentes in July 2013. Upon Audentes’ IPO in July 2016, the Company classifiedthese shares as available-for-sale securities and recognized an unrealized gain of $0.6 million. Prior to Audentes’ IPO, the shares were not marketable andwere accounted for by the Company as a cost method investment. The Company sold all of its shares of Audentes common stock during the year endedDecember 31, 2017.As of December 31, 2017 and 2016, no available-for-sale securities had remaining maturities greater than three years.The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. As of December 31,2017 and 2016, the balance in the Company’s accumulated other comprehensive loss consisted solely of net unrealized gains and losses on available-for-salesecurities, net of income tax effects and reclassification adjustments for realized gains and losses. During the years ended December 31, 2017, 2016 and 2015,the Company recognized net unrealized gains (losses) on available-for-sale securities of $(0.2) million, $1.1 million and $(0.7) million, respectively, andincome tax expense of $0, $0.4 million and $0, respectively, in other comprehensive income (loss). The Company recognized net realized gains (losses) of$0.5 million, less than $(0.1) million and $0 on the sale or maturity of available-for-sale securities during the years ended December 31, 2017, 2016 and2015, respectively, which were reclassified out of accumulated other comprehensive loss during the periods and are included in investment income in theconsolidated statements of operations and comprehensive loss. 121 Table of Contents The aggregate fair value of securities held by the Company in an unrealized loss position for more than 12 months as of December 31, 2017 was $17.1million. The aggregate unrealized loss of securities held by the Company in an unrealized loss position for more than 12 months as of December 31, 2017was $0.1 million. The Company did not hold any securities in an unrealized loss position for more than 12 months as of December 31, 2016. The aggregatefair value of securities held by the Company in an unrealized loss position for less than 12 months as of December 31, 2017 and 2016 was $109.2 million and$102.5 million, respectively. As of December 31, 2017, securities held by the Company which were in an unrealized loss position consisted of 46 investmentgrade corporate bond positions. The Company has the intent and ability to hold such securities until recovery and has determined that noneof its investments were other-than-temporarily impaired as of December 31, 2017 or 2016. 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 as well as common equity securities as disclosed in Note 3. Thefollowing tables present the fair value of cash equivalents and marketable securities in accordance with the hierarchy discussed in Note 2 (in thousands): Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total December 31, 2017 Money market mutual funds (cash equivalents) $— $46,646 $— $46,646 Corporate bonds (marketable securities) — 129,738 — 129,738 $— $176,384 $— $176,384 Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total December 31, 2016 Money market mutual funds (cash equivalents) $— $24,840 $— $24,840 Corporate bonds (marketable securities) — 133,208 — 133,208 Common equity securities (marketable securities) 918 — — 918 $918 $158,048 $— $158,966 There were no transfers of financial instruments between levels of the fair value hierarchy during the years ended December 31, 2017 and 2016.Management estimates that the carrying amounts of its accounts receivable, accounts payable and accrued expenses and other current liabilitiesapproximate fair value due to the short-term nature of those instruments. 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 reported as of December 31, 2017. 122 Table of Contents 5. Property and Equipment, NetProperty and equipment, net consists of the following (in thousands): December 31, 2017 December 31, 2016 Computer equipment and software $1,481 $1,038 Lab equipment 8,561 2,780 Furniture and fixtures 1,384 1,213 Leasehold improvements 5,828 4,917 Total property and equipment 17,254 9,948 Accumulated depreciation and amortization (3,277) (624)Property and equipment, net $13,977 $9,324During the years ended December 31, 2017, 2016 and 2015, the Company recorded depreciation expense of $2.7 million, $0.5 million and $0.1million, respectively. 6. 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 March 2015, the Company entered into a non-cancelable operating lease for office space at 9712 Medical Center Drive in Rockville, Maryland (theMedical Center Drive Lease). The lease term commenced in April 2015 and monthly payments under the lease began in October 2015 and escalate annuallyin accordance with the lease agreement.In September 2015, November 2015 and July 2017, the Company amended the Medical Center Drive Lease to include additional office andlaboratory space at 9714 Medical Center Drive, and ultimately extend the term of the lease to September 2021. The Company has options to extend the termof the Medical Center Drive Lease for up to six additional years. Under the amended lease, the Company has received a $0.4 million tenant improvementallowance from the landlord which will be deferred and amortized on a straight-line basis as a reduction of rent expense over the term of the lease.In January 2016, the Company entered into a 7.5-year, non-cancelable operating lease for its corporate headquarters at 9600 Blackwell Road inRockville, Maryland (the Blackwell Road Lease). The lease commenced in February 2016, and expires in September 2023. The Company has an option toextend the term of the lease for an additional five years. In November 2017, the Blackwell Road Lease was amended to include additional office space for theremainder of the lease term. Monthly payments under the lease began in September 2016 and escalate annually in accordance with the lease agreement. TheCompany has received a $0.8 million tenant improvement allowance from the landlord which will be deferred and amortized on a straight-line basis as areduction of rent expense over the term of lease.In May 2016, the Company entered into a 51-month, non-cancelable operating lease for additional office space at 400 Madison Avenue in New York,New York. The lease commenced in July 2016, and expires in October 2020. Monthly payments under the lease began in October 2016 and escalate annuallyin accordance with the lease agreement. Under the terms of the lease agreement, the Company has provided the landlord with an irrevocable letter of credit of$0.2 million which the landlord may draw upon in the event of any uncured default by the Company under the terms of the lease. As of December 31, 2017and 2016, the Company had recorded restricted cash of $0.2 million as collateral to the financial institution which issued the letter of credit.123 Table of Contents As of December 31, 2017, future minimum lease payments under non-cancelable operating leases are as follows (in thousands): Operating Leases 2018 $2,172 2019 2,297 2020 2,310 2021 1,720 2022 621 Thereafter 479 Total minimum lease payments $9,599 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, 2017, 2016 and 2015 was $1.8 million, $1.8 million and $0.4 million, respectively.Licenses Granted to the CompanyLicenses granted to the Company may require the Company to make future payments relating to sublicense fees, milestone fees for milestonesachieved in the future and royalties on future sales of licensed products. Additionally, the Company may be responsible for the cost of the maintenance of theintellectual property as incurred by its licensors. Up-front fees to obtain licensed technology are included in research and development expenses and patentmaintenance costs are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. Sublicense feesare based on a specified percentage of license fees earned by the Company and are included in licensing costs in the consolidated statements of operationsand comprehensive loss. Milestone fees are included in licensing costs in the consolidated statements of operations and comprehensive loss if the underlyingmilestone is achieved by a licensee, or in research and development expense if the underlying milestone is achieved by the Company as a result of thedevelopment of its product candidates. Royalties on sales of licensed reagents for use in research and development are included in costs of reagent sales inthe consolidated statements of operations and comprehensive loss. The Company has not commercialized any product candidates or paid any royalties underthese agreements other than for the sales of licensed reagents.The Trustees of the University of Pennsylvania. In February 2009, the Company entered into a license agreement, which has been amended from timeto time, with The Trustees of the University of Pennsylvania (together with the University of Pennsylvania, Penn) for exclusive, worldwide rights to certainpatents owned by Penn underlying the Company’s NAV Technology Platform. Under the terms of the agreement, in consideration for the license, theCompany issued to Penn a 24.5% equity interest in the Company on a fully diluted basis after issuance. The Company is obligated to pay Penn royalties onnet sales and sublicense fees, if any. Additionally, the Company is obligated to reimburse Penn for certain costs incurred related to the maintenance of thelicensed patents.In April 2016, the Company entered into an agreement with Penn whereby the Company will fund clinical trial activities performed by Penn for RGX-501, the Company’s product candidate for homozygous familial hypercholesterolemia (HoFH). In connection with the agreement, the Company amended itslicense from Penn to include exclusive license rights to data, results and other information generated in connection with the RGX-501 clinical trial.Expenses incurred by the Company related to its license from Penn were as follows (in thousands): Years Ended December 31, 2017 2016 2015 Sublicense fees $207 $430 $703 Royalties on sales of reagents 4 11 9 Maintenance of licensed patents 233 133 154 $444 $574 $866 124 Table of Contents As of December 31, 2017 and 2016, the Company had accrued less than $0.1 million and $0.2 million, respectively, in expenses payable to Pennunder the license agreement, which are included in accounts payable and accrued expenses on the Company’s consolidated balance sheets. Until September30, 2015, the Company considered Penn to be a related party. For the nine months ended September 30, 2015, the Company incurred $0.4 million inexpenses for sublicense fees, royalties on reagent sales and reimbursement of patent maintenance costs under its license from Penn. See Note 12 for furtherinformation on related party transactions with Penn.GlaxoSmithKline LLC. In March 2009, the Company entered into a license agreement, which was amended in April 2009, with GlaxoSmithKline LLC(GSK) for exclusive, worldwide rights to certain patents underlying the Company’s NAV Technology Platform which are owned by Penn and exclusivelylicensed to GSK. Under the terms of the agreement, in consideration for the license the Company issued to GSK a 19.9% equity interest in the Company on afully diluted basis after issuance. The Company is obligated to pay GSK royalties on net sales and sublicense fees, if any. Additionally, the Company isobligated to reimburse GSK for certain costs incurred and invoiced to the Company related to the maintenance of the licensed patents. The Company is alsoobligated to pay GSK up to $1.5 million upon the achievement of various milestones. From the inception of the agreement through December 31, 2017, theCompany has incurred $0.5 million for milestones that have been achieved, or are deemed probable of achievement.Expenses incurred by the Company related to its license from GSK were as follows (in thousands): Years Ended December 31, 2017 2016 2015 Sublicense fees $997 $430 $703 Royalties on sales of reagents 2 7 5 Milestone fees 500 — — Maintenance of licensed patents 509 597 573 $2,008 $1,034 $1,281 As of December 31, 2017 and 2016, the Company had accrued $0.3 million and $0.4 million, respectively, in expenses payable to GSK under thelicense agreement, which are included in accounts payable and accrued expenses on the Company’s consolidated balance sheets. Until September 30, 2015,the Company considered GSK to be a related party. For the nine months ended September 30, 2015, the Company incurred $0.7 million in expenses forsublicense fees, royalties on reagent sales and reimbursement of patent maintenance costs under its license from GSK. See Note 12 for further information onrelated party transactions with GSK.Regents of the University of Minnesota. In November 2014, the Company entered into a license agreement, which was amended in November 2016,with Regents of the University of Minnesota (Minnesota), for an exclusive license under certain patent rights to commercialize products covered by thelicensed patent rights in any country or territory in which a licensed patent has been issued and is unexpired, or a licensed patent application is pending. Inconsideration for the license, the Company paid an up-front fee, and reimbursed Minnesota for patent maintenance expenses, for a total of less than $0.1million. Under the terms of the agreement, the Company is obligated to pay Minnesota annual maintenance fees of less than $0.1 million per year on eachanniversary date of the agreement. Additionally, the Company is obligated to pay royalties on net sales and sublicense fees, if any, and up to $0.1 million perlicensed product upon the achievement of various milestones. In November 2016, the license with Minnesota was amended to include additional patentrights. In consideration for the additional patent rights, the Company paid an up-front fee of less than $0.1 million.From the inception of the agreement through December 31, 2017, the Company has incurred less than $0.1 million for milestones that have beenachieved, or are deemed probable of achievement. The Company has not incurred any royalties or sublicense fees payable to Minnesota since the inceptionof the license agreement. During the years ended December 31, 2017, 2016 and 2015, the Company incurred $0.1 million, $0.1 million and less than $0.1million, respectively, in total expenses under the license agreement with Minnesota. As of December 31, 2017 and 2016, the Company had accrued $0.1million and less than $0.1 million, respectively, in expenses payable to Minnesota under the license agreement.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 potential exposure under these agreements is unknown because it involves claims that may be made against the Companyin the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As ofDecember 31, 2017 and 2016, the Company did not have any material indemnification claims that were probable or reasonably possible and consequentlyhas not recorded any related liabilities.125 Table of Contents European Patent Office ProceedingIn June 2017, a third party filed an opposition with the European Patent Office challenging the validity of a European patent owned by Penn for theAAV8 vector, which the Company has exclusively licensed. This matter is in its early stages and the Company is unable to estimate the timing or outcome ofthis matter but intends to assist Penn in vigorously defending this patent. As of December 31, 2017, the Company has not recorded any liabilities related tothis matter. 7. CapitalizationAs of December 31, 2017 and 2016, the authorized capital stock of the Company included 100,000,000 shares of common stock, par value $0.0001per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. The Company’s restated certificate of incorporation and bylaws contain therights, preferences and privileges of the Company’s stockholders and their respective shares.Issuance of Series C Preferred StockOn January 13, 2015, the Company completed the sale and issuance of 4,631,774 shares of Series C convertible preferred stock (Series C PreferredStock), par value $0.0001 per share, at a per share price of $6.477 for aggregate gross proceeds of $30.0 million, which included $26.0 million in cashproceeds, net of issuance costs of $0.2 million, and the conversion of $3.8 million of debt by FOXKISER LLP (FOXKISER).Extinguishment of Preferred StockIn connection with the issuance of the Series C Preferred Stock in January 2015, the rights, preferences and privileges of the Series A convertiblepreferred stock (Series A Preferred Stock) and Series B convertible preferred stock (Series B Preferred Stock) then outstanding were modified. Morespecifically, Series C Preferred Stock received preference in dividends and liquidation proceeds 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 cumulativedividends 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 redemptionvalue and liquidation preferences of Series A Preferred Stock and Series B Preferred Stock, which were previously equal to original issue price plus accruedbut unpaid cumulative dividends, were reduced to original issue price plus non-cumulative dividends declared. Additionally, the redemption date of Series APreferred 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 $1.3 million on the Series A Preferred Stock and a gain of $2.1 million on the Series BPreferred Stock within stockholders’ equity (deficit) equal to the difference between the fair value of the new shares of preferred stock issued and the carryingamount of the old shares of preferred stock extinguished. The Company allocated the entire net gain on extinguishment of convertible preferred stock of $0.8million to additional paid-in capital. The net gain on extinguishment is reflected in the calculation of net loss available to common stockholders inaccordance with FASB ASC Topic 260, Earnings per Share. The fair value of the Series A Preferred Stock and Series B Preferred Stock was determined usingthe 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 usedto allocate equity 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 7,366,849 shares of Series D convertible preferred stock (Series D Preferred Stock),par value $0.0001 per share, at a per share price of $9.5699 for proceeds of $68.0 million, net of issuance costs of $2.5 million. Outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, were presented outsideof stockholders’ equity (deficit) due to the rights, preferences and privileges of these securities, including redemption features. These securities were markedto their respective redemption values at each reporting date and the accretion of the securities was excluded from net loss applicable to common stockholdersfor purposes of calculating net loss per share.126 Table of Contents Conversion of Convertible Preferred Stock upon IPOPrior to the closing of the IPO on September 22, 2015, all of the outstanding shares of the Company’s convertible preferred stock were converted into16,298,045 shares of its common stock. As of December 31, 2017 and 2016, the Company did not have any preferred stock outstanding.The Company’s reserved shares of common stock for future issuance are as follows (in thousands): December 31, 2017 December 31, 2016 Reserved for issuance under equity incentive plans 7,430 6,887 Reserved for issuance under employee stock purchase plan 206 254 7,636 7,141 8. Significant AgreementsSee Note 6 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 Platform. License agreements generally have a term at least equal to the life of theunderlying patents and are terminable only at the option of the licensee. License agreements may require licensees to pay non-refundable up-front fees,option fees and annual maintenance fees. Additional contingent consideration under the licenses may include sublicense fees, milestone fees and royalties onnet sales of commercialized products. Sublicense fees vary by license and range from a mid-single digit percentage to a low-double digit percentage oflicense fees received by licensees as a result of sublicenses. Royalties on net sales of commercialized products vary by license and range from a mid-singledigit percentage to a low-teen percentage of net sales by licensees.Milestone fees are payable to the Company upon the achievement of specific clinical, regulatory and commercial developments by licensees. As ofDecember 31, 2017, the Company’s license agreements, excluding additional licenses that could be granted upon the exercise of options by licensees, couldresult in aggregate milestone fees payable to the Company of up to $27.8 million upon the commencement of various stages of clinical trials, $48.5 millionupon the submission of regulatory approval filings, $110.5 million upon the approval of commercial products by regulatory agencies and $92.0 million uponthe achievement of specified sales targets for licensed products. The achievement of milestones by licensees is highly dependent on the successfuldevelopment and commercialization of licensed products and it is at least reasonably possible that some or all of the milestone fees will not be realized bythe Company.License revenue consists of the following (in thousands): Years Ended December 31, 2017 2016 2015 Up-front fees and option fees for commercial licenses $6,420 $3,050 $5,900 Maintenance fees for commercial licenses 920 910 635 Milestone fees 1,850 — 250 Research and other license revenue 1,195 343 240 $10,385 $4,303 $7,025 AveXis, Inc. License to Treat Spinal Muscular Atrophy, as Amended. In January 2018, the Company entered into an amendment (the January 2018Amendment) to its March 2014 license agreement (the March 2014 License) with AveXis, Inc. (AveXis). Under the January 2018 Amendment, the Companygranted AveXis an exclusive, worldwide commercial license, with rights to sublicense, to any recombinant AAV vector in the Company’s intellectualproperty portfolio during the term of the license agreement for the treatment of spinal muscular atrophy (SMA) in humans by in vivo gene therapy. Under theoriginal March 2014 License, the Company had granted AveXis a license relating only to the NAV AAV9 vector.127 Table of Contents Additionally, the January 2018 Amendment modifies the terms and conditions of the March 2014 License relating to assignment. Under the amendedassignment provision, AveXis is permitted to transfer the March 2014 License, as amended, without the Company’s consent in connection with a change ofcontrol of AveXis, subject to the transferee or successor agreeing in writing to be bound by the terms of the March 2014 License, as amended, and thepayment to the Company of certain fees due upon such change of control, as described below. Under the original March 2014 License, any assignment byAveXis without the Company’s prior written consent had been prohibited. The January 2018 Amendment also provides that, solely upon the written requestof AveXis, the Company may, in its sole discretion after receipt of such request, provide certain collaboration services to AveXis regarding the developmentand commercialization of gene therapy product candidates for the treatment of SMA.Pursuant to the January 2018 Amendment, in consideration for the additional rights granted thereunder and in addition to the payments and royaltiesowed under the original March 2014 License, AveXis paid to the Company a fee of $80.0 million upon entry into the January 2018 Amendment. In addition,AveXis will pay to the Company (i) $30.0 million on the first anniversary of the effective date of the January 2018 Amendment, (ii) $30.0 million on thesecond anniversary of the effective date of the January 2018 Amendment and (iii) potential commercial milestone payments of up to $120.0 million. In theevent of a change of control of AveXis, to the extent that any fee described in (i) or (ii) above, or the first $40.0 million of milestone payments described in(iii) above, has not yet been paid to the Company, AveXis will be obliged to pay any such unpaid fee to the Company upon the change of control.Additionally, for any product developed for the treatment of SMA using the NAV AAV9 vector, the Company will continue to receive mid-single to lowdouble-digit royalties on net sales as defined in the original March 2014 License, and for any product developed for the treatment of SMA using a NAVvector other than NAV AAV9, the Company will receive a low double-digit royalty on net sales.During the years ended December 31, 2017, 2016 and 2015, the Company recognized license revenue of $1.1 million, $0.1 million and $0.3 million,respectively, under the March 2014 License. The Company did not recognize any revenue in 2017 related to the amendment of the license in January 2018.AveXis, Inc. License to Treat Rett Syndrome and Amyotrophic Lateral Sclerosis. In June 2017, the Company entered into an exclusive licenseagreement (the June 2017 License) with AveXis for the development and commercialization of products to treat Rett Syndrome and amyotrophic lateralsclerosis (ALS) caused by mutations in the gene that produces the copper zinc superoxide dismutase 1 (SOD1) enzyme using AAV9. Under the licenseagreement, the Company granted AveXis an exclusive, sublicensable worldwide license under the licensed intellectual property to make, have made, use,import, sell and offer for sale licensed products in the treatment of Rett Syndrome and ALS caused by mutations in the SOD1 gene using AAV9. Inconsideration for the license, AveXis paid the Company an up-front fee of $6.0 million, and is required to pay annual maintenance fees, milestone fees of upto $36.0 million, a low double digit royalty percentage on net sales of licensed products, subject to reduction in specified circumstances, and a lower mid-double digit percentage of any sublicense fees AveXis receives from sublicensees for the licensed intellectual property rights. The Company recognizedlicense revenue of $6.0 million under the June 2017 License during the year ended December 31, 2017. 9. Stock-based CompensationIn September 2014, the Board of Directors adopted the 2014 Stock Plan (2014 Plan). In June 2015, the Board of Directors adopted the 2015 EquityIncentive 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 2015 Plan, no further awards may be issued under the 2014 Plan. Any options orawards outstanding under the 2014 Plan as of the effective date of the 2015 Plan remained outstanding and effective. The number of authorized shares underthe 2015 Plan automatically increases annually on January 1, beginning January 1, 2016, by the lesser of (i) 4% of the total number of shares of commonstock outstanding on December 31 of the prior year, or (ii) a number of common shares determined by the Board of Directors. In January 2016 and 2017, theBoard of Directors authorized an additional 1,052,538 and 1,059,065 shares, respectively, to be issued under the 2015 Plan. As of December 31, 2017, thetotal number of shares of common stock authorized for issuance under the 2015 Plan and 2014 Plan was 8,236,603 of which 1,922,892 remain available forfuture grants under the 2015 Plan. In January 2018, the Board of Directors authorized an additional 1,251,810 shares to be issued under the 2015 Plan.The 2014 Plan and 2015 Plan provide for the issuance of stock options, stock appreciation rights, restricted and unrestricted stock and unit awards,and performance cash awards to employees, members of the Board of Directors and consultants of the Company. Since the inception of the plans, theCompany has issued only stock options and restricted stock units under the plans. Stock options under the 2014 Plan and 2015 Plan generally expire tenyears following the date of grant. Options typically vest over a four-year period, but vesting provisions can vary by award based on the discretion of theBoard of Directors. Certain stock option awards granted by the Company include performance conditions that must 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 fair value of the Company’s common stock on thedate of grant. Restricted stock units vest in accordance with the underlying award agreements and, upon vesting, are settled in common stock of theCompany.128 Table of Contents 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 or settlement, are added to the number of shares of common stock available for issuance under the 2015 Plan. Shares available for issuance under the2015 Plan may be either authorized but unissued shares of the Company’s common stock or common stock reacquired by the Company and held in treasury.The 2015 Plan expires in June 2025, ten years from the date it was adopted by the Board of Directors, unless earlier terminated.Stock-based Compensation ExpenseThe Company’s stock-based compensation expense by award type is as follows (in thousands): Years Ended December 31, 2017 2016 2015 Stock options $10,031 $6,950 $2,921 Restricted stock units 275 23 — Employee stock purchase plan 299 58 — $10,605 $7,031 $2,921 As of December 31, 2017, the Company had $22.9 million of unrecognized stock-based compensation expense related to stock options, restrictedstock units and the 2015 Employee Stock Purchase Plan (the 2015 ESPP), which is expected to be recognized over a weighted-average period of 2.5 years.The Company has recorded aggregate stock-based compensation expense in the consolidated statement of operations and comprehensive loss asfollows (in thousands): Years Ended December 31, 2017 2016 2015 Research and development $5,128 $2,743 $1,760 General and administrative 5,477 4,288 1,161 $10,605 $7,031 $2,921 Stock OptionsThe following table summarizes stock option activity under the 2014 Plan and 2015 Plan (in thousands, except per share data): Weighted- average Weighted- Remaining average Contractual Aggregate Exercise Life Intrinsic Shares Price (Years) Value (a) Outstanding at December 31, 2016 5,118 $7.77 8.5 $57,400 Granted 1,155 $20.44 Exercised (516) $4.83 Cancelled or forfeited (289) $16.59 Outstanding at December 31, 2017 5,468 $10.25 7.9 $125,738 Exercisable at December 31, 2017 2,979 $6.24 7.4 $80,482 Vested and expected to vest at December 31, 2017 5,468 $10.25 7.9 $125,738 (a)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the commonstock for the options that were in the money at the dates reported.129 Table of Contents The weighted-average grant date fair value per share of options granted during the years ended December 31, 2017, 2016 and 2015 was $13.87, $8.37and $7.08, respectively. During the years ended December 31, 2017, 2016 and 2015, the total number of stock options exercised was 515,916, 163,158 and125,563, respectively, resulting in total proceeds of $2.5 million, $0.2 million and $0.1 million, respectively. The total intrinsic value of options exercisedduring the years ended December 31, 2017, 2016 and 2015 was $11.1 million, $1.7 million and $0.5 million, respectively. 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 the prospects of a liquidity event, among others. After the completion of the Company’sIPO in September 2015, the fair value of the common stock is based on the closing price of the common stock on the date of grant.Stock Options Granted to Employees. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $10.1 million, $6.4 million and$1.4 million, respectively, of stock-based compensation expense related to stock options granted to employees and directors. The fair value of optionsgranted to employees and directors was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-averageassumptions: Years Ended December 31, 2017 2016 2015 Expected volatility 77% 75% 68%Expected term (in years) 6.2 6.2 6.1 Risk-free interest rate 2.1% 1.5% 1.7%Expected dividend yield 0.0% 0.0% 0.0% 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, 2017, 2016 and 2015, the Company recorded $0.5 million, $0.6 million and $1.5 million, respectively,of stock-based compensation expense related to stock options granted to non-employees. The fair value of options granted to non-employees was estimatedat each measurement date using the Black-Scholes valuation model with the following weighted-average assumptions: Years Ended December 31, 2017 2016 2015 Expected volatility 77% 83% 75%Expected term (in years) 7.7 8.5 9.5 Risk-free interest rate 2.2% 1.7% 2.1%Expected dividend yield 0.0% 0.0% 0.0%Restricted Stock UnitsThe following table summarize restricted stock unit activity under the 2015 Plan (in thousands, except per share data): Weighted- average Grant Date Shares Fair Value Unvested balance at December 31, 2016 40 $20.90 Granted — $— Vested — $— Forfeited — $— Unvested balance at December 31, 2017 40 $20.90130 Table of Contents Employee Stock Purchase PlanIn June 2015, the Company’s Board of Directors adopted the 2015 ESPP, which became effective on September 16, 2015, the date on which theregistration statement for the IPO was declared effective. The 2015 ESPP authorizes the initial issuance of up to a total of 254,000 shares of the Company’scommon stock to participating employees. The number of shares reserved for issuance under the 2015 ESPP automatically increases on the first business dayof each fiscal year, commencing in 2016, by a number equal to the lesser of (i) 1% of the shares of common stock outstanding on the last business day of theprior fiscal year; or (ii) the number of shares determined by the Company’s Board of Directors. Unless otherwise determined by the administrator of the 2015ESPP, two offering periods of six months’ duration will begin each year on January 1 and July 1. The Board of Directors did not authorize any further sharesto be reserved for issuance under the 2015 ESPP in January 2016 or 2017. As of December 31, 2017, the total number of shares of common stock authorizedfor issuance under the 2015 ESPP was 254,000, of which 206,280 remain available for future issuance. During the year ended December 31, 2017, 47,720shares of common stock were issued under the 2015 ESPP. There were no shares of common stock issued under the ESPP during the years ended December31, 2016 and 2015. 10. 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% of eligible compensation. For the years ended December 31, 2017, 2016 and2015, the Company contributed $1.0 million, $0.6 million and $0.2 million, respectively, in matching contributions to the 401(k) Plan. Prior to theestablishment of the 401(k) Plan in February 2015, the Company did not sponsor any retirement plans. 11. Income TaxesThe substantial majority of the Company’s income and loss is generated in the U.S. and attributable to the U.S. tax jurisdiction. There was no foreignincome tax expense (benefit) for the years ended December 31, 2017, 2016 and 2015.The Tax Cuts and Jobs Act of 2017 (the TCJA) was signed into law in December 2017, and has resulted in significant changes to the U.S. corporateincome tax system. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from atop marginal rate of 35% to a flat rate of 21%, elimination, reduction or limitation of certain domestic deductions and credits, limitation of the deduction fornet operating losses (NOLs) to 80% of current year taxable income, elimination of NOL carrybacks, one-time taxation of offshore earnings at reduced ratesregardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain significant exceptions), immediate deductions forcertain new investments instead of deductions for depreciation expense over time, and modification or repeal of many business deductions and credits,including the orphan drug tax credit. The changes resulting from the TCJA are effective beginning in 2018; however, the impact to the Company’s deferredtax assets and liabilities as a result of these changes has been accounted for as of December 31, 2017 on a provisional basis.In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows the Company to record provisional amounts forthe effects of the TCJA in the period it was enacted for a measurement period not extend beyond one year of the enactment date. In accordance with SAB 118,the Company has determined that the impact of the TCJA to its deferred tax assets and liabilities and valuation allowance as of December 31, 2017 is areasonable estimate and provisional amount. The final impact of the TCJA may differ from this provisional amount due to changes in the Company’sestimates and the issuance of additional regulatory or other guidance. The Company expects to complete its assessment of the final impact of the TCJAwithin the required measurement period under SAB 118.131 Table of Contents A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate of 34% to income tax expense (benefit) as reflectedin the financial statements is as follows (in thousands): Years Ended December 31, 2017 2016 2015 Federal income tax benefit at statutory rate $(24,876) $(21,556) $(7,756)State income tax benefit, net of federal benefit (7,756) (1,617) (1,511)Step-up in assets upon conversion to C-corporation — — (709)Research and development credits (6,297) (7,275) — Stock-based compensation expense for incentive stock options and employee stock purchase plan (3,012) 1,805 283 Other non-deductible expenses and reconciling items (26) 170 129 Change in corporate tax rates 16,598 42 111 Change in valuation allowance 25,369 27,996 9,453 Total income tax expense (benefit) $— $(435) $— The significant components of the Company’s net deferred tax assets are as follows (in thousands): December 31, 2017 December 31, 2016 Deferred tax assets: Net operating loss carryforwards $37,658 $25,625 Research and development tax credits 21,137 10,890 Step-up in assets upon conversion to C-corporation 721 953 Stock-based compensation expense for non-qualified stock options and restricted stock units 4,263 1,401 Unrealized losses on marketable securities 89 — Deferred rent 458 258 Accruals and other 1,540 1,132 Total deferred tax assets before valuation allowance 65,866 40,259 Valuation allowance (65,669) (40,084)Total deferred tax assets 197 175 Deferred tax liabilities: Depreciation (197) (19)Unrealized gains on marketable securities — (156)Total deferred tax liabilities (197) (175)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, 2017 and 2016. The valuation allowanceincreased approximately $25.6 million and $28.0 million during the years ended December 31, 2017 and 2016, respectively, due primarily to federal netoperating losses and research and development credits generated during the periods. The net increase in the valuation allowance during the year endedDecember 31, 2016 includes a partially offsetting decrease of $0.4 million for the income tax effects of gains on available-for-sale securities recognized inother comprehensive income for the period.As of December 31, 2017 and 2016, the Company had U.S. federal NOL carryforwards of approximately $126.7 million and $66.4 million,respectively, which may be available to offset future income tax liabilities and expire at various dates beginning in 2034. As of December 31, 2017 and 2016,the Company also had U.S. state NOL carryforwards of approximately $167.8 million and $55.0 million, respectively, which may be available to offset futureincome tax liabilities and expire at various dates beginning in 2035.132 Table of Contents As of December 31, 2017, the Company had federal research and development and orphan drug tax credit carryforwards of approximately $21.3million which may be available to reduce future tax liabilities and expire at various dates beginning in 2035. The Company has conducted a formal study todocument the qualified activities and expenses used to calculate the credits through the year ended December 31, 2016. The remaining portion of the creditsas of December 31, 2017 are subject to future studies which may result in an adjustment to the Company’s credit carryforwards. The calculation of thesecredits requires assumptions to be made by management to estimate qualified research expenses. The Company accounts for uncertain tax positions inaccordance with the provisions of ASC 740, and accordingly, recognizes the tax benefit of tax positions to the extent that the benefit will more likely thannot be realized. As of December 31, 2017, the Company has unrecognized tax benefits of $0.1 million which have been reserved against the creditcarryforwards as uncertain tax positions. No reserve for uncertain tax positions has been placed against qualified expenses for which a study has not beenconducted. However, a full valuation allowance has been provided against the net credit carryforwards and, if an adjustment is required upon the completionof the study, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards andthe valuation allowance.Under the provisions of the Internal Revenue Code, the NOL and tax credit carryforwards are subject to review and possible adjustment by the InternalRevenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulativechanges in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the InternalRevenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset futuretaxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownershipchange. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inceptionwhich may have resulted 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 inthe future.The Company files income tax returns in the United States at the federal level and in states in which the Company conducts business activities. Thefederal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2013 onward. To the extent the Companyhas tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service orstate tax authorities to the extent utilized in a future period. 12. Related Party TransactionsThe Trustees of the University of PennsylvaniaPenn received an equity interest in the Company as consideration for the intellectual property license granted to the Company in February 2009, andprior to September 30, 2015, the Company considered Penn to be a related party. See Note 6 for further information, including costs incurred by theCompany, regarding its license from Penn.In addition to the license agreement, Penn also provides manufacturing and research and development services to the Company. During the ninemonths ended September 30, 2015, the Company incurred $0.1 million in services from Penn for the manufacturing of reagents for sale by the Company aswell as $5.1 million in research and development services provided by 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.GlaxoSmithKline LLCGSK received an equity interest in the Company as consideration for the intellectual property license granted to the Company in March 2009, andprior to September 30, 2015, the Company considered GSK to be a related party. See Note 6 for further information, including costs incurred by theCompany, regarding its license 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, 2015.133 Table of Contents Dimension Therapeutics, Inc.The Company and a number of its members, directors and management received common stock of Dimension Therapeutics, Inc. (Dimension) asconsideration for a license granted to Dimension in October 2013. Additionally, at the date of the license, three of the Company’s board members also servedon the board of directors of Dimension. As a result, prior to September 30, 2015, the Company considered Dimension to be a related party.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.The Company granted various commercial licenses, and options to obtain future commercial licenses, to Dimension prior to September 30, 2015.During the nine months ended September 30, 2015, the Company recognized license revenue of $2.0 million from commercial licenses granted toDimension, which is included in license revenue from related party in the consolidated statements of operations and comprehensive loss. Revenue earned andrecognized from Dimension subsequent to September 30, 2015 is no longer included in revenue from related party in the consolidated statements ofoperations and comprehensive loss.During 2014, the Company received $0.2 million from Dimension for the purchase of materials owned by the Company and used in the Company’smanufacturing process for research and development and clinical trials. The $0.2 million was recognized as a gain on disposal of the material in the periodsin which the material was delivered to Dimension. During the nine months ended September 30, 2015, the Company recognized gains of less than $0.1million for the delivery of the material to Dimension.FOXKISER LLP The Company was party to a services agreement, as amended from time to time, with FOXKISER, an affiliate of certain stockholders of the Companyand an affiliate of one current and one former member of the Board of Directors, which was terminated in January 2015. Under the agreement, the Companypaid a fixed 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 tothe Company. The amounts outstanding to FOXKISER under the services agreement in excess of 30 days from their due date accrued interest at 1.5% permonth, compounding monthly. The Company allocated the service fees from FOXKISER between research and development and general and administrativeexpense. For the year ended December 31, 2015, the Company incurred costs under the arrangement of $0.2 million which was allocated to research anddevelopment expense and $0.2 million which was allocated to general and administrative expense.Prior to 2015, the Company received cash proceeds and services from FOXKISER from time to time in exchange for various promissory notes andother debt instruments. Pursuant to the terms of the debt instruments, at the option of FOXKISER, the debts may be fully settled in shares of preferred equitysecurities of the Company. Interest expense to FOXKISER under these debt instruments for the year ended December 31, 2015 was less than $0.1 million.In January 2015, in conjunction with the Company’s issuance of Series C Preferred Stock, FOXKISER elected its share settlement options andconverted $3.8 million of the outstanding debt payable by the Company into 585,578 shares of Series C Preferred Stock at a per share price of $6.477. Thepreviously outstanding debt instruments were settled in full upon the conversion.In January 2015, the Company entered into an operating lease with FOXKISER for office space in Washington, D.C. The lease agreement, which had amonth-to-month term, required monthly payments of less than $0.1 million. The lease was terminated in April 2015. Total rent expense to FOXKISER duringthe term of the lease was $0.1 million.Effective January 2016, the Company entered into a Professional Services Agreement with FOXKISER, pursuant to which the Company pays a fixedmonthly fee in consideration for certain strategic planning, development and regulatory services provided by FOXKISER. The agreement expired inDecember 2016, and effective January 2017 the Company entered into a new Professional Services Agreement with FOXKISER which expired in December2017. Effective January 2018, the Company entered into a new Professional Services Agreement, which has a term of one year and is terminable by eitherparty, at any time, upon 60 days’ prior written notice to the other party. Costs incurred under the Professional Services Agreements with FOXKISER for theyears ended December 31, 2017 and 2016 were $1.5 million and $1.0 million, respectively, and are recorded as research and development expenses in theconsolidated statements of operations and comprehensive loss.134 Table of Contents Scientific Founder and Special Advisor In September 2014, the Company entered into an advisory agreement, as amended, with James M. Wilson, M.D., Ph.D., the Company’s ScientificFounder and Special Advisor (formerly the Company’s Chief Scientific Advisor), who is also the Chairman of the Company’s Scientific Advisory Board. Theagreement required a fixed monthly payment in consideration for scientific advisory services and expired in March 2017. Dr. Wilson will continue to provideservices at no cost to the Company pursuant to a new advisory agreement entered into in March 2017. During the years ended December 31, 2017, 2016 and2015, the Company incurred advisory fees of $0.1 million, $0.3 million and $0.2 million, respectively, under the agreements. Additionally, in 2014 and 2015the Company granted options to purchase a total of 211,600 shares of common stock to Dr. Wilson as compensation for the advisory services to be providedto the Company, which vest partially upon the completion of service conditions and partially upon the achievement of specified performance conditions asset forth in the award agreements. 13. 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 (in thousands): Years Ended December 31, 2017 2016 2015 Stock options issued and outstanding 5,468 5,118 3,684 Unvested restricted stock units outstanding 40 40 — Employee stock purchase plan 20 22 — 5,528 5,180 3,684 Amounts in the table above reflect the common stock equivalents of the noted instruments. 14. Supplemental DisclosuresAccrued expenses and other current liabilities consists of the following (in thousands): December 31, 2017 December 31, 2016 Accrued personnel costs $5,789 $3,338 Accrued external general and administrative expenses 1,078 672 Accrued external research and development expenses 2,072 3,005 Accrued purchases of property and equipment 430 844 Other accrued expenses and current liabilities 236 267 $9,605 $8,126 135 Table of Contents 15. Selected Quarterly Financial Information (Unaudited)The following table contains quarterly financial information for the years ended December 31, 2017 and 2016. Management believes that thefollowing information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operatingresults for any quarter are not necessarily indicative of results for any future period. Amounts in the following table are in thousands, except per share data. Quarters Ended March 31,2017 June 30, 2017 September 30,2017 December 31,2017 Total revenues $455 $6,562 $1,336 $2,040 Research and development expense $16,619 $13,917 $12,518 $14,170 General and administrative expense $6,622 $6,355 $9,444 $4,808 Total operating expenses $23,377 $21,618 $22,645 $18,638 Net loss $(21,993) $(14,473) $(20,706) $(15,997)Basic and diluted net loss per common share $(0.82) $(0.47) $(0.67) $(0.51) Quarters Ended March 31,2016 June 30, 2016 September 30,2016 December 31,2016 Total revenues $393 $2,375 $125 $1,696 Research and development expense $6,183 $10,680 $12,560 $16,059 General and administrative expense $5,479 $6,169 $6,200 $5,742 Total operating expenses $11,644 $17,327 $18,793 $22,165 Net loss $(10,768) $(14,437) $(18,154) $(19,608)Basic and diluted net loss per common share $(0.41) $(0.55) $(0.69) $(0.74) 136 Table of Contents EXHIBIT INDEX Incorporated by Reference Exhibit NumberDescriptionFormExhibit NumberFiling DateFiled orFurnishedHerewith 3.1Restated Certificate of Incorporation8-K3.19/22/15 3.2Amended and Restated Bylaws8-K3.29/22/15 4.1Specimen stock certificate evidencing the shares of common stockS-14.18/17/15 4.2Amended and Restated Investors’ Rights Agreement dated as of May 15, 2015S-14.28/17/15 10.1Form of Indemnity Agreement for directors and officersS-110.18/17/15 10.2*2014 Stock Plan, as amendedS-110.28/17/15 10.3*2015 Equity Incentive Plan and form of option agreement thereunderS-1/A10.39/15/15 10.4*2015 Employee Stock Purchase PlanS-1/A10.49/8/15 10.5*Employment Agreement effective as of June 30, 2015 between the Registrantand Kenneth T. MillsS-110.58/17/15 10.6*Employment Agreement effective as of June 30, 2015 between the Registrantand Stephen Yoo, M.D.S-110.68/17/15 10.7*Employment Agreement effective as of June 30, 2015 between the Registrantand Vittal VasistaS-110.78/17/15 10.8*Employment Agreement effective as of February 16, 2016 between theRegistrant and Curran Simpson10-K10.343/3/16 10.9*Employment Agreement effective as of February 29, 2016 between theRegistrant and Faraz Ali10-Q10.355/5/16 10.10*Employment Agreement effective as of August 18, 2016 between theRegistrant and Patrick J. Christmas10-Q10.3711/9/16 10.11*Employment Agreement effective as of March 27, 2017 between theRegistrant and Olivier Danos, Ph.D.10-Q10.15/9/17 10.12*Separation Agreement and General Release dated January 26, 2018 betweenthe Registrant and Faraz Ali8-K/A10.12/1/18 10.13*Independent Director Compensation PolicyS-110.88/17/15 10.14*REGENXBIO Inc. Management Cash Incentive PlanS-110.298/17/15 10.15†License Agreement effective February 24, 2009 between the Registrant andThe Trustees of the University of PennsylvaniaS-1/A10.99/15/15 137 Table of Contents Incorporated by Reference Exhibit NumberDescriptionFormExhibit NumberFiling DateFiled orFurnishedHerewith 10.16†First Amendment to License Agreement dated March 6, 2009 between theRegistrant and The Trustees of the University of PennsylvaniaS-110.108/17/15 10.17†Second Amendment to License Agreement effective September 9, 2014between the Registrant and The Trustees of the University of PennsylvaniaS-1/A10.119/15/15 10.18†Third Amendment to License Agreement effective April 29, 2016 between theRegistrant and The Trustees of the University of Pennsylvania10-Q/A10.3612/23/16 10.19†License Agreement dated March 6, 2009 between the Registrant andSmithKline Beecham Corporation d/b/a GlaxoSmithKlineS-1/A10.129/15/15 10.20Amendment to License Agreement dated April 15, 2009 between theRegistrant and SmithKline Beecham Corporation d/b/a GlaxoSmithKlineS-110.138/17/15 10.21†Exclusive Patent License Agreement dated November 10, 2014 between theRegistrant and the Regents of the University of MinnesotaS-1/A10.259/15/15 10.22†First Amendment to Exclusive Patent License Agreement dated November 28,2016 between the Registrant and the Regents of the University of Minnesota10-K10.203/7/17 10.23†License Agreement dated March 21, 2014 between the Registrant and AveXis,Inc.S-1/A10.169/15/15 10.24‡First Amendment to License Agreement dated January 8, 2018 between theRegistrant and AveXis, Inc. X 10.25Lease dated March 6, 2015 between the Registrant and BMR-Medical CenterDrive LLCS-110.268/17/15 10.26First Amendment to Lease dated September 30, 2015 between the Registrantand BMR-Medical Center Drive LLC10-K10.313/3/16 10.27Second Amendment to Lease dated November 23, 2015 between theRegistrant and BMR-Medical Center Drive LLC10-K10.323/3/16 10.28Third Amendment to Lease dated July 21, 2017 between the Registrant andBMR-Medical Center Drive LLC10-Q10.18/8/17 10.29Lease dated January 28, 2016 between the Registrant and TNREF III 9600Blackwell, LLC10-K10.333/3/16 10.30First Amendment to Lease dated November 3, 2017 between the Company and9600 Blackwell II LLC, as successor in interest to TNREF III 9600 Blackwell,LLC10-Q10.111/8/17 21.1Subsidiaries of the Registrant X138 Table of Contents Incorporated by Reference Exhibit NumberDescriptionFormExhibit NumberFiling DateFiled orFurnishedHerewith 23.1Consent of PricewaterhouseCoopers LLP, independent registered accountingfirm X 31.1Certification of the Chief Executive Officer, as required by Section 302 of theSarbanes-Oxley Act of 2002 X 31.2Certification of the Chief Financial Officer as required by Section 302 of theSarbanes-Oxley Act of 2002 X 32.1Certifications of the Chief Executive Officer and Chief Financial Officer asrequired by 18 U.S.C. 1350 X 101The following materials from the Registrant’s Annual Report on Form 10-K forthe fiscal year ended December 31, 2017 formatted in XBRL (eXtensibleBusiness Reporting Language):(i) Consolidated Balance Sheets(ii) Consolidated Statements of Operations and Comprehensive Loss(iii) Consolidated Statements of Convertible Preferred Stock andStockholders’ Equity (Deficit)(iv) Consolidated Statements of Cash Flows(v) Notes to Consolidated Financial Statements X *Management contract or compensatory plan or arrangement.†Confidential treatment has been granted with respect to certain portions of this exhibit.‡Confidential treatment has been requested with respect to certain portions of this exhibit. These portions have been omitted and submitted separatelyto the SEC. 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. 139 Table of Contents SIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized on March 6, 2018. REGENXBIO INC. By: /s/ Kenneth T. Mills Kenneth T. Mills,President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Kenneth T. Mills President, Chief Executive Officer and March 6, 2018Kenneth T. Mills Director (Principal Executive Officer) /s/ Vittal Vasista Chief Financial Officer March 6, 2018Vittal Vasista (Principal Financial and Accounting Officer) /s/ Donald J. Hayden, Jr. Chairman of the Board of Directors March 6, 2018Donald J. Hayden, Jr. /s/ Daniel J. Abdun-Nabi Director March 6, 2018Daniel J. Abdun-Nabi /s/ Luke M. Beshar Director March 6, 2018Luke M. Beshar /s/ Allan M. Fox Director March 6, 2018Allan M. Fox /s/ A.N. “Jerry” Karabelas Director March 6, 2018A.N. “Jerry” Karabelas /s/ David C. Stump Director March 6, 2018David C. Stump /s/ Daniel Tassé Director March 6, 2018Daniel Tassé 140EXHIBIT 10.24CONFIDENTIAL TREATMENT REQUESTED FIRST AMENDMENT TO LICENSE AGREEMENT This First Amendment to License Agreement (the “First Amendment”) is made as of January 8, 2018 (the “First AmendmentEffective Date”) by and between REGENXBIO Inc. (formerly known as ReGenX Biosciences, LLC), a corporation organized underthe laws of the State of Delaware, with offices at 9600 Blackwell Road, Suite 210, Rockville, MD 20850 (“Licensor”), and AveXis,Inc., a corporation organized under the laws of the State of Delaware, with offices at 2275 Half Day Road, Suite 200, Bannockburn,IL 60015 (“Licensee”). Licensor and Licensee are hereinafter referred to individually as a “Party” and collectively as the “Parties.” WHEREAS, the Parties entered into that certain License Agreement dated March 21, 2014 (the “License Agreement”); WHEREAS, the Parties desire to amend certain provisions of the License Agreement, including amending the definitions ofField, Licensed Patents, and Licensed Product, and amending Section 10.2, and pursuant to Section 10.9 of the License Agreement,the License Agreement may be amended provided that such amendment is in writing and signed by duly authorized representatives ofboth Parties; WHEREAS, the Parties do not intend to change the scope of the license originally granted by Licensor to Licensee underthe Agreement with respect to AAV9; and WHEREAS, the Licensee has determined that the First Amendment does not require regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and in the LicenseAgreement, the Parties hereby agree as follows: 1.Amendment Fee. In consideration for the execution of the First Amendment, Licensee shall pay Licensor a fee of(i) eighty million dollars ($80,000,000) upon the First Amendment Effective Date; (ii) thirty million dollars ($30,000,000) on the firstanniversary of the First Amendment Effective Date; (iii) thirty million dollars ($30,000,000) on the second anniversary of the FirstAmendment Effective Date; (iv) **** upon AAV9 Products sold by Licensee, its Affiliates or Sublicensees first achieving cumulativeNet Sales of ****, payable within **** after the end of the Calendar Quarter in which such milestone is achieved; and (v) **** uponAAV9 Products sold by Licensee, its Affiliates or Sublicensees first achieving cumulative Net Sales of ****, payable within ****after the end of the Calendar Quarter in which such milestone is achieved. In the event of a Change of Control and to the extent thatpayments (ii), (iii) or (iv) above have not been received by Licensor from Licensee, Licensee, at Licensor’s option, shall pay Licensorany unpaid amounts recited in (ii), (iii) or (iv), irrespective of cumulative Net Sales of AAV9 Products, within **** of the Change ofControl. 2.Whereas Term. The first “WHEREAS” term of the License Agreement is hereby deleted in its entirety andreplaced with the following: ****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED “WHEREAS, Licensor has rights under certain Licensed Patents (as defined herein)pertaining to various recombinant adeno-associated virus vectors; and” 3.Defined Terms. Capitalized terms that are not defined herein shall have the meanings set forth in the LicenseAgreement. 4.Section 1.8. Section 1.8 of the License Agreement is hereby deleted in its entirety and replaced with the following: “1.8“Field” means the AAV9 Field and New Vector Field.” 5.Section 1.10. Section 1.10 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “1.10“Licensed Patents” means AAV9 Licensed Patents and New Vector LicensedPatents.” 6.Section 1.11. Section 1.11 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “1.11“Licensed Products” means (a) any product in the AAV9 Field, any product inthe New Vector Field or any product in both the AAV9 Field and the New Vector Field thatis made, made for, used, sold, offered for sale, or imported by Licensee, its Affiliates, and anyof its or their Sublicensees, the manufacture, use, sale, offer for sale, or import of whichproduct, in the absence of the license granted pursuant to this Agreement, would infringe or iscovered by at least one Valid Claim in the country of manufacture, use, sale, offer for sale, orimport, including products manufactured by a process that would infringe or is covered by atleast one Valid Claim in the country of manufacture, use, sale, offer for sale, or import; or (b)any service sold by Licensee, its Affiliates, and any of its or their Sublicensees with respect tothe administration of any product in the AAV9 Field, any product in the New Vector Field orany product in both the AAV9 Field and the New Vector Field to patients that, in the absenceof the licenses granted pursuant to this Agreement, would infringe or is covered by at least oneValid Claim in the country of sale.” 7.Sections 1.23 to 1.32. The License Agreement is hereby amended to add the following Sections 1.23 to 1.32: “1.23“AAV9 Field” means the treatment of spinal muscular atrophy in humans by invivo gene therapy using AAV9.” 2****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED “1.24“AAV9 Licensed Patents” means, to the extent they cover AAV9, (a) all patentsand patent applications listed in Exhibit A-1, and (b) any re-examination certificates thereof;(c) the foreign counterparts of the patents and patent applications in subsections (a) and (b);and (d) extensions, continuations, divisionals, and re-issued applications of the patents andpatent applications in subsections (a) through (c).” “1.25“AAV9 Products” means any Licensed Product in the AAV9 Field.” “1.26“Change of Control” means (i) any transaction or series of related transactionsfollowing which the holders of Licensee’s capital stock or membership or equity interestsimmediately prior to such transaction or series of related transactions collectively are theowners of less than 50% of the outstanding equity interests of Licensee entitled to (a) vote withrespect to the election of directors (or positions having a similar function) or (b) receive theproceeds upon any sale, liquidation or dissolution of Licensee; (ii) a sale, transfer, or otherdisposition, in a single transaction or series of related transactions, of all or a material portionof Licensee’s interest in the Licensed Product; (iii) a sale, transfer or other disposition, in asingle transaction or a series of related transactions, of all or a material portion of Licensee’sright, title, or interest in its assets taken as a whole; or (iv) the merger of Licensee with a ThirdParty by operation of law or otherwise other than a merger following which the holders ofLicensee’s capital stock or membership or equity interests immediately prior to suchtransaction or series of related transactions collectively are the owners of at least 50% of theoutstanding equity interests of Licensee or the surviving entity after such merger entitled to (a)vote with respect to the election of directors (or positions having a similar function) or (b)receive the proceeds upon any sale, liquidation or dissolution of Licensee or the survivingentity after such merger. For clarity, an exclusive license of Licensee’s interest in the LicensedProducts to a limited territory that does not include the United States, the European Union, theUnited Kingdom or Japan will not be deemed a Change of Control.” “1.27“Control” or “Controlled” means the possession by Licensor (whether byownership or license) of the ability to grant to Licensee access, a license, or a sublicense (asapplicable) to the applicable patent or patent application on the terms and conditions set forthherein without violating the terms of any agreement or other arrangement with any ThirdParty.” 3****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED “1.28“First Amendment Effective Date” has the meaning set forth in the preamble ofthis First Amendment.” “1.29“New Vector(s)” means any recombinant adeno-associated virus vector otherthan AAV9. For the avoidance of doubt, New Vectors include, but are not limited to, AAV7(protein id ****), AAV8 (protein id ****), and AAVrh10 (protein id ****) and anyrecombinant adeno-associated virus derivatives of such AAV7, AAV8 or AAVrh10 vectors.As used herein, “recombinant” shall mean any vector derived from an adeno associated virusintended for use in a therapeutic product that has been genetically modified in any way. Forthe avoidance of doubt, New Vectors shall include, without limitation, all AAVvectors described in the AAV9 Licensed Patents and New Vector Licensed Patents, other thanAAV9.” “1.30“New Vector Field” means the treatment of spinal muscular atrophy in humansby in vivo gene therapy using a New Vector.” “1.31“New Vector Licensed Patents” means all Patents to the extent they cover NewVectors, which are Controlled by Licensor or its Affiliates prior to the fourteenth (14th)anniversary of the First Amendment Effective Date, including without limitation: (a) all patentsand patent applications listed in Exhibit A-2; and (b) any re-examination certificates thereof;(c) the foreign counterparts of the patents and patent applications in subsections (a) and (b);and (d) extensions, continuations, divisionals, and re-issued applications of the patents andpatent applications in subsections (a) through (c).” “1.32“Patents” means patents, utility models, applications and pre-grant and post-grantforms of any of the foregoing, including divisionals, reissues, substitutions, confirmations,registrations, validations, re-examinations, additions, continuations, continued prosecutionapplications, continuations-in-part of or to any of the foregoing, and extensions, renewals, orrestorations of any of the foregoing by existing or future extension, renewal, or restorationmechanisms, including supplementary protection certificates or the equivalent thereof." 8.Sections 2.2.1 and 2.2.2. Sections 2.2.1 and 2.2.2 of the License Agreement are hereby deleted in their entiretyand replaced with the following: 2.2.1The rights and licenses granted in Section 2.1 shall not include any right (andLicensor and the ReGenX Licensors retain the exclusive (even as to Licensee), fullysublicensable right) under the Licensed Patents to make, have made, use, sell, offer to sell, andimport Domain Antibodies that are expressed by an adeno-associated vector, including AAV9and New Vectors.4****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED 2.2.2. Licensor and the ReGenX Licensors retain the following rights with respect to theLicensed Patents: (a)A non-exclusive, sublicensable right under the Licensed Patents to make,have made, use, sell, offer to sell, and import products that deliver RNAinterference and antisense drugs using an adeno-associated vector,including AAV9 and New Vectors; and (b)A non-exclusive right for the ReGenX Licensors (which right issublicensable by the ReGenX Licensors) to use the Licensed Patents fornon-commercial research purposes and to use the Licensed Patents forsuch ReGenX Licensors' discovery research efforts with non-profitorganizations and collaborators. 9.Section 2.5.1. Section 2.5.1 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “2.5.1Licensee hereby grants to Licensor a non-exclusive, worldwide, royalty-free,transferable, sublicensable, irrevocable, perpetual license: (a)to use any Licensed Back Improvements (and any intellectual propertyrights with respect thereto) consummate in scope to the Retained Rights,and (b)to practice the Licensed Back Improvements (and any intellectual propertyrights with respect thereto) in connection with AAV9, New Vectors orboth, including the right to research, develop, make, have made, use, offerfor sale, and sell products and services; provided that Licensor shall haveno right, under the license in this Section 2.5.1(b), to practice the LicensedBack Improvements in the Field.” 10.Section 3.4. Section 3.4 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “3.4Royalties. 3.4.1Royalties for Licensed Products in the AAV9 Field. In furtherconsideration of the rights and licenses granted to Licensee under Section 2.1, Licensee shallpay to Licensor the following royalties based upon Net Sales of Licensed Products in theAAV95****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED Field, subject to the reductions in royalty rates set forth in Section 3.4.1.1: Cumulative Annual Net Sales of all LicensedProducts in the AAV9 Field Worldwide Royalty PercentagePortion of Net Sales in a calendar year less than **** ****Portion of Net Sales in a calendar year between (andincluding) **** through (and including) **** ****Portion of Net Sales in a calendar year greater than**** **** By way of example only, if Licensee receives $700,000,000 in cumulative Net Salesof all Licensed Products in the AAV9 Field in a calendar year, then the royalties payable byLicensee to Licensor under this Section 3.4.1 during such calendar year would be calculatedas follows: = (****)(****) + (****)(****) + (****)(****) = (****) + (****) + (****) = (****) 3.4.1.1Third Party Royalty Stacking Provision. If Licensee mustobtain a license from a Third Party to avoid infringement of such Third Party’s rightsin order to manufacture, use or commercialize a given Licensed Product in theAAV9 Field and if the royalties required to be paid to such Third Party for suchlicense, together with those royalties payable to Licensor, in the aggregate, exceed**** of Net Sales for any Licensed Product in the AAV9 Field, then the royaltyowed to Licensor for that Licensed Product will be reduced by an amount calculatedas follows: 6****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED STACKING ROYALTY CALCULATIONS R = (C * (A/ (A+B)) Where R = reduction of Licensor royalty,A = unreduced Licensor royalty,B = sum of all Third Party royalties,C = increment of projected total royalty above **** Example Calculation: assume i) all Third Party royalties = **** ii) unreduced Licensor royalty = **** iii) projected total royalty = **** R = (**** - ****) * (**** / (**** + ****)) R = (**** * ****) R = **** Licensor Stacked Royalty = **** – **** = **** (but subject to the cap described below) Notwithstanding the foregoing, Licensee will pay to Licensor no less than**** of the royalties that Licensee would otherwise pay to Licensor with respect toNet Sales of Licensed Products in the AAV9 Field if there were no royalties due toThird Parties. 3.4.2Royalties for Licensed Products in the New Vector Field. In furtherconsideration of the rights and licenses granted to Licensee under Section 2.1, Licensee shallpay to Licensor a royalty of **** on Net Sales of Licensed Products in the New Vector Field,subject to the reductions in royalty rates set forth in Section 3.4.2.1: 3.4.2.1Third Party Stacking Provision. If Licensee must obtain alicense from a Third Party to avoid infringement of such Third Party’s rights in orderto manufacture, use, or commercialize a given Licensed Product in the New VectorField and if the royalties required to be paid to such Third Party for such license,together with those payable to Licensor, in the aggregate, exceed **** of Net Salesfor any Licensed Product in the New Vector Field, then the royalty7****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED owed to Licensor for that Licensed Product will be reduced by an amount calculatedas follows: STACKING ROYALTY CALCULATIONS R = (C * (A / (A+B)) Where R = reduction of Licensor royalty,A = unreduced Licensor royalty,B = sum of all Third Party royalties,C = increment of projected total royalty above **** Example Calculation: assume i) all Third Party royalties = **** ii) unreduced Licensor royalty = **** iii) projected total royalty = **** R = (**** - ****) * (**** / (**** + ****)) R = (**** * ****) R = **** Licensor Stacked Royalty = **** – **** = **** (but subject to the cap described below) Notwithstanding the foregoing, Licensee will pay to Licensor no less than **** of theroyalties that Licensee would otherwise pay to Licensor with respect to Net Sales of LicensedProducts in the New Vector Field if there were no royalties due to Third Parties.” 11.Section 5.2.2. Section 5.2.2 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “5.2.2Notwithstanding Section 5.2.1, Licensor has the right to publish (through press releases,scientific journals, or otherwise) and refer to any clinical, regulatory, or research results relatedto Licensee’s Licensed Product or AAV9 or New Vector program that have been publiclydisclosed by Licensee, including referring to Licensee by name as a licensee of Licensor,which publication or referral by Licensor shall not require the prior consent of Licensee.” 12.Section 6.1. Section 6.1 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing:8****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED “6.1Term of this Agreement. This Agreement, unless sooner terminated as provided inthis Agreement, expires on a country-by-country and Licensed Product-by-Licensed Productbasis upon the expiration, lapse, abandonment, or invalidation of the last Valid Claim toexpire, lapse, or become abandoned or unenforceable for the applicable Licensed Product insuch country. Notwithstanding anything to the contrary in this Agreement, unless earlierterminated as provided in this Agreement, the Parties agree that Licensee shall retain its licenseunder Section 2.1 to New Vector Licensed Patents in the New Vector Field (and retain itsright to include newly filed and newly issued New Vector Licensed Patents under the scope ofsuch license) until the expiration of the fourteenth (14th) anniversary of the First AmendmentEffective Date, even if the Agreement has expired with respect to all then current LicensedProducts.” 13.Section 10.2. Section 10.2 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: “10.2Assignment. The rights and obligations of Licensee and Licensor hereundershall inure to the benefit of, and shall be binding upon, their respective permitted successorsand assigns. Licensee may not assign or otherwise transfer (by operation of law or otherwise)this Agreement or any of its rights or obligations under this Agreement without the priorwritten consent of Licensor which consent is in the absolute discretion of Licensor (exceptLicensee shall have the right to assign this Agreement without Licensor's consent to a whollyowned Affiliate, in which case Licensee shall remain responsible for the performance of thisAgreement by such Affiliate); provided, however, Licensee shall be permitted to transfer (byoperation of law or otherwise ) this Agreement without Licensor's consent in connection witha Change of Control; provided that, Licensee: (i) requires any transferee or successor to agreein writing to be legally bound by this Agreement to the same extent as Licensee and providesLicensor with a copy of such undertaking; (ii) provides Licensor with written notice of theChange of Control to Licensor within **** of the consummation of the transaction resulting ina Change of Control of Licensee; (iii) provides Licensor with a copy of the definitiveagreement for the Change of Control of Licensee within **** of the consummation of thetransaction (provided, that Licensee shall be entitled to include customary redactions in suchcopy provided to Licensor, to the extent such redacted information is not necessary to verifycompliance with the terms of this Agreement or otherwise required by the Penn Agreementand/or GSK Agreement); and (iv) at the Licensor’s option, Licensee pays Licensor as set forth9****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED in the last sentence of Section 1 of the First Amendment (Amendment Fee),supra. Notwithstanding anything to the contrary in this Agreement, for clarity, in case of aLicensee Change of Control, in no event shall any intellectual property rights owned orcontrolled by the acquirer or its Affiliates immediately prior to such Licensee Change ofControl be included in any of the licenses granted to Licensor under this Agreement. Licensormay assign this Agreement and its rights and obligations without the consent of Licensee. Noassignment shall relieve the assigning Party of responsibility for the performance of anyaccrued obligations which it has prior to such assignment. Any attempted assignment byLicensee in violation of this Section 10.2 shall be null and void and of no legal effect.” 14.Section 10.4. Section 10.4 of the License Agreement is hereby deleted in its entirety and replaced with thefollowing: 10.4Notices. Notices, payments, statements, reports and other communications underthis Agreement shall be in writing and shall be deemed to have been received as of the datereceived if sent by public courier (e.g., Federal Express), by Express Mail, receipt requested,by facsimile, or by electronic mail (with a copy of such facsimile or electronic mail also sentby one of the other methods of delivery) and addressed as follows: If for Licensor: with a copy to: REGENXBIO Inc. REGENXBIO Inc.9600 Blackwell Road 9600 Blackwell RoadSuite 210 Suite 210Rockville, MD 20850 Rockville, MD 20850USA USAAttn: Chief Executive Officer Attn: General CounselTelephone: 240-552-8181 Telephone: 240-552-8181Facsimile: 240-652-9692 Facsimile: 240-652-9692 If for Licensee: with a copy to: AveXis, Inc. AveXis, Inc.2275 Half Day Road, Suite 200 2275 Half Day Road, Suite 200Bannockburn, IL 60015 Bannockburn, IL 60015Attn: Chief Executive Officer Attn: General CounselTelephone: Telephone: 312-971-2270Facsimile: Facsimile: Either Party may change its official address upon written notice to the other Party.10****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED 15.Exhibit A of the License Agreement is hereby deleted and replaced by Exhibit A-1 to this First Amendment. 16.Exhibit A-2 is hereby added to the License Agreement. 17.For the sake of clarity, the requirements in Section 4.1 are satisfied so long as Licensee is fulfilling its obligationswith respect to any Licensed Product in either the AAV9 Field or the New Vector Field, and the requirements in Section 4.2 apply toany Licensed Product. 18.Other than as set forth in Schedule A, the representations and warranties provided by Licensor in Section 8.1 ofthe License Agreement are true and correct as of the First Amendment Effective Date. 19.The representations and warranties provided by Licensee in Section 8.2 of the License Agreement are true andcorrect as of the First Amendment Effective Date. 20.Licensor represents and warrants to Licensee as of the First Amendment Effective Date that: (a)The Licensed Patents set forth on Exhibit A-1 and Exhibit A-2 list all patents and patent applications owned orcontrolled by Licensor as of the First Amendment Effective Date that claim or cover adeno associated virus vectorcompositions of matter or methods of use in SMA; and (b)All adeno associated virus vectors discovered, generated, owned or controlled by Licensor as of the First AmendmentEffective Date are claimed or covered by the Licensed Patents set forth on Exhibit A-1 and Exhibit A-2. 21.Solely upon the written request of Licensee, Licensor may, in its sole discretion after receipt of such request,engage in collaboration activities with Licensee related to ****. 22.This First Amendment amends the terms of the License Agreement and is deemed incorporated into, andgoverned by all other terms of, the License Agreement. To the extent that the License Agreement is explicitly amended by this FirstAmendment, the terms of this First Amendment will control where the terms of the License Agreement are contrary to or conflict withthe terms of this First Amendment. All other terms and conditions of the License Agreement not explicitly amended by this FirstAmendment shall remain in full force and effect. The License Agreement shall, together with this First Amendment, be read andconstrued as a single instrument. 23.Counterparts. Signatures on this First Amendment may be communicated by facsimile or e-mail transmission andshall be binding upon the Parties upon receipt by transmitting the same by facsimile or e-mail transmission, which signatures shall bedeemed originals. If executed in counterparts, the First Amendment shall be effective as if simultaneously executed. [REMAINDER INTENTIONALLY LEFT BLANK]11****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED IN WITNESS WHEREOF, the Parties, intending to be legally bound, have caused this First Amendment to be executed bytheir duly authorized representatives. REGENXBIO INC. By: /s/ Kenneth T. Mills Name: Kenneth T. Mills Title: President and CEO Date: 1-8-2018 AVEXIS, INC. By: /s/ Sean Nolan Name: Sean Nolan Title: President and CEO Date: 1-7-18 12****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED EXHIBIT A-1 Patents and Patent Applications in the AAV9 Field **** 13****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED EXHIBIT A-2 Patents and Patent Applications in the New Vector Field **** 14****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS.CONFIDENTIAL TREATMENT REQUESTED SCHEDULE A A patent challenge in the European Union relating to **** has been filed and was disclosed by Licensor to Licensee prior to the FirstAmendment Effective Date. 15****CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THEOMITTED PORTIONS. EXHIBIT 21.1 Subsidiaries of REGENXBIO Inc. Name of Subsidiary Jurisdiction of Incorporation or OrganizationREGENXBIO EU Limited Ireland EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S‑8 (No. 333-216508, 333-209899, 333-206984) ofREGENXBIO Inc. of our report dated March 6, 2018 relating to the financial statements, which appears in this Form 10‑K./s/ PricewaterhouseCoopers LLPMcLean, VirginiaMarch 6, 2018 EXHIBIT 31.1CERTIFICATIONI, Kenneth T. Mills, certify that:1.I have reviewed this Annual Report on Form 10-K of REGENXBIO Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) 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, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about 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 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 6, 2018 /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.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) 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, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about 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 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 6, 2018 /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 year ended December 31, 2017 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), the undersigned, Kenneth T. Mills, President, Chief Executive Officer and Director of theRegistrant, and Vittal Vasista, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-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 6, 2018 /s/ Kenneth T. Mills Kenneth T. Mills President and Chief Executive Officer(Principal Executive Officer) Date: March 6, 2018 /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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