Selecta Biosciences
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 001-37798 Selecta Biosciences, Inc.(Exact Name of Registrant as Specified in its Charter)Delaware 26-1622110(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 480 Arsenal Way Watertown, MA 02472(Address Of Principal Executive Offices) (Zip Code)Registrant’s Telephone Number, Including Area Code (617) 923-1400Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $0.0001 par value per share The Nasdaq Global MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ý 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 ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (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 ý No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý 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, tothe 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, or a smaller reporting company or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐ Accelerated filer ýNon-accelerated filer ☐ Smaller reporting company ýEmerging growth company ý 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. ýIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ýAs of June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held bynon-affiliates of the registrant was approximately $197.7 million based on the closing price of the registrant's common stock on the Nasdaq Global Market on June 29, 2018 of$13.25 per shareAs of March 8, 2019 the registrant had 44,733,437 shares of common stock, par value $0.0001 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders to be filed with the Securities and ExchangeCommission are incorporated by reference into Part III of this Annual Report on Form 10-K. TABLE OF CONTENTS Part I Item 1. Business3Item 1A.Risk Factors35Item 1B.Unresolved Staff Comments71Item 2.Properties71Item 3.Legal Proceedings71Item 4.Mine Safety Disclosures71 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities74Item 6. Selected Consolidated Financial Data75Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations76Item 7A.Quantitative and Qualitative Disclosures About Market Risk87Item 8. Financial Statements and Supplementary Data87Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure87Item 9A. Controls and Procedures87Item 9B. Other Information88 Part III Item 10.Directors, Executive Officers and Corporate Governance89Item 11.Executive Compensation89Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters89Item 13.Certain Relationships and Related Transactions, and Director Independence89Item 14.Principal Accountant Fees and Services89 Part IV Item 15.Exhibits and Financial Statement Schedules90Item 16.Form 10-K Summary94 SIGNATURES EXHIBIT INDEX 1FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harborprovisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations andfinancial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, and theplans and objectives of management for future operations and future results of anticipated products are forward-looking statements. These statements involveknown and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially differentfrom any future results, performance or achievements expressed or implied by the forward-looking statements.In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,”“target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. Theforward-looking statements in this Annual Report are only predictions. We have based these forward-looking statements largely on our current expectationsand projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of important factors that could cause actual results to differmaterially from those in the forward-looking statements, including the factors described under the sections in this Annual Report titled “Risk Factors” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the following:- our status as a development-stage company and our expectation to incur losses in the future;- our future capital needs and our need to raise additional funds;- our ability to build a pipeline of product candidates and develop and commercialize drugs;- our unproven approach to therapeutic intervention;-our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;-our ability to establish our own manufacturing facilities and to receive or manufacture sufficient quantities of our product candidates;- our ability to maintain our existing or future collaborations or licenses;- our ability to protect and enforce our intellectual property rights;- federal, state, and foreign regulatory requirements, including FDA regulation of our product candidates;- our ability to obtain and retain key executives and attract and retain qualified personnel; and- our ability to successfully manage our growth.Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible formanagement to predict all risk factors and uncertainties.You should read this Annual Report and the documents that we reference in this Annual Report completely and with the understanding that our actualfuture results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except asrequired by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any newinformation, future events, changed circumstances or otherwise.2PART IItem 1. BusinessOVERVIEWWe are a clinical-stage biopharmaceutical company using our ImmTOR technology, designed to induce tolerance to novel biologic therapies that wouldotherwise be limited by immunogenicity with the goal of effectively and safely treating rare and serious diseases. Many such diseases are treated withbiologic therapies that are foreign to the patient’s immune system and therefore elicit an undesired immune response. Of particular concern are anti-drugantibodies, or ADAs, which are often produced by the immune system in response to biologic therapy and can adversely affect the efficacy and safety oftreatment. Our proprietary tolerogenic ImmTOR technology encapsulates an immunomodulator in biodegradable nanoparticles and is designed to mitigatethe formation of ADAs by inducing antigen-specific immune tolerance to biologic drugs. ADAs can start developing in the body with the first dose of abiologic therapy and can render subsequent doses ineffective or unsafe, potentially depriving patients of life-saving therapeutic options and limiting thelikelihood of success for many otherwise promising novel biologic drugs and technologies. We believe ImmTOR has potential to enhance the efficacywithout compromising the safety of existing approved biologic drugs, improve product candidates under development and enable novel therapeuticmodalities, such as re-administration of systemic gene therapy. We intend to build a product pipeline by combining our ImmTOR technology with a range ofbiologics and also plan to seek collaborations and license agreements to broaden our applications for the platform.Our most advanced product candidate, SEL-212, is a proprietary combination of a therapeutic uricase enzyme (pegadricase) and our ImmTOR technologythat is designed to durably control serum uric acid levels in patients with chronic refractory gout through monthly administration. Our preclinical dataindicate that ImmTOR, when co-administered with pegadricase, induced antigen-specific immune tolerance to pegadricase and substantially reduced theformation of associated ADAs. Our Phase 1 data showed that ImmTOR mitigated the formation of ADAs against pegadricase after a single dose of SEL-212.Interim Phase 2 clinical data as of December 17, 2018 suggest the potential of monthly doses of SEL-212 to durably control serum uric acid levels bymitigating the formation of anti-pegadricase antibodies. Initial tissue imaging studies by dual energy computerized tomography (CT) scans also providedevidence regarding the potential of SEL-212 to rapidly eliminate tissue deposits of monosodium urate crystals. These interim data also showed a low rate ofgout flare rates. Based on our current Phase 2 clinical data and feedback received from the U.S. Food and Drug Administration, or FDA, during our end-of-Phase 2 meeting we plan to commence enrollment and initiate dosing in our head-to-head (COMPARE) clinical trial of SEL-212, utilizing revised stoppingrules, compared to the current FDA-approved uricase therapy, KRYSTEXXA®, in the first quarter of 2019. We expect our clinical and, if approved, marketingstrategy for SEL-212 to initially focus on the estimated 160,000 patients in the United States with chronic refractory gout that are being treated byrheumatologists.We are also applying our ImmTOR technology in an effort to mitigate the formation of ADAs when dosing gene therapy. Gene therapies often use a viralvector, such as an adeno-associated virus, or AAV, vector to place corrective genetic material into cells to treat genetic diseases. One of the key hurdles forthe gene therapy field is to overcome immunogenicity against the viral vector. ADAs form in response to the first administration of a gene therapy vector andprevent effective subsequent doses of gene therapy. The ability to provide repeat doses may be particularly important for pediatric patients to receivecontinued treatment benefit later in life as gene expression wanes due to cellular turnover as patients grow. The ability to re-administer gene therapies alsocould provide the potential for dose titration and could be advantageous for diseases where the goal is to transfect a high number of cells.Our first proprietary investigational gene therapy program is targeted to treat a rare genetic disease, Methylmalonic Acidemia, or MMA, pursuant to which weare collaborating with a clinical and gene therapy laboratory at the National Institutes of Health, or NIH, and the Massachusetts Eye and Ear Infirmary andThe Schepens Eye Institute, Inc., which we collectively refer to as MEE. We have in-licensed the Anc80 gene therapy vector, or Anc80, from MEE. Anc80 isan engineered vector that has been reported to have limited cross-reactivity to antibodies against wild type AAV serotypes. In preclinical studies, Anc80 hasshown potency as a gene therapy vector. We believe our product candidate, if successfully developed and approved, has the potential to prevent undesiredimmune responses to the vector and transgene that can occur with the first dose of gene therapy by using our ImmTOR technology. In January 2017, weentered into a strategic manufacturing agreement with Lonza Houston, Inc. Under our license agreement with MEE, we also have the exclusive option todevelop gene therapies using Anc80 for several additional diseases including lysosomal storage, muscular and genetic metabolic diseases. For moreinformation, see "Licenses and Collaborations - Massachusetts Eye and Ear Infirmary” below.In addition to developing this proprietary non-immunogenic therapeutic candidate, we intend to continue expanding our proprietary immune tolerancepipeline and pursue out-licensing opportunities for select applications of our ImmTOR technology. In December 2016, we entered into a license agreement,or the Spark License Agreement, with Spark Therapeutics,3Inc., or Spark, that provides Spark with exclusive worldwide rights to our ImmTOR technology to research, develop and commercialize gene therapies forFactor VIII, an essential blood clotting protein relevant to the treatment of hemophilia A, which is the initial target under the agreement, as well as exclusiveoptions for up to four additional pre-specified targets. For more information, see “Licenses and Collaborations - Spark Therapeutics" below.In September 2018, we announced a collaboration with the European consortium, CureCN, for an ImmTOR+AAV gene therapy combination productcandidate in Crigler-Najjar Syndrome. We expect CureCN to initiate preclinical toxicology studies in the first half of 2019 and for the combination productcandidate to enter the clinic in the second half of the year.In addition to this renewed focus on our AAV gene therapy applications, we are deprioritizing our SEL-403 Phase 1 oncology program. The trial, which wasplaced on clinical hold by the FDA, was being conducted by the National Cancer Institute, part of the National Institutes of Health.OUR STRATEGYOur goal is to become the first biopharmaceutical company to develop and commercialize targeted therapies that are designed to more effectively and safelytreat rare and serious diseases by inducing immune tolerance to potent but immunogenic biologic therapies. In addition, we intend to maximize the value ofour ImmTOR technology by collaborating with biopharmaceutical companies on programs that can benefit from our technology but that are outside our areaof focus. The key elements of our strategy include the following.•Advance the development of SEL-212 for the treatment of chronic refractory gout. We believe SEL-212 has the potential, if successfullydeveloped and approved, to become the first monthly biologic treatment that durably controls uric acid while also dissolving harmful deposits ofuric acid crystals for a majority of patients with chronic refractory gout. We are currently conducting a Phase 1/2 clinical program, comprised of twocompleted Phase 1 clinical studies and an ongoing Phase 2 clinical program. We expect to commence enrollment for our head-to-head (COMPARE)clinical study against Krystexxa in the first quarter of 2019 and expect to have interim six-month data in the fourth quarter of 2019, and data fromstatistical superiority endpoints expected to be available in the first quarter of 2020. The two armed, open label trial is projected to enroll between120-150 patients per arm, with one arm receiving Krystexxa (per label) and the other arm receiving six monthly doses of SEL-212. The primaryendpoint in the study is the percentage of patients in each arm that maintain serum uric acid control below 6 mg/dL at the six month endpoint. Theresults of the head-to-head (COMPARE) clinical trial are expected to inform the design of our planned Phase 3 clinical trials of SEL-212, which weplan to initiate in the fourth quarter of 2019.•Transform gene therapy by enabling repeated administration of systemically-administered AAV gene therapy vectors. One of the key challengesfor the gene therapy field is the inability to administer more than one dose of AAV systemically due to the formation of neutralizing anti-AAVantibodies. We believe redosing has the potential to enable dose titration of gene therapy to achieve therapeutic expression of the transgene, torestore therapeutic expression in pediatric patients that have lost expression of the transgene due to target organ growth. A 2018 publication inNature Communications provided peer-reviewed preclinical data supporting ImmTOR’s potential to mitigate the formation of neutralizing anti-AAVantibodies and enable productive AAV vector redosing in mice and nonhuman primates.4•Leverage ImmTOR to develop additional novel uses and classes of non-immunogenic biologics. We intend to use our ImmTOR technology todevelop a range of proprietary, non-immunogenic biologic therapeutic candidates. In each case, ImmTOR would be evaluated for its potential tomitigate undesired immune response to the biologic therapy with the goal of improving efficacy and/or safety. Our strategy is to develop proprietarytreatments for rare and serious diseases by combining ImmTOR with biologics that have been in- licensed or provided through researchcollaborations.•Establish infrastructure and capabilities to commercialize our products in rare and orphan diseases. While we believe our ImmTOR technologymay be broadly applicable across disease areas, we intend to focus our proprietary efforts on developing and commercializing proprietary ImmTOR -enabled products for rare and serious diseases where there is high unmet medical need. Therapies for treating these diseases require focusedcommercial efforts and coordination with patient groups and investigators. As our first product candidate, SEL-212, advances toward Phase 3clinical trials and potential commercialization, we intend to build a commercial infrastructure to capture its full value.•Selectively pursue collaborations and maximize the value of our ImmTOR programs for immune tolerance. In addition to our own proprietaryproduct development efforts, we are in discussions with potential collaborators and licensees to pursue novel therapies that would utilize ourImmTOR technology. For example, in December 2016, we entered into the Spark License Agreement to develop gene therapies for certain targetsutilizing our ImmTOR technology. For more information, see “Licenses and Collaborations - Spark Therapeutics." In September of 2018 we alsoannounced a collaboration with CureCN, a European non-profit developing an AAV gene therapy for the treatment of Crigler Najjar Syndrome, anultra-rare disease of iron metabolism mediated by a single gene deletion of a liver enzyme. The consortium plans to utilize our ImmTOR technologyin combination with their AAV gene therapy with the potential to re-dose patients who are not producing enough enzyme post their first dose ofAAV gene therapy. Preclinical toxicology studies are expected to begin in the first half of 2019, with the potential for initiation ofpreclinical/clinical combination studies in the second half of 2019.OVERVIEW OF THE HUMAN IMMUNE SYSTEMThe human immune system is an integrated system of specialized immune cells, cell products and tissues that protect against infectious disease and cancer.The immune system recognizes antigens, which are substances, such as proteins, enzymes or complex sugars. These antigens can be endogenous, or self-antigens, which are produced by the body, or exogenous antigens derived from foreign sources, such as viruses, fungi or bacteria. The human immune systemhas evolved to recognize and destroy potentially harmful substances. To function effectively, the immune system must discern between harmful antigens andinnocuous antigens. The immune system maintains a delicate balance between effector cells, which mount immune responses to antigens that representpotential threats, and regulatory cells, which mitigate undesired and potentially harmful immune responses through immune tolerance. Depending upon thecharacteristics of the antigen and the context in which the antigen is encountered, the immune system must determine whether to mount a defensive (effector)or regulatory (tolerogenic) immune response.Antigens are processed in lymphoid organs, such as lymph nodes and the spleen, where the immune system determines whether to mount a defensive orregulatory response through a process called “antigen presentation.” In connection with antigen presentation, dendritic cells process the antigens and presentthem to T cells. When presented, antigens perceived as harmful induce a stimulatory response that can result in the activation of cytolytic T cells or helper Tcells, the latter of which help to induce B cells to produce antibodies. The role of cytolytic T cells is to kill cells that harbor intracellular antigens, such asviruses. The role of antibodies is to neutralize or eliminate extracellular antigens on cell surfaces or in interstitial fluids, such as plasma. Figure 1 belowdepicts both antigen presentation and the related immune responses.5Figure 1. Antigen Presentation and Related Tolerogenic or Stimulatory Immune ResponseThere are a number of adverse outcomes that can occur when the immune system mounts an undesired response to an innocuous foreign antigen or a self-antigen. For example, food allergy occurs when the immune system mounts an immune response to innocuous food antigens. Another example of undesiredimmunogenicity occurs when the immune system is exposed to a biologic treatment, recognizes it as a foreign antigen and instructs the body to mount adefense by forming ADAs to the biologic, which can compromise a therapy’s desired beneficial effect. Undesired immunogenicity is common with biologictherapies, such as in enzyme and protein replacement therapies, and in novel technologies, such as gene therapy and antibody-drug conjugates.A number of therapies have been developed to modulate an immune response. These therapies fall into two categories:•Immunosuppressive therapies. Immunosuppressive therapies are designed to suppress the immune system and inhibit an undesired immuneresponse. However, many current therapies are not antigen-specific and, as a result, broadly suppress the immune system leading to undesired sideeffects that include opportunistic infections, skin cancer and lymphomas. We believe there is an opportunity to develop therapies that instruct theimmune system to mitigate the formation of ADAs in an antigen-specific manner and remain tolerant to the specific antigen, thereby mitigating off-target effects of systemic immunosuppression.•Immunostimulatory therapies. Immunostimulatory therapies are designed to stimulate the immune system to prevent or treat infections andcancers. The most common class of immunostimulatory therapies are vaccines, which are designed to simulate the body’s immune system to mount adefensive response to a specific antigen. While traditional vaccines have been successful for the prevention of infectious diseases, there has beenlimited success in developing therapeutic vaccines for the successful treatment of certain other diseases, including chronic infections and cancer. Asa result, we believe there is a need for more effective vaccines to treat these diseases.OUR ImmTOR TECHNOLOGYOur ImmTOR technology is based in part on the pioneering research performed by our co-founders at Harvard University, Massachusetts Institute ofTechnology, or MIT, and Brigham and Women’s Hospital, or Brigham. In connection with our company’s founding, we licensed 17 patent families related toseveral aspects of our ImmTOR technology from our co-founders’ institutions pursuant to an agreement with MIT, the party that administers licensingarrangements with respect to patents jointly owned by these institutions. We believe one of the key insights from this research is that nanoparticles areuniquely suited to deliver precise instructions to the immune system as a result of the natural predisposition of the immune system to interrogatenanoparticles, such as viruses. This research led to a portfolio of patents and patent applications covering aspects of our ImmTOR technology. We haveaggressively sought to extend and protect the proprietary intellectual property underlying the composition and use of ImmTOR for antigen-specificimmunotolerance. For more information, see "Intellectual Property" below.We are currently developing our ImmTOR technology for:•combination with a uricase enzyme for the treatment of chronic refractory gout;•combination with gene therapies for the treatment of rare diseases;6•potential application with other marketed products, product candidates in development and novel biologic drugs that would otherwise be tooimmunogenic to developOur SVP nanoparticles are designed to remain intact after injection into the body and accumulate selectively in lymphoid organs, which include lymphnodes and the spleen, where the immune response is coordinated. They are designed to be processed by specialized immune cells, such as dendritic cells andother antigen-presenting cells that initiate and regulate immune responses, where they deliver the immunomodulator in a coordinated and targeted manner.Depending on the type of immunomodulator encapsulated in the SVP, our technology is designed to induce a tolerogenic response to mitigate the formationof ADAs against a biologic drug or to treat allergies and autoimmune diseases.OUR ANTIGEN-SPECIFIC IMMUNE TOLERANCE PROGRAMOur antigen-specific tolerance programs utilize ImmTOR, our biodegradable nanoparticle encapsulating the immunomodulator rapamycin. Rapamycin is asmall molecule approved for the prevention of organ rejection in kidney transplant patients. To mitigate the formation of ADAs and induce immune tolerancein the body, we co-administer our ImmTOR with a free antigen, such as a biologic drug, which is depicted in Figure 2 below.Figure 2. Co-Administration of ImmTOR with a Biologic DrugImmTOR is designed to be co-administered (prior to the biologic drug) at the beginning of therapy with a biologic drug to mitigate the formation of ADAswithout requiring the alteration of the drug or its dose regimen. As a result, we believe our ImmTOR may provide us with significant opportunities in theareas of immune tolerance and ADA prevention because ImmTOR is designed to be co-administered at the beginning of therapy with many different biologicdrugs. Importantly, we believe each pairing of ImmTOR with a biologic drug also offers us the opportunity to pursue a distinct proprietary product candidate,which we believe has the potential to be separately patented, approved and marketed. ImmTOR is manufactured in facilities subject to current goodmanufacturing practice, or cGMP, requirements using well-defined commercial operations, which, we believe, further enhances the scalability of ourtolerance programs.During preclinical studies, we observed that delivering an antigen together with ImmTOR provided the appropriate signals in vivo to induce regulatory Tcells, which, in turn, inhibited effector immune responses, such as the formation of ADAs. In our preclinical studies, we observed that ImmTOR labeled with afluorescent dye selectively accumulated in lymphoid organs where it was processed by antigen-presenting cells. Figure 3 below depicts a model of howImmTOR would enter a lymph node and be taken up by a dendritic cell. We believe that when delivered in the context of our ImmTOR , both the biologicdrug and ImmTOR are taken up and processed by dendritic cells in a manner that may induce regulatory T cells, which can potentially block the activation ofhelper T cells, mitigating the formation of ADAs.7Figure 3. ImmTOR and Antigen/Biologic Drug Presentation and Related Immune Tolerance InductionLimitations of existing therapiesAll biologics, even those comprised of human protein sequences, have the potential to induce ADAs. Whether a biologic drug elicits an ADA responsedepends on both product-specific factors, such as propensity to form aggregates, the route of administration and mechanism of action, as well as patient-specific factors, such as genetics, underlying disease and medications. For instance, many enzyme and protein replacement therapies used in the treatment ofrare and serious diseases have a particularly high rate of immunogenicity because patients are genetically deficient in the target protein and, as a result, thetherapeutic protein can be recognized as foreign by the patient’s immune system.The formation of ADAs can lead to neutralization of efficacy, modification of pharmacokinetics and pharmacodynamics as well as allergic responses.Immunogenicity remains a significant hurdle for the development of safe and effective biologic treatments and has become a key concern for regulators, asevidenced by over 100 approved biologics that describe immunogenicity in their labels or clinical literature. According to product package inserts,approximately 50 currently marketed biologics report an incidence of ADAs affecting over 20% of patients. Among these biologics are Factor VIII products,such as Advate® (antihemophilic factor) for the treatment of hemophilia A and antibody therapeutics with fully human sequences, such as Humira®(adalimumab). We believe that immunogenicity also is a leading cause of product development failure for biopharmaceutical companies and that this issue ishampering the development of novel platform technologies, such as gene therapy and gene editing.Undesired immunogenicity represents a significant hurdle that can hamper the clinical development of new biologic platforms. For example, in gene therapy,viral vectors are required to transport the genetic material into cells. The viral origin of these vectors explains their immunogenicity, which has led drugdevelopers to limit applications to situations where the required frequency and site of administration are conducive to manageable immune responses.Treatment and product development failure resulting from undesired immunogenicity has been recognized by regulators and patient advocacy organizations.In June 2014, the FDA and the National Organization for Rare Diseases, or NORD, co-sponsored a workshop on undesired immune responses to enzymereplacement therapies and called on the biopharmaceutical industry to take a more proactive approach to addressing immunogenicity to biologics.Currently, we believe there are no comprehensive solutions to the complications of immunogenicity. Drug developers often stop the development ofbiologics that show an undesired immune response during preclinical or clinical development. In some cases, biopharmaceutical companies may attempt toreduce undesired immune responses by re-engineering the biologic through protein pegylation or removal of immunogenic epitopes. However, theseapproaches are limited in their effectiveness. Physicians may try to address the issue of undesired immune responses by increasing the dose of the biologic,which can be prohibitively expensive and may present greater safety concerns, or in life-threatening situations, by using global immunosuppressivecombination therapies. We believe that our tolerogenic ImmTOR technology could offer an entirely new and effective treatment alternative for undesiredimmune responses, including with respect to the formation of ADAs, but potentially also for autoimmune diseases and allergies.8OUR IMMTOR PROGRAMS DESIGNED TO INDUCE ANTIGEN-SPECIFIC IMMUNE TOLERANCEWe believe our ImmTOR technology designed to induce antigen-specific immune tolerance has a broad range of potential applications. We are currentlypursuing targeted product development strategies for multiple applications in which we believe ImmTOR products could be highly differentiated.•Therapeutic enzymes. Therapeutic enzymes are a frequently used class of biologic drugs to treat rare diseases. Through our analysis of biologicdrugs, including our preclinical studies, we have observed that enzymes are especially prone to undesired immune responses. Our first productcandidate, SEL-212, includes pegadricase, a pegylated uricase enzyme, which is an example of an immunogenic enzyme for which we are applyingImmTOR with the intention of improving the enzyme’s efficacy and safety. Other examples of immunogenic enzymes include acid alpha-glucosidase for the treatment of Pompe disease, alpha galactosidase A for the treatment of Fabry’s disease and microbial enzymes such asasparaginase for the treatment of cancers. We intend to seek opportunities to secure supply of and, if appropriate, licenses to these or other enzymesthat we would evaluate in combination with ImmTOR.•Gene therapies. We believe gene therapies have the potential to address key unmet medical needs for many rare genetic diseases, but undesiredimmune responses to the viral vectors used for gene replacement, augmentation and editing may be restricting their broader use. Through ouranalysis of genetic diseases, we have identified applications and patient segments that we believe would benefit from our ImmTOR technology. Weintend to develop proprietary ImmTOR -enabled non-immunogenic gene therapy candidates with viral vectors such as the Anc80 vector that wehave licensed from MEE, but which are also designed to be utilized with more common AAV vectors (e.g., AAV8, AAV5). We believe our productcandidates have the potential to mitigate the problem of pre-existing immunogenicity to the gene therapy vector by using Anc80 and to preventundesired immune responses to the vector and transgene that can occur with the first dose of gene therapy by using our ImmTOR technology. Ourinitial area of focus is on genetic metabolic diseases, but may also include lysosomal storage diseases and genetic muscular diseases. We believe weare the first company to systematically pursue the development of gene therapy product candidates with the goal of enabling repeat administration.We have engaged third parties with experience in gene therapy and rare diseases to support the development of our proprietary products. We alsohave licensed our ImmTOR technology to Spark Therapeutics for the development of gene therapies for certain pre-specified targets. For moreinformation, see "Licenses and Collaborations - Spark Therapeutics".•Other products and product candidates affected by undesired immune responses. We have generated preclinical data which we believe suggests abroad potential benefit of ImmTOR for immune tolerance. For many biologic drugs, undesired immune responses limit efficacy and cause safetyconcerns. This includes TNF-alpha-specific monoclonal antibodies for the treatment of rheumatoid arthritis and coagulation factor replacementtherapies for the treatment of hemophilia. We intend to out-license ImmTOR technology for use with other products that are outside our focus tolarger biopharmaceutical companies. We believe our ImmTOR technology may also be of interest to biopharmaceutical companies with novelbiologic development concepts or product candidates in clinical development that have demonstrated initial efficacy but are experiencing issueswith safety or sustained efficacy due to inhibitory ADAs.SEL-212 for the treatment of chronic refractory goutOverviewSEL-212 is our proprietary product candidate under development for the treatment of chronic refractory gout. SEL-212 consists of ImmTOR co-administeredwith pegadricase, a pegylated uricase. We believe that our SEL-212 has the potential, if successfully developed and approved, to offer a uniquely effectivetreatment for patients with chronic refractory gout, while also providing evidence regarding the utility of our ImmTOR technology platform. Pegylateduricase, in the form of the approved drug Krystexxa, has demonstrated the ability to significantly reduce uric acid levels and dissolve the harmful uric acidcrystals that are the manifestations of gout upon initial treatment in patients. However, we believe broad commercial adoption has not been achievedprimarily due to undesired immune responses. Based on the data received from our preclinical and Phase 1/2 clinical studies, we believe that by leveragingour ImmTOR technology to mitigate the formation of ADAs following the dosing of our pegylated uricase, pegadricase, SEL-212, if successfully developedand approved, could enable the removal of uric acid crystals in a majority of patients.The market for gout therapyGout is a painful and potentially disabling form of arthritis resulting from excess accumulation of uric acid and deposition of uric acid crystals in joints andsoft tissues, including those of the kidney and heart, causing harmful inflammation. Gout is9caused by an overproduction of uric acid, a natural byproduct of purine metabolism that is produced after consumption of food with high levels of purinessuch as seafood, meat, yeast and certain vegetables, and/or an inability of the kidneys to excrete adequate amounts of uric acid from the body. Highconcentrations of serum uric acid lead to formation of uric acid crystals in joints and tissues, causing pain, inflammation and joint damage, and increase therisk for other conditions, including cardiovascular, cardiometabolic, joint and kidney disease.There are approximately 8.3 million and 10.0 million gout sufferers in the United States and the European Union, respectively. The first line of treatments forgout are Allopurinol and Febuxostat. Both drugs are Xanthine Oxidase inhibitors, oral drugs that reduce the synthesis of uric acid. Lesinurad and Probenecidare oral gout drugs that increase the rate of excretion of uric acid through the kidneys, and are used almost exclusively in combination with these first linetreatments. While these oral treatments are designed to prevent the formation of uric acid deposits, they are not well suited to reduce existing uric aciddeposits in joints and tissues.Gout is a spectrum of disease that is typically diagnosed through the measurement of uric acid levels in the blood and/or the identification of uric acidcrystals from a visible tophus. High concentrations of serum uric acid increase the risk of co-morbidities, including cardiovascular, cardiometabolic, joint andkidney disease. Patients who are unable to reduce their serum uric acids levels below 6 mg/dl with oral drugs are diagnosed with refractory gout. Patients whohave uric acid deposits, or tophi, in soft tissues, joints, the urinary tract, the digestive tract or the heart and a persistently elevated uric acid level when leftuntreated are diagnosed with chronic tophaceous gout. Tophi are a source of inflammation and pain. Chronic refractory gout constitutes a subset of goutpatients exhibiting chronic high serum uric acid levels and painful and damaging uric acid deposits. In total, we estimate that there are approximately160,000 chronic refractory gout patients in the U.S. who are seen by rheumatologists.Figure 4 below illustrates the association between gout and diseases of the heart, vascular system, metabolic process, kidney and joints.Figure 4. Co-Morbidities Associated with GoutBased on our preclinical studies, clinical data from our Phase 1b and ongoing Phase 2 trials and market research, we believe that SEL-212 may potentiallyaddress several key unmet needs in the treatment of chronic refractory gout: the durable control of serum uric acid levels, the elimination of painful anddamaging uric acid deposits, reduction in incidence and severity of flares and once-monthly dosing.Our product development strategy is designed to address these unmet medical needs while improving the dosing regimen to a once-monthly treatment. Weexpect to commence enrollment for our Phase 2 head-to-head (COMPARE) clinical study against Krystexxa, which is intended to evaluate the differencesbetween Krystexxa and SEL-212 with respect to serum uric acid control, flare rates and dosing convenience, in the first quarter of 2019. The results of thehead-to-head (COMPARE) clinical trial are expected to inform the design of our planned Phase 3 clinical trial of SEL-212, following which we plan to seekregulatory approval for the treatment of refractory gout based on an endpoint of reduction of serum uric acid levels below 6 mg/dl. We intend for the Phase 3protocol to include patients with chronic tophaceous gout. During our market research, physicians expressed their preference for a product that could bedosed monthly for at least six months. If approved, we plan to position10SEL-212 as a debulking therapy for gout that has the potential to remove harmful uric acid deposits over a limited number of once-monthly doses andsubsequently allow patients to switch to oral gout maintenance therapy unless and until such patients experience a subsequent manifestation of uric aciddeposits. We do not believe that oral therapy would completely prevent the build-up over time of uric acid crystals in patients with a history of chronictophaceous gout and, as a result, we anticipate that treatment with SEL-212, if approved, would be required intermittently in such patients. We believe thatSEL-212, if approved, may be effective in removing harmful uric acid deposits in most patients with chronic tophaceous gout over multiple courses oftreatment in their lifetimes. Figure 5 below depicts this positioning strategy as a sample diagram illustrating what we believe to be a shift in the treatmentparadigm for chronic refractory gout.Figure 5. Sample Treatment Course for Chronic Refractory Gout.We expect our clinical and marketing strategy for SEL-212 to initially focus on the estimated 160,000 patients in the United States with chronic refractorygout who are being treated by rheumatologists. If SEL-212 is approved, we expect our strategy for marketing SEL-212 to rheumatologists will be to promotea switch from oral therapies to SEL-212 for patients with serum uric acid levels chronically above 6 mg/dl or those diagnosed with chronic tophaceous gout.Some rheumatologists have begun to utilize imaging technologies recommended by the guideline writing associations for rheumatology, including theAmerican College of Rheumatology and the European League Against Rheumatism. In particular, dual energy computed tomography, or DECT, canvisualize uric acid deposits in joints and tissues as depicted in Figure 6 below in green. DECT has the potential to become an important tool to managechronic refractory gout. Figure 6 below depicts a patient, using DECT imaging, with heavy urate burden at onset of study and almost a complete resolution ofthis after five months. We believe DECT imaging use could increase the market for SEL-212 by better assessing the severity of gout prior to treatment and bydemonstrating the impact of efficacy following treatment.11Figure 6. Tophi / Uric Acid Deposits (shown in green) Visualized Using Dual Energy Computed Tomography ImagingSEL-212 componentsOur SEL-212 consists of ImmTOR co-administered with pegadricase. Our ImmTOR consists of nanoparticles composed of poly(D,L-lactide), or PLA, andpoly(D,L-lactide)-block-poly(ethylene-glycol), or PLA-PEG, encapsulating rapamycin. Our pegadricase consists of a uricase modified with poly(ethylene-glycol), or PEG. The components of SEL-212 are depicted in Figure 7 below.Figure 7. Components of SEL-212Our pegadricase is a pegylated version of the therapeutic enzyme uricase, which we have licensed from Shenyang Sunshine Pharmaceutical Co., Ltd., or3SBio, exclusively for all markets, except Japan and Greater China, and exclusively for Japan only in combination with our ImmTOR technology. Uricase isan enzyme endogenous to all mammals, except for humans and certain primates, which converts uric acid to the more soluble metabolite, allantoin. There is anatural limit to the amount of uric acid that can be excreted by the kidneys, which decreases with age and can be reduced by some medications. Byconverting uric acid to allantoin, uricase provides an additional way for the body to reduce uric acid.12ImmTOR is our biodegradable nanoparticle that encapsulates rapamycin, also referred to as sirolimus. Rapamycin is the active ingredient of Rapamune, animmunosuppressant which has extensive prior use in humans and is currently FDA-approved as a prophylaxis of organ rejection in kidney transplant patientsaged 13 or older. PLA is part of the broader poly(lactic-co-glycolic acid), or PLGA, family of biodegradable polymers that have more than 30 years ofcommercial use and are formulation components in a number of approved products. Polyethylene glycol, or PEG, has been widely studied in clinical trialsand is also a formulation component in many approved biologic products. In our preclinical studies, ImmTOR co-administered at the initiation of treatmentwith a biologic drug substantially reduced the formation of associated ADAs and induced antigen-specific immune tolerance to the biologic drug.Clinical developmentFor chronic refractory gout, we are executing a clinical development program that seeks to evaluate SEL-212’s ability to durably reduce serum uric acidlevels below 6.0 mg/dL. The saturation point of uric acid, or the maximum level at which uric acid will remain soluble in plasma, is 6.8 mg/dL. When uricacid rises above 6.8 mg/dL, monosodium urate microcrystals begin to form and settle in joints and other tissues, creating an inflammatory response that isdiagnosed as gout. This inflammatory response is the source of highly debilitating gout flares experienced by patients. When serum uric acid levels dropbelow the level of 6.0 mg/dL, microcrystals will begin to dissolve and, over time, gout symptoms will resolve. Therefore, a serum uric acid level of less than6.0 mg/dL is defined as the target for uric acid-lowering treatments by organizations such as the American College of Rheumatology and the EuropeanLeague Against Rheumatism. The FDA and EMA have also considered the maintenance of serum uric acid levels below 6 mg/dL to be an acceptable primaryendpoint in clinical trials for urate lowering therapies. Available oral gout therapies are designed to prevent the formation of uric acid microcrystals but arenot effective in rapidly removing existing crystalized deposits. In severe gout patients who have significant deposits of monosodium urate crystals, known astophi, it is of clinical benefit to significantly reduce serum uric acid levels (i.e. below 0.1 mg/dL) for a period of time in order to rapidly dissolve themonosodium urate crystals.We expect to conduct multiple clinical studies in more than 400 patients with gout or elevated levels of serum uric acid. We initiated our clinical program inthe U.S. in the second quarter of 2015 with a multicenter Phase 1a trial of pegadricase in patients with serum uric acid levels greater than 6.0 mg/dL. Wecompleted the patient treatment portion of our Phase 1a trial in November 2015, initiated a Phase 1b trial in December 2015 and reported data from bothPhase 1 clinical trials in December 2016. In our Phase 1b trial, we demonstrated that a single dose of SEL-212 was capable of lowering serum uric acid levelsbelow 0.1 mg/dL for at least 30 days, which is correlated with the inhibition of uricase-specific ADAs. We initiated patient recruitment in an open label multi-dose Phase 2 clinical trial of SEL-212 in patients with symptomatic gout and elevated uric acid levels in October 2016. This study is being conducted atmultiple clinical sites in the U.S. We have completed our initial end-of-Phase 2 meeting with the FDA and believe we have established a path forward forpotential BLA submission. This program may consist of either a head-to-head active comparator study(s) or studies similar to the Krystexxa Phase 3 program,which would involve a comparison of SEL-212 to placebo.Phase 1 and Phase 2 clinical trialsSEL-212 is currently being evaluated in a Phase 1/2 clinical program that includes a Phase 1a and Phase 1b clinical trial in patients with high uric acid levelsas well as a Phase 2 clinical trial in patients with symptomatic gout and high uric acid levels. Each Phase 1 clinical trial was designed with the primaryobjective to evaluate the safety and tolerability of SEL-212 and its individual components. Additional objectives of the Phase 1 clinical trials includedidentifying a pegadricase dose that was capable of lowering serum uric acid levels over a period of one month, evaluating the immunogenicity of pegadricaseafter a single dose and demonstrating that ImmTOR co-administered with pegadricase reduced uric acid levels and mitigated the formation of uricase-specificADAs. The Phase 2 clinical trial evaluated the effect of multiple doses over an extended period of time on serum uric acid and the formation of ADAs inpatients. We received final data from both Phase 1 clinical trials in December 2016. We commenced patient recruitment in the Phase 2 clinical trial inOctober 2016. We plan to commence enrollment for our Phase 2 head-to-head (COMPARE) clinical trial of SEL-212, utilizing revised stopping rules,compared to Krystexxa in the first quarter of 2019 and expect to present interim 6-month data planned in the fourth quarter of 2019, and statistical superiorityendpoints in the first quarter of 2020. The two-armed, open label trial is projected to enroll between 120-150 patients per arm, with one arm receivingKrystexxa (per label) vs. 6 monthly doses of SEL-212. The primary endpoint in the study is the percentage of patients in each arm that maintain sUA controlbelow 6 mg/dL at the six month endpoint. The results of the head-to-head (COMPARE) clinical trial are expected to inform the design of our planned Phase 3clinical trials of SEL-212, which we plan to initiate in the fourth quarter of 2019.Phase 1a clinical trialThe Phase 1a clinical trial for SEL-212 was conducted at multiple sites in the United States and was a single ascending dose trial of pegadricase alone in 22patients with elevated serum uric acid levels greater than 6 mg/dl. At the outset of the trial, each of five cohorts received a single intravenous infusion ofpegadricase at ascending dose levels. We monitored the patients during a 30-day period post-infusion. We commenced enrollment of the clinical trial in thesecond quarter of 2015 and completed the13treatment portion of the trial in November 2015. We observed that pegadricase showed no serious adverse events, or SAEs, and was well tolerated at the fivedose levels tested. Additionally, we observed that pegadricase rapidly reduced and sustained average serum uric acid levels below 6 mg/dl for each cohort for14 to 30 days, depending on the dose level. Consistent with our preclinical studies in animals, pegadricase induced uricase-specific ADAs in all patients withvarying levels in this Phase 1a trial.Figure 8 below indicates the serum uric acid and uricase-specific ADA levels for each patient in Cohort #3 of the Phase 1a clinical trial, which received asingle dose of 0.4 mg/kg of pegadricase. The serum uric acid levels were measured at baseline and days seven, 14, 21 and 30 and uricase-specific ADA levelsat baseline and days seven, 14 and 30 following the single intravenous injection of pegadricase. We did not measure uricase-specific ADA levels at day 21 inthe Phase 1a clinical trial. Patient number two in this cohort developed a relatively low level uricase-specific ADA titer of 40 and maintained uric acid levelsbelow 0.5 mg/dL through the thirtieth day after dosing. By contrast, the remaining four patients in the cohort developed levels of uricase-specific ADAsgreater than 1,000 titer and uric acid levels above 5 mg/dL by the thirtieth day after dosing. Based on the results from our Phase 1a clinical trial, we observedthat pegadricase at the 0.4 mg/kg dose is capable of achieving and maintaining a reduction of serum uric acid below the target of 6 mg/dL for a 30-day periodin the absence of inhibitory uricase-specific ADAs.Figure 8. Phase 1a Clinical Trial: Serum Uric Acid and Uricase-Specific ADA Levels of the Third CohortBased on our analysis of the Phase 1a clinical trial data, we selected the pegadricase dose of 0.4 mg/kg from Cohort #3 of the Phase 1a clinical trial for furtherstudy in the Phase 1b clinical trial.Phase 1b clinical trialIn December 2015, we initiated our Phase 1b clinical trial at multiple sites in the United States. The clinical trial enrolled 63 patients with serum uric acidlevels greater than 6 mg/dl. One group of five patients received a single 0.4 mg/kg dose of pegadricase alone, which we refer to as the Pegadricase Cohort.Four groups of patients, each containing two placebo-control patients and five test article patients, received a placebo or a single intravenous infusion ofImmTOR alone at the following ascending dose levels: 0.03 mg/kg, 0.1 mg/kg, 0.3 mg/kg and 0.5 mg/kg, which we refer to collectively as the ImmTORCohorts. Four groups of patients received a single intravenous infusion of ImmTOR at ascending dose levels of 0.03 mg/kg (5 patients), 0.1 mg/kg (10patients), 0.15 mg/kg (5 patients) or 0.3 mg/kg (5 patients) with a fixed dose of pegadricase of 0.4 mg/kg, which we collectively call the SEL-212 cohorts. Allpatients were followed for at least 30 days after their initial dose.Figure 9 below depicts the serum uric acid levels of the Pegadricase Cohort (depicted in red symbols), the ImmTOR Cohorts (depicted in blue symbols), andthe SEL‑212 Cohorts (depicted in green symbols) from the Phase 1b clinical trial. Serum uric acid levels were measured at baseline and days seven, 14, 21, 30and longer for some patients that maintained serum uric acid control at day 21. As expected, ImmTOR alone had no relevant effect on reducing serum uricacid levels across the ImmTOR Cohorts, as such levels remained relatively constant during the 30‑day period. Patients in the Pegadricase Cohort showed animmediate drop in uric acid levels after dosing, with uric acid levels returning close to or above baseline levels by day 21 in four of the five patients, similarto what was observed in Cohort #3 in the Phase 1A study. In contrast, patients in the SEL-212 Cohort receiving the lowest dose of ImmTOR (0.03 mg/kg) co-administered with pegadricase (0.4 mg/kg), showed four out of five patients maintaining serum uric acid levels below 6 mg/dL through day 21 after dosing.SEL-212 patients receiving ImmTOR at 0.1 mg/kg co-administered with 0.4 mg/kg of pegadricase, showed seven out of 10 patients maintained levels ofserum uric acid of less than 0.1 mg/dl through day 30. SEL-212 patients receiving ImmTOR at 0.15 mg/kg co-administered with 0.4 mg/kg of pegadricase,showed all five patients maintaining levels of serum uric acid of less than 6 mg/dL through day 30. Finally, SEL-212 patients receiving ImmTOR at 0.3mg/kg c- administered with 0.4 mg/kg of pegadricase, showed all five14patients maintaining levels of serum uric acid of less than 0.1 mg/dL through day 30. These results indicate that SEL-212 showed a dose-dependent reductionin serum uric acid levels.Figure 9. Phase 1b Clinical Trial: Uric Acid Levels Across All Phase 1b CohortsFigure 10 below depicts the serum uric acid levels at day 30 next to the corresponding day 30 uricase-specific ADA titer for all patients in the PegadricaseCohort and in the SEL-212 Cohorts at the three higher dose levels. Four of the five patients treated with 0.4 mg/kg pegadricase alone showed their serum uricreturn to baseline by day 30 and all five showed uricase specific ADA titers greater than 1000. Seven of 10 SEL-212 patients treated with 0.1 mg/kg ImmTORand 0.4 mg/kg pegadricase showed serum uric acid levels below 0.1 mg/dL with corresponding low or negative uricase specific ADA titers at day 30. All fiveSEL-212 patients treated with 0.15 mg/kg ImmTOR and 0.4 mg/kg pegadricase showed serum uric acid below 6 mg/dL at day 30. One patient developeduricase specific ADA titers greater than 1000 but still maintained his serum uric acid below the target threshold of 6 mg/dL at day 30. The other four patientsshowed no ADA titers and had serum uric acid levels below 0.1 mg/dL. Finally, all five SEL-212 patients treated with 0.3 mg/kg ImmTOR and 0.4 mg/kgpegadricase showed serum uric acid below 0.1 mg/dL at day 30 with corresponding low or negative ADA titers. The one patient with an ADA titer of 120 atbaseline showed the same titer at baseline and at each time point tested, indicating that this patient had pre-existing low titer of antibody that was cross-reactive with pegadricase at baseline. These results indicate that SEL-212 mitigated the formation of uricase-specific ADAs which correlated with sustainedcontrol of serum uric acid levels through at least day 30 after a single dose.15Figure 10. Comparison of Phase 1b Uric Acid and Uricase‑Specific ADA LevelsCertain patients in the SEL-212 Cohort were requested to return for additional visits on days 37, 44, and/or 51 because their serum uric acid levels were stillunder control (<6 mg/dL) at day 21. Not all patients were able to return for the additional visits. The data for those who could return are in included in Figure11 below. The data show that uric acid levels eventually returned to baseline, as expected after a single dose of pegadricase. Importantly, no emergence ofADAs was detected in those patients who exhibited low or no ADA titers at day 30. These data suggest that the treatment with ImmTOR controlled immuneresponses to pegadricase for up to 51 days after dosing. The data also support monthly dosing in the Phase 2 multiple dose trial of SEL-212.Figure 11. Comparison of Phase 1b Uric Acid and Uricase‑Specific ADA LevelsAt the completion of our Phase 1b program for SEL-212 we had dosed a total of 64 patients in the trial with either SEL-212 (ImmTOR and pegadricase),ImmTOR alone, pegadricase alone or placebo. The median serum acid level of patients enrolled was 7.3 mg/dL, with a mean of 7.4 mg/dL at baseline.Patients presented with an average of 5.3 co-morbidities, such as hypertension and diabetes.We have generally observed that SEL‑212 and its components, ImmTOR and pegadricase, have been well tolerated in this patient population. There were atotal of six SAEs in the Phase 1b trial. Of the six SAEs, three were determined to not to be related to study drug by investigators. Of the remaining three SAEsthat were determined to possibly or likely be related to16study drug, two were cases of stomatitis that occurred at the highest dose of ImmTOR tested (0.5 mg/kg), leading us to define 0.3 mg/kg as the maximumtolerated dose of ImmTOR in this patient population. The remaining SAE was a case of drug hypersensitivity that occurred at a dose of 0.1 mg/kg of ImmTORin combination with 0.4 mg/kg of pegadricase. In all cases, the patient fully-recovered from the SAE without residual effects.Phase 2 clinical trialIn the fourth quarter of 2016, we began enrolling patients with symptomatic gout and elevated serum uric acid levels in an open-label, multiple ascendingdose Phase 2 clinical trial of SEL-212. The primary and secondary endpoints for this trial include safety, tolerability, pharmacokinetics, and reduction ofserum uric acid and ADA levels. We are also collecting data regarding flares and other patient-related observations. We are enrolling patients in multipleascending dose cohorts with the primary goal of identifying the dose regimens to advance into our planned Phase 3 clinical program.As of December 17, 2018, a total of 152 patients had been dosed in the Phase 2 trial at 15 active U.S. clinical sites and the treatment phase of all SEL-212cohorts had been completed. The following is a summary of clinical activity from the trial as defined by the primary clinical endpoint (i.e., serum uric acidlevels below 6 mg/dL):•Control and 0.05 mg/kg ImmTOR Dose Cohorts (cohorts receiving five monthly doses of pegadricase alone or three monthly doses of 0.2 mg/kg or0.4 mg/kg of pegadricase + 0.05 mg/kg of ImmTOR followed by two monthly doses of pegadricase alone): Dosing of patients in the control cohortsreceiving pegadricase alone was stopped early due to a loss of clinical activity caused by the immunogenicity of the enzyme. Clinical activity waslost by week 12 in the majority of patients receiving pegadricase in combination with the 0.05 mg/kg dose of ImmTOR .•0.08 and 0.1 mg/kg ImmTOR Dose Cohorts (cohorts receiving three monthly doses of 0.2 mg/kg or 0.4 mg/kg of pegadricase + 0.08 or 0.10 mg/kg ofImmTOR followed by two monthly doses of pegadricase alone): A majority of patients in these cohorts maintained clinical activity while receivingthe combination therapy through week 12. These results are consistent with the level of clinical activity observed through day 30 at a similar SEL-212 dose level in our Phase 1b trial. At the 0.1 mg/kg dose level, half of the patients that maintained clinical activity through week 12 alsomaintained clinical activity through week 20.•0.125 and 0.15 mg/kg ImmTOR Dose Cohorts (cohorts receiving three monthly doses of pegadricase +0.125 or 0.15 mg/kg of ImmTOR followed bytwo monthly doses of pegadricase alone): A majority of patients in these cohorts maintained clinical activity while receiving the combinationtherapy through week 12. These results are consistent with the level of clinical activity observed through day 30 at a similar SEL-212 dose level inour Phase 1b trial. Approximately 81% of evaluable patients (N=27) receiving up to 0.15 mg/kg ImmTOR in combination with 0.2 or 0.4 mg/kg ofpegadricase followed by 2 monthly doses of pegadricase alone had serum uric acid control below 6 mg/dL at week 12.•0.10 and 0.15 mg/kg ImmTOR 5 Combination Dose Cohorts (cohorts receiving five monthly doses of pegadricase +0.10 or 0.15 mg/kg of ImmTOR ):Five monthly doses of SEL-212 resulted in sustained serum uric acid control and has been well tolerated over the entire treatment period. 100% ofthe patients that had serum uric acid levels below 6 mg/dL at 12 weeks maintained control through 20 weeks. Approximately 66% of evaluablepatients (21/32) completed week 20 with serum uric acid levels below 6 mg/dL. (Figure 12).Figure 12. Five Combination Doses Controlled Serum Uric Acid <6 mg/dL at Week 20 in 66% of Patients17Data from the ongoing trial suggest that ADA levels have been strongly correlated with serum uric acid levels. We have observed that ImmTOR has reducedthe formation of ADAs in a dose-dependent manner, which we believe enables pegadricase to maintain its clinical activity for extended durations ascompared to pegadricase administered without ImmTOR.Data from the ongoing trial suggest that sustained control of serum uric acid near 0 mg/dL may lead to reduction in uric acid deposits as measured by DECTimaging.As of December 17, 2018, approximately 29% of patients receiving SEL-212 reported a gout flare during their first month of the trial. This is followed by adecline in flare rates during the remainder of the therapy (Figure 13). By comparison, 50% of patients reported a flare during the first month in the controlcohorts receiving pegadricase alone before treatment was stopped due to loss of efficacy and safety.Figure 13. Percentage of Patients Reporting a Gout Flare per MonthSEL-212 has been generally well tolerated at clinically active doses following repeated administrations in the trial. As of December 17, 2018, 20 patientsreported a total of 23 SAEs in the Phase 2 clinical trial. Nine SAEs had been reported in the five dose combination cohorts, seven of which were reported to benot related or unlikely related to study drug, and two of which were infusion reactions. All SAEs were successfully treated without further issues.Our ImmTOR programs for immune tolerance in gene therapyOverviewAlthough gene therapy has made significant progress over the last several years, it faces certain limitations due to undesired immunogenicity to either theAAV vector or the encoded transgene.For those patients who are able to receive a dose of gene therapy, gene vector-specific ADAs frequently occur and have been found to prevent the AAV vectorfrom reaching its target cell. It is unknown exactly how long these neutralizing ADAs prevent redosing of gene therapy. However, it has been observed instudies with animals and humans that high titer AAV-specific ADAs develop and persist for more than 10 years, preventing vector readministration. Inaddition, cellular immune responses have been found to correlate with liver inflammation and loss of gene expression.Because of the induction of lasting antibodies against AAV, we believe many gene therapy companies have focused on the single localized dose in diseasesof the eye and central nervous system for which immunogenicity is perceived to be less of an issue. We believe that many gene therapy applications mayrequire or would benefit from multiple doses, especially therapies designed to treat diseases via intravenous administration. Some of these rare geneticdeficiencies are best treated when patients are infants or small children in order to prevent developmental defects. However, pediatric patients may have ahigher need for repeat dosing due to higher cell turnover as the patient grows. Accordingly, we believe that a solution enabling repeat dosing wouldsignificantly expand the number of diseases and patients that could be treated with gene therapies.Genethon CollaborationIn collaboration with Genethon, a not-for-profit company focusing on gene therapies, we have generated and presented preclinical data in mice in which weobserved that ImmTOR mitigated the formation of ADAs to AAV-based gene therapy, thereby enabling repeat dosing of the AAV vector in these mice.Preclinical data generated in connection with this collaboration18also show that ImmTOR mitigated the formation of ADAs to AAV capsids in nonhuman primates. We believe these results further indicate that ImmTOR mayhave the potential to mitigate undesired immune responses and enable repeat intravenous administration of gene therapies.SEL-302 for the Treatment of Methylmalonic AcidemiaIn 2016, we in-licensed Anc80, a gene therapy vector, from MEE. In preclinical studies, Anc80 has been observed to be a potent gene therapy vector.By combining ImmTOR and Anc80, we intend to enable the development of highly differentiated gene therapies with the goal of improving gene therapysafety by mitigating cellular immune responses, and allowing for repeat gene therapy dosing.In collaboration with the clinical and gene therapy laboratories at the NIH and MEE, we are developing SEL-302, a product candidate utilizing the Anc80vector in combination with ImmTOR for the treatment of methylmalonic acidemia, or MMA, which can cause severe developmental defects and prematuredeath as a result of an accumulation of toxic metabolites. Other than dietary and cofactor therapy, organ transplantation is the only existing option forpatients with MMA, a severe organic acidemia most frequently caused by mutations in the enzyme methylmalonyl-CoA mutase, or MUT.SEL-313 for the Treatment of OTC DeficiencyFor our second gene therapy program, we plan to develop another product candidate for the treatment of OTC deficiency, which is another metabolicdisorder. We are pursuing this second indication through collaborations with third parties with preclinical and clinical experience in this area.Factor VIIIOn December 2, 2016, or the Spark Signing Date, we entered into a License and Option Agreement, or the Spark License Agreement, with Spark Therapeutics,Inc., or Spark, to collaborate on the development of gene therapies for certain targets utilizing our ImmTOR technology. Under the terms of the Spark LicenseAgreement, we granted Spark certain exclusive, worldwide, royalty-bearing licenses to our intellectual property and know-how relating to our ImmTORtechnology to research, develop and commercialize gene therapies for Factor VIII, an essential blood clotting protein relevant to the treatment of hemophiliaA, which is the initial target under the collaboration.Pursuant to the Spark License Agreement, Spark has made aggregate payments of $15.0 million to date. On a target-by-target basis, we will be eligible toreceive up to an aggregate of $430.0 million in milestone payments for each target, with up to $65.0 million being based on Spark’s achievement of specifieddevelopment and regulatory milestones and up to $365.0 million for commercial milestones, as well as tiered royalties on global net sales at percentagesranging from mid-single to low-double digits. Until December 2019, Spark has the right to fund up to 50.0% of any development or regulatory milestonepayable to us by issuing us shares of Spark’s common stock having a fair market value equal to the percentage of such development or regulatory milestone,as applicable.In addition, for a period of three years from the Spark Signing Date, Spark may exercise options to research, develop and commercialize gene therapiesutilizing the ImmTOR technology for up to four additional pre-specified targets, subject to Spark’s payment of the applicable option exercise fee, in a rangeof $1.4 million to $2.0 million depending on the incidence of the applicable indication, to us in each case.In connection with the Spark License Agreement, we also entered into a stock purchase agreement with Spark, or the Spark SPA, pursuant to which Sparkpurchased an aggregate of $15.0 million of our common stock including (i) 197,238 shares for an aggregate purchase price of $5.0 million on the SparkSigning Date, (ii) 324,362 shares for an aggregate purchase price of $5.0 million on June 8, 2017, and (iii) 205,254 shares for an aggregate purchase price of$5.0 million on October 31, 2017.For more information about the Spark License Agreement and the Spark SPA, see the discussion under “Licenses and Collaborations” below.Crigler Najjar SyndromeIn September 2018 we also announced a collaboration with CureCN, a European non-profit developing an AAV gene therapy for the treatment of CriglerNajjar Syndrome, an ultra-rare disease of iron metabolism mediated by a single gene deletion of a liver enzyme. The consortium plans to utilize our ImmTORtechnology in combination with their AAV gene therapy with the potential to re-dose patients who are not producing enough enzyme post their first dose ofAAV gene therapy. Preclinical toxicology studies are expected to begin in the first half of 2019, with the potential for initiation of preclinical combinationstudies in the second half of 2019.19MANUFACTURINGWe manufacture ImmTOR using a readily-scalable, self-assembly nanoemulsion process with well-defined, robust commercial pharmaceutical unitoperations. This proprietary, highly specialized and precisely controlled manufacturing process enables us to reproducibly manufacture ImmTOR acrossmany production scales, from milligram-scale at the laboratory bench to hundreds of grams to multi-kilogram scale for commercial production. This well-defined process has been produced at multiple scales. We have also developed and executed the required detailed analytic characterization of our products.For the SEL-212 program, we have increased ImmTOR production to a 50-gram scale and have developed an approximately 400-gram scale process, which,at the current projected clinical dose, we believe would be suitable for commercial launch. The process is designed such that this same equipment is capableof potentially producing up to a one kilogram batch size scale. As our nanoparticle manufacturing process is compact, and therefore also portable, ourstrategy is to transfer our custom designed process skids to our contract manufacturing organization, or CMO, and have the CMO produce the nanoparticles,under our direction. This is the strategy we use for production of clinical supplies for clinical trials and would be the expected strategy for commercialproduction.The pegadricase enzyme for SEL-212 is produced by fermentation in E. Coli and is sourced from 3SBio in China. 3SBio is a Chinese pharmaceuticalcompany that produces multiple approved products in China and also has product sales in other countries around the world. 3SBio supplies the pegadricaseused in the current clinical trials of SEL-212 in the United States. Through a licensing arrangement, we own exclusive worldwide rights to pegadricaseoutside of China, with co-ownership of rights in Japan and with 3SBio owning all rights in China. Under this arrangement, 3SBio has agreed to supply uswith pegadricase. We also have selected a back-up supplier for pegadricase in the United States.In January 2017 we entered into a manufacturing agreement with Lonza Houston, Inc., a leader in viral gene and cell therapy manufacturing. Under the termsof the agreement, Lonza has agreed to produce an Anc80-AAV-based gene therapy product for our proprietary program for MMA.LICENSES AND COLLABORATIONSSpark TherapeuticsIn December 2016, we entered into the Spark License Agreement to develop gene therapies for certain targets utilizing our ImmTOR technology.Under the terms of the Spark License Agreement, we granted Spark certain exclusive, worldwide, royalty-bearing licenses to our intellectual property andknow-how relating to our ImmTOR technology to research, develop and commercialize gene therapies for Factor VIII, an essential blood clotting proteinrelevant to the treatment of hemophilia A, which is the initial target under the license agreement.Pursuant to the Spark License Agreement, Spark made payments to us of $30.0 million in the aggregate. On a target-by-target basis, we will be eligible toreceive up to an aggregate of $430.0 million in milestone payments for each target, with up to $65.0 million being based on Spark’s achievement of specifieddevelopment and regulatory milestones and up to $365.0 million for commercial milestones, as well as tiered royalties on global net sales at percentagesranging from mid-single to low-double digits. Until December 2019, Spark has the right to fund up to 50.0% of any development or regulatory milestonepayable to us by issuing us shares of Spark’s common stock having a fair market value equal to the percentage of such development or regulatory milestone,as applicable.In addition, until December 2019, Spark may exercise options to research, develop and commercialize gene therapies utilizing our ImmTOR technology forup to four additional targets, subject to Spark’s payment to us of the applicable option exercise fee, in a range of $1.4 million to $2.0 million depending onthe incidence of the applicable indication.Each party is responsible for its own costs and expenses incurred in connection with its respective activities under the Spark License, except that Spark hasagreed to reimburse us for FTE and out-of-pocket costs incurred in performing certain tasks or assistance specifically requested by Spark. We retain theresponsibility to manufacture Spark’s preclinical, clinical and commercial requirements for the ImmTOR technology, subject to the terms of the SparkLicense.The Spark License Agreement will continue on a country-by-country and product-by-product basis until the expiration of Spark’s royalty paymentobligations with respect to such product in such country unless earlier terminated by the parties. The Spark License Agreement may be terminated by Sparkfor convenience upon ninety days’ notice. Either party may terminate the Spark License Agreement on a target-by-target basis for material breach withrespect to such target.In connection with the Spark License Agreement, we also entered into the Spark SPA, pursuant to which Spark has purchased in the aggregate $15.0 millionof our common stock including (i) 197,238 shares for an aggregate purchase price of $5.020million on the Spark Signing Date, (ii) 324,362 shares for an aggregate purchase price of $5.0 million on June 8, 2017, and (iii) 205,254 shares for anaggregate purchase price of $5.0 million on October 31, 2017.Massachusetts Institute of TechnologyIn November 2008, we entered into a license agreement with MIT, which we refer to as the MIT License. We amended the MIT License in January 2010,November 2012, August 2013 and November 2016. Under the MIT License, we acquired an exclusive worldwide license, with the right to grant sublicenses,to develop, make, sell, use and import certain licensed products that are therapeutic or prophylactic vaccines and use certain licensed processes in theexercise of rights to the licensed products, the manufacture, sale and practice of which are covered by patent rights owned or controlled by MIT, includingpatents jointly owned with Brigham, the President and Fellows of Harvard College, the Immune Disease Institute and the Children’s Medical CenterCorporation. Our exclusivity is subject to certain retained rights of these institutions and other third parties.Upon our entry into the MIT License, we paid MIT a non-refundable license issue fee, reimbursed certain of MIT’s costs and issued shares of our commonstock to MIT and the other institutional patent owners which were subject to certain anti-dilution, registration and other protective rights. We are obligated topay MIT creditable annual maintenance fees, low-single-digit running royalty on annual net sales, developmental milestones up to an aggregate of $1.5million, a mid-single digit percentage of certain payments we receive from corporate partners and a specified percentage of certain income received fromsublicensees after 2009 between 10% and 30%. We may terminate the MIT License at any time upon six months written notice. MIT has the right toterminate the MIT License immediately upon written notice to us if we cease to carry on our business related to the MIT License, fail to maintain insurance asrequired under the MIT License, file for bankruptcy, fail to pay amounts due under the MIT License, challenge or assist others in bringing a challenge toMIT’s patents or fail to cure material breach within 60 days’ written notice thereof. Absent early termination, the MIT License will continue until theexpiration or abandonment of the last to expire patent right subject to the MIT License.Shenyang Sunshine Pharmaceutical Co., Ltd.In May 2014, we entered into a license agreement with 3SBio, as amended in May 2017, which we refer to as the 3SBio License. Pursuant to the 3SBioLicense, we were granted an exclusive license to certain pegadricase-related patents and related “know-how” owned or in-licensed by 3SBio for theworldwide (except for Greater China and Japan) development and commercialization of products based thereupon for human therapeutic, diagnostic andprophylactic use. We are also granted a worldwide (except for Greater China) exclusive license to develop, commercialize and manufacture or havemanufactured products combining our proprietary ImmTOR technology with pegadricase or related compounds supplied by 3SBio (or otherwise supplied ifour rights to manufacture are in effect) for human therapeutic, diagnostic and prophylactic use. We were also granted a co-exclusive license to manufactureand have manufactured pegadricase and related compounds for our preclinical and clinical use or, if the 3SBio License is terminated for 3SBio’s materialbreach, for any use under the 3SBio License. In addition, the 3SBio License, as amended, permits us to utilize one or more third parties to provide up to 20%of our commercial supply of pegadricase. Otherwise, except in the case of a supply shortage on the part of 3SBio, we are obligated to obtain at least 80% ofour supply of such compounds for Phase 3 clinical trials and commercial use from 3SBio under the terms of supply agreements to be negotiated.Under the 3SBio License we have paid to 3SBio an aggregate of $1.0 million in upfront and milestone-based payments in 2015 and made an additionalmilestone payment totaling $2.0 million in 2016. We are required to make future payments to 3SBio contingent upon the occurrence of events related to theachievement of clinical and regulatory approval milestones of up to an aggregate of $21.0 million for products containing our ImmTOR technology, and upto an aggregate of $41.5 million for products without our ImmTOR technology. We are also required to pay 3SBio tiered royalties on annual worldwide netsales related to the pegadricase component of products at percentages ranging from the low-to-mid single digits for products containing our ImmTORtechnology, and from the mid-single digits to low or low-to-mid teens for products without our ImmTOR technology, subject to specified reductions. Theseroyalties are payable, on a country-by-country and product-by-product basis until the later of (i) the date that all of the patent rights for that product haveexpired in that country, or (ii) a specified number of years from the first commercial sale of such product in such country.The 3SBio License expires on the date of expiration of all of our royalty payment obligations unless earlier terminated by either party for an uncured materialdefault or for the other party’s bankruptcy. We may also terminate the 3SBio License on a country-by-country or product-by-product basis for any reasoneffective upon 60 days’ prior written notice to 3SBio or, with respect to a given product, immediately upon written notice to 3SBio if we identify a safety orefficacy concern related to such product.21BINDIn December 2008, we entered into a cross-license agreement with BIND Therapeutics, Inc. (formerly BIND Biosciences, Inc.), or BIND, which we refer to asthe BIND Agreement. Pursuant to the BIND Agreement, BIND granted us a perpetual, irrevocable, royalty-free worldwide non-exclusive license under certainof BIND’s existing and future patent rights to make, have made, use, sell, offer for sale and import products and services covered by such patents and patentapplications in the field of certain prophylactic and therapeutic vaccines. The time period for adding new patent rights, not included in the families ofpreviously licensed patent rights, to our license grant from BIND has expired. Pursuant to the BIND Agreement, we granted BIND a perpetual, irrevocable,royalty-free, worldwide non-exclusive license under certain of our current and future patent rights to make, have made, use, sell, offer for sale and importproducts and services covered by such patents and patent applications in all other fields, in each case, excluding certain future patent rights of each partyrelated to novel targeting agents. The time period for adding new patent rights, not included in the families of previously licensed patent rights, to BIND’slicense grant from us has expired.We have paid BIND an upfront license issuance fee and reimbursed certain of BIND’s fees in connection with the entry into the BIND Agreement. Noroyalties or other payments are due to or by either party. The BIND Agreement expires upon expiration of the last patent right covered by the BINDAgreement. Neither party may unilaterally terminate the BIND Agreement for any reason. If either party materially breaches the BIND Agreement, fails toexpend a specified amount in research and development activities related to the BIND Agreement, undergoes bankruptcy or insolvency, or undergoes achange of control, the future patent rights to be included in the license grant to the party breaching, failing to expend such amounts or undergoing such eventunder the BIND Agreement will no longer be granted to the breaching party.In connection with BIND’s entry into bankruptcy proceeding in 2016, Pfizer purchased substantially all of the assets of BIND, including those pertaining tothe BIND Agreement.Massachusetts Eye and Ear InfirmaryIn May 2016, we entered into a license agreement with the Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc., or,collectively, MEE, which we refer to as the MEE License. Under the MEE License, we were granted an exclusive commercial worldwide license, with theright to grant sublicenses through multiple tiers, to make, have made, use, offer to sell, sell and import certain products and to practice certain processes, thesale, use or practice of which are covered by patents and proprietary know-how owned or controlled by MEE, for use of Anc80 gene therapy vectors for geneaugmentation therapies expressing certain target sequences.MEE also granted us exclusive options to exclusively license certain of their intellectual property rights relating to several additional target sequences andvariations thereof each linked to a specified disease. Pursuant to the MEE Agreement, we agreed to pay MEE a license fee in the low six figures, annuallicense maintenance fees ranging from the mid-twenty thousands to mid-seventy thousands and an option maintenance fee in the low five figures for eachexercisable option. We also agreed to pay development milestones on a licensed product-by-licensed product basis, totaling up to an aggregate of between$4.2 million to $37.0 million and sales milestones on a licensed product-by-licensed product basis, totaling up to an aggregate of between $50.0 million to$70.0 million; tiered royalties equal to a percentage of net sales ranging from mid-single digits to mid-teens, subject to certain reductions; and a percentage,in a range expected to be in the mid-teens depending on timing, of any sublicense income we receive from sublicensing our rights granted thereunder, subjectto certain reductions and exclusions. The MEE License will continue until the expiration of the last to expire of the patent rights licensed thereunder. Wemay terminate the MEE License in whole or in part upon prior written notice. MEE may terminate the MEE License on a target sequence-by-target sequencebasis if we fail to make any scheduled payments in respect of such target sequence or if we materially breach a diligence obligation in respect of such targetsequence, in each case if we fail to cure within a specified time period. MEE may terminate the MEE License in its entirety if we materially breach certain ofour obligations related to diligence, representations and warranties, and maintenance of insurance; if we challenge the validity or enforceability of anypatents licensed thereunder; if any of our executive officers are convicted of a felony relating to manufacture, use, sale or importation of licensed products; orupon our insolvency or bankruptcy.INTELLECTUAL PROPERTYWe endeavor to protect our SVP based immunotherapy program technology, which we consider fundamental to our business, by seeking, maintaining anddefending patent rights, whether developed internally or licensed from third parties, relating to our program, product candidates, their methods of use and theprocesses for their manufacture. Our practice is to strive to protect our intellectual property by, among other methods, pursuing and obtaining patentprotection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, programsand product candidates that are commercially important to the operation and growth of our business. We also rely on trade secrets22and know-how relating to our proprietary technology, programs and product candidates, continuing innovation and in-licensing opportunities to maintain,advance and fortify our proprietary position in our SVP-based immunotherapy program and product candidates. Our commercial success will depend in parton our ability to obtain and maintain patent and other proprietary protection for our program technology, inventions and improvements; to preserve theconfidentiality of our trade secrets; to maintain our licenses to use intellectual property owned or controlled by third parties; to defend and enforce ourproprietary rights, including our patents; and to operate without infringing the patents and proprietary rights of third parties.We have developed and in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to our SVP-basedimmunotherapy technology, program and product candidates. Our patent portfolio contains 10 issued patents in the United States and 82 foreign issuedpatents, in all cases, owned solely by us. We also have 62 pending patent applications in the United States as well as 407 foreign pending patentapplications, in all cases, owned solely by us. These patents and patent applications include claims directed to:•tolerance and cancer immunotherapy programs;•other immune stimulation programs;•methods and compositions incorporating our proprietary SVP nanoparticle in a variety of tolerance applications, including:•mitigating or treating anti-drug antibodies association with protein drugs such as pegadricase or LMB-100, and•genetic therapies (such as viral delivery of genes).•development and commercialization of SEL-212, including both composition of matter and method of treatment claims (there are three patentfamilies that cover the SEL-212 product, one of which is a licensed, issued U.S. patent that covers the SEL-212 product, which expires in 2021); and•methods and compositions incorporating our proprietary SVP nanoparticle in a variety of cancer immunotherapy applications, including:•creating various cancer vaccines, and•combination treatments, including co-treatment with PD-1/PDL-1 checkpoint inhibitors.Set forth below is a table indicating the expiration dates for our owned patent families, or expected expiration dates in the case of our owned patentapplication families, corresponding to each of our programs.Program Description PatentFamily(1) Expiration(2)Refractory and chronic tophaceous gout (SEL-212) ImmTOR co-administered with pegadricase 19 2032-2037Mesothelioma/Pancreatic Cancer ImmTOR co-administered with LMB-100 16 2032-2035Gene therapy ImmTOR co-administered with AAV vector 19 2032-2035Peanut allergy SVP-adjuvant and SVP-food allergen 13 2032-2035Celiac disease ImmTOR and SVP-gluten 13 2032-2035Type 1 diabetes ImmTOR and SVP-insulin 15 2032-2035Smoking cessation and relapse prevention (SELA-070) SVP-adjuvant and SVP-nicotine 6 2030-2032HPV-associated cancer (SEL-701) SVP-adjuvant and SVP-HPV antigen 6 2030-2032(1)Reflects number of relevant patent and patent application families.(2)Reflects expiration date and estimated expiration date ranges of issued patents and patent applications, respectively.In addition, we have exclusively or non-exclusively licensed intellectual property, including the following patent portfolio: 36 U.S. issued patents; 235foreign issued patents; 7 U.S. pending patent applications; and 74 foreign pending applications. The licensed patents and patent applications cover variousaspects of the technology being developed by us, including claims directed to compositions of matter and methods of use, and have been filed in variouscountries worldwide including in North America, Europe and Asia, with material expiration dates varying from 2021 to, if claims are issued, 2028. In additionto filing and prosecuting patent applications in the United States, we often file analogous patent applications in the European Union and in additionalforeign countries where we believe such filing is likely to be beneficial, including but not limited to Australia, Brazil, China, and Eurasia, including theRussian Federation, Europe, South Korea, Mexico, India, Israel and Japan.Each patent’s term depends upon the laws of the countries in which they are obtained. The patent term in most countries in which we file is 20 years from theearliest date of filing of a non-provisional patent application. Notably, the term of U.S. patents may be extended due to delays incurred due to compliancewith FDA or by delays encountered during prosecution that23are caused by the USPTO. For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond theexpiration of the patent, depending upon the length of time the drug is under regulatory review. There is a limit to the amount of time a patent may beextended in the United States; no patent extension can extend the remaining term of a patent beyond a total of 14 years from the date of product approval andonly one patent applicable to an approved drug may be extended. Similar patent term extensions are available in Europe and other jurisdictions for patentsthat cover regulatory-approved drugs. Currently, we own or license patents with material expiration dates ranging from 2021 to 2032. If patents are issued onpending patent applications that we own or license, the resulting patents are expected to have material expiration dates ranging from 2027 to 2035. However,the actual patent protection period varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type ofpatent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validityand enforceability of the patent.COMPETITIONThe biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis onproprietary products. We face potential competition from many different sources, including pharmaceutical and biotechnology companies, academicinstitutions and governmental agencies and public and private research institutions. Product candidates that we successfully develop and commercialize maycompete with existing therapies and new therapies that may become available in the future.Our competitors may have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing,preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors alsocompete with us in recruiting and retaining qualified scientific, sales, marketing and management personnel, establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies mayalso prove to be significant competitors, particularly through collaborative arrangements with large and established companies.The key competitive factors affecting the success of SEL-212, and any other tolerance or immune stimulation product candidates that we develop, ifapproved, are likely to be their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from governmentand other third-party payors.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or lesssevere side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or otherregulatory approval for their products more rapidly than we may obtain approval for ours. In addition, our ability to compete may be affected in many casesby insurers or other third-party payors seeking to encourage the use of generic or biosimilar products. SEL-212 may compete with others in the gout market,including Krystexxa, which contains a pegylated uricase similar to the pegadricase component of SEL-212 and is indicated for the treatment of refractorygout. Horizon Pharma plc, whose affiliates own Krystexxa, may find other approaches to eliminate undesired immunogenicity to Krystexxa. Long-termtreatment with global immunosuppressive products may increase the susceptibility to contract infections, tumors and may lead to organ failure. Largecompanies with active research to prevent the formation of ADAs and treat allergies or autoimmune diseases include Sanofi, Pfizer Inc., or Pfizer, andMerck & Co., Inc., or Merck. Small, early-stage biopharmaceutical companies active in the research for new technologies to induce antigen-specific immunetolerance include Anokion SA, AnTolRx Inc., Apitope International NV, Caladrius Biosciences, Cour Pharmaceutical Development Company, Inc.,Dendright International, Inc., Parvus Therapeutics, REGiMMUNE Corporation, Rubius Therapeutics, Inc., Tolerion, Inc., Topas Therapeutics GmbH, andTxcell SA. However, we believe that most of these companies are focused on autoimmune and inflammatory diseases rather than immune tolerance tobiologics.GOVERNMENT REGULATIONGovernment authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research,development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing.Our most advanced product candidate, SEL-212, is subject to regulation in the United States as a combination product. If marketed individually, eachcomponent would be subject to different regulatory pathways and would require approval of independent marketing applications by the FDA. A combinationproduct, however, is assigned to a Center that will have primary jurisdiction over its regulation based on a determination of the combination product’sprimary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our SEL-212, we believe thatthe primary mode of action is attributable to the biologic component of the product. In the case of SEL-212, which we believe will24be regulated as a therapeutic biologic, the FDA’s Center for Drug Evaluation and Research, or CDER, will have primary jurisdiction over premarketdevelopment. We expect to seek approval of SEL-212 through a single Biologics License Application, or BLA, reviewed by CDER, and we do not expectthat the FDA will require a separate marketing authorization for each constituent of SEL-212.Biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act,and other federal, state, local and foreign statutes and regulations. SEL-212 and any other product candidates that we develop must be approved by the FDAbefore they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreigncountries.U.S. biological products development processThe process required by the FDA before a biologic, including a gene therapy, may be marketed in the United States generally involves the following:•completion of extensive nonclinical testing, sometimes referred to as preclinical testing, including laboratory tests, animal trials and formulationstudies in accordance with applicable regulations, including good laboratory practices, or GLPs, and applicable requirements for humane use oflaboratory animals;•submission to the FDA of an IND, which must become effective before human clinical trials may begin;•performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinicalpractice, or GCP, regulations and any additional requirements for the protection of human research subjects and their health information, to establishthe safety, purity and potency of the proposed biological product for its intended use;•submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinicaltesting and clinical trials;•satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity,strength, quality and purity;•potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA; and•FDA review and approval, or licensure, of the BLA.Before testing any biological product candidate in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to asnonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety andactivity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinicaldata or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. TheIND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that 30-day timeperiod. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also imposeclinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes aclinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA.In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involvingrecombinant or synthetic nucleic acid molecules had historically been subject to review by the Recombinant DNA Advisory Committee, or RAC, of theNational institutes of Health, or NIH, Office of Biotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant orSynthetic Nucleic Acid Molecules, or NIH Guidelines. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statementproposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles andresponsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications.During the public comment period, which closed on October 16, 2018, the NIH announced that it would no longer accept new human gene transfer protocolsfor review as a part of the protocol registration process or convene the RAC to review individual clinical protocols. These trials remain subject to the FDA’soversight and other clinical trial regulations, and oversight at the local level will continue as set forth in the NIH Guidelines. Specifically, under the NIHGuidelines, supervision of human gene transfer trials includes evaluation and assessment by an Institutional Biosafety Committee, or IBC, a localinstitutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses thesafety of the research and identifies any potential risk25to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are notmandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acidmolecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualifiedinvestigators, generally physicians not employed by or under the study sponsor’s control. Clinical trials are conducted under protocols detailing, amongother things, the objectives of the clinical study, dosing procedures, patient selection and exclusion criteria, and the parameters to be used to monitor patientsafety, 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 trials must be conducted and monitored in accordance with the FDA’s regulationscomprising the GCP requirements, including the requirement that all research patients provide informed consent. Further, each clinical study must bereviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical study will be conducted.Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:•Phase I. The biological product candidate is initially introduced into healthy human patients and tested for safety. In the case of some products forsevere or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initialhuman testing is often conducted in patients.•Phase II. The biological product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, topreliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosingschedule.•Phase III. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population atgeographically dispersed clinical study sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and providean adequate basis for product labeling.Post-approval clinical trials, sometimes referred to as Phase IV clinical trials, may be conducted after initial marketing approval. These clinical trials are usedto gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinicalstudy investigators. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including afinding that the research patients or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of aclinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the biological product candidatehas been associated with unexpected serious harm to patients.There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of clinicaltrials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publicly available atwww.clinicaltrials.gov. Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional informationabout the physical characteristics of the biological product candidate as well as finalize a process for manufacturing the product in commercial quantities inaccordance with GMP requirements.U.S. review and approval processesAfter the completion of clinical trials of a biological product candidate, FDA approval of a BLA must be obtained before commercial marketing of thebiological product. The BLA must include results of product development, laboratory and animal trials, human trials, information on the manufacture andcomposition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, or PREA, a BLA orsupplement to a BLA must contain data to assess the safety and effectiveness of the biological product candidate for the claimed indications in all relevantpediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The Food andDrug Administration Safety and Innovation Act, or FDASIA, requires that a sponsor who is planning to submit a marketing application for a drug orbiological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit aninitial Pediatric Study Plan, or PSP, within sixty days after an c 2 meeting or as may be agreed between the sponsor and FDA. Unless otherwise required byregulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on anannual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by asmall business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphanindication.26Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agencyaccepts 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 may requestadditional information. In this event, the BLA must be resubmitted with the additional information. Once the submission is accepted for filing, the FDAbegins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, pureand potent for its intended use and whether the product is being manufactured in accordance with cGMP requirements to assure and preserve the product’sidentity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that presentdifficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and arecommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisorycommittee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also willdetermine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product candidate. If the FDAconcludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determinesthat the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product withinrequired specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials wereconducted in compliance with IND study requirements and GCP requirements.Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria forapproval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the applicantinterprets the same data. If the FDA decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes allof the specific deficiencies in the BLA identified by the FDA. Additionally, the complete response letter may include recommended actions that the applicantmight take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressingall of the deficiencies 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 may otherwisebe limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions beincluded in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS,or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase IV clinical trials,designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved productsthat have been commercialized.One of the performance goals agreed to by the FDA under the PDUFA is to review 90% of standard BLAs in 10 months from the filing date and 90% ofpriority BLAs in six months from the filing date, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates forstandard and priority BLAs.Orphan designationThe FDA may grant orphan designation to drugs or biologics intended to treat a rare disease or condition that affects fewer than 200,000 individuals in theUnited States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and marketingthe product for this type of disease or condition will be recovered from sales in the United States. Orphan designation must be requested before submitting aBLA. After the FDA grants orphan designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphandesignation does not convey any advantage in or shorten the duration of the regulatory review and approval process.In the United States, orphan designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, taxadvantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product isentitled to orphan exclusivity, which means the FDA may not approve any other application to market the same product for the same indication for a periodof seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturerwith orphan exclusivity is unable to assure sufficient quantities of the approved orphan designated product. Competitors, however, may receive approval ofdifferent products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication forwhich the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitorobtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’sproduct for the same indication or disease. If a drug or biological product designated as an orphan product receives marketing approval for an indicationbroader than what is designated, it may not be entitled to orphan product exclusivity.27We have not requested orphan designation for our product candidates, but depending on the proposed indication for which we intend to develop our futureproducts, we may in the future request such designation.Expedited development and review programsThe FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new biological products that meet certain criteria.Specifically, new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition anddemonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product andthe specific indication for which it is being studied. The sponsor of a new biologic may request that the FDA designate the biologic as a Fast Track product atany time during the clinical development of the product. Unique to a Fast Track product, the FDA may consider for review sections of the marketingapplication on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of theapplication, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user feesupon submission of the first section of the application.Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended toexpedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it has the potential toprovide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of adisease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new biological productdesignated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Biological productsstudied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existingtreatments may be eligible for accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studiesestablishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on aclinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence ofthe condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a biological productsubject to accelerated approval perform adequate and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a conditionfor accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Trackdesignation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.In addition, under the provisions of FDASIA, the FDA established a Breakthrough Therapy Designation which is intended to expedite the development andreview of products that treat serious or life-threatening diseases or conditions. A breakthrough therapy is defined as a drug that is intended, alone or incombination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drugmay demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effectsobserved early in clinical development. The designation includes all of the features of Fast Track designation, as well as more intensive FDA interaction andguidance. The Breakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, but these can also be granted to thesame product candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and providing advice, intended toexpedite the development and review of an application for approval of a breakthrough therapy. Requests for breakthrough therapy designation will bereviewed within 60 days of receipt, and FDA will either grant or deny the request.Fast Track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval but mayexpedite the development or approval process. Even if we receive one of these designations for our product candidates, the FDA may later decide that ourproduct candidates no longer meet the conditions for qualification. In addition, these designations may not provide us with a material commercial advantage.Post-approval requirementsMaintaining substantial compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial time and financialresources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP requirements.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 record-keeping requirements,reporting of adverse effects and reporting updated safety and efficacy information.We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition onpromoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities and promotional activities involving the internet. Discovery of previously unknown problems or the failure tocomply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market aswell as28possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approvalprocess or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDAsanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, productseizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising orcommunications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties.Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to registertheir establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies forcompliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of productionand quality control to maintain cGMP compliance. In addition, changes to the manufacturing process or facility generally require prior FDA approval beforebeing implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject tofurther FDA review and approval.Biosimilars and exclusivityThe Patient Protection and Affordable Care Act, or ACA, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition andInnovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with anFDA-licensed reference biological product.Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety,purity and potency, can be shown through analytical studies, animal studies and a clinical study or studies. Interchangeability requires that a product isbiosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product inany given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated orswitched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the referencebiologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which suchproducts are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product wasfirst licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which thereference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference productif the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinicaltrials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for certain biosimilars approved asinterchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted bypharmacies, which are governed by state pharmacy law.A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existingexclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be grantedbased on the voluntary completion of a pediatric study in accordance with an FDA-issued "Written Request" for such a study.The BPCIA is complex and continues to be interpreted and implemented by the FDA. As a result, the ultimate impact, implementation and meaning of theBPCIA is subject to significant uncertainty.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, clinicalstudies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks,their use may be restricted in some countries.Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to thecommencement of clinical studies or marketing of the product in those countries. Certain countries outside of the United States have a similar process thatrequires the submission of a clinical study application much like the IND prior to the commencement of human clinical studies. In the European Union, forexample, a clinical trial authorization, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, muchlike the FDA and the IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical study development may proceed.29The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. In allcases, the clinical studies are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their originin the Declaration of Helsinki.In the European Economic Area, or EEA, which is composed of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein,medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.There are two types of MAs.•The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee forMedicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of theEEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, ,advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), and medicinal products thatcontain a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute asignificant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. Under the Centralized Procedure themaximum timeframe for the evaluation of a marketing authorization application is 210 days (excluding clock stops, when additional written or oralinformation is to be provided by the applicant in response to questions asked by the CHMP). Accelerated evaluation might be granted by the CHMPin exceptional cases, when the authorization of a medicinal product is of major interest from the point of view of public health and in particular fromthe viewpoint of therapeutic innovation. Under the accelerated procedure the standard 210 days review period is reduced to 150 days.•National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are availablefor products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in aMember State of the EEA, this National MA can be recognized in another Member States through the Mutual Recognition Procedure. If the producthas not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member Statesthrough the Decentralized Procedure.To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketing authorizationapplication, which is similar to the U.S. BLA. The European Union also provides opportunities for market exclusivity. For example, in the European Union,upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of marketexclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic orbiosimilar application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’sdata may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity. However, there is no guaranteethat a product will be considered by the European Union’s regulatory authorities to be a new chemical entity, and products may not qualify for dataexclusivity. Products receiving orphan designation in the European Union can receive ten years of market exclusivity, during which time no marketingauthorization application shall be accepted and no marketing authorization shall be granted for a similar medicinal product for the same indication. Anorphan product can also obtain an additional two years of market exclusivity in the European Union for pediatric studies. No extension to any supplementaryprotection certificate can be granted on the basis of pediatric studies for orphan indications.The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 ofRegulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when theapplication is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justifyinvestment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EuropeanUnion, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000.Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization,entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before theapplication for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designationhas been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not conveyany advantage in, or shorten the duration of, the regulatory review and approval process.30The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria fororphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketingauthorization may be granted to a similar product for the same indication at any time if the:•second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;•applicant consents to a second orphan medicinal product application; or•applicant cannot supply enough orphan medicinal product.For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct ofclinical studies, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical studies are conducted inaccordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.We are also subject to data privacy and security laws in the jurisdictions outside of the U.S. in which we are established, run clinical trials or in which we sellor market our products once approved. For example, in Europe we are subject to Regulation (EU) 2016/679 (General Data Protection Regulation or GDPR) inrelation to our collection, control, processing and other use of personal data (i.e. data relating to an identifiable living individual). We process personal datain relation to participants in our clinical trials in the EEA., including the health and medical information of these participants. The GDPR is directlyapplicable in each E.U. Member State, however, it provides that E.U. Member States may introduce further conditions, including limitations which couldlimit our ability to collect, use and share personal data (including health and medical information), or could cause our compliance costs to increase,ultimately having an adverse impact on our business. The GDPR imposes onerous accountability obligations requiring data controllers and processors tomaintain a record of their data processing and implement policies as part of its mandated privacy governance framework. It also requires data controllers to betransparent and disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is to be used, imposeslimitations on retention of personal data; defines for the first time pseudonymized (i.e., key-coded) data; introduces mandatory data breach notificationrequirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. We arealso subject to E.U. rules with respect to cross-border transfers of personal data out of the E.U. and EEA. We are subject to the supervision of local dataprotection authorities in those E.U. jurisdictions where we are established or otherwise subject to the GDPR. Fines for certain breaches of the GDPR aresignificant: up to the greater of EUR 20 million or 4% of total global annual turnover. In addition to the foregoing, a breach of the GDPR could result inregulatory investigations, reputational damage, orders to cease/ change our use of data, enforcement notices, as well potential civil claims including classaction type litigation where individuals suffer harm.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatoryapprovals, product recalls, seizure of products, operating restrictions and criminal prosecution.Other healthcare lawsIn addition to FDA restrictions on marketing of pharmaceutical and biological products, other U.S. federal and state healthcare regulatory laws restrictbusiness practices in the biopharmaceutical industry, which include, but are not limited to, state and federal anti-kickback, false claims, data privacy andsecurity, and physician payment and drug pricing transparency laws.The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving orproviding any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for orrecommending the purchase, lease, or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcareprograms. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has been interpreted to apply toarrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. The intent standardunder the Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entity does not need to have actual knowledge of thestatute or specific intent to violate it in order to have committed a violation. Violation of the federal Anti-Kickback Statute may also constitute a false orfraudulent claim for purposes of the federal civil False Claims Act. The majority of states also have anti-kickback laws, which establish similar prohibitionsand in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.The federal false claims and civil monetary penalties laws, including the civil False Claims Act, prohibit any person or entity from, among other things,knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the federal government or knowinglymaking, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or from knowinglymaking a false statement to avoid, decrease or conceal an obligation. A claim includes “any request or demand” for money or property presented to the U.S.31government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name ofthe government. Violations of the civil False Claims Act can result in very significant monetary penalties and treble damages. In addition, the civil monetarypenalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program thatthe person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Many states also have similar fraud andabuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of thepayor. Given the significant size of actual and potential settlements, it is expected that the government authorities will continue to devote substantialresources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other actions, knowingly and willfully executing, orattempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling orstealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying,concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment forhealthcare benefits, items or services. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to havecommitted a violation.In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other healthcare providers. TheACA imposed, among other things, new annual reporting requirements through the Physician Payments Sunshine Act for covered manufacturers for certainpayments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and theirimmediate family members. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership orinvestment interests may result in civil monetary penalties. In addition, certain states require implementation of compliance programs and compliance withthe pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, imposerestrictions on marketing practices, and/or tracking and reporting of pricing information and marketing expenditure as well as gifts, compensation and otherremuneration or items of value provided to physicians and other healthcare professionals and entities.We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, asamended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, imposespecified requirements relating to the privacy, security and transmission of individually identifiable health information held by covered entities and theirbusiness associates. Among other things, HITECH made HIPAA’s security standards directly applicable to, as well as imposed certain other privacyobligations on, “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protectedhealth information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties thatmay be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actionsfor damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civilactions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other insignificant ways and may not have the same requirements, thus complicating compliance efforts.If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties,including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminishedprofits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs andindividual imprisonment, any of which could adversely affect our ability to operate our business and our financial results.To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations,which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation ofcorporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.Coverage and reimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical or biological products for which we obtain regulatoryapproval. In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing theprescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our productsunless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of any products for which wereceive regulatory approval for commercial sale will therefore depend, in part, on the availability of coverage and adequate32reimbursement from third-party payors. Third-party payors include government authorities, managed care plans, private health insurers and otherorganizations.The process for determining whether a third-party payor will provide coverage for a pharmaceutical or biological product typically is separate from theprocess for setting the price of such product or for establishing the reimbursement rate that the payor will pay for the product once coverage is approved.Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approvedproducts for a particular indication. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of our productsonce approved and have a material adverse effect on our sales, results of operations and financial condition. Moreover, a third-party payor’s decision toprovide coverage for a pharmaceutical or biological product does not imply that an adequate reimbursement rate will be approved. Adequate third-partyreimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in productdevelopment. Additionally, coverage and reimbursement for products can differ significantly from payor to payor. One third-party payor’s decision to cover aparticular medical product or service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverageat an adequate reimbursement rate.The containment of healthcare costs is a priority of federal, state and foreign governments, and the prices of pharmaceutical or biological products have beena focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessityand reviewing the cost-effectiveness of pharmaceutical or biological products, medical devices and medical services, in addition to questioning safety andefficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our productsafter FDA approval or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit.Healthcare reformA primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted tocontrol costs by limiting coverage and the amount of reimbursement for particular medical products. For example, the ACA, among other things, increasedthe minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebatesowed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; extendedthe Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care plans; subjected drug manufacturers tonew annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; and created a new Patient Centered Outcomes ResearchInstitute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria andlower reimbursement and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement fromMedicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containmentmeasures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.We also expect that the current presidential administration and U.S. Congress will continue to seek to modify, repeal, or otherwise invalidate all, or certainprovisions of, the ACA. Recently, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with theindividual mandate to carry health insurance. Further, on December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that theindividual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Acts, theremaining provisions of the ACA are invalid as well. While the Trump Administration and the Centers for Medicare and Medicaid Services have both statedthat the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the ACA willimpact the law.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. This included aggregate reductionsof Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments, will stay ineffect through 2027 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act was signed into law, which,among other things, further reduced Medicare payments to several providers, including hospitals and imaging centers, and increased the statute of limitationsperiod for the government to recover overpayments to providers from three to five years. Recently there has also been heightened governmental scrutiny overthe manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enactedlegislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patientprograms, and reform government program reimbursement methodologies.33We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal andstate governments will pay for healthcare products and services, which could result in reduced demand for our products once approved or additional pricingpressures.EmployeesAs of January 31, 2019, we had 39 full-time employees, 28 of whom were primarily engaged in research and development activities. A total of 7 employeeshave either one or both an M.D. or Ph.D. degree. None of our employees is represented by a labor union and we consider our employee relations to be good.Corporate InformationWe were incorporated in Delaware in 2007. Our principal executive offices are located at 480 Arsenal Way, Watertown, MA 02472 and our telephone numberis (617) 923-1400. Our website address is www.selectabio.com. Information contained on or accessible through our website is not a part of this Annual Reporton Form 10-K, and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only.Available InformationWe file electronically with the SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements andother information. Our SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. We make available on our websiteat www.selectabio.com, under “Investors,” free of charge, copies of these reports as soon as reasonably practicable after filing or furnishing these reports withthe SEC34Item 1A. Risk FactorsInvesting in our common stock involves a high degree of risk. You should consider carefully the risks described below, together with the other informationincluded or incorporated by reference in this Annual Report on Form 10-K. If any of the following risks occur, our business, financial condition, results ofoperations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock coulddecline. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial conditionand results of operations.RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITALWe are a development‑stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future andmay never achieve or maintain profitability.Since inception, we have incurred significant operating losses in every year. Our net loss was $65.3 million, $65.3 million and $36.2 million for the yearsended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had an accumulated deficit of $280.4 million. To date, we havefinanced our operations primarily through the public offering and private placements of our securities, funding received from research grants andcollaboration arrangements and our credit facility. We currently have no source of product revenue, and we do not expect to generate product revenue for theforeseeable future. All of our revenue to date has been collaboration and grant revenue. We have devoted substantially all of our financial resources andefforts to developing our ImmTOR technology, identifying potential product candidates and conducting preclinical studies and our clinical trials. We are inthe early stages of development of our product candidates, and we have not completed development of any ImmTOR-enabled therapies. We expect tocontinue to incur significant expenses and operating losses for the foreseeable future. We expect that our expenses will increase substantially as we:- conduct additional clinical trials of SEL‑212, our lead product candidate;- continue the research and development of our other product candidates;- seek to enhance our ImmTOR technology and discover and develop additional product candidates;- seek regulatory approvals for any product candidates that successfully complete clinical trials;-potentially establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any productsfor which we may obtain regulatory approval;-maintain, expand and protect our intellectual property portfolio, including through licensing arrangements;-add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our productdevelopment and potential future commercialization efforts and to support our operations as a public company; and-experience any delays or encounter any issues with any of the above, including, but not limited to, failed studies, complex results, safety issues or otherregulatory, manufacturing or scale-up challenges.To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This willrequire us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates,discovering additional product candidates, obtaining regulatory approval and securing reimbursement for these product candidates, manufacturing,marketing and selling any products for which we may obtain regulatory approval, and establishing and managing our collaborations at various stages of aproduct candidate’s development. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if wedo, may never generate revenues that are significant enough to achieve profitability.Because of the numerous risks and uncertainties associated with pharmaceutical and biological product development, we are unable to accurately predict thetiming or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or other regulatory authorities toperform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our productcandidates, our expenses could increase and revenue could be further delayed.Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remainprofitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversifyour product offerings or continue our operations.We will need substantial additional funding in order to complete development of our product candidates and commercialize our products, if approved. Ifwe are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercializationefforts.35We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our clinical trials of SEL‑212, and continueresearch and development for our other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incursignificant commercialization expenses related to product manufacturing, marketing, sales and distribution. Accordingly, we will need to obtain substantialadditional funding to continue operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce oreliminate our clinical trials, our other research and development programs or any future commercialization efforts.We believe that our existing cash, cash equivalents and investments, and restricted cash as of December 31, 2018, together with the net proceeds from ourrecent follow-on offering in January 2019, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2020.The current operating plan accounts for funding in preparation for the planned Phase 3 clinical program for SEL-212. However, prior to beginning the Phase3 clinical program, we expect to conduct the planned head-to-head Phase 2 trial against Krystexxa. We believe that we have the financial resources tocomplete the planned head-to-head Phase 2 trial against Krystexxa, but will require an additional equity offering or other external sources of capital toconduct the planned Phase 3 program for SEL-212. We have based this estimate on assumptions that may prove to be wrong, and we could use our capitalresources sooner than we currently expect. Because of the uncertainty in securing additional capital, we have concluded that substantial doubt exists withrespect to our ability to continue as a going concern within one year after the date of the filing of this Annual Report on Form 10-K.Our future capital requirements will depend on many factors, including:- the scope, progress, results and costs of our clinical trials of SEL‑212;- the number of product candidates that we pursue;-our collaboration agreements remaining in effect, our entering into additional collaboration agreements and our ability to achieve milestones underthese agreements;- the cost of manufacturing clinical supplies of our product candidates;- our headcount growth and associated costs;-the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates;- the costs, timing and outcome of regulatory review of our product candidates;-the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidatesfor which we receive marketing approval;- the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;-the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingany intellectual property‑related claims;- the effect of competing technological and market developments; and-the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements forproduct candidates.Any additional fundraising efforts may divert our management from their day‑to‑day activities, which may adversely affect our ability to develop andcommercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptableto us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders, and the issuance of additionalsecurities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equityor convertible securities would dilute all of our stockholders. The incurrence of indebtedness could result in increased fixed payment obligations and we maybe required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell orlicense intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be requiredto seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable and we may be required to relinquishrights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on ourbusiness, operating results and prospects.If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research ordevelopment programs, including our clinical trial programs, or the commercialization of any product candidates, or be unable to sustain or expand ouroperations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results ofoperations.36Our recurring losses from operations and negative cash flows from operations raise substantial doubt regarding our ability to continue as a going concern.As of December 31, 2018 and December 31, 2017, we had an accumulated deficit of $280.4 million and $216.9 million, respectively. We anticipate operatinglosses to continue for the foreseeable future due to, among other things, costs related to research, development of our product candidates, conductingpreclinical studies and clinical trials, and our administrative organization. We will require substantial additional financing to fund our operations and tocontinue to execute our strategy, and we will pursue a range of options to secure additional capital. These conditions raise substantial doubt about our abilityto continue as a going concern within one year after the date of filing this Annual Report on Form 10-K.We are exploring various sources of funding such as strategic collaborations and the issuance of equity to fund our operations. If we raise additional fundsthrough strategic collaborations and alliances, which may include existing collaboration partners, we may have to relinquish valuable rights to ourtechnologies or product candidates, or grant licenses on terms that are not favorable to us. To the extent that we raise additional capital through the sale ofequity, the ownership interest of our existing shareholders will be diluted and other preferences may be necessary that adversely affect the rights of existingshareholders. The current operating plan accounts for funding in preparation for the planned Phase 3 clinical program for SEL-212. However, prior tobeginning the Phase 3 clinical program, we expect to conduct the planned head-to-head Phase 2 trial against Krystexxa. We believe that we have thefinancial resources to complete the planned head-to-head Phase 2 trial against Krystexxa, but will require an additional equity offering or other externalsources of capital to conduct the planned Phase 3 program for SEL-212. If we are unable to raise sufficient capital through the transactions discussed above,we intend to curtail expenses contemplated by the current operating plan, and we may be required to delay, limit, reduce or terminate our productdevelopment efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If theforegoing plans are unsuccessful and we are unable to continue as a going concern, you could lose all or part of your investment in the company.Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.We commenced active operations in 2007, and our operations to date have been limited to developing and researching our ImmTOR technology and relatedproducts and programs, building our intellectual property portfolio, developing our supply chain, planning our business, raising capital and providinggeneral and administrative support for these operations. Other than SEL-212, our lead product candidate, and SEL-403, our product candidate utilizing LMB-100 in combination with ImmTOR, which we have decided to de-prioritize, our product candidates are still in preclinical development. While we havecompleted our Phase 1 clinical trial for SEL‑212, we have not yet completed any other clinical trials for SEL‑212 or any other product candidate, nor have wedemonstrated our ability to successfully complete any Phase 3 or other pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scaleproduct, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.Additionally, we expect our financial condition and operating results to continue to fluctuate significantly from quarter‑to‑quarter and year‑to‑year due to avariety of factors, many of which are beyond our control. Consequently, any predictions you make about our future success or viability may not be asaccurate as they could be if we had a longer operating history.The terms of our credit facility place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the termsof any new debt could further restrict our ability to operate our business.On September 12, 2017, we entered into a term loan facility of up to $21.0 million with Silicon Valley Bank, or SVB. The term loan facility is governed by aloan and security agreement, dated September 12, 2017, between us and SVB, which was funded in full on September 13, 2017. The term loan facility withSVB is secured by a lien on substantially all of our assets, other than intellectual property, provided that such lien on substantially all assets includes anyrights to payments and proceeds from the sale, licensing or disposition of intellectual property. We also granted SVB a negative pledge with respect to ourintellectual property.The term loan facility contains customary covenants and representations, including but not limited to financial reporting obligations and limitations ondividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.The term loan facility also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rightsfor the benefit of SVB. The events of default under the term loan facility include, but are not limited to, our failure to make any payments of principal orinterest under the term loan facility or other transaction documents, our breach or default in the performance of any covenant under the term loan facility orother transaction documents, the occurrence of a material adverse effect, making a false or misleading representation or warranty in any material respect underthe term loan facility, our insolvency or bankruptcy, any attachment or judgment on our assets of at least approximately $0.3 million, or the occurrence ofany default under any of our agreements or obligations involving indebtedness in excess of approximately $0.3 million. If an event of default occurs, SVB is37entitled to take enforcement action, including acceleration of amounts due under the term loan facility. If we raise any additional debt financing, the terms ofsuch additional debt could further restrict our operating and financial flexibility.Our ability to use our net operating loss and research and development tax credit carryforwards to offset future taxable income may be subject to certainlimitations.We have net operating loss carryforwards, or NOLs, for federal and state income tax purposes that may be available to offset our future taxable income, if any.In general, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownershipchange” is subject to limitations on its ability to use its pre‑change NOLs to offset future taxable income. If the U.S. Internal Revenue Service, or IRS,challenges our analysis that existing NOLs will not expire before utilization due to previous ownership changes, or if we undergo an ownership change inconnection with or after a public offering, our ability to use our NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership,some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Furthermore, our ability to use NOLsof companies that we may acquire in the future may be subject to limitations. As a result, we may not be able to use a material portion of the NOLs reflectedon our balance sheet, even if we attain profitability. The reduction of the corporate tax rate under the Tax Cuts and Jobs Act of 2017, or the TCJA, may causea reduction in the economic benefit of our NOLs and other deferred tax assets available to us. Under the TCJA, net operating losses generated afterDecember 31, 2017 will not be subject to expiration but may only be used to offset up to 80% of our taxable income.In January 2019, the Company completed an equity offering that it believes will result in an ownership change under Section 382 of the Internal RevenueCode. Based upon estimates, the Company believes that deferred tax assets of $49.5 million, related to federal and Massachusetts net operating losses andcredits, will no longer be available going forward. Such amounts are offset by a full valuation allowance at December 31, 2018. The Company will finalizethis calculation in 2019.RISKS RELATED TO THE DISCOVERY, DEVELOPMENT AND REGULATORY APPROVAL OF OUR PRODUCT CANDIDATESOur product candidates are based on our ImmTOR technology, which is an unproven approach designed to induce antigen‑specific immune tolerance tobiologic drugs or stimulate the immune system. We are very early in our clinical development efforts and may not be successful in our efforts to use ourImmTOR technology to build a pipeline of product candidates and develop marketable drugs.All of our product candidates are derived from our ImmTOR technology, which is an unproven approach to inducing antigen‑specific tolerance orstimulating the immune system. We are primarily using our ImmTOR technology to improve and enable biologics that treat rare and serious diseases, with aninitial focus on developing SEL‑212 for the treatment of chronic refractory gout. We are also leveraging our ImmTOR platform to pursue programs inadditional therapeutic areas such as oncology and gene therapy. For instance, in May 2017 we licensed LMB-100, a potent anti-bacterial toxin, and in March2018 initiated a Phase 1 trial of our product candidate SEL-403 to evaluate LMB-100 in combination with our ImmTOR technology in patients withmalignant pleural or peritoneal mesothelioma who have undergone at least one regimen of chemotherapy. A patient in the Phase 1 trial experienced a Grade 5SAE (patient death) related to pneumonitis, which was deemed by the trial investigator to be probably related to ImmTOR and possibly related to thepatient’s pleural mesothelioma condition. In November 2018, the FDA placed the IND for SEL-403 on full clinical hold in response to adverse eventsobserved during the Phase 1 trial, and we are working with the NCI investigators to fully understand the data from the trial in order to define the futuredevelopment of SEL-403 in mesothelioma, pancreatic cancer and other oncology indications, but have made the decision to de-prioritize our Phase Ioncology program related to SEL-403. In addition, we are developing two gene therapy product candidates for rare inborn errors of metabolism. Our leadgene therapy program is a potential treatment for methylmalonic acidemia. This product candidate is known as SEL-302. Our second gene therapy productcandidate, or SEL-313, is being developed to treat ornithine transcarbamylase deficiency. In September 2018, we announced a new collaboration withCureCN, a European consortium, for the use of our ImmTOR technology in combination with an AAV gene therapy in Crigler-Najjar syndrome, a rare geneticdisorder characterized by an inability to properly convert and clear bilirubin from the body. We expect CureCN to initiate preclinical toxicology studies inthe first half of 2019 and for the combination product candidate to enter the clinic in the second half of 2019 with the goal of potentially re-dosing genetherapy.We are at an early stage of development and our technology has not yet led to, and may never lead to, approvable or marketable drugs. We may haveproblems identifying new product candidates and applying our technologies to these other areas. Even if we are successful in identifying new productcandidates, they may not be suitable for clinical development, including as a result of harmful side effects, limited efficacy or other characteristics thatindicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. The success of our product candidates willdepend on several factors, including the following:38-completion of preclinical studies and clinical trials with positive results;-receipt of marketing approvals from applicable regulatory authorities;-obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;-making arrangements with third-party manufacturers for, or establishing, commercial manufacturing capabilities, or establishing such capabilitiesourselves;-launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;-our existing collaboration agreements remaining in effect and our ability to enter into new collaborations throughout the development process asappropriate, from preclinical studies through to commercialization;-acceptance of our products, if and when approved, by patients and the medical community;-effectively competing with other therapies;-obtaining and maintaining coverage and adequate reimbursement by third‑party payors, including government payors, for our products, if approved;-protecting our rights in our intellectual property portfolio;-operating without infringing or violating the valid and enforceable patents or other intellectual property of third parties;-maintaining an acceptable safety profile of our products following approval; and-maintaining and growing an organization of scientists and business people who can develop and commercialize our product candidates and technology.If we do not successfully develop and commercialize product candidates based upon our technological approach, we will not be able to obtain futurerevenues, which would result in significant harm to our financial position and adversely affect our stock price.We have not received FDA approval for a therapeutic based on our ImmTOR technology or for a biologic product manufactured in China and we know ofonly one company who has received FDA approval for a therapeutic based on a biologic sourced from China. In addition, we may use biologics other thanpegadricase (formerly pegsiticase) with our ImmTOR technology.As a result, we cannot be certain that our approach, or our development of SEL-212, will lead to the development or approval of marketable products. Inaddition:-due to the unproven nature of our ImmTOR therapeutics, they may have different efficacy and safety rates in various indications;-the FDA or other regulatory agencies may lack experience in evaluating the efficacy and safety of products based on ImmTOR or a biologic sourced fromChina or other jurisdictions, which could result in a longer‑than‑expected regulatory review process, increase our expected development costs or delay orprevent commercialization of our product candidates; and-in the event of a biologics license application, or BLA, for SEL‑212 or another product and a pre‑approval inspection by the FDA of the facilities ofShenyang Sunshine Pharmaceutical Co., Ltd., or 3SBio, or any other manufacturer of biologics we may use, the FDA may not approve the facility forproduction or may make observations that will take significant time for 3SBio or such other provider to address.The occurrence of any of the foregoing, would effectively prevent or delay approval of our lead and other product candidates.We are applying our ImmTOR technology to antigen-specific immune tolerance for gene therapy involving gene augmentation, replacement or editing.Regulatory authorities in the United States and European Union have limited experience in reviewing and approving gene therapy products, which couldaffect the time and data required to obtain marketing authorization of any of our product candidates.Our future success depends in part on our successful development of viable gene therapy product candidates utilizing ImmTOR technology. We mayexperience problems or delays in developing such product candidates and any such problems or delays (i) may result in unanticipated costs and time todevelop our product candidates and/or (ii) may not be resolved in a satisfactory manner.The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years. If additional clinical trials arerequired for certain jurisdictions, these trials can vary substantially based upon a variety of factors,39including the type, complexity and novelty of the product candidates involved, and may ultimately be unsuccessful. Changes in marketing approval policiesduring the development period, changes in or the enactment or promulgation of additional statutes or regulations, respectively, or changes in the regulatoryreview process for each submitted product application, may cause delays in the review and approval of an application.The regulatory approval process and clinical trial requirements for novel product candidates can be more expensive and take longer than for other, betterknown or more extensively studied product candidates, and we cannot predict how long it will take or how much it will cost to complete clinicaldevelopments and obtain regulatory approvals for a gene therapy product candidate in either the United States or the European Union or how long it willtake to commercialize a gene therapy product candidate, if and when approved. Regulatory requirements governing gene therapy products have changedfrequently and may continue to change in the future. For example, in addition to the submission of an investigational new drug application, or IND, to theFDA, before initiation of a clinical trial in the United States, certain human clinical trials for cell therapy products and gene therapy had historically beensubject to review by the Recombinant DNA Advisory Committee, or the RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities,or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Following an initial review, RAC memberswould make a recommendation as to whether the protocol raises important scientific, safety, medical, ethical or social issues that warrant in-depth discussionat the RAC’s quarterly meetings. Even though the FDA decides whether individual cell therapy or gene therapy protocols may proceed under an IND, theRAC’s recommendations were shared with the FDA and the RAC public review process, if undertaken, could delay the initiation of a clinical trial, even if theFDA had reviewed the trial design and details and has not objected to its initiation or has notified the sponsor that the study may begin. Conversely, the FDAcan put an IND on clinical hold even if the RAC provided a favorable review or has recommended against an in-depth, public review.On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for genetherapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials ofgene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16, 2018,the NIH has announced that it will no longer accept new human gene transfer protocols for review as part of the protocol registration process under theexisting NIH Guidelines or convene the RAC to review individual clinical protocols. These trials will remain subject to the FDA’s oversight and otherclinical trial regulations, and oversight at the local level will continue as otherwise set forth in the NIH Guidelines. Specifically, under the NIH Guidelines,supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committeethat reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the researchand identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While theNIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant orsynthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Eventhough we may not be required to submit a protocol for our gene therapy product candidates through the NIH for RAC review, we will still be subject tosignificant regulatory oversight by the FDA, and in addition to the government regulators, the applicable IBC and institutional review board, or IRB, of eachinstitution at which we or our collaborators conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review andapprove the proposed clinical trial.The same applies in the European Union, or the EU. The European Medicines Agency, or the EMA, has a Committee for Advanced Therapies, or CAT, that isresponsible for assessing the quality, safety and efficacy of advanced-therapy medicinal products. Advanced-therapy medical products include gene therapymedicine, somatic-cell therapy medicines and tissue-engineered medicines. The role of the CAT is to prepare a draft opinion on an application for marketingauthorization for a gene therapy medicinal candidate that is submitted to the EMA. In the EU, the development and evaluation of a gene therapy medicinalproduct must be considered in the context of the relevant EU guidelines. The EMA may issue new guidelines concerning the development and marketingauthorization for gene therapy medicinal products and require that we comply with these new guidelines. Similarly, complex regulatory environments existin other jurisdictions in which we might consider seeking regulatory approvals for our product candidates, further complicating the regulatory landscape. Asa result, the procedures and standards applied to gene therapy products and cell therapy products may be applied to any of our gene therapy or genomeediting product candidates, but that remains uncertain at this point.The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to evaluate the safety and efficacy ofa product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatoryapproval process for product candidates created with novel genome editing technology such as ours can be more lengthy, rigorous and expensive than theprocess for other better known or more extensively studied product candidates and technologies. Since we are developing novel treatments for diseases inwhich there is little clinical experience with new endpoints and methodologies, there is heightened risk that the FDA, the EMA or comparable regulatorybodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficultto analyze. This may be a particularly significant risk for many of the40genetically defined diseases for which we may develop product candidates alone or with collaborators due to small patient populations for those diseases,and designing and executing a rigorous clinical trial with appropriate statistical power is more difficult than with diseases that have larger patientpopulations. Regulatory agencies administering existing or future regulations or legislation may not allow production and marketing of products utilizinggenome editing technology in a timely manner or under technically or commercially feasible conditions. Even if our product candidates obtain requiredregulatory approvals, such approvals may later be withdrawn as a result of changes in regulations or the interpretation of regulations by applicable regulatoryagencies.Changes in applicable regulatory guidelines may lengthen the regulatory review process for our product candidates, require additional studies or trials,increase development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of such productcandidates, or lead to significant post-approval limitations or restrictions. Additionally, adverse developments in clinical trials conducted by others of genetherapy products or products created using genome editing technology, or adverse public perception of the field of genome editing, may cause the FDA, theEMA and other regulatory bodies to revise the requirements for approval of any product candidates we may develop or limit the use of products utilizinggenome editing technologies, either of which could materially harm our business. Furthermore, regulatory action or private litigation could result inexpenses, delays or other impediments to our research programs or the development or commercialization of current or future product candidates.As we advance any gene therapy product candidates, we will be required to consult with various regulatory authorities, and we must comply with applicablelaws, rules, and regulations, which may change from time to time including during the course of development of our product candidates. If we fail to do so,we may be required to delay or discontinue development of certain of our product candidates. These additional processes may result in a review and approvalprocess that is longer than we otherwise would have expected. Even if we comply with applicable laws, rules, and regulations, and even if we maintain closecoordination with the applicable regulatory authorities with oversight over our product candidates, our development programs may fail to succeed.Regulatory authorities have substantial discretion in the approval process and may refuse to accept a marketing application as deficient or may decide thatour data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained frompreclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Delay or failure to obtain, or unexpected costs inobtaining, the regulatory approval necessary to bring a potential product to market would materially and adversely affect our business, financial condition,results of operations and prospects.Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays incompleting, or ultimately be unable to complete, the development and commercialization of our product candidates.Our lead product candidate, SEL-212, is currently being evaluated in a Phase 2 clinical program that we initiated in October 2016 and that concluded in2018. We are preparing for the start of a pivotal Phase 3 program for SEL-212. We are also actively preparing to start a head-to-head clinical trial of SEL-212compared to the current FDA-approved uricase therapy, Krystexxa, and plan to initiate this trial in the first quarter of 2019, prior to beginning the Phase 3program. In May 2017, we in-licensed LMB-100, a next-generation immunotoxin that completed a Phase 1 clinical program at the Center for CancerResearch at the National Cancer Institute, or NCI, part of the National Institutes of Health, for pancreatic cancer, mesothelioma and other cancers in 2017. Forthis product candidate, known as SEL-403, we plan to co-administer LMB-100 with ImmTOR. In March 2018, we initiated a Phase 1 trial of SEL-403 inpatients with malignant pleural or peritoneal mesothelioma who have undergone at least one regimen of chemotherapy under a Cooperative Research andDevelopment Agreement, or CRADA, at NCI. A patient in the Phase 1 trial experienced a Grade 5 SAE (patient death) related to pneumonitis, which wasdeemed by the trial investigator to be probably related to ImmTOR and possibly related to the patient’s pleural mesothelioma condition. In November 2018,the FDA placed the IND for SEL-403 on full clinical hold in response to adverse events observed during the Phase 1 trial, and we are working with the NCIinvestigators to fully understand the data from the trial in order to define the future development of SEL-403 in mesothelioma, pancreatic cancer and otheroncology indications. We have since decided to deprioritize the SEL-403 Phase 1 oncology program. Aside from these programs, our other productcandidates are in preclinical development. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or willreceive regulatory approval, and the risk of failure through the development process is high. Before obtaining marketing approval from regulatory authoritiesfor the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety andefficacy of our product candidates in humans. Preclinical development is costly and inherently uncertain. For example, we have invested significantresources in our preclinical gene therapy program, which has demonstrated the potential for treatment of rare inborn errors of metabolism. Early preclinicalresults may not be predictive of future results, however, if our technology proves to be ineffective or unsafe as a result of, among other things, adverse sideeffects, pre-existing anti-drug antibodies that can neutralize the viral vector and block gene transfer, or cellular immune response to the transduced cells.41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 candidate for its intended indications. Clinical testing is expensive, difficult to design and implement, cantake many years to complete and its outcome is inherently uncertain. A failed clinical trial can occur at any stage of testing. Moreover, the outcome ofpreclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarilypredict final results. For example, the clinical trial results to date from our Phase 2 trial of SEL-212 may not be predictive of future results as we completedosing of patient cohorts receiving combination therapy for the entire treatment period. Moreover, we may not be able to complete, or may be required todeviate from, currently planned dosing levels in the Phase 2 trial, or may not be able to determine an appropriate dosing regimen for SEL-212 for the Phase 3program, for a variety of reasons, including, but not limited to, feedback from the FDA.Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive results inpreclinical development or early-stage clinical trials, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by,among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including adverseevents. SAEs caused by, or other unexpected properties of, any product candidates that we may choose to develop could cause us, an institutional reviewboard or regulatory authority to interrupt, delay or halt clinical trials of one or more of such product candidates and could result in a more restrictive label orthe delay or denial of marketing approval by the FDA or comparable non-U.S. regulatory authorities. If any product candidate that we may choose to developis associated with SAEs or other unexpected properties, we may need to abandon development or limit development of that product candidate to certain usesor subpopulations in which those undesirable characteristics would be expected to be less prevalent, less severe or more tolerable from a risk-benefitperspective. For example, multiple SAEs have occurred in connection with the SEL-212 Phase 1/2 clinical program and the SEL-403 Phase 1 clinical trial,including a Grade 5 SAE (patient death) in the SEL-403 Phase 1 clinical trial that was deemed by the trial investigator to be probably related to ImmTOR,and additional SAEs or similar events could occur during the course of our development of SEL-212 or our other product candidates, which could bematerially adverse to the success of these programs and delay or prevent our ability to obtain FDA approval. Moreover, preclinical and clinical data is oftensusceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studiesand clinical trials nonetheless failed to obtain FDA or other regulatory authority approval. If we fail to produce positive results in our clinical trials of ourproduct candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly,our business and financial prospects, would be negatively impacted.In addition, we cannot be certain as to what type and how many clinical trials the FDA will require us to conduct before we may successfully gain approval tomarket SEL-212 or any of our other product candidates in the United States or other countries, if any. Prior to approving a new therapeutic product, the FDAgenerally requires that safety and efficacy be demonstrated in two adequate and well-controlled clinical trials. We expect to conduct more than one Phase 3trial for SEL-212 in the refractory gout indication in order to gain approval. However, we may not receive FDA approval for our plan to provide six doses ofthe combination therapy of SEL-212 for the Phase 3 trial. Additional clinical trials could cause us to incur significant development costs, delay or prevent thecommercialization of SEL-212 or otherwise adversely affect our business.We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approvalfor, or commercialize, our product candidates, including:-clinical trials of our product candidates may produce unfavorable, incomplete or inconclusive results;-regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospectivetrial site;-we may experience delays in reaching, or fail to reach, agreement on acceptable terms with contract research organizations, or CROs, or clinical trialsites;-we may be unable to recruit suitable patients to participate in a clinical trial, the number of patients required for clinical trials of our product candidatesmay be larger than we expect, enrollment in these clinical trials may be slower than we expect or participants may drop out of these clinical trials at ahigher rate that we expect;-the number of clinical trial sites required for clinical trials of our product candidates may be larger than we expect;-our third‑party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;-we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are beingexposed to unacceptable health risks;-investigators, regulators, data safety monitoring boards or institutional review boards may require that we or our investigators suspend or terminateclinical research, or we may decide to do so ourselves;42-investigators may deviate from the trial protocol, fail to conduct the trial in accordance with regulatory requirements or misreport study data;-the cost of clinical trials of our product candidates may be greater than we expect or we may have insufficient resources to pursue or complete certainaspects of our clinical trial programs or to do so within the timeframe we planned;-the supply or quality of raw materials or manufactured product candidates (whether provided by us or third parties) or other materials necessary toconduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experienceinterruptions in supply;-regulators may revise the requirements for approving our product candidates, or such requirements may not be as we expect;-the FDA or comparable foreign regulatory authorities may disagree with our clinical trial design or our interpretation of data from preclinical studies andclinical trials, or may change the requirements for approval even after it has reviewed and commented on the design of our clinical trials; and-regarding trials managed by our existing or any future collaborators, our collaborators may face any of the above issues, and may conduct clinical trialsin ways they view as advantageous to them but potentially suboptimal for us.If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unableto successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestlypositive or if there are safety concerns, or if we are forced to delay or abandon certain clinical trials or other testing in order to conserve capital resources, wemay:-be delayed in obtaining marketing approval for our product candidates, if at all;-lose the support of collaborators, requiring us to bear more of the burden of research and development;-not obtain marketing approval at all;-obtain marketing approval in some countries and not in others;-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 additional post‑marketing testing requirements; or-have a product removed from the market after obtaining marketing approval.We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, bya Data Safety Monitoring Board for such trial or by the FDA or comparable foreign regulatory authorities. Such authorities may impose such a suspension ortermination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols,inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold,unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrativeactions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need toamend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination,which may impact the costs, timing or successful completion of a clinical trial.Our product development costs will increase if we experience delays in clinical testing or in obtaining marketing approvals. We do not know whether any ofour preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical orclinical 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, potentially impairing our ability to successfully commercialize our product candidates and harmingour business and results of operations.If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed orprevented.We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligiblepatients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In addition, from time to time ourcompetitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwisebe eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.43We are initially developing our lead product candidate, SEL‑212, for the treatment of chronic refractory gout, which affects approximately 160,000 patientsin the United States. Accordingly, there is a limited number of patients who could enroll in our clinical studies.In addition to the size of the patient population, patient enrollment is also affected by other factors including:-the severity of the disease under investigation;-the patient eligibility criteria for the study in question;-the perceived risks and benefits of the product candidate under study;-the availability of other treatments for the disease under investigation;-the existence of competing clinical trials;-our efforts to facilitate timely enrollment in clinical trials;-investigators engagement with, or enthusiasm about, the trial;-our payments for participating in clinical trials;-the patient referral practices of physicians;-the design of the trial;-the ability to monitor patients adequately during and after treatment; and-the proximity and availability of clinical trial sites for prospective patients.In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates,and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials mayinstead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect toconduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are availablefor our clinical trials at such clinical trial site. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delaysand could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs forour product candidates, which could cause the value of our common stock to decline and limit our ability to obtain additional financing.We may conduct clinical trials for product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in suchlocations or the complexity of regulatory burdens may otherwise adversely impact us.Opening trial sites outside the United States may involve additional regulatory, administrative and financial burdens, including compliance with foreign andlocal requirements relating to regulatory submission and clinical trial practices. Although the FDA may accept data from clinical trials conducted outside theUnited States, acceptance of these data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed andconducted and performed by qualified investigators in accordance with good clinical practices, including review and approval by an independent ethicscommittee and informed consent from trial patients. The trial data must be applicable to the U.S. population and U.S. medical practice in ways that the FDAdeems clinically meaningful. Generally, the patient population for any clinical trials conducted outside the United States must be representative of thepopulation for which we intend to seek approval in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDAacceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. Nonetheless, therecan be no assurance that the FDA will accept data from trials conducted outside the United States. If the FDA does not accept the data from any trial that weconduct outside the United States, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay orpermanently halt our development of any applicable product candidates.In addition, the conduct of clinical trials outside the United States could have a significant impact on us. Risks inherent in conducting international clinicaltrials include:-foreign regulatory requirements that could burden or limit our ability to conduct our clinical trials;-increased costs and heightened supply constraints associated with the acquisition of standard of care drugs and/or combination or comparator agents forwhich we may bear responsibility in certain jurisdictions;-administrative burdens of conducting clinical trials under multiple foreign regulatory schema;-foreign exchange fluctuations;-more burdensome manufacturing, customs, shipment and storage requirements;44-cultural differences in medical practice and clinical research;-lack of consistency in standard of care from country to country;-diminished protection of intellectual property in some countries; and-changes in country or regional regulatory requirements.We may not be able to obtain orphan drug designation for our product candidates, and even if we do, we may be unable to maintain the benefits associatedwith orphan drug designation, including the potential for market exclusivity.Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphandrugs. We expect to seek orphan drug designation for several of our product candidates. Under the Orphan Drug Act of 1983, the FDA may designate aproduct as an orphan product if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000individuals annually in the United States, or a patient population of greater than 200,000 individuals in the United States, but for which there is noreasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States.In the United States, orphan designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, taxadvantages and user‑fee waivers. In addition, if a product candidate that has orphan designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications,including a full BLA or full new drug application, or NDA, to market the same biologic or drug for the same indication for seven years, except in limitedcircumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficientproduct quantity.The applicable exclusivity period is ten years in the European Union, but such exclusivity period can be reduced to six years if a product no longer meets thecriteria for orphan designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition ifthe FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.Interim, top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data becomeavailable and are subject to audit and verification procedures that could result in material changes in the final data.From time to time, we may publish interim, top-line or preliminary data from our clinical studies. Interim data from clinical trials that we may complete aresubject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from thepreliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adversedifferences between preliminary or interim data and final data could significantly harm our business prospects.The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if weare ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following thecommencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approvalpolicies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinicaldevelopment and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that SEL-212 or anyother product candidates we may seek to develop in the future will ever obtain regulatory approval. Neither we nor any future collaborator is permitted tomarket any of our product candidates in the United States until we receive regulatory approval of a Biologics License Application, or BLA, from the FDA.Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate with substantialevidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe andeffective, or in the case of biologics, safe, pure, and potent, for their intended uses. Results from nonclinical studies and clinical trials can be interpreted indifferent ways. Even if we believe the nonclinical or clinical data for our product candidates are promising, such data may not be sufficient to supportapproval by the FDA and other regulatory authorities. The FDA may also require us to conduct additional preclinical studies or clinical45trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program.The FDA or any foreign regulatory bodies can delay, limit or deny approval of our drug or device product candidates or require us to conduct additionalnonclinical or clinical testing or abandon a program for, including the following:•the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;•we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe andeffective for its proposed indication;•the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities forapproval;•serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to ourproduct candidates;•we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;•the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;•the data collected from clinical trials of our product candidates may not be acceptable or sufficient to support the submission of a BLA or othersubmission or to obtain regulatory approval in the United States or elsewhere, and we may be required to conduct additional clinical studies;•the FDA’s or the applicable foreign regulatory agency may disagree regarding the formulation, labeling and/or the specifications of our productcandidates;•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers withwhich we contract for clinical and commercial supplies; and•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering ourclinical data insufficient for approval.Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and arecommercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatoryapproval to market our product candidates, which would significantly harm our business, results of operations and prospects.In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications thanwe request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketingclinical trials, including Phase 4 clinical trials, and/or the implementation of a Risk Evaluation and Mitigation Strategy, or REMS, which may be required toensure safe use of the drug after approval. The FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limitedindication or patient population than we originally requested, or may approve a product candidate with a label that does not include the labeling claimsnecessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercialprospects for our product candidates.Any breakthrough therapy designation that we may receive from the FDA for our product candidates may not lead to a faster development or regulatoryreview or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.We may in the future seek breakthrough therapy designation for some of our product candidates. A breakthrough therapy is defined as a drug that is intended,alone or in combination with one or more other drugs, to treat a serious or life‑threatening disease or condition, and preliminary clinical evidence indicatesthat the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For drugs that have beendesignated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficientpath for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies bythe FDA are also eligible for accelerated approval.Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteriafor designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The availability of breakthroughtherapy designation was established with the passage of the Food and Drug Administration Safety and Innovation Act of 2012. We cannot be sure that anyevaluation we may make of our product candidates as qualifying for breakthrough therapy designation will meet the FDA’s expectations. In any event, thereceipt of a46breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs consideredfor approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our productcandidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification ordecide that the time period for FDA review or approval will not be shortened.Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidatesor compromise our ability to conduct our business or obtain regulatory approvals for our product candidates.Gene therapy remains a novel technology. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain theacceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in the treatment of those diseases thatour product candidates target and prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments theyare already familiar with and for which greater clinical data may be available. More restrictive government regulations or negative public opinion wouldhave a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates ordemand for any products we may develop. Our product candidates, including our products that utilize viral delivery systems, could produce adverse events.Adverse events in our clinical trials or following approval of any of our product candidates, even if not ultimately attributable to our product candidates,could result in increased governmental 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.Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit thecommercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result ina more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Further, therapies such as those weare developing involve unique side effects that could be exacerbated compared to side effects from other types of therapies with singular components.Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, our trials could be suspended orterminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our productcandidates for any or all targeted indications. For example, a patient in the Phase 1 trial of SEL-403 experienced a Grade 5 SAE (patient death) related topneumonitis, which was deemed by the trial investigator to be probably related to ImmTOR and possibly related to the patient’s pleural mesotheliomacondition, and in November 2018, FDA placed the IND for SEL-403 on full clinical hold due to adverse events observed in the Phase 1 trial. We are workingwith the NCI investigators to fully understand the data from the trial in order to define the future development of SEL-403 in mesothelioma, pancreatic cancerand other oncology indications, but have decided to deprioritize the SEL-403 Phase 1 oncology program.The drug‑related side effects could also affect patient enrollment in our clinical trials or the ability of any enrolled patients to complete such trials or result inpotential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by suchproducts, a number of potentially significant negative consequences could result, including:-regulatory authorities may withdraw approvals of such product;-regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;-regulatory authorities may impose additional restrictions on the marketing of, or the manufacturing processes for, the particular product;-we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;-we could be sued and held liable for harm caused to patients, or become subject to fines, injunctions or the imposition of civil or criminal penalties; and-our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and couldsignificantly harm our business, results of operations and prospects.47In addition, if our product candidates are associated with undesirable side effects in certain patient populations, such as pediatric patients or the elderly, wemay need to abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or othercharacteristics are less prevalent, less severe or more acceptable from a risk‑benefit perspective, any of which would harm our business.RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES AND MANUFACTURINGWe rely on 3SBio in China as our primary supplier of pegadricase and on other third parties for the manufacture of our product candidates for preclinicaland clinical testing, and expect to continue to do so for the foreseeable future. Our reliance on third parties increases the risk that we will not havesufficient quantities of our product candidates or that such quantities may not be available at an acceptable cost, or in compliance with regulatoryrequirements, which could delay, prevent or impair our development or commercialization efforts.We obtain the biologic pegadricase, a component of SEL‑212, our lead product candidate, primarily from 3SBio in China. Under our license agreement with3SBio, we have limited rights to manufacture pegadricase and, while we have entered into a contract with a back-up supplier located outside of China, weexpect to continue to rely on 3SBio as the primary supplier of pegadricase for the foreseeable future. In addition, to our knowledge only one company hasreceived FDA approval for a therapeutic based on a biologic product manufactured in China.Any disruption in production or inability of 3SBio in China to produce adequate quantities of pegadricase to meet our needs, whether as a result of a naturaldisaster, failure to comply with regulatory requirements or other causes, could impair our ability to operate our business on a day‑to‑day basis and to continueour research and development of our future product candidates. Furthermore, since 3SBio is located in China, we are exposed to the possibility of productsupply disruption and increased costs in the event of changes in the policies of the United States or Chinese governments, political unrest or unstableeconomic conditions in China. Any of these matters could materially and adversely affect our business and results of operations. Any issues related to themanufacturing lots or similar action regarding pegadricase used in preclinical studies or clinical trials could delay the studies or trials or detract from theintegrity of the trial data and its potential use in future regulatory filings. In addition, manufacturing interruptions or failure to comply or maintaincompliance with regulatory requirements by 3SBio could significantly delay our clinical development of potential products and reduce third‑party orclinical researcher interest and support of our proposed trials. These interruptions or failures could also impede commercialization of our future productcandidates and impair our competitive position. Further, we may be exposed to fluctuations in the value of the local currency in China. Future appreciationof the local currency could increase our costs. In addition, our labor costs could continue to rise as wage rates increase due to increased demand for skilledlaborers and the availability of skilled labor declines in China.In addition to 3SBio, we rely, and expect to continue to rely, on other third parties for the manufacture of our product candidates for preclinical and clinicaltesting, as well as for commercial manufacture if any of our product candidates receive marketing approval. Our reliance on such third parties increases therisk that we will not have sufficient quantities of our product candidates on a timely basis or at all, or that such quantities will be available at an acceptablecost or quality, which could delay, prevent or impair our development or commercialization efforts. For example, we rely on third parties for the manufactureof our gene therapy preclinical materials. Gene therapy is a relatively new area for commercial biopharmaceutical development and there are a limitednumber of contract manufacturing organizations, or CMOs, with adequate facilities and expertise in this area. As a result, we may be unable to successfullymanufacture our gene therapy preclinical materials through a third party or scale up the manufacture of our gene therapy product candidates for clinicaltesting or commercialization, if at all.We may be unable to establish any agreements with third‑party manufacturers on acceptable terms or at all. Even if we are able to establish agreements withthird‑party manufacturers, reliance on third‑party manufacturers entails additional risks, including the:-inability, failure or unwillingness of third‑party manufacturers to comply with regulatory requirements, maintain quality assurance, meet our needs,specifications or schedules or continue to supply products to us;-reduced control we have over product development, including with respect to our lead product candidate, due to our reliance on such third‑partymanufacturers,-breach of manufacturing agreements by the third‑party manufacturers;-misappropriation or disclosure of our proprietary information, including our trade secrets and know‑how;-relationships that the third-party manufacturer may have with others, some of which may be our competitors, and, if it does not successfully carry out itscontractual duties, does not meet expectations, experiences work stoppages, or needs to be replaced, we may need to enter into alternative arrangements,which may not be available, desirable or cost‑effective; and-termination or nonrenewal of agreements by third‑party manufacturers at times that are costly or inconvenient for us.48The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will beconducted after we submit our marketing application to the FDA. We do not control the manufacturing process of, and are completely dependent on, ourcontract manufacturing partners for compliance with the regulatory requirements, known as current good manufacturing practices, or cGMPs, for manufactureof our product candidates. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatoryrequirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we haveno control over the ability of our contract manufacturers or suppliers to maintain adequate quality control, quality assurance and qualified personnel. If theFDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any suchapproval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatoryapproval for or market our product candidates, if approved. Our failure, or the failure of our third‑party manufacturers, to comply with applicable regulationscould result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals,license revocations, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantlyand adversely affect supplies of our products. In addition, there are a limited number of manufacturers that operate under cGMP regulations and that might becapable of manufacturing our products. Therefore, our product candidates and any future products that we may develop may compete with other products foraccess to manufacturing facilities. Any failure to gain access to these limited manufacturing facilities could severely impact the clinical development,marketing approval and commercialization of our product candidates.Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currentlyhave arrangements in place for redundant supply or a second source for required raw materials used in the manufacture of our product candidates or for themanufacture of finished product. Moreover, we often rely on one CMO to produce multiple product components. For instance, one of our CMOs producesseveral polymers used in our ImmTOR technology. If our current CMOs cannot perform as agreed, we may be required to replace such manufacturers and wemay be unable to replace them on a timely basis or at all. Our current and expected future dependence upon others for the manufacture of our productcandidates or products could delay, prevent or impair our development and commercialization efforts.Our existing collaborations are important to our business, and future licenses may also be important to us. If we are unable to maintain any of thesecollaborations, or if these arrangements are not successful, our business could be adversely affected.We have entered into collaborations with other parties, including pharmaceutical companies and universities, to develop products based on our ImmTORtechnology, and such collaborations and licensing arrangements currently represent a significant portion of our product pipeline. Certain of ourcollaborations also provide us with important funding for some of our development programs and we expect to receive additional funding undercollaborations in the future. Our existing collaborations, and any future collaborations we enter into, may pose a number of risks, including the following:-collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;-collaborators may not perform their obligations as expected;-collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not tocontinue or renew development or commercialization programs based on preclinical or clinical trial results, changes in the collaborators’ strategic focusor available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;-collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate,repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;-collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if thecollaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are moreeconomically attractive than ours, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;-a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commitsufficient resources to the marketing and distribution of such product or products;-disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, mightcause delays or termination of the research, development or commercialization of product49candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of whichwould be time‑consuming and expensive;-collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invitelitigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;-collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;-collaborations may be terminated for the convenience of the collaborator or for our failure to comply with our obligations under existing or futurecollaborations and, if terminated, we would potentially lose the right to pursue further development or commercialization of the applicable productcandidates;-collaborators may learn about our technology and use this knowledge to compete with us in the future;-there may be conflicts between different collaborators that could negatively affect those collaborations and potentially others; and-the number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers.If our collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreementwith us, we may not receive any future research and development funding or milestone or royalty payments under such collaborations. If we do not receivethe funding we expect under these agreements, our continued development of our ImmTOR technology and product candidates could be delayed and we mayneed additional resources to develop additional product candidates. All of the risks relating to product development, regulatory approval andcommercialization described in this Annual Report on Form 10-K also apply to the activities of our therapeutic program collaborators and there can be noassurance that our collaborations will produce positive results or successful products on a timely basis or at all.Additionally, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination or otherwise changes its businesspriorities, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of ourcollaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of our business in the businessand financial communities, and our stock price, could be adversely affected. In addition, we have a limited number of collaborations and if our relationshipwith any one or more of such collaborators were to cease, our business would be harmed as a result.We may in the future collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization oftherapeutic products. We face significant competition in seeking appropriate collaborators. If we are unable to reach agreements with suitable collaboratorson a timely basis, on acceptable terms, or at all, we may not be able to access specific antigens that would be suitable to development with our technology,have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay itspotential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development orcommercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need toobtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and donot have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop ourproduct candidates or bring them to market or continue to develop our programs, and our business may be materially and adversely affected.We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including byfailing to meet deadlines for the completion of such trials.We expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, toconduct and manage our clinical trials, including our Phase 2 and Phase 3 clinical trials of SEL‑212. We also expect to rely on other third parties to store anddistribute drug supplies for our clinical trials.Our reliance on these third parties for research and development activities will reduce our control over these activities but does not relieve us of ourresponsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigationalplan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards, commonly referred to as good clinical practice, or GCP,regulations, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that therights, safety and welfare of trial participants are protected. Other countries’ regulatory agencies also have requirements for clinical trials. Regulatoryauthorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or third-partycontractors fail to comply with applicable GCPs, the data generated in50our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trialsbefore approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority willdetermine that any of our clinical trials complies with GCP regulations. In addition, our clinical trials must be conducted with product produced undercurrent good manufacturing practice, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which woulddelay the regulatory approval process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on agovernment‑sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminalsanctions.Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do notsuccessfully carry out their contractual duties, do not comply with confidentiality obligations, do not meet expected deadlines, experience work stoppages,terminate their agreements with us or need to be replaced, or do not conduct our clinical trials in accordance with regulatory requirements or our statedprotocols, we may need to enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials maybe extended, delayed or terminated, or may need to be repeated. If any of the foregoing occur, we may not be able to obtain, or may be delayed in obtaining,marketing approvals for our product candidates or in commercializing our product candidates.We have no experience manufacturing our product candidates at commercial scale, and if we decide to establish our own manufacturing facility, wecannot assure you that we can manufacture our product candidates in compliance with regulations at a cost or in quantities necessary to make themcommercially viable.We have a pilot manufacturing facility at our Watertown, Massachusetts location where we conduct process development, scale‑up activities and themanufacture of ImmTOR product candidates for preclinical use. We rely on the scale equipment at our CMOs for the manufacture of the clinical supply of allof our product candidates. If our facility, or our CMOs’ facilities, were damaged or destroyed, or otherwise subject to disruption, it would require substantiallead‑time to replace our manufacturing capabilities. In such event, we would be forced to identify and rely entirely on alternative third‑party contractmanufacturers for an indefinite period of time. Any disruptions or delays at our facility or its failure to meet regulatory compliance would impair our abilityto develop and commercialize our product candidates, which would adversely affect our business and results of operations.In addition, the FDA and other comparable foreign regulatory agencies must, pursuant to inspections that are conducted after submitting a BLA or relevantforeign marketing submission, confirm that the manufacturing processes for the product candidate meet cGMP regulations. We do not currently have any ofour own manufacturing facilities that meet the FDA’s cGMP requirements for the production of any product candidates used in humans, and rely on ourCMOs for clinical production.We may choose to establish a manufacturing facility for our product candidates for production at a commercial scale. However, we have no experience incommercial‑scale manufacturing of our product candidates and this activity will require substantial additional funds and additional qualified employees. Wemay not be able to develop commercial‑scale manufacturing facilities that are adequate to produce materials for additional later‑stage clinical trials orcommercial use.The equipment and facilities employed in the manufacture of pharmaceuticals are subject to stringent qualification requirements by regulatory agencies,including validation of such facilities, equipment, systems, processes and analytics. We may be subject to lengthy delays and expense in conductingvalidation studies, if we can meet the requirements at all.RISKS RELATED TO COMMERCIALIZATION OF OUR PRODUCT CANDIDATES AND OTHER LEGAL COMPLIANCE MATTERSEven if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients,third‑party payors and others in the medical community necessary for commercial success.If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third‑partypayors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not generate significantproduct revenues and we may not become profitable. The degree of market acceptance of our product candidates, if any, will depend on a number of factors,including:-their efficacy, safety and other potential advantages compared to alternative treatments;-the clinical indications for which our product candidates are approved;-our ability to offer them for sale at competitive prices;-their convenience and ease of administration compared to alternative treatments;-the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;51-the strength of marketing and distribution support;-the availability of third‑party coverage and adequate reimbursement for our product candidates;-the prevalence and severity of their side effects and their overall safety profiles;-any restrictions on the use of our product candidates together with other medications;-interactions of our product candidates with other medicines patients are taking;-our ability to create awareness with patients and physicians about the harmful effects of uric acid deposits;-the timing of market introduction of any approved product candidates as well as competitive products and other therapies;-inability of certain types of patients to take our product candidates;-their ability to remain attractive in the event of changing treatment guidelines;-adverse publicity about the product or favorable publicity about competitive products; and-potential product liability claims.We currently have no sales organization. If we are unable to establish effective sales, marketing and distribution capabilities, or enter into agreementswith third parties with such capabilities, we may not be successful in commercializing our product candidates if and when they are approved.We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achievecommercial success for any product candidate for which we obtain marketing approval, we will need to establish a sales and marketing organization or makearrangements with third parties to perform sales and marketing functions and we may not be successful in doing so.In the future, we expect to build a focused sales and marketing infrastructure to market or co‑promote our product candidates in the United States andpotentially elsewhere, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. Forexample, recruiting and training a sales force is expensive and time‑consuming and could delay any product launch. If the commercial launch of a productcandidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely orunnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our salesand marketing personnel.Outside the United States, we may rely on third parties to sell, market and distribute our product candidates. We may not be successful in entering intoarrangements with such third parties or may be unable to do so on terms that are favorable to us. In addition, our product revenue and our profitability, if any,may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likelywill have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our productseffectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we willnot be successful in commercializing our product candidates.We face substantial competition, including from biosimilars, which may result in others discovering, developing or commercializing competing productsbefore or more successfully than we do.The development and commercialization of new drug and biologic products and technologies is highly competitive and is characterized by rapid andsubstantial technological development and product innovations. We are aware of a number of large pharmaceutical and biotechnology companies, includingSanofi, Horizon Pharma plc, Pfizer Inc., and Merck & Co., Inc., as well as smaller, early-stage companies, that offer or are pursuing the development ofpharmaceutical products or technologies that may address one or more indications that our product candidates target. We face competition with respect to ourcurrent product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future,from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources,established presence in the market and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtainingregulatory approvals and reimbursement for product candidates and in marketing approved products than we do. Mergers and acquisitions in thepharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.These third parties compete with us in recruiting and retaining qualified scientific, sales and marketing and management personnel, establishing clinical trialsites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.52Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or lesssevere side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or otherregulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong marketposition before we are able to enter the market, especially for any competitor developing a microbiome therapeutic that will likely share our same regulatoryapproval requirements. In addition, our ability to compete may be affected in many cases by insurers or other third‑party payors seeking to encourage the useof generic or biosimilar products.We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competitionsooner than anticipated.The Biologics Price Competition and Innovation Act of 2009 (BPCIA) was enacted as part of the Affordable Care Act to establish an abbreviated pathway forthe approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approvebiosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under theBPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The lawis complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject touncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have amaterial adverse effect on the future commercial prospects for our biological products.We believe that any product candidate approved in the United States as a biological product under a BLA should qualify for the 12-year period ofexclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider thesubject product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner thananticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar totraditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are stilldeveloping.Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations or third‑party coverageor reimbursement policies, any of which would harm our business.Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. Our ability tocommercialize any product candidates successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products andrelated treatments will be available from government health administration authorities, private health insurers and other organizations. Governmentauthorities and third‑party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for andestablish reimbursement levels.Obtaining and maintaining adequate reimbursement for our products may be difficult. We cannot be certain if and when we will obtain an adequate level ofreimbursement for our products by third‑party payors. Even if we do obtain adequate levels of reimbursement, third‑party payors, such as government orprivate healthcare insurers, carefully review and increasingly question the coverage of, and challenge the prices charged for, products. Governmentauthorities and third‑party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.Increasingly, third‑party payors are requiring that pharmaceutical companies provide them with predetermined discounts from list prices and are challengingthe prices charged for products. We may also be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the levelof reimbursement relative to other therapies. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may notbe able to successfully commercialize any product candidate for which we obtain marketing approval.There may be significant delays in obtaining reimbursement for newly approved products, and coverage may be more limited than the purposes for which theproduct is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for reimbursement does not imply that aproduct will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interimreimbursement levels for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates mayvary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost productsand may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required bygovernment healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where theymay be sold at lower prices than in the United States. Our inability to promptly obtain coverage and adequate reimbursement rates from bothgovernment‑funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability toraise capital needed to commercialize products and our overall financial condition.53The regulations that govern marketing approvals, pricing, coverage and reimbursement for new products vary widely from country to country. Current andfuture legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketingor product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control,including possible price reductions, even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particularcountry, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impactthe revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investmentin one or more product candidates, even if our product candidates obtain marketing approval. There can be no assurance that our product candidates, if theyare approved for sale in the United States or in other countries, will be considered medically necessary for a specific indication or cost‑effective, or thatcoverage or an adequate level of reimbursement will be available.Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, whichhas resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review therelationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.Product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.We face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials and will face an even greater risk if wecommercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or productscaused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:-regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions;-decreased demand for any product candidates or products that we may develop;-injury to our reputation and significant negative media attention;-loss of clinical trial participants or increased difficulty in enrolling future participants;-significant costs to defend the related litigation or to reach a settlement;-substantial payments to trial participants or patients;-loss of revenue;-reduced resources of our management to pursue our business strategy; and-the inability to commercialize any products that we may develop.We maintain general liability, product liability and umbrella liability insurance. Our existing insurance coverage may not fully cover potential liabilities thatwe may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our productcandidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequateto satisfy any liability that may arise.Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.Although we do not have any current plans to market and sell our products in other jurisdictions outside of the United States, we may decide to do so in thefuture and either we or our collaborators would need to obtain separate marketing approvals and comply with numerous and varying regulatory requirements.The approval procedure varies among countries and can involve additional testing. The time required to obtain approval in foreign countries may differsubstantially from that required to obtain FDA approval. Clinical trials conducted in one country may not be accepted by regulatory authorities in othercountries. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition,in many countries outside the United States, it is required that the product candidate be approved for reimbursement before the product candidate can beapproved for sale in that country. We or our collaborators may not obtain approvals for our product candidates from regulatory authorities outside the UnitedStates on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval byone regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions, or by the FDA.However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not beable to file for marketing approvals and may not receive necessary approvals to commercialize our product candidates in any market.54Our relationships with healthcare providers, customers and third‑party payors will be subject to applicable anti‑kickback, fraud and abuse and otherhealthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs,contractual damages, reputational harm and diminished profits and future earnings.Arrangements with physicians, others who may be in a position to generate business for us, and customers may expose us to broadly applicable fraud andabuse and other healthcare laws and regulations that constrain the business or financial arrangements and relationships through which we market, sell anddistribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include thefollowing:-the federal Anti‑Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receivingor providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or thepurchase, order or recommendation of, any good or service for which payment may be made under a federal healthcare program such as Medicare andMedicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; inaddition, the government may assert that a claim including items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes afalse or fraudulent claim for purposes of the False Claims Act;-the federal false claims and civil monetary penalties laws, including the civil False Claims Act, which impose criminal and civil penalties againstindividuals or entities for knowingly presenting, or causing to be presented, to the federal government claims for payment that are false or fraudulent.Private individuals (e.g., whistleblowers) can bring these actions on behalf of the government;-the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things,executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Aperson or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;-HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, whichalso imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy,security and transmission of individually identifiable health information;-the federal Physician Payments Sunshine Act, which requires applicable manufacturers of certain products for which payment is available under a federalhealthcare program to report annually to the government information related to certain payments or other “transfers of value” made to physicians andteaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members;-analogous state laws and regulations, such as state anti‑kickback and false claims laws, which may apply to sales or marketing arrangements and claimsinvolving healthcare items or services reimbursed by third‑party payors, including private insurers; requirements to comply with federal andpharmaceutical industry compliance guidelines, and; state data privacy and price transparency laws, many of which differ from each other in significantways and often are broader than and not preempted by HIPAA or the Sunshine Act, thus complicating compliance efforts; and-similar healthcare laws and regulations in the European Union and other jurisdictions, including reporting requirements detailing interactions with andpayments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data ProtectionRegulation, or GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in theEuropean Union (including health data).Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It ispossible that governmental authorities will conclude that our business practices, including our relationships with physicians and other healthcare providers,some of whom may recommend, purchase and/or prescribe our product candidates, if approved, may not comply with current or future statutes, regulations orcase law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws orany other governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages,fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractualdamages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers orentities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrativesanctions, including exclusions from government funded healthcare programs. The risk of our being found in violation of these laws is increased by the factthat many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.55Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our productcandidates and affect the prices we may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding thehealthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities and affect our abilityto profitably sell any product candidates for which we obtain marketing approval.For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, asweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud andabuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and imposeadditional health policy reforms.Among the provisions of the ACA of importance to our potential product candidates are the following:-an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents;-an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;-a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused,instilled, implanted or injected;-extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;-expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;-a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and-a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along withfunding for such research.Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA. The Trump Administration and the U.S. Congressmay take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement. Most recently, the Tax Cuts and Jobs Acts (the“Tax Act”) was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance. OnDecember 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of theACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. While the Trump Administrationand CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repealand replace the ACA will impact the ACA and our business. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation orthe impact of potential legislation on us.We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare andother healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for anyapproved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from privatepayors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitabilityor commercialize our products.Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory review,which may result in significant additional expense. Additionally, any of our product candidates, if approved, could be subject to post‑marketingrestrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experienceunexpected problems with our products.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post‑approval clinical data, labeling, advertisingand promotional activities for such product, will be subject to the continual requirements of and review by the FDA and other regulatory authorities. Theserequirements include submissions of safety and other post‑marketing information and reports, registration and listing requirements, cGMP requirementsrelating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding thedistribution of samples to physicians and recordkeeping. We and our contract manufacturers will also be subject to continual review and periodic inspectionsto assess compliance with cGMP. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatorycompliance, including manufacturing, production and quality control.56Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may bemarketed or to the conditions of approval, including the requirement to implement a risk evaluation and mitigation strategy, or REMS, which could includerequirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods,patient registries and other risk mitigation tools. If any of our product candidates receives marketing approval, the accompanying label may limit theapproved use of our product, which could limit sales of the product.The FDA may also impose requirements for costly post‑marketing studies or clinical trials and surveillance to monitor the safety or efficacy of our approvedproducts. The FDA closely regulates the post‑approval marketing and promotion of drugs and biologics to ensure they are marketed only for the approvedindications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communicationsregarding off‑label use, and if we market our products outside of their approved indications, we may be subject to enforcement action for off‑label marketing.Violations of the FDA’s restrictions relating to the promotion of prescription products may also lead to investigations alleging violations of federal and statehealth care fraud and abuse laws, as well as state consumer protection laws.In addition, if a regulatory agency or we later discover previously unknown problems with our products, such as adverse events of unexpected severity orfrequency or problems with manufacturers or manufacturing processes, the regulatory agency may impose restrictions on the products or us, includingrequiring withdrawal of the product from the market. Any failure to comply with applicable regulatory requirements may yield various results, including:-litigation involving patients taking our products;-restrictions on such products, manufacturers or manufacturing processes;-restrictions on the labeling or marketing of a product;-restrictions on product distribution or use;-requirements to conduct post‑marketing studies or clinical trials;-warning letters;-withdrawal of products from the market;-suspension or termination of ongoing clinical trials;-refusal to approve pending applications or supplements to approved applications that we submit;-recall of products;-fines, restitution or disgorgement of profits or revenues;-suspension or withdrawal of marketing approvals;-damage to relationships with existing and potential collaborators;-unfavorable press coverage and damage to our reputation;-refusal to permit the import or export of our products;-product seizure or detention;-injunctions; or-imposition of civil or criminal penalties.Noncompliance with other requirements in foreign jurisdictions regarding safety monitoring or pharmacovigilance can also result in significant financialpenalties. Similarly, failure to comply with U.S. and foreign regulatory requirements regarding the development of products for pediatric populations and theprotection of personal health information can also lead to significant penalties and sanctions.Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generatenegative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize andgenerate revenues. If regulatory sanctions are applied or if regulatory approval is withheld or withdrawn, the value of our company and our operating resultswill be adversely affected.The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delayregulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements orpolicies, or if we are not able to maintain regulatory compliance,57we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business,prospects, financial condition and results of operations.We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,either in the United States or abroad. For example, certain policies of the current administration may impact our business and industry. Namely, the Trumpadministration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, orotherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking,issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these Executive Orders will be implemented, and theextent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability toengage in oversight and implementation activities in the normal course, our business may be negatively impacted.Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, orotherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, abilityto hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency havefluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subjectto the political process, which is inherently fluid and unpredictable.Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary governmentagencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, theU.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop criticalactivities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatorysubmissions, which could have a material adverse effect on our businessWe are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti‑corruption laws, and anti‑money laundering laws andregulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminalliability and other serious consequences for violations, which can harm our business.We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, variouseconomic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign CorruptPractices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other stateand national anti‑bribery and anti‑money laundering laws in the countries in which we conduct activities. Anti‑corruption laws are interpreted broadly andprohibit companies and their employees, agents, contractors and other partners from authorizing, promising, offering or providing, directly or indirectly,improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the UnitedStates, to sell our product candidates abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations, andother regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government‑affiliated hospitals,universities and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other partners,even if we do not explicitly authorize or have actual knowledge of such activities. Our violations of the laws and regulations described above may result insubstantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract andfraud litigation, reputational harm and other consequences.Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.In some countries, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmentalauthorities can take considerable time after the receipt of marketing approval for a product candidate. In addition, there can be considerable pressure bygovernments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatorydevelopments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained.Reference pricing used by various countries and parallel distribution or arbitrage between low‑priced and high‑priced countries, can further reduce prices. Toobtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost‑effectiveness of our productcandidate to other available therapies, which is time‑consuming and costly. If coverage and reimbursement of our product candidates are unavailable orlimited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.58If we or our contract manufacturers or other third parties fail to comply with environmental, health and safety laws and regulations, we could becomesubject to fines or penalties or incur costs that could harm our business.We and our contract manufacturers and other third parties with whom we do business are subject to numerous environmental, health and safety laws andregulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Ouroperations involve the use of hazardous and flammable materials, including biological materials and chemicals, such as trichloroethylene. Our operationsalso produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk ofcontamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liablefor any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines andpenalties for failure to comply with such laws and regulations.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from theuse of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmentalliability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current orfuture laws and regulations may impair our research, development or production efforts. The failure to comply with these laws and regulations also may resultin substantial fines, penalties or other sanctions.RISKS RELATED TO OUR INTELLECTUAL PROPERTYIf we or our licensors are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect ourproduct candidates, others could compete against us more directly, which would negatively impact our business.Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and othercountries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the UnitedStates and abroad related to our novel technologies and product candidates. We also rely on trade secrets to protect aspects of our business that are notamenable to, or that we do not consider appropriate for, patent protection.The patent prosecution process is expensive and time‑consuming, and we may not be able to file and prosecute all necessary or desirable patent applicationsat a reasonable cost, in a timely manner or in all jurisdictions. As we reach the statutory deadlines for deciding whether and where to initiate prosecution inspecific foreign jurisdictions by filing national stage applications based on our Patent Cooperation Treaty, or PCT, applications, we will have to decidewhether and where to pursue patent protection for the various inventions claimed in our patent portfolio, and we will only have the opportunity to obtainpatents in those jurisdictions where we pursue protection. It is also possible that we will fail to identify patentable aspects of our research and developmentoutput before it is too late to obtain patent protection. It is possible that defects of form in the preparation or filing of our patents or patent applications mayexist, or may arise in the future, such as, with respect to proper priority claims, inventorship, claim scope or patent term adjustments. If there are materialdefects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Moreover, ourcompetitors may independently develop equivalent knowledge, methods and know‑how. Any of these outcomes could impair our ability to preventcompetition from third parties, which may have an adverse impact on our business. We also cannot guarantee that any of our patent searches or analyses,including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete and thorough,nor can we be certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or necessaryfor the commercialization of our product candidates in any jurisdiction.In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents coveringtechnology that we license from third parties. We may also require the cooperation of our licensors to enforce any licensed patent rights, and suchcooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interestsof our business. Moreover, we have obligations under our licenses, and any failure to satisfy those obligations could give our licensor the right to terminatethe license. Termination of a necessary license could have a material adverse impact on our business.We cannot provide any assurances that the issued patents we currently own, or any future patents, include claims with a scope sufficient to protect ourproduct candidates or otherwise provide any competitive advantage. Further, it is possible that a patent claim may provide coverage for some but not all partsof a product candidate or third‑party product. These and other factors may provide opportunities for our competitors to design around our patents, shouldthey issue.59Moreover, other parties may have developed technologies that may be related or competitive to our approach, and may have filed or may file patentapplications, and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming similar methods orby claiming subject matter that could dominate our patent position. In addition, it may be some time before we understand how patent offices react to ourpatent claims and whether they identify prior art of relevance that we have not already considered.Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and otherjurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we werethe first to make the inventions claimed in any owned patents or pending patent applications, or that we were the first to file for patent protection of suchinventions, nor can we know whether those from whom we may license patents were the first to make the inventions claimed or were the first to file. For theseand other reasons, the issuance, scope, validity, enforceability and commercial value of our patent rights are subject to a level of uncertainty. Our pendingand future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or which effectively preventothers from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the UnitedStates and other countries may diminish the value of our patents or narrow the scope of our patent protection.We may be subject to a third‑party preissuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in opposition,derivation, reexamination, inter partes review, post‑grant review or interference proceedings challenging our patent rights or the patent rights of others. Anadverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties tocommercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercializeproduct candidates without infringing third‑party patent rights. In addition, if the breadth or strength of protection provided by our patents and patentapplications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affectour ability to develop, market or otherwise commercialize our product candidates. The issuance, scope, validity, enforceability and commercial value of ourpatents are subject to a level of uncertainty.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has inrecent years been the subject of much litigation. Due to legal standards relating to patentability, validity, enforceability and claim scope of patents coveringbiotechnological and pharmaceutical inventions, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factualquestions. Even if issued, a patent’s validity, inventorship, ownership or enforceability is not conclusive. Accordingly, rights under any existing patent orany patents we might obtain or license may not cover our product candidates, or may not provide us with sufficient protection for our product candidates toafford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies.In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know‑how,information, or technology that is not covered by our patents. Although our agreements require all of our employees to assign their inventions to us, and werequire all of our employees, consultants, advisors and any other third parties who have access to our trade secrets, proprietary know‑how and otherconfidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietaryknow‑how, and other confidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gainaccess to or independently develop substantially equivalent trade secrets, proprietary know‑how, and other information and technology. Furthermore, thelaws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we mayencounter significant problems in protecting and defending our intellectual property globally. If we are unable to prevent unauthorized disclosure of ourintellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantagein our market, which could adversely affect our business and operations.Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time‑consuming and would divert the attention of ourmanagement and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awardedif we were to prevail may not be commercially meaningful. Even if we are successful, domestic or foreign litigation, or USPTO or foreign patent officeproceedings, may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or potential collaborators, toprevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other proceedings, there is a riskthat some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings. In addition, during thecourse of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings ordevelopments or public60access to related documents. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.If we are unable to protect the confidentiality of our trade secrets and know‑how, our business and competitive position would be harmed.In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know‑how, technologyand other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non‑disclosure andconfidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contractmanufacturers, consultants, advisors and other third parties. We also seek to enter into confidentiality and invention or patent assignment agreements withour employees, advisors and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information,including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties byother means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secretis difficult, expensive and time‑consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing orunwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we wouldhave no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our tradesecrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed.Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcingpatents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time‑consuming and inherently uncertain. Inaddition, recent patent reform legislation could further increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents. On September 16, 2011, the Leahy‑Smith America Invents Act, or the Leahy‑Smith Act, was signed into law.The Leahy‑Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications areprosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of theLeahy‑Smith Act, and many of the substantive changes to patent law associated with the Leahy‑Smith Act, in particular the first to file provisions, becameeffective on March 16, 2013. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patentcovering an invention of ours even if we had made the invention before it was made by the third party. This requires us to be cognizant of the time frominvention to filing of a patent application. Thus, for our U.S. patent applications containing a priority claim after March 16, 2013, there is a greater level ofuncertainty in the patent law. Moreover, some of the patent applications in our portfolio will be subject to examination under the pre‑Leahy‑Smith Act lawand regulations, while other patents applications in our portfolio will be subject to examination under the law and regulations, as amended by theLeahy‑Smith Act. This introduces additional complexities into the prosecution and management of our portfolio.In addition, the Leahy‑Smith Act limits where a patentee may file a patent infringement suit and provides opportunities for third parties to challenge anyissued patent in the USPTO. These provisions apply to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiarystandard in USPTO proceedings compared to the evidentiary standard in U.S. federal court necessary to invalidate a patent claim, a third party couldpotentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficientto invalidate the claim if first presented in a federal court action.Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims because it may be easier for them to do so relative tochallenging the patent in a federal court action. It is not clear what, if any, impact the Leahy‑Smith Act will have on the operation of our business. However,the Leahy‑Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.In addition, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights ofpatent owners in certain situations. From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO may change the standardsof patentability, and any such changes could have a negative impact on our business.Depending on these and other decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change orbe interpreted in unpredictable ways that would weaken our ability to obtain new patents or to enforce any patents that may issue to us in the future. Inaddition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts.61Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates anduse our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in thebiotechnology and pharmaceutical industries. While no such litigation has been brought against us and we have not been held by any court to have infringeda third party’s intellectual property rights, we cannot guarantee that our technology, product candidates or use of our product candidates do not infringethird‑party patents.We are aware of numerous patents and pending applications owned by third parties, and we monitor patents and patent applications in the fields in which weare developing product candidates, both in the United States and elsewhere. However, we may have failed to identify relevant third‑party patents orapplications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the UnitedStates remain confidential until patents issue. Moreover, it is difficult for industry participants, including us, to identify all third‑party patent rights that maybe relevant to our product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incompletedatabases and the difficulty in assessing the meaning of patent claims. We may fail to identify relevant patents or patent applications or may identify pendingpatent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to ourtechnology. In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of a current or futureproduct candidate, or we may incorrectly conclude that a third‑party patent is invalid, unenforceable or not infringed by our activities. Additionally, pendingpatent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our productcandidates or the use of our product candidates.The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Otherparties may allege that our product candidates or the use of our technologies infringes patent claims or other intellectual property rights held by them or thatwe are employing their proprietary technology without authorization. We may become party to, or threatened with, future adversarial proceedings orlitigation regarding intellectual property rights with respect to our product candidates and technology, including interference or derivation proceedingsbefore the USPTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual property rightsand intellectual property rights that may be granted in the future.Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we are found, orbelieve there is a risk we may be found, to infringe a third party’s intellectual property rights, we could be required or may choose to obtain a license fromsuch third party to continue developing and marketing our product candidates and technology. However, we may not be able to obtain any such 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 access to the sametechnologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, wecould be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding ofinfringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materiallyharm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact onour business.Even if we are successful in such proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings,which could have a material adverse effect on us. Patent litigation is costly and time‑consuming. We may not have sufficient resources to bring these actionsto a successful conclusion. 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 have a substantial adverse effect on the price of our common stock.Any of these risks coming to fruition could harm our business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, and our issuedpatents covering our product candidates could be found invalid or unenforceable or could be interpreted narrowly if challenged in court.Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringementclaims to stop third‑party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time‑consuming. If weinitiated legal proceedings against a third party to enforce a patent, if and when issued, covering one of our product candidates, the defendant couldcounterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendantcounterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of severalstatutory requirements, including lack of novelty, obviousness or non‑enablement, or failure to claim patent‑eligible subject62matter. Grounds for unenforceability assertions include allegations that someone connected with the prosecution of the patent withheld relevant informationfrom the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the UnitedStates or abroad, even outside the context of litigation. Such mechanisms include re‑examination, post‑grant review, inter partes review, interferenceproceedings and equivalent proceedings in foreign jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendmentof our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidityand unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and thepatent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose atleast part, and perhaps all, of the patent protection on our product candidates. Moreover, even if not found invalid or unenforceable, the claims of our patentscould be construed narrowly or in a manner that does not cover the allegedly infringing technology in question. Such a loss of patent protection would havea material adverse impact on our business.The lives of our patents may not be sufficient to effectively protect our products and business.Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective non-provisional filing date.Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates,proprietary technologies and their uses are obtained, once the patent life has expired, we may be open to competition. In addition, although upon issuance inthe United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certaindelays caused by the patent applicant during patent prosecution. Given the amount of time required for the development, testing and regulatory review ofnew product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. If we do not havesufficient patent life to protect our product candidates, proprietary technologies and their uses, our business and results of operations will be adverselyaffectedObtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with theserequirements.Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patentand, in some jurisdictions, during the pendency of a patent application. The USPTO and various foreign governmental patent agencies require compliancewith a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can inmany cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance canresult in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to officialactions within prescribed time limits, non‑payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitorsmight be able to enter the market, which would have an adverse effect on our business.If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that areimportant to our business.We are party to multiple license agreements that impose, and we may enter into additional licensing and funding arrangements with third parties that mayimpose, diligence, development and commercialization timelines, milestone payment, royalty, insurance and other obligations on us. Under our existinglicensing agreements, we are obligated to pay royalties on net product sales of product candidates or related technologies to the extent they are covered bythe agreement. Our results of operations will be affected by the level of royalty payments that we are required to pay to third parties. We cannot preciselypredict the amount, if any, of royalties that we will be required to pay to third parties in the future. Any disagreements with the counterparty over the amountof royalties owed could lead to litigation, which is costly. In addition, if we fail to comply with our obligations under current or future license agreements,our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any productcandidate that is covered by these agreements, or may face other penalties under the agreements. Such an occurrence could materially adversely affect thevalue of product candidates being developed using rights licensed to us under any such agreement. Termination of these agreements or reduction orelimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us tolose our rights under these agreements, including our rights to important intellectual property or technology. Furthermore, our counterparties may allege thatwe are operating outside the scope of the licenses granted and terminate our license or otherwise require us to alter development, manufacturing or marketingactivities.We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.63We currently have rights to certain intellectual property, through licenses from third parties and under patents and patent applications that we own, todevelop our product candidates. Because we may find that our programs require the use of proprietary rights held by third parties, the growth of our businessmay depend in part on our ability to acquire, in‑license or use these proprietary rights. We may be unable to acquire or in‑license compositions, methods ofuse, processes or other third‑party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing andacquisition of third‑party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to licenseor acquire third‑party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over usdue to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be acompetitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third‑party intellectual property rights on termsthat would allow us to make an appropriate return on our investment.If we are unable to successfully obtain rights to required third‑party intellectual property rights or maintain the existing intellectual property rights we have,we may have to abandon development of that program and our business and financial condition could suffer.We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership ofwhat we regard as our own intellectual property.Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. We may also engage advisors and consultants who are concurrently employed at universities or other organizations or who performservices for other entities. Although we try to ensure that our employees, advisors and consultants do not use the proprietary information or know‑how ofothers in their work for us, we may be subject to claims that we or our employees, advisors or consultants have used or disclosed intellectual property,including trade secrets or other proprietary information, of any such party’s former or current employer or in violation of an agreement with another party.Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any suchclaims.In addition, while it is our policy to require our employees, consultants, advisors and contractors who may be involved in the 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 develops intellectual property that we regard as our own. Our and their assignment agreements may not be self‑executing or may be breached, and wemay be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as ourintellectual property. Similarly, we may be subject to claims that an employee, advisor or consultant performed work for us that conflicts with that person’sobligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of workperformed for us. Litigation may be necessary to defend against these claims. Although we have no knowledge of any such claims being alleged to date, ifsuch claims were to arise, litigation may be necessary to defend against any such claims.If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights orpersonnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction tomanagement.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and ourbusiness may be adversely affected.Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing onother marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potentialcollaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our abilityto build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims broughtby owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the longterm, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and ourbusiness may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights orother intellectual property may be ineffective and could result in substantial costs and diversion of resources, and could adversely impact our financialcondition or results of operations.We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce ourintellectual property rights even in the jurisdictions where we seek protection.Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive,and our intellectual property rights in some countries outside the United States could be less64extensive than in the United States, assuming that rights are obtained in the United States and assuming that rights are pursued outside the United States. Inthis regard, in addition to the United States, we also seek to protect our intellectual property rights in other countries. The statutory deadlines for pursuingpatent protection in individual foreign jurisdictions are based on the priority date of each of our patent applications. For all of the patent families in ourportfolio, including the families that may provide coverage for our lead product candidate, the relevant statutory deadlines have not yet expired. Therefore,for each of the patent families that we believe provide coverage for our lead product candidate, we will need to decide whether and where to pursueadditional protection outside the United States. In addition, the laws of some foreign countries, do not protect intellectual property rights to the same extentas federal and state laws in the United States. Consequently, for our existing patent rights outside the United States and any foreign patent rights we maydecide to pursue in the future, we may not be able to obtain relevant claims and/or we may not be able to prevent third parties from practicing our inventionsin all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, mayexport otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as in the United States. These productsmay compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them fromcompeting. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effectiveor sufficient to prevent third parties from so competing.If we do not obtain additional protection under the Hatch‑Waxman Act and similar foreign legislation extending the terms of our patents for our productcandidates, our business may be harmed.Depending upon the timing, duration and specifics of FDA regulatory approval for our product candidates, one or more of our U.S. patents may be eligible forlimited patent term restoration under the Hatch‑Waxman Act. The Hatch‑Waxman Act permits a patent restoration term of up to five years as compensationfor patent term lost during product development and the FDA regulatory review process. Patent term restorations, however, are limited to a maximum of fiveyears and cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the FDA.The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval ofthe application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failingto apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope ofpatent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension isless than we request, the period during which we will have the right to exclusively market our product will be shortened, our competitors may obtain earlierapproval of competing products and our ability to generate revenues could be materially adversely affected.RISKS RELATED TO OUR OPERATIONSOur new corporate strategy and restructuring may not be successful.On January 3, 2019, following a strategic business review, we announced our new strategy to focus on the development of SEL-212 for the treatment ofchronic refractory gout and advancement of our ImmTOR technology in the area of gene therapy, specifically ImmTOR in combination with AAV genetherapy for the treatment of CN, as well as the deprioritization of our oncology development program. The success of this strategic shift will depend on ourability to successfully develop our product candidates, hire and retain senior management or other highly qualified personnel, prioritize competing projectsand efforts and obtain sufficient resources, including additional capital. The early stage development of novel product candidates is highly unpredictabledue to the lengthy and expensive process of clinical drug development, potential for safety, efficacy or tolerability problems with such product candidates,unexpected expenses or inaccurate financial assumptions or forecasts, potential delays or unfavorable decisions of regulatory agencies and competition fortargeted indications or within targeted markets. Accordingly, there are no assurances our change in strategic focus will be successful, which may have anadverse effect on our results of operations or financial condition.Also on January 3, 2019, as a result of our strategic business review, we announced our plan to reduce budgeted headcount by approximately 36% to alignour workforce with our newly announced strategy. While the reduction in workforce generally affects employees in all areas, those working in research andrelated general and administrative functions were most affected. The reduction in workforce resulted in the termination of approximately 17 employmentpositions effective January 3, 2019. Following the reduction in workforce, we expect to have approximately 45 full-time employment positions and to beappropriately resourced to continue executing on our current strategy. We substantially completed the reduction in workforce during the first quarter of 2019.Our workforce after these actions may not be sufficient to fully execute our new strategy, and we may not be able to effectively attract or retain newmanagement or qualified employees needed to implement this strategy.65We estimate that we will incur aggregate charges in connection with the reduction in workforce of approximately $0.5 million, all of which are expected tobe cash expenditures. However, our restructuring activities may also result in unexpected risks or costs, such as employee claims and contractual disputes andthe risk that the actual financial and other impacts of the reductions could vary materially from the outcomes anticipated, which may have a material adverseeffect on our results of operations or financial condition.Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.We are highly dependent on Carsten Brunn, Ph.D., our President and Chief Executive Officer, as well as the other principal members of our management,scientific and clinical team. Although we have entered into employment agreements or offer letters with Dr. Brunn and certain of our executive officers, eachof them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.Earl Sands, M.D., our Chief Medical Officer, retired effective January 1, 2019. In March 2019, John Leaman, M.D., our Chief Financial Officer and Head ofCorporate Strategy, announced his intention to resign effective March 31, 2019. Recruiting and retaining a new Chief Medical Officer and Chief FinancialOfficer will be critical to our success. We anticipate that we will experience a transitional period until our new Chief Medical Officer and Chief FinancialOfficer are hired and fully integrated into his or her new roles. Any delay or failure to recruit Dr. Sands' and Dr. Leaman’s successors may adversely affect ourbusiness and financial results. We cannot predict how long it will take to hire a new Chief Medical Officer and Chief Financial Officer and if we are not ableto appoint a new Chief Medical Officer and Chief Financial Officer in a timely manner, or we are forced to operate with a transitional leadership team, ourbusiness, financial condition, and results of operations could be materially and adversely affected. Moreover, we cannot provide any assurance that thetransition in leadership will not result in a disruption that adversely impacts our business and employee morale.Recruiting and retaining qualified scientific, clinical, manufacturing, technology and sales and marketing personnel will also be critical to our success. Theloss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercializationobjectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees maybe difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experiencerequired to successfully develop, gain regulatory approval of and commercialize product candidates. Competition to hire from this limited pool is intense,and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical andbiotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities andresearch institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research anddevelopment and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments underconsulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high qualitypersonnel, our ability to pursue our growth strategy will be limited.We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as aresult, we may encounter difficulties in managing our growth, which could disrupt our operations.We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of lead discovery andproduct development, regulatory affairs, clinical affairs and manufacturing and, if any of our product candidates receives marketing approval, sales,marketing and distribution. To manage our expected future growth, we must continue to implement and improve our managerial, operational and financialsystems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limitedexperience of our management team in managing a company with such expected growth, we may not be able to effectively manage the expansion of ouroperations or recruit and train additional qualified personnel in a timely manner, if at all. The expansion of our operations may lead to significant costs andmay divert our management and business development resources. Any inability to manage or financially support growth could delay the execution of ourbusiness plans or disrupt our operations.We have incurred increased costs as a result of operating as a public company, and our management will be required to devote substantial time to newcompliance initiatives and corporate governance practices.As a public company, and particularly after we are no longer an emerging growth company, we have incurred and expect to continue to incur significantlegal, accounting and other expenses that we did not incur as a private company. The Sarbanes‑Oxley Act of 2002, the Dodd‑Frank Wall Street Reform andConsumer Protection Act, the listing requirements of The Nasdaq Global Market and other applicable securities rules and regulations impose variousrequirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governancepractices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these66rules and regulations have increased our legal and financial compliance costs and made some activities more time‑consuming and costly.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our management on our internal controlover financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal controlover financial reporting issued by our independent registered public accounting firm. If we are unable to maintain effective internal control over financialreporting, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations as a public companyor comply with the requirements of the SEC or Section 404. This could result in a restatement of our financial statements, the imposition of sanctions,including the inability of registered broker dealers to make a market in our common stock, or investigation by regulatory authorities. Any such action orother negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of anaccounting, reporting or control issue could adversely affect the trading price of our securities and our business. Material weaknesses in our internal controlover financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain. This could result in anadverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.A variety of risks associated with maintaining our subsidiary in Russia or expanding operations internationally could adversely affect our business.In addition to our U.S. operations, we maintain a wholly owned subsidiary in Russia, Selecta RUS, and may expand international operations in the future,including by conducting clinical trials of our product candidates in countries outside the United States. We may face risks associated with maintaining oursubsidiary in Russia, or with any international operations, including possible unfavorable regulatory, pricing and reimbursement, legal, political, tax andlabor conditions, which could harm our business. We may also rely on collaborators to commercialize any approved product candidates outside of the UnitedStates. Doing business internationally involves a number of risks, including but not limited to:-multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws,regulatory requirements and other governmental approvals, permits and licenses;-failure by us to obtain and maintain regulatory approvals for the use of our product candidates in various countries;-additional potentially relevant third‑party patent rights;-complexities and difficulties in obtaining protection of and enforcing our intellectual property rights;-difficulties in staffing and managing foreign operations;-complexities associated with managing multiple‑payor reimbursement regimes, government payors or patient self‑pay systems;-limits on our ability to penetrate international markets;-financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand andpayment for our product candidates and exposure to foreign currency exchange rate fluctuations, which could result in increased operating expenses andreduced revenues;-natural disasters, political and economic instability, including wars, events of terrorism and political unrest, outbreak of disease, boycotts, curtailment oftrade and other business restrictions and economic weakness, including inflation;-changes in diplomatic and trade relationships;-challenges in enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectualproperty rights to the same extent as the United States;-certain expenses including, among others, expenses for travel, translation and insurance;-legal risks, including use of the legal system by the government to benefit itself or affiliated entities at our expense, including expropriation of property;and-regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview ofthe FCPA its books and records provisions, or its anti‑bribery provisions.Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.Our business and operations would suffer in the event of system failures.67Despite the implementation of security measures, our internal computer systems and those of our current and future contractors and consultants are vulnerableto damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we are not awareof any 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 resultin a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or futureclinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we relyon third parties to manufacture our product candidates and conduct clinical trials, and similar events relating to their computer systems could also have amaterial adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications,or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of ourproduct candidates could be delayed.Acquisitions or joint ventures could disrupt our business, cause dilution to our stockholders and otherwise harm our business.We may acquire other businesses, product candidates or technologies as well as pursue strategic alliances, joint ventures, technology licenses or investmentsin complementary businesses. We have not made any acquisitions to date, and our ability to do so successfully is unproven. Any of these transactions couldbe material to our financial condition and operating results and expose us to many risks, including:-disruption in our relationships with future customers or with current or future distributors or suppliers as a result of such a transaction;-unexpected liabilities related to acquired companies;-difficulties integrating acquired personnel, technologies and operations into our existing business;-diversion of management time and focus from operating our business to acquisition integration challenges;-increases in our expenses and reductions in our cash available for operations and other uses;-possible write‑offs or impairment charges relating to acquired businesses; and-inability to develop a sales force for any additional product candidates.Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different culturesand languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.Also, the expected benefit of any acquisition may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of ourequity securities, the incurrence of debt, contingent liabilities or amortization expenses or write‑offs of goodwill, any of which could harm our financialcondition. We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on ouroperating results.RISKS RELATED TO OUR COMMON STOCKThe market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our commonstock.The trading price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to various factors, some of which arebeyond our control. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatilitythat has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your commonstock at or above the price at which you purchased. The market price for our common stock may be influenced by many factors, including:-the success of competitive products or technologies;-results or progress, or changes in approach or timelines, of clinical trials of our product candidates or those of our competitors;-failure or discontinuation of any of our development programs;-commencement of, termination of, or any development related to any collaboration or licensing arrangement;-regulatory or legal developments in the United States and other countries;-development of new product candidates that may address our markets and make our product candidates less attractive;-changes in physician, hospital or healthcare provider practices that may make our product candidates less useful;68-announcements by us, our partners or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capitalcommitments;-announcement or market expectation of additional financing efforts;-developments or disputes concerning patent applications, issued patents or other proprietary rights;-the recruitment or departure of key personnel;-the level of expenses related to any of our product candidates or clinical development programs;-failure to meet or exceed financial estimates, projections or development timelines of the investment community or that we provide to the public;-the results of our efforts to discover, develop, acquire or in‑license additional product candidates or products;-actual or expected changes in estimates as to financial results, development timelines or recommendations by securities analysts;-variations in our financial results or those of companies that are perceived to be similar to us;-changes in the structure of healthcare payment systems;-sale of common stock by us or our stockholders in the future as well as the overall trading volume of our common stock;-market conditions in the pharmaceutical and biotechnology sectors;-general economic, industry and market conditions; and-the other factors described in this “Risk factors” section.Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control or significantlyinfluence all matters submitted to stockholders for approval.Our executive officers, directors and stockholders who own more than 5% of our outstanding common stock and their respective affiliates, in the aggregate,hold shares representing approximately 32.1% of our outstanding voting stock as of December 31, 2018. As a result, if these stockholders choose to acttogether, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management andaffairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of ourmanagement and approval of any merger, consolidation or sale of all or substantially all of our assets.A significant portion of our total outstanding shares are eligible to be sold into the market, which could cause the market price of our common stock todrop significantly, even if our business is doing well.Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of sharesintend to sell shares, could reduce the market price of our common stock. Holders of an aggregate of approximately 3.1 million shares of our common stock asof December 31, 2018 have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their sharesin registration statements that we may file for ourselves or other stockholders, until such shares can otherwise be sold without restriction under Rule 144 oruntil the rights terminate pursuant to the terms of the investors’ rights agreement between us and such holders. We have also registered and intend to continueto register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in thepublic market upon issuance, subject to volume limitations applicable to affiliates.We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stockless attractive to investors.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growthcompany until the last day of the fiscal year following the fifth anniversary of the closing of the initial public offering of our common stock. However, ifcertain events occur prior to the end of such five‑year period, including if we become a “large accelerated filer,” our annual gross revenues exceed$1.07 billion or we issue more than $1.07 billion of non‑convertible debt in any three‑year period, we will cease to be an emerging growth company prior tothe end of such five‑year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certaindisclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:69-not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;-not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory auditfirm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;-reduced disclosure obligations regarding executive compensation; and-exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachutepayments not previously approved.We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock lessattractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. In addition, theJOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accountingstandards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to privatecompanies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accountingstandards as other public companies that are not emerging growth companies.If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding ourstock, our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Ifany of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance,or if our preclinical studies, clinical trial programs and operating results fail to meet the expectations of analysts, our stock price would likely decline. If oneor more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn couldcause our stock price or trading volume to decline.Provisions in our restated certificate of incorporation and restated bylaws and under Delaware law could make an acquisition of our company, which maybe beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our restated certificate of incorporation and our restated bylaws, which became effective upon the closing of the initial public offering of ourcommon stock may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable,including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might bewilling to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board ofdirectors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders toreplace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State ofDelaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three yearsafter the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approvedin a prescribed manner.Furthermore, our restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court ofChancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us by stockholders. Webelieve this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolvingcorporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi‑forumlitigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit anystockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees oragents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings,and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in ourrestated certificate of incorporation to be applicable or unenforceable in such action.We could be subject to securities class action litigation.In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk isespecially relevant for us because biopharmaceutical companies have experienced significant stock70price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, whichcould harm our business.Recently-enacted U.S. Tax reform legislation could adversely affect our business and financial condition.The TCJA has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limitinginterest deductions, modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testingexpenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”), adopting elements of a territorial taxsystem, imposing a one-time transition tax, or repatriation tax, on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revisingthe rules governing net operating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. In addition, it isunclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point forcomputing state and local tax liabilities. While some of the changes made by the TCJA may adversely affect us in one or more reporting periods andprospectively, other changes may be beneficial on a going forward basis. We continue to work with our tax advisors and auditors to determine the full impactthat the TCJA will have on us on an ongoing basis. We urge our investors to consult with their legal and tax advisors with respect to the TJCA.Item 1B. Unresolved Staff CommentsNot applicable.Item 2. PropertiesOur corporate headquarters are located in Watertown, Massachusetts and consist of 32,933 total square feet of leased office and laboratory space. In October2017, we entered into a lease for approximately 5,100 square feet of additional office space. The leases both expire on March 31, 2020. We also leaseapproximately 2,500 square feet of office and laboratory space in Moscow, Russia on a month to month basis. We believe that our existing facilities aresufficient for our needs for the foreseeable future.Item 3. Legal ProceedingsWe are not party to any material legal proceedings.Item 4. Mine Safety DisclosuresNot applicable.Directors of the RegistrantCarsten Brunn, Ph.D. has served as our President, Chief Executive Officer and member of our board of directors since December 2018. Prior to joining SelectaBiosciences, Inc., Dr. Brunn was the President of Pharmaceuticals for the Americas Region at Bayer and a member of the Global Pharmaceutical ExecutiveCommittee. Prior to being appointed to that role in 2017, he was the President of Bayer Pharmaceuticals in Japan, a role he held since 2013. He also served asthe Chairman of the European Federation of Pharmaceutical Industries and Associations (EFPIA) Japan, an organization representing innovativepharmaceutical companies in Japan. Over the last 25 years, Dr. Brunn has held a number of senior leadership positions in Europe, Asia and the United Statesat leading companies such as Eli Lilly, Novartis, Basilea and Bausch and Lomb. Dr. Brunn graduated from the University of Freiburg in Germany with aMaster of Science in Pharmaceutical Sciences. In addition, he studied at the University of Washington under a research scholarship. He received his Ph.D. inChemistry from the University of Hamburg, Germany and completed his executive education at London Business School.Timothy C. Barabe joined our board of directors in July 2016. Mr. Barabe also serves on the boards of ArQule, Inc., Veeva Systems Inc., and VigilantBiosciences, Inc., a private company. From 2014 to 2017, Mr. Barabe served on the board of directors of Opexa Therapeutics, Inc. Mr. Barabe retired in June2013 from his position as Executive Vice President and Chief Financial Officer of Affymetrix, Inc. Previously, from July 2006 until March 2010, he wasSenior Vice President and Chief Financial Officer of Human Genome Sciences, Inc. From 2004 to 2006, he served as Chief Financial Officer of RegentMedical Limited, a U.K.-based, privately owned, surgical supply company. Mr. Barabe served with Novartis AG from 1982 through August 2004 in asuccession of senior executive positions in finance and general management, most recently as the Chief Financial Officer of Sandoz GmbH, the genericpharmaceutical subsidiary of Novartis. Mr. Barabe received his B.B.A. degree from the University of Massachusetts (Amherst) and his M.B.A. degree from theUniversity of Chicago. Mr. Barabe’s experience as a senior financial executive of life sciences companies and knowledge of the pharmaceutical and biotechindustries contributed to our board of directors’ conclusion that he should serve as a director of our company.71Omid Farokhzad, M.D. is one of our co-founders and has served as a member of our board of directors since 2007. Dr. Farokhzad is the CEO and founder ofSeer Biosciences. Previously, he was a Professor at Harvard Medical School, or HMS, and a physician-scientist at Brigham and Women’s Hospital, or BWH,where he established and directed the BWH Center of Nanomedicine. He currently maintains an unpaid faculty position at HMS and BWH. Prior to joiningthe HMS faculty, Dr. Farokhzad completed his postgraduate clinical and postdoctoral research trainings, respectively, at BWH/HMS and MIT. In 2016, hewas among the recipients of the Ellis Island Medal of Honor, and in 2014, the Golden Door Award from the International Institute of New England, for hisscientific, societal, and economic contributions to America as an immigrant. Dr. Farokhzad was elected to the College of the Fellows of the American Instituteof Medical and Biological Engineering. He is the recipient of the 2013 RUSNANOPRIZE, and was named an Ernst & Young 2012 New England Entrepreneurof the Year. Dr. Farokhzad has been directly involved in the launch and development of four biotechnology companies and, on occasion, has assumedadditional roles in support of management. Dr. Farokhzad currently serves on the Board of Directors of Seer Biosciences, Tarveda Therapeutics and PlaconTherapeutics. From 2006 to 2014, Dr. Farokhzad served on the Board of Directors of BIND Therapeutics, Inc. He received his M.D. and M.A. from BostonUniversity School of Medicine, and his M.B.A. from MIT. Dr. Farokhzad’s extensive knowledge of our business and the nanomedicine field and his medicaltraining contributed to our board of directors’ conclusion that he should serve as a director of our company.Amir Nashat, Ph.D. has served as a member of our board of directors since 2008. Dr. Nashat has been a Partner at Polaris Partners, a venture capital firm, since2009 and focuses on investments in the life sciences. He currently serves on the board of directors of Fate Therapeutics, Inc., aTyr Pharma, Inc., SyrosPharmaceuticals and several private companies. Dr. Nashat has also served as a director of Receptos, Inc., BIND Therapeutics, Inc., as well as AdnexusTherapeutics, Inc. (acquired by Bristol-Myers Squibb Company) and other private companies. Dr. Nashat completed his Ph.D. as a Hertz Fellow in ChemicalEngineering at MIT with a minor in biology. Dr. Nashat earned both his M.S. and B.S. in materials science and mechanical engineering at the University ofCalifornia, Berkeley. Dr. Nashat’s extensive experience as a venture capitalist and board member to numerous companies in the biotechnology industrycontributed to our board of directors’ conclusion that he should serve as a director of our company.Aymeric Sallin, M.S. has served as a member of our board of directors since 2008. Mr. Sallin has served as the Chief Executive Officer of NanoDimension, aventure capital firm, since 2002 and is the founder of that firm. Since 2014, Mr. Sallin has served as a strategic advisory board member of the ÉcolePolytechnique Fédérale de Lausanne, or EPFL. Since 2002, Mr. Sallin has worked to promote nanotechnology around the world, and has received the NSTIFellow Award and 2012 EPFL Alumni award for his contribution to the field of nanotechnology. Mr. Sallin has worked to generate and close investments ofhundreds of millions of dollars into several of NanoDimension’s portfolio companies. He currently serves as a board member of H55, Inc., View, Inc.,CROCUS Technology and Tarveda Therapeutics. Mr. Sallin is also a member of the Swiss Academy of Engineering Science. Mr. Sallin received his Mastersin Physical Engineering from EPFL in Lausanne, Switzerland. Mr. Sallins' extensive knowledge of our business and the nanomedicine field contributed toour board of directors’ conclusion that he should serve as a director of our company.Timothy A. Springer, Ph.D. has served as a member of our board of directors since June 2016 and as a scientific advisor to us since December 2008. Since1989, Dr. Springer has served as the Latham Family Professor at Harvard Medical School. He has also served as Senior Investigator in the Program in Cellularand Molecular Medicine at Boston Children’s Hospital since 2012, and as Professor of Biological Chemistry and Molecular Pharmacology at HarvardMedical School and Professor of Medicine at Boston Children’s Hospital since 2011. Dr. Springer was the Founder of LeukoSite, a biotechnology companyacquired by Millennium Pharmaceuticals in 1999. Additionally, he is a founder, investor and board member of Scholar Rock and Morphic Therapeutic. Dr.Springer is a member of the National Academy of Sciences and his honors include the Crafoord Prize, the American Association of ImmunologistsMeritorious Career Award, the Stratton Medal from the American Society of Hematology, and the Basic Research Prize from the American Heart Association.Dr. Springer received a B.A. from the University of California, Berkeley, and a Ph.D. from Harvard University. Dr. Springer’s extensive knowledge of ourbusiness and the nanomedicine field contributed to our board of directors’ conclusion that he should serve as a director of our company.Patrick Zenner has served as a member of our board of directors since June 2017. Mr. Zenner retired in 2001 from the position of President and ChiefExecutive Officer of Hoffmann-La Roche Inc., North America, based in Nutley, N.J. Mr. Zenner held various executive positions during his 32-year careerwith the company. Mr. Zenner is currently a member of the board of trustees of Creighton University and is Chairman of the board of trustees of FairleighDickinson University. In addition, Mr. Zenner is Chairman of the board and a director of both ArQule, Inc. and West Pharmaceutical Services, Inc. Until itssale in 2012, Mr. Zenner was a director of Par Pharmaceuticals, Inc. In 2010, he resigned from the boards of Geron Corporation, Xoma Ltd. and ExactSciences, Inc. Until its sale in September 2009, Mr. Zenner was a director of CuraGen Corporation. Mr. Zenner received a B.S./B.A. from Creighton Universityand an M.B.A. from Fairleigh Dickinson University. Mr. Zenner’s extensive experience as a senior pharmaceutical executive and board member to numerouscompanies in the biotechnology industry contributed to our board of directors’ conclusion that he should serve as a director of our company.72Executive Officers of the RegistrantLloyd Johnston, Ph.D. has served as our Chief Operating Officer and Senior Vice President, Research and Development since January 2014. Dr. Johnstonserved as Selecta’s Senior Vice President of Pharmaceutical Research, Development and Operations from January 2011 to December 2013 and Vice Presidentof Pharmaceutical Research from July 2008 to January 2011. Prior to joining Selecta, Dr. Johnston was Vice President of Operations for Alkermes, Inc. from2004 to 2008, and served in several roles, including Director of Manufacturing, from 1999 to 2004, with responsibility for process development, scale-up,and clinical manufacturing for pulmonary and sustained release injectable products, as well as leadership of Alkermes’ manufacturing facility in Chelsea,MA. At Alkermes, Dr. Johnston was also a project leader and member of Steering Committees for numerous products through various stages of developmentfrom Phase 1 through registration. Dr. Johnston was an original member of Advanced Inhalation Research Inc., or AIR, a private company formed in 1998 andacquired by Alkermes in 1999. Prior to joining AIR, Dr. Johnston was a lecturer in the Department of Chemical Engineering at the University of New SouthWales in Sydney, Australia. He received his B.Sc. in Chemical Engineering from Queen’s University in Ontario, Canada, and his M.S. and Ph.D. in ChemicalEngineering from MIT.Takashi Kei Kishimoto, Ph.D. has served as our Chief Scientific Officer since June 2011. Prior to joining Selecta, Dr. Kishimoto was Vice President ofDiscovery Research at Momenta Pharmaceuticals, Inc., where he served in several leadership positions from March 2006 to June 2011 and led amultidisciplinary team in advancing both novel and complex generic products for inflammation, oncology, and cardiovascular disease. He served as SeniorDirector of Inflammation Research at Millennium Pharmaceuticals, Inc. from 1999 to 2006, where he provided the scientific leadership for four programs inclinical development, and as an Associate Director of Research at Boehringer Ingelheim Pharmaceuticals. Dr. Kishimoto has published over 60 peer-reviewedarticles in scientific journals, including Nature, Science, Cell and the New England Journal of Medicine. Dr. Kishimoto received his B.A. from New Collegeof the University of South Florida and his Ph.D. in Immunology from Harvard University.John Leaman, M.D. has served as our Chief Financial Officer, Head of Corporate Strategy since October 2017. Dr. Leaman previously served as Head ofCorporate Development at InfaCare Pharmaceutical Corp., a specialty pharmaceutical company that was recently acquired by Mallinckrodt plc., from June2016 to September 2017. Prior to this, Dr. Leaman was Chief Financial Officer of Medgenics, Inc., a publicly traded biotech company from September 2013to February 2016. He also previously held senior roles at Shire plc from 2012 to 2014 and Devon Park Bioventures, a venture capital fund targetinginvestments in therapeutics companies from 2007 to 2012. Dr. Leaman brings to Selecta extensive licensing, merger and acquisition experience and beganhis career serving a range of life sciences companies as an Associate Principal at McKinsey & Company from 2002 to 2007. Dr. Leaman received an M.D.from the Perelman School of Medicine at the University of Pennsylvania, an M.B.A. from the Wharton School at the University of Pennsylvania, a B.A. inpsychology, philosophy and physiology from Oriel College, University of Oxford while completing a Rhodes Scholarship, and a B.S. in biology fromElizabethtown College.Stephen Smolinski has served as our Chief Commercial Officer since October 2017. Mr. Smolinski previously served as the Vice President and Head of theNorth American Rheumatology Business Unit of Sanofi/Genzyme, a pharmaceutical company from June 2015 to August 2017, where he led the developmentof the company’s commercialization plans for the rheumatoid arthritis medicine KEVZARA®. Prior to this, he served as Group Vice President of Immunology& Inflammation, Global Strategic Unit at Sanofi a pharmaceutical company, from July 2013 to June 2015. Mr. Smolinski also previously held seniorcommercial roles at Roche-Genentech, Bristol-Myers Squibb, Johnson & Johnson and Savient Pharmaceuticals. Mr. Smolinski received a B.S. in health careadministration from Oregon State University.73PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is publicly traded on The Nasdaq Global Market under the symbol “SELB.”HoldersAs of March 8, 2019, there were approximately 44,733,437 shares of our common stock outstanding held by approximately 44 holders of record.DividendsWe have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion ofour business and do not expect to pay any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made atthe discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and otherfactors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. In addition, our ability to pay cashdividends is currently prohibited by the terms of our credit facility.Stock Performance GraphThis performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by referenceinto any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.The graph set forth below compares the cumulative total stockholder return on our common stock between June 21, 2016 (the date of our initial publicoffering) and December 31, 2018, with the cumulative total return of (a) the Nasdaq Biotechnology Index and (b) the Nasdaq Composite Index, over the sameperiod. This graph assumes the investment of $100 at the market close on June 21, 2016 in our common stock, the Nasdaq Biotechnology Index and theNasdaq Composite Index and assumes the reinvestment of dividends, if any. The stock price performance of the following graph is not necessarily indicativeof future stock price performance.74Company/Index6/21/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 SelectaBiosciences, Inc.$100.00 $101.79 $122.50 $102.29 $141.86 $130.36 $70.07 $72.79 $94.64 $111.07 $19.00NasdaqComposite Index100.00 110.25 112.08 123.43 128.57 136.36 145.29 146.14 155.39 166.48 137.28NasdaqBiotechnologyIndex100.00 112.98 103.59 114.82 121.55 130.97 126.00 125.07 128.76 143.01 113.48Purchases of Equity Securities by the Issuer or Affiliated PurchasersWe did not repurchase any of our equity securities during the quarter ended December 31, 2018, nor issue any securities that were not registered underSecurities Act.Recent Sales of Unregistered Securities and Use of Proceeds from Registered SecuritiesNone.Item 6. Selected Consolidated Financial DataYou should read the following selected consolidated financial data together with our consolidated financial statements and the related notes and with the“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K. The selectedconsolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by theconsolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.We have derived the consolidated statement of operations and comprehensive loss data for the years ended December 31, 2018, 2017, and 2016, and theconsolidated balance sheet data as of December 31, 2018, and 2017, from our audited consolidated financial statements included elsewhere in this AnnualReport on Form 10-K. The consolidated statement of operations and comprehensive loss for the years ended December 31, 2015 and 2014 the consolidatedbalance sheet data as of December 31, 2016, 2015 and 2014 are derived from our audited consolidated financial statements that are not included in thisAnnual Report. Our historical results are not necessarily indicative of the results that should be expected in the future. Year Ended December 31, (In thousands, except share and per share data)2018 2017 2016 2015 2014Consolidated Statement of Operations Data Grant and collaboration revenue$903 $207 $8,083 $6,011 $3,040Operating expenses65,925 63,991 42,753 31,315 18,439Loss from operations(65,022) (63,784) (34,670) (25,304) (15,399)Loss on extinguishment of debt— (673) — — —Other income (expense), net(314) (864) (1,540) 130 2,519Net loss$(65,336) $(65,321) $(36,210) $(25,174) $(12,880)Net loss per share: Basic and diluted$(2.92) $(3.20) $(3.89) $(15.13) $(7.84)Weighted average common shares outstanding: Basic and diluted22,389,286 20,425,050 10,493,939 2,150,422 2,090,677 As of December 31, (In thousands)2018 2017 2016 2015 2014Consolidated Balance Sheet Data Cash, cash equivalents and short-term deposits and investments$37,403 $96,562 $84,141 $36,462 $16,592Total assets$44,482 $101,100 $89,301 $42,824 $22,228Loans payable$21,385 $21,042 $7,977 $11,855 $4,824Redeemable convertible preferred stock$— $— $— $137,482 $94,033Total stockholders' equity (deficit)$(5,418) $51,814 $54,957 $(116,493) $(87,755)75Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 6. SelectedConsolidated Financial Data” and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Thisdiscussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statementsregarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A “Risk Factors.”OVERVIEWWe are a clinical-stage biopharmaceutical company using our ImmTOR technology with the goal to effectively and safely treat rare and serious diseases byenabling the development of novel biologic therapies that would otherwise be limited by their immunogenicity. Many such diseases are treated withbiologic therapies that are foreign to the patient’s immune system and therefore elicit an undesired immune response.Our proprietary tolerogenic ImmTOR technology encapsulates an immunomodulator in biodegradable nanoparticles to mitigate the formation of ADAs byinducing antigen-specific immune tolerance to biologic drugs. We believe ImmTOR has potential to enhance the efficacy without compromising the safetyof existing approved biologic drugs, improve product candidates under development and enable novel therapeutic modalities, such as re-administration ofsystemic gene therapy.Our lead product candidate, SEL-212, is a combination of a therapeutic uricase enzyme and our ImmTOR technology that is designed to be the first biologictreatment that durably controls uric acid while also dissolving harmful deposits of uric acid in patients with chronic refractory gout, a debilitating rare diseasewith an unmet medical need. We have submitted to the FDA two investigational new drug, or IND, applications for SEL-212, both of which are active. EachIND lists us as the named sponsor and is indicated for the treatment of chronic gout in adult patients refractory to conventional therapy. SEL-212 is currentlyin a Phase 2 clinical program in multiple clinical sites in the United States. Based on our Phase 1/2 clinical data, we believe that SEL-212 has the potential tocontrol serum uric acid levels and mitigate the formation of ADAs in response to the therapeutic enzyme. We are planning to conduct a head-to-head clinicaltrial of SEL-212 compared to the current FDA-approved uricase therapy, Krystexxa.SEL-212 is designed as a monthly treatment for chronic refractory gout consisting of ImmTOR co-administered with pegadricase, our proprietary pegylateduricase. Our preclinical data indicate that ImmTOR, when co-administered with pegadricase, may induce antigen-specific immune tolerance to pegadricaseand substantially reduce the formation of associated ADAs. Our Phase 1 data shows that ImmTOR mitigated the formation of ADAs against pegadricase after asingle dose of SEL-212. We believe that SEL-212 has the potential to offer a uniquely effective treatment for patients with chronic refractory gout, while alsodemonstrating the clinical effectiveness of our ImmTOR technology. We expect our clinical and marketing strategy for SEL-212 to initially focus on theestimated 160,000 patients in the United States with chronic refractory gout that are being treated by rheumatologists.We are also developing two gene therapy product candidates in preclinical development for rare inborn errors of metabolism. SEL-302, our lead gene therapyproduct candidate, is a potential treatment for methylmalonic acidemia, which can cause severe developmental defects and premature death as a result of anaccumulation of toxic metabolites. Our second gene therapy product candidate, SEL-313, is being developed to treat ornithine transcarbamylase deficiency.In September 2018, we announced a new collaboration with CureCN, a European consortium, for the use of our ImmTOR technology in combination with anAAV gene therapy in Crigler-Najjar syndrome, a rare genetic disorder characterized by an inability to properly convert and clear bilirubin from the body.We expect CureCN to initiate preclinical toxicology studies in the first half of 2019 and for the combination product candidate to enter the clinic in thesecond half of 2019 with the goal of potentially re-dosing gene therapy.We were incorporated in 2007 under the laws of the State of Delaware and our corporate headquarters is in Watertown, Massachusetts. Our operations to datehave been limited to organizing and staffing our company, business planning, acquiring operating assets, raising capital, developing our technology,identifying potential nanoparticle immunomodulatory product candidates, research and development, undertaking preclinical studies and conductingclinical trials. To date, we have financed our operations primarily through the public offering and private placements of our securities, funding received fromresearch grants and collaboration arrangements and our credit facility. We do not have any products approved for sale and have not generated any productsales. All of our revenue to date has been generated from research grants and contractsSince inception, we have incurred significant operating losses. We incurred net losses of $65.3 million and $65.3 million for the years ended December 31,2018 and 2017, respectively. As of December 31, 2018, we had an accumulated deficit of $280.4 million. We expect to continue incurring significantexpenses and operating losses for at least the next several years as we:76- conduct additional clinical trials for SEL‑212;- continue the research and development of our other product candidates;- seek to enhance our ImmTOR technology and discover and develop additional product candidates;- seek regulatory approvals for any product candidates that successfully complete clinical trials;-potentially establish a sales, marketing and distribution infrastructure and scale‑up external manufacturing capabilities to commercialize any productsfor which we may obtain regulatory approval;- maintain, expand and protect our intellectual property portfolio, including through licensing arrangements; and-add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our productdevelopment and potential future commercialization efforts and to support our operations as a public company.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debtfinancings, license and collaboration agreements with partners, and research grants. We may be unable to raise capital when needed or on reasonable terms, ifat all, which would force us to delay, limit, reduce or terminate our product development or future commercialization efforts. We will need to generatesignificant revenues to achieve profitability, and we may never do so.The current operating plan accounts for funding in preparation for the planned Phase 3 clinical program for SEL-212. However, prior to beginning the Phase3 clinical program, we expect to conduct the planned head-to-head Phase 2 trial against Krystexxa. We believe that we have the financial resources tocomplete the planned head-to-head Phase 2 trial against Krystexxa, but will require an additional equity offering or other external sources of capital toconduct the planned Phase 3 program for SEL-212. We have based this estimate on assumptions that may prove to be wrong, and we could use our capitalresources sooner than we currently expect. Because of the uncertainty in securing additional capital, we have concluded that substantial doubt exists withrespect to our ability to continue as a going concern within one year after the date of the filing of this Annual Report on Form 10-K. For additionalinformation, see “Liquidity and Capital Resources.”The consolidated financial information presented below includes the accounts of Selecta Biosciences Inc. and our wholly owned subsidiaries, Selecta (RUS)LLC, a Russian limited liability company, or Selecta RUS, and Selecta Biosciences Security Corporation, a Massachusetts securities corporation. Allintercompany accounts and transactions have been eliminated.FINANCIAL OPERATIONS OVERVIEWGrant and collaboration revenueTo date, we have not generated any product sales. Our revenue consists of grant and collaboration revenue, which includes amounts recognized related toupfront and milestone payments for research and development funding under collaboration and license agreements. In addition, we earn revenue under theterms of government contracts or grants, which require the performance of certain research and development activities. We expect that any revenue wegenerate will fluctuate from quarter to quarter because of the timing and amount of fees, research and development reimbursements and other payments fromcollaborators. We do not expect to generate revenue from product sales for at least the next several years. If we or our collaborators fail to complete thedevelopment of our product candidates in a timely manner or fail to obtain regulatory approval as needed, our ability to generate future revenue will beharmed, and will affect the results of our operations and financial position. For a further description of the agreements underlying our collaboration andgrant‑based revenue, see Notes 2 and 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Research and developmentOur research and development expenses consist of external research and development costs, which we track on a program‑by‑program basis and primarilyinclude contract manufacturing organization, or CMO, related costs, fees paid to contract research organizations, or CROs, and internal research anddevelopment costs, which are primarily compensation expenses for our research and development employees, lab supplies, analytical testing, allocatedoverhead costs and other related expenses. Our research and development costs are often devoted to expanding our programs and are not necessarilyallocable to a specific target.We have incurred a total of $198.0 million in research and development expenses from inception through December 31, 2018, with a majority of theexpenses being spent on the development of SEL‑212 and a prior nicotine vaccine candidate, and the remainder being spent on our various discovery andpreclinical stage product candidate programs and the general expansion of our technology.77As we expand the clinical development of SEL‑212 and our gene therapy programs, we expect our research and development expenses to increase. Inaddition, as a result of the termination of the Sanofi Agreement, which was effective on May 8, 2017, we exercised our right to acquire the developmentprograms under the Sanofi Agreement. The exercise itself did not require the payment of any consideration to Sanofi. We are solely responsible forperforming and funding any development and clinical trial activities relating to further development of vaccine candidates that we choose to undertake afterthe termination date of the Sanofi Agreement.We expense research and development costs as incurred. Conducting a significant amount of research and development is central to our business model.Product candidates in clinical development generally have higher development costs than those in earlier stages of development, primarily due to the sizeand duration of clinical trials. We plan to increase our research and development expenses for the foreseeable future as we seek to complete development ofSEL‑212, and to further advance our preclinical and earlier stage research and development projects. The successful development of our clinical andpreclinical product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessaryto complete the development of SEL‑212 or any of our preclinical programs or the period, if any, in which material net cash inflows from these productcandidates may commence. Clinical development timelines, the probability of success and development costs can differ materially from our expectations. Forexample, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those which we currently expect will be required forthe completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could berequired to expend significant additional financial resources and time to complete any clinical development.The following table sets forth the components of our research and development expenses during the periods indicated (in thousands): Year ended December 31, 2018 2017 2016Research and development expenses (key projects and initiatives): SEL-212$22,770 $19,593 $9,936SELA-0701,602 1,227 3,781Discovery and preclinical stage product candidate programs, collectively2,623 6,933 1,583Other internal research and development expenses20,692 17,412 14,402 Total research and development expenses$47,687 $45,165 $29,702 General and administrativeGeneral and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance,business development and support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research anddevelopment expenses, travel expenses for our general and administrative personnel and professional fees for auditing, tax and corporate legal services,including intellectual property-related legal services. We expect that our general and administrative expenses will increase in future periods, reflecting anexpanding infrastructure and increased professional fees associated with being a public reporting company and maintaining and expanding our intellectualproperty portfolio.Investment incomeInvestment income consists primarily of interest income earned on our cash and cash equivalents and short-term investments.Loss on extinguishment of debtWe recognized a loss on extinguishment of debt of $0.7 million for the year ended December 31, 2017. The loss on extinguishment of debt consists of a finalpayment fee, a loan prepayment fee, the write-off of unamortized debt issuance costs, unamortized warrant valuation discount and miscellaneous costsincurred as a result of our repayment of the 2015 Term Loan totaling $10.0 million.Interest expenseInterest expense consists of interest expense on amounts borrowed under our credit facilities.Other income (expense)Other income (expense) for the years ended December 31, 2018, 2017 and 2016 was de minimis.Foreign currency transaction gain (loss)78The functional currency of our Russian subsidiary is the Russian ruble. In addition to holding cash denominated in Russian rubles, our Russian bankaccounts also hold cash balances denominated in U.S. dollars to facilitate payments to be settled in U.S. dollars or other currencies. At December 31, 2018and December 31, 2017, we maintained cash of $0.4 million and $1.3 million, respectively, in Russian banks, of which $0.4 million and $1.2 million wasdenominated in U.S. dollars for the year ended December 31, 2018 and the year ended December 31, 2017, respectively. The amounts denominated in U.S.dollars and used in transacting the day-to-day operations of our Russian subsidiary are subject to transaction gains and losses, which are reported as incurred.Income taxesOn December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act ("Tax Reform Act"). The legislation significantlychanges U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, expanding the tax base andimposing a tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate federal income tax ratefrom a maximum of 35% to a flat 21% rate, effective January 1, 2018. We have recognized the impact of the Tax Reform Act in these consolidated financialstatements and related disclosures. The impact of the remeasurement of our U.S. deferred tax assets and liabilities to 21% resulted in the reduction of deferredtax assets of approximately $23.4 million, which is offset by a full valuation allowance, thus there is no net effect. We recorded no tax expense related to thedeemed repatriation tax because our foreign entity, Selecta (RUS) is a foreign disregarded entity, which is not subject to the repatriation tax.CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATESOur management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statementsrequires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities inour consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed byus for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience,known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reportedresults for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.Clinical Trial CostsClinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these costs to thirdparties. Third party clinical trial expenses include patient costs, clinical research organization costs and costs for data management. The accrual for site andpatient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. Paymentsfor these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on theconsolidated balance sheets as a prepaid asset or accrued clinical trial cost. These third party agreements are generally cancelable, and related costs arerecorded as research and development expenses as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered forfuture R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. Wealso record accruals for estimated ongoing clinical research and development costs. When evaluating the adequacy of the accrued liabilities, we analyzeprogress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may bemade in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. Thehistorical clinical accrual estimates made by the Company have not been materially different from the actual costs.Revenue RecognitionWe currently generate our revenue through grants, collaboration and license agreements with strategic collaborators for the development andcommercialization of product candidates. Prior to January 1, 2018, we recognized revenue in accordance with ASC Topic 605, Revenue Recognition ("ASC605"). Under ASC 605, we recognized revenue when all of the following criteria were 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.79Under ASC 605, amounts received prior to satisfying the revenue recognition criteria were recognized as deferred revenue in our consolidated balance sheets.Amounts expected to be recognized as revenue within the 12 months following the balance sheet date were classified as deferred revenue, current portion.Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date were classified as deferred revenue, net of currentportion.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 and its related amendments(collectively referred to as ASC 606) requires that an entity recognize revenue when it transfers promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted ASC 606, Revenue from Contractswith Customers, on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The reported resultsfor 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, which is also referredto herein as "legacy GAAP" or the "previous guidance". Refer to Note 13 to our consolidated financial statements included elsewhere in this Annual Reporton Form 10-K for the impact of adoption of ASU 2014-09 on our consolidated financial position, results of operations, equity and cash flows as of theadoption date and for the three and twelve months ended December 31, 2018. The adoption of ASC 606 represents a change in accounting principle that willmore closely align revenue recognition with the delivery of our services and will provide financial statement readers with enhanced disclosures.Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expectsto receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract, includingwhether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocatethe transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy each performance obligation. We onlyapply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services ittransfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promisedwithin each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. If a promisedgood or service is not distinct, it is combined with other performance obligations. We then recognize as revenue the amount of the transaction price that isallocated to the respective performance obligation when (or as) the performance obligation is satisfied. For example, certain performance obligationsassociated with Spark (see Note 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K) will be satisfied overtime, and revenue will be recognized using the output method, based on the proportion of actual deliveries to the total expected deliveries over the initialterm.Collaboration and Grant RevenueWe currently generate our revenue through grants, collaboration and license agreements with strategic collaborators for the development andcommercialization of product candidates. The grants, collaboration and license agreements are within the scope of ASC 606.In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements, we perform the five steps above. As partof the accounting for the arrangement, we must develop assumptions that require judgment to determine the stand-alone selling price for each performanceobligation identified in the contract. We use key assumptions to determine the stand-alone selling price, which may include market conditions,reimbursement rates for personnel costs, development timelines and probabilities of regulatory success.We capitalize the incremental costs of obtaining a contract with a customer if we expect to recover those costs. Such incremental costs would not have beenincurred if the contract with a customer had not been obtained.Licenses of intellectual property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified inthe arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and thecustomer is able to use and benefit from the license. If not distinct, the license is combined with other performance obligations in the contract. For licensesthat are combined with other performance obligations, we assess the nature of the combined performance obligation to determine whether the combinedperformance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizingrevenue. We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.Optional licenses are evaluated to determine if they are issued at a discount, and therefore, represent material rights and accounted for as separate performanceobligations.80Milestone Payments: At the inception of each arrangement that includes developmental and regulatory milestone payments, we evaluate whether theachievement of each milestone specifically relates to our efforts to satisfy a performance obligation or transfer a distinct good or service within a performanceobligation. If the achievement of a milestone is considered a direct result of our efforts to satisfy a performance obligation or transfer a distinct good orservice and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocated to that distinct good orservice. If the milestone payment is not specifically related to our effort to satisfy a performance obligation or transfer a distinct good or service, the amount isallocated to all performance obligations using the relative standalone selling price method. We also evaluate the milestones to determine whether they areconsidered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probablethat a significant revenue reversal would not occur, the associated milestone value is included in the transaction price to be allocated, otherwise, suchamounts are constrained and excluded from the transaction price. At the end of each subsequent reporting period, we re-evaluate the probability ofachievement of such development milestones and any related constraint, and if necessary, adjusts our estimate of the transaction price. Any such adjustmentsto the transaction price are allocated to the performance obligations on the same basis as at contract inception. Amounts allocated to a satisfied performanceobligation shall be recognized as revenue, or as a reduction of revenue, in the period in which the transaction price changes.Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development orcommercial supply at the customer’s discretion are evaluated to determine if they are distinct and optional. For optional services that are distinct, we assess ifthey are priced at a discount, and therefore, provide a material right to the licensee to be accounted for as separate performance obligations.Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be thepredominant item to which the royalties relate, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performanceobligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied) in accordance with the royalty recognitionconstraint. Emerging growth company statusThe Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an ‘‘emerging growth company’’ such as us to take advantage of an extendedtransition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to privatecompanies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accountingstandards as other public companies that are not emerging growth companies.Smaller Reporting CompanyWe qualify as a “smaller reporting company” under the rules of the Securities Act and the Exchange Act. As a result, in addition to the exemptions availableto us as an “emerging growth company,” we may choose to take advantage of certain scaled disclosure requirements available specifically to smallerreporting companies. For example, we are not required to provide a contractual obligations table in Part II, Item 7 of our Annual Report on Form 10-K and weare permitted to include only two years of consolidated financial statements. Additionally, even if we cease to be an emerging growth company as notedabove, as long as we continue to be a smaller reporting company, we may continue to rely on the reduced executive compensation disclosure obligationsavailable to emerging growth companies. We will remain a smaller reporting company until the last day of the fiscal year in which the aggregate market valueof our common stock held by non-affiliated persons and entities, or our public float, was less than $250 million as of the last business day of our mostrecently completed second fiscal quarter, or the last day of the fiscal year in which we have at least $100 million in revenue and at least $700 million inpublic float as of the last business day of our most recently completed second fiscal quarter.RESULTS OF OPERATIONSComparison of the Years Ended December 31, 2018 and 2017RevenueThe following is a comparison of revenue for the years ended December 31, 2018 and 2017 (in thousands, except percentages): Year Ended December 31, Increase 2018 2017 (decrease)Grant revenue$903 $159 $744 468%Collaboration revenue— 48 (48) —%Total revenue$903 $207 $696 336%81During the year ended December 31, 2018, we recognized the remaining grant revenues from NIDA after receiving final approval from NIDA. The increase ingrant revenue was the sole result of the conclusion of NIDA versus the conclusion of the grant terms associated with our other grant revenues in 2017.Research and developmentThe following is a comparison of research and development expenses for the years ended December 31, 2018 and 2017 (in thousands, except percentages): Year Ended December 31, Increase 2018 2017 (decrease)Research and development$47,687 $45,165 $2,522 6% During the year ended December 31, 2018, our research and development expenses increased by $2.5 million, or 6%, as compared to 2017, reflectingincreases of $3.2 million relating to our Phase 2 trial of SEL-212 and planning for the SEL-212 Phase 3 program, $1.7 million of compensation costs relatedto headcount growth to support the clinical trial programs and pipeline advancements, $0.9 million for facilities, and $0.7 million of stock compensationexpense, offset by a decrease of $4.3 million for preclinical stage product programs.General and administrativeThe following is a comparison of general and administrative expenses for the years ended December 31, 2018 and 2017 (in thousands, except percentages): Year Ended December 31, Increase 2018 2017 (decrease)General and administrative$18,238 $18,826 $(588) (3)% During the year ended December 31, 2018, our general and administrative expenses decreased by $0.6 million, or 3%, as compared to 2017, primarily due todecreases of $0.5 million in patent expense, $0.7 million in consulting fees and $0.8 million in contract license fees associated with collaborations, offset byan increase of $1.0 million in stock compensation expense.Investment incomeInvestment income increased by $0.4 million during the year ended December 31, 2018 as compared to 2017. This increase was due to the investmentportfolio composition and higher yield earned on the investments.Loss on extinguishment of debtThere was no extinguishment of debt during the year ended December 31, 2018. For the year ended December 31, 2017, we recognized a loss onextinguishment of debt of $0.7 million. The loss on extinguishment of debt consists of a final payment fee, a loan prepayment fee, the write-off ofunamortized debt issuance costs, unamortized warrant valuation discount and miscellaneous costs incurred as a result of our repayment of the 2015 TermLoan totaling $10.0 million.Foreign currency transaction gain (loss)We recognized foreign currency gains of $0.1 million and losses of $0.1 million during the years ended December 31, 2018 and 2017, respectively, reflectinglittle fluctuation of the U.S. dollar to the Russian ruble from the beginning to the end of each period.Interest expenseInterest expense was $1.5 million and $1.2 million for the years ended December 31, 2018 and 2017, respectively, representing interest expense andamortization of the carrying costs of our credit facilities.Other income (expense)Other income (expense) was de minimis for the years ended December 31, 2018 and 2017.Net LossNet loss for the year ended December 31, 2018 was $65.3 million compared to $65.3 million for the year ended December 31, 2017.82Comparison of the Years Ended December 31, 2017 and 2016RevenueThe following is a comparison of revenue for the years ended December 31, 2017 and 2016 (in thousands, except percentages): Year Ended December 31, Increase 2017 2016 (decrease)Grant revenue$159 $5,243 $(5,084) (97)%Collaboration revenue48 2,840 (2,792) (98)%Total revenue$207 $8,083 $(7,876) (97)%During the year ended December 31, 2017, total revenue decreased by $7.9 million, or 97%, as compared to 2016. The decrease in grant revenue was theresult of the conclusion of the grant terms associated with certain of our other grant revenues. The decrease in collaboration revenues was due to thetermination of the Sanofi collaboration agreement in November 2016.Research and developmentThe following is a comparison of research and development expenses for the years ended December 31, 2017 and 2016 (in thousands, except percentages): Year Ended December 31, Increase 2017 2016 (decrease)Research and development$45,165 $29,702 $15,463 52% During the years ended December 31, 2017, our research and development expenses increased by $15.5 million, or 52%, as compared to the same period in2016, reflecting increases of $9.7 million relating to our Phase 2 trial of SEL-212 and planning for the SEL-212 Phase 3 program, $5.4 million relating todiscovery and preclinical stage product programs, $0.9 million for facilities and office costs, $0.6 million of stock compensation expense, $0.8 million ofcompensation costs related to headcount growth to support the clinical trial programs and pipeline advancements and $3.0 million of depreciation and otherexpenses, offset by decreases of $2.6 million relating to our Nicotine product candidate and $2.3 million for licenses and permits.General and administrativeThe following is a comparison of general and administrative expenses for the years ended December 31, 2017 and 2016 (in thousands, except percentages): Year Ended December 31, Increase 2017 2016 (decrease)General and administrative$18,826 $13,051 $5,775 44% During the year ended December 31, 2017, our general and administrative expenses increased by $5.8 million, or 44%, as compared to the same period in2016, primarily due to $1.9 million related to growth in headcount to support public company filings and control processes, a $0.6 million increase inprofessional fees related to the universal shelf registration filing, $1.5 million of stock compensation expense, $0.8 million relating to contract licensing feesassociated with collaborations, $0.5 million of office and facilities expense and $0.6 million in consulting fees, offset by a $0.3 million reduction in patentcosts.Investment incomeInvestment income increased by $0.4 million during the year ended December 31, 2017 as compared to 2016. This increase was due to the investmentportfolio composition and higher yield earned on the investments.Loss on extinguishment of debtWe recognized a loss on extinguishment of debt of $0.7 million during the year ended December 31, 2017. There was no extinguishment of debt during theyear ended December 31, 2016. The loss on extinguishment of debt consists of a final payment fee, a loan prepayment fee, the write-off of unamortized debtissuance costs, unamortized warrant valuation discount and miscellaneous costs incurred as a result of our repayment of the 2015 Term Loan totaling $10.0million.Foreign currency transaction gain (loss)We recognized foreign currency losses of $0.1 million during the year ended December 31, 2017, compared to a loss of $0.5 million during the year endedDecember 31, 2016, respectively, reflecting the fluctuation of the U.S. dollar to the Russian ruble from the beginning to the end of each period.83Interest expenseInterest expense was $1.2 million and $1.3 million for the years ended December 31, 2017 and 2016, respectively, representing interest expense andamortization of the carrying costs of our credit facilities.Other income (expense)Other income (expense) was de minimis for the years ended December 31, 2017 and 2016.LIQUIDITY AND CAPITAL RESOURCESSince our inception, we have incurred recurring net losses. We expect that we will continue to incur losses and that such losses will increase for theforeseeable future. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we willneed additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, third‑party funding and othercollaborations and strategic alliances.From our inception through December 31, 2018, we have raised an aggregate of $310.8 million to fund our operations, of which $118.5 million was from thesale of preferred stock, $11.1 million was from government grants, $25.3 million was from borrowings under our credit facility, $44.3 million was through ourcollaborations and license agreements, $64.5 million in combined net proceeds was raised from our initial public offering in June 2016 and the underwriters'exercise in part of their option to purchase additional shares of our common stock in July 2016, and $47.1 million in combined net proceeds was raised fromour private placement of common stock in June 2017, or the 2017 PIPE.On June 26, 2017, we entered into a Securities Purchase Agreement, or the Institutional Purchase Agreement, with the purchasers named therein, or theInstitutional Investors, and a Securities Purchase Agreement, or the Springer Purchase Agreement, with Timothy Springer, Ph.D., a member of our board ofdirectors. We closed the Institutional Purchase Agreement and the Springer Purchase Agreement on June 27, 2017, resulting in total aggregate gross proceedsto us of $50.0 million.On August 10, 2017, we entered into an open market sale agreement with Jefferies LLC, as sales agent, or the Sales Agreement, pursuant to which we may,from time to time, issue and sell common stock with an aggregate value of up to $50.0 million in an "at-the market offering". To date, there have been nosales of common stock pursuant to the Sales Agreement.As of December 31, 2018, our cash and cash equivalents were $37.4 million, of which $0.4 million was held by our Russian subsidiary designated solely foruse in its operations. Our Russian subsidiary cash is consolidated for financial reporting purposes. In January 2019, the Company completed an offering of itscommon stock which raised an additional $31.3 million in net proceeds to support operations.In addition to our existing cash equivalents, we receive research and development funding pursuant to our research grants and collaboration agreements.Currently, funding from research grants and payments under our collaboration agreements represent our only source of committed external funds.IndebtednessOn September 12, 2017, we entered into a term loan facility of up to $21.0 million with Silicon Valley Bank, a California corporation, or SVB, the proceedsof which were used to repay our previously existing term loan facility with Oxford Finance LLC and Pacific Western Bank, as successor in interest to Square1 Bank, and for general corporate and working capital purposes. The term loan facility is governed by a loan and security agreement, dated September 12,2017, between us and SVB, which was funded in full on September 13, 2017. The term loan facility with SVB is secured by a lien on substantially all assets,other than intellectual property, provided that such lien on assets includes any rights to payments and proceeds from the sale, licensing or disposition ofintellectual property. We also granted SVB a negative pledge with respect to our intellectual property.The term loan facility contains customary covenants and representations, including but not limited to financial reporting obligations and limitations ondividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.The term loan facility also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rightsfor the benefit of SVB.The events of default under the term loan facility include, but are not limited to, our failure to make any payments of principal or interest under the term loanfacility or other transaction documents, our breach or default in the performance of any covenant under the term loan facility or other transaction documents,the occurrence of a material adverse effect, making a false or misleading representation or warranty in any material respect under the term loan facility, ourinsolvency or bankruptcy, any attachment or judgment on our assets in excess of approximately $0.3 million, or the occurrence of any default under any ofour agreements or obligations involving indebtedness in excess of approximately $0.3 million. If an event of default occurs, SVB is84entitled to take enforcement action, including acceleration of amounts due under the term loan facility. If we raise any additional debt financing, the terms ofsuch additional debt could further restrict our operating and financial flexibility.Plan of operations and future funding requirementsAs of the date of this Annual Report on Form 10-K, we have not generated any product sales. We do not know when, or if, we will generate revenue fromproduct sales. We will not generate significant revenue from product sales unless and until we obtain regulatory approval and commercialize one of ourcurrent or future product candidates. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-partyclinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses, and general overhead costs.Moreover, as a result of the termination of the Sanofi Agreement, which was effective on May 8, 2017, we exercised our right to acquire the developmentprograms under the Sanofi Agreement. This exercise itself did not require the payment of any consideration to Sanofi. We are solely responsible forperforming and funding any development and clinical trial activities relating to further development of vaccine candidates that we choose to undertake afterthe termination date of the agreement. We expect that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as wecontinue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subjectto risks in the development of our products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors thatmay adversely affect our business. We expect that we will need substantial additional funding to support our continuing operations.As of December 31, 2018 and December 31, 2017, we had an accumulated deficit of $280.4 million and $216.9 million, respectively. The Companyanticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of its product candidates,conducting preclinical studies and clinical trials, and its administrative organization. The Company will require substantial additional financing to fund itsoperations and to continue to execute its strategy, and the Company will pursue a range of options to secure additional capital. These conditions raisesubstantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued.Management is exploring various sources of funding such as strategic collaborations and the issuance of equity to fund its operations. If the Company raisesadditional funds through strategic collaborations and alliances, which may include existing collaboration partners, the Company may have to relinquishvaluable rights to its technologies or product candidates, or grant licenses on terms that are not favorable to the Company. To the extent that the Companyraises additional capital through the sale of equity, the ownership interest of its existing shareholders will be diluted and other preferences may be necessarythat adversely affect the rights of existing shareholders. The current operating plan includes the cost to prepare for the Phase 3 clinical program for SEL-212.However, prior to beginning the Phase 3 clinical program, the Company expects to conduct the planned head-to-head Phase 2 trial against Krystexxa. TheCompany will require an additional equity offering or other external sources of capital to conduct the Phase 3 clinical program. If the Company is unable toraise sufficient capital through the transactions discussed above, it intends to curtail expenses contemplated by the current operating plan, and the Companymay be required to delay, limit, reduce or terminate its product development efforts or grant rights to develop and market product candidates that it wouldotherwise prefer to develop and market itself. Because of the uncertainty in securing additional capital and the insufficient amount of cash resources atDecember 31, 2018 and through the issuance of additional equity in January 2019, management has concluded that substantial doubt exists with respect toour ability to continue as a going concern within one year after the date of the filing of this Annual Report on Form 10-K.Our future capital requirements will depend on many factors, including:- the scope, progress, results and costs of our clinical trials of SEL-212;-the number of product candidates that we pursue;-our collaboration agreements remaining in effect, our entering into additional collaboration agreements and our ability to achieve milestones underthese agreements;-the cost of manufacturing clinical supplies of our product candidates;-our headcount growth and associated costs;-the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates;- the costs, timing and outcome of regulatory review of our product candidates;-the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidatesfor which we receive marketing approval;-the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;85-the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingany intellectual property-related claims;-the effect of competing technological and market developments; and-the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements forproduct candidates.Summary of Cash Flows Year Ended December 31,(In thousands)2018 2017 2016Cash provided by (used in): Operating activities$(59,161) $(52,026) $(19,757)Investing activities25,272 (2,098) (22,100)Financing activities697 66,023 67,659Effect of exchange rate changes on cash(153) 78 463Net change in cash, cash equivalents, and restricted cash$(33,345) $11,977 $26,265Operating activitiesNet cash used in operating activities for the year ended December 31, 2018 was $59.2 million compared to $52.0 million in 2017, an increase of $7.2 millionyear over year. The increase in net cash used in operating activities was primarily due to an increase of $3.8 million to prepaid expenses, a decrease inaccounts payable of $1.8 million, and a decrease of $3.2 million to accrued expenses. This was offset by an increase of $1.6 million in stock-basedcompensation expense.The net cash used in operating activities in 2017 was primarily due to a $29.1 million increase in recorded net loss associated with the increased research anddevelopment expenses as we advanced from Phase 1 to Phase 2 clinical trials, a greater use of cash related to accounts payable of $5.0 million and a decreasein recorded deferred revenues of $7.5 million, offset by increases of $4.9 million in recorded accrued expenses, a $2.0 million reduction in restricted cash,prepaid expenses and other assets, an increase in stock-based compensation expense of $2.0 million and a $0.7 million loss on early extinguishment of debt.Investing activitiesNet cash provided by investing activities for the year ended December 31, 2018 was $25.3 million compared to net cash used in investing activities of $2.1million in 2017. The net cash provided by investing activities in 2018 was primarily due to receipts of $41.7 million from maturities of short-terminvestments, offset by $15.6 million of purchases of short-term investments.The net cash used in investing activities in 2017 was primarily due to $61.5 million of purchases of short-term investments, offset by receipts of $60.2million from maturities of short-term investments.Financing activitiesNet cash provided by financing activities for the year ended December 31, 2018 was $0.7 million compared to net cash provided by financing activities of$66.0 million in 2017. The net cash provided by financing activities in 2018 was due to $0.2 million from the issuance of common stock under the ESPP and$0.5 million from the exercise of employee stock options.The net cash provided by financing activities in 2017 was due to $47.1 million of net cash derived from the 2017 PIPE, $21.0 million from the issuance ofthe 2017 Term Loan, $10.0 million received in connection with the issuance of common stock to Spark for contractual equity acquisition rights, $0.7 millionfrom the exercise of employee stock options and $0.2 million from the issuance of common stock under the ESPP, offset by $12.9 million of loan principlerepayments.Commitments and ContingenciesThe following summarizes our principal contractual obligations as of December 31, 2018:Contractual ObligationsTotal 2019 2020 2021 2022 LaterOperating leases obligations (1)$1,857 $1,482 $375 $— $— $—Research and development contract obligations (2)240 60 60 60 60 —Debt obligations (3)24,446 4,742 9,232 8,718 1,754 — Total contractual obligations$26,543 $6,284 $9,667 $8,778 $1,814 $—86________________________________________(1) Operating lease obligations represent future minimum lease payments under non‑cancellable property leases in Watertown, Massachusetts. The minimum lease payments do notinclude common area maintenance charges, real estate taxes or any sublease income we may earn.(2) Research and development contract obligations represent minimum annual license fees payable to universities or partners under our license agreements. Under our licenseagreement with the Massachusetts Institute of Technology, or MIT, milestone payments are due upon the occurrence of certain events and royalty payments commence upon ourcommercialization of a product. For purposes of presenting our contractual obligations under the MIT agreement, we have assumed license payments are fully offset by royaltypayments in 2023.(3) Debt obligations payments are based on the contractual payment dates.Off-Balance Sheet ArrangementsAs of December 31, 2018, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the Securities and ExchangeCommission.Recent Accounting PronouncementsFor a discussion of recently adopted or issued accounting pronouncements please refer to Item 8, “Financial Statements and Supplementary Data” within thisAnnual Report on Form 10‑K.Item 7A. Quantitative and Qualitative Disclosures About Market RiskThe market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates.As of December 31, 2018 and December 31, 2017, we had cash, cash equivalents and short-term deposits and investments of $37.4 million and $96.6 million,respectively, consisting of non‑interest and interest‑bearing money market accounts, corporate bonds, U.S. government agency bonds and tri-party repurchaseagreements. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to theshort‑term and the low risk profile of our money market accounts and investments, and our current plan to hold investments to maturity, an immediate 100basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents or short-term investments.In addition, we are subject to currency risk for balances held in Russian rubles in our foreign subsidiary. We hold portions of our funds in both U.S. dollarsand Russian rubles. The exchange rate between the U.S. dollar and Russian ruble changes from period to period. At December 31, 2018, we held $0.4 millionof total cash in Russian banks to support our Russian subsidiary, which includes $0.4 million of cash and cash equivalents and no restricted cash, of which$0.4 million of cash and cash equivalents were denominated in U.S. dollars. We do not hedge against foreign currency risks. We do not believe that inflationand changing prices had a significant impact on our results of operations for any periods presented herein.Item 8. Financial Statements and Supplementary DataThe consolidated financial statements together with the report of our independent registered public company accounting firm, required to be filed pursuant tothis Item 8 are appended to this Annual Report on Form 10-K. An index of those consolidated financial statements is found in Item 15 of this Annual Reporton Form 10-K.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresLimitations on effectiveness of controls and proceduresIn designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designedand operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and proceduresmust reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls andprocedures relative to their costs.Evaluation of disclosure controls and procedures87Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by thisAnnual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded thatour disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2018.Management’s annual report on internal control over financial reportingOur management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “InternalControl - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on this assessment, our management concluded that, as of December 31, 2018, our internal control over financial reporting was effective.Attestation Report of the Registered Public Accounting FirmThis Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act 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) during the threemonths ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other Information.None.88PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceOur board of directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available on ourwebsite at www.selectabio.com in the “Investors & Media” section under “Corporate Governance.” We intend to satisfy the disclosure requirement underItem 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics, as well as Nasdaq’s requirement todisclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above.The information in response to this item is contained in part under the caption “Executive Officers of the Registrant” at the end of Part I of this Annual Reporton Form 10-K. The remainder of the response to this item will be contained in the Proxy Statement for our Annual Meeting of Stockholders scheduled to beheld on June 14, 2019 and is incorporated herein by reference.Item 11. Executive CompensationThe information required by this Item 11 of Form 10-K regarding executive compensation will be included in the Proxy Statement for our Annual Meeting ofStockholders scheduled to be held on June 14, 2019 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 12 of Form 10-K regarding security ownership of certain beneficial owners and management and related stockholdermatters will be included in the Proxy Statement for our Annual Meeting of Stockholders scheduled to be held on June 14, 2019 and is incorporated herein byreference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item 13 of Form 10-K regarding certain relationships and related transactions, and director independence will be included inthe Proxy Statement for our Annual Meeting of Stockholders scheduled to be held on June 14, 2019 and is incorporated herein by reference.Item 14. Principal Accountant Fees and ServicesThe information required by this Item 14 of Form 10-K regarding principal accountant fees and services will be included in the Proxy Statement for ourAnnual Meeting of Stockholders scheduled to be held on June 14, 2019 and is incorporated herein by reference.89PART IVItem 15. Exhibits, Financial Statement Schedules(a)(1) Financial StatementsThe financial statements listed below are filed as part of this Annual Report on Form 10-K.INDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting FirmF-1 Consolidated Balance Sheets at December 31, 2018 and 2017F-2 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018, 2017 and 2016F-3 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2018, 2017 and 2016F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016F-6 Notes to Consolidated Financial StatementsF-7(a)(2) Financial Statement SchedulesAll financial schedules have been omitted because the required information is either presented in the consolidated financial statements filed as part of thisAnnual Report on Form 10-K or the notes thereto or is not applicable or required.(a)(3) Exhibits Incorporated by Reference ExhibitNumber Exhibit Description Form File No. Exhibit FilingDate FiledHerewith3.1 Restated Certificate of Incorporation of SelectaBiosciences, Inc. 8-K 001-37798 3.1 6/29/2016 3.2 Amended and Restated By-laws of SelectaBiosciences, Inc. 8-K 001-37798 3.2 6/29/2016 4.1 Fifth Amended and Restated Investors' RightsAgreement, dated as of August 26, 2015, by andbetween the Registrant and each of thestockholders party thereto, as amended byAmendment No. 1 to Fifth Amended andRestated Investors Rights Agreement, dated asof June 7, 2016 S-1/A 333-211555 4.1 6/8/2016 4.2 Specimen Stock Certificate evidencing theshares of common stock S-1 333-211555 4.2 5/24/2016 904.3 Form of Warrant to Purchase Shares of Series DPreferred Stock, dated August 9, 2013 or July25, 2014, issued by the Registrant to OxfordFinance LLC and Square One Bank, togetherwith a schedule of warrant holders S-1 333-211555 4.5 5/24/2016 4.4 Form of Warrant to Purchase Shares of Series EPreferred Stock, dated December 31, 2015,issued by the Registrant to Oxford Finance LLCand Square One Bank, together with a scheduleof warrant holders S-1 333-211555 4.6 5/24/2016 4.5 Common Stock Purchase Warrant, dated June27, 2017, by and between the Registrant andTimothy Springer, Ph.D. 8-K 001-37798 4.1 6/28/2017 4.6 Registration Rights Agreement, dated June 27,2017, by and among the Registrant and theInvestors named therein. 8-K 001-37798 10.3 6/28/2017 10.1# 2016 Incentive Award Plan and form of awardagreements thereunder S-1/A 333-211555 10.2 6/8/2016 10.2# 2016 Employee Stock Purchase Plan S-1/A 333-211555 10.3 6/8/2016 10.3# 2018 Employment Inducement IncentiveAward Plan, and form of agreements thereunder 8-K 001-37798 10.1 9/27/2018 10.4# 2008 Stock Incentive Plan and form of awardagreements thereunder S-1/A 333-211555 10.1 6/20/2016 10.5# Non-Employee Director Compensation Program S-1/A 333-211555 10.4 6/8/2016 10.6# Form of Indemnification Agreement forDirectors and Officers S-1 333-211555 10.5 5/24/2016 10.7(a)† Exclusive Patent License Agreement, dated asof November 25, 2008, by and between theRegistrant and the Massachusetts Institute ofTechnology S-1 333-211555 10.7(a) 5/24/2016 10.7(b)† First Amendment to Exclusive Patent LicenseAgreement, dated as of January 12, 2010, byand between the Registrant and theMassachusetts Institute of Technology S-1 333-211555 10.7(b) 5/24/2016 10.7(c)† Letter Agreement, dated as of November 27,2012, by and among the Registrant,Massachusetts Institute of Technology andSanofi S-1 333-211555 10.7(c) 5/24/2016 10.7(d)† Letter Amendment, dated as of November 27,2012, by and between the Registrant and theMassachusetts Institute of Technology S-1 333-211555 10.7(d) 5/24/2016 10.7(e)† Second Amendment to Exclusive PatentLicense Agreement, dated as of August 29,2013, by and between the Registrant and theMassachusetts Institute of Technology S-1 333-211555 10.7(e) 5/24/2016 10.7(f)† Third Amendment to Exclusive Patent LicenseAgreement, entered into on November 21, 2016and effective as of November 18, 2016, by andbetween the Massachusetts Institute ofTechnology and the Registrant 8-K/A 001-37798 10.3(a) 12/14/2016 9110.7(g)† Letter Agreement, dated as of December 2,2016, by and between the MassachusettsInstitute of Technology and the Registrant 8-K/A 001-37798 10.3(b) 12/14/2016 10.7(h)† Letter Agreement, dated as of December 2,2016, by and among Spark Therapeutics, Inc.,the Massachusetts Institute of Technology andthe Registrant 8-K/A 001-37798 10.3(c) 12/14/2016 10.8† Amended and Restated License Agreement,dated as of May 31, 2017, by and between theRegistrant and Shenyang SunshinePharmaceutical Co., Ltd. 10-Q 001-37798 10.6 8/11/2017 10.9† Manufacturing Services Agreement, dated as ofAugust 1, 2014, by and between the Registrantand Shenyang Sunshine Pharmaceutical Co.,Ltd. S-1 333-211555 10.10 5/24/2016 10.10† Exclusive License Agreement, dated as of May17, 2016, by and among the Registrant, theMassachusetts Eye and Ear Infirmary and TheSchepens Eye Research Institute, Inc. S-1 333-211555 10.12 5/24/2016 10.11† Lease, dated as of September 30, 2008, asamended by the First Amendment, dated as ofJuly 12, 2011, the Second Amendment, dated asof October 11, 2011 and the Third Amendment,dated as of April 6, 2015, by and between theRegistrant and ARE-480 Arsenal Street, LLC S-1 333-211555 10.13 5/24/2016 10.12† Fourth Amendment to Lease, dated August 21,2016, by and between ARE-480 Arsenal StreetLLC and Selecta Biosciences, Inc. 8-K 001-37798 10.1 9/14/2016 10.13# Consulting Agreement, dated as of May 30,2018, by and between the Registrant and OmidFarokhzad 10-Q 001-37798 10.2 8/8/2018 10.14# Amendment to Consulting Agreement, datedDecember 31, 2018, to Consulting Agreementby and between Registrant and OmidFarokzhad, dated May 30, 2018 *10.15# Summary of Oral Agreement, by and betweenthe Registrant and Omid Farokhzad S-1/A 333-211555 10.16 6/8/2016 10.16# Employment Agreement, dated as of June 6,2016, by and between the Registrant andWerner Cautreels S-1/A 333-211555 10.17 6/8/2016 10.17# Separation Agreement and Release, dated as ofDecember 1, 2018, by and between theRegistrant and Werner Cautreels, Ph.D. 8-K 001-37798 10.1 12/3/2018 10.18# Consulting Agreement, dated as of December 1,2018, by and between the Registrant andWerner Cautreels, Ph.D. 8-K 001-37798 10.2 12/3/2018 10.19# Employment Agreement, dated as of September25, 2018, by and between the Registrant andCarsten Brunn, Ph.D. 8-K 001-37798 10.2 9/27/2018 9210.20# Employment Agreement, dated as of June 6,2016, by and between the Registrant andTakashi Kei Kishimoto S-1/A 333-211555 10.18 6/8/2016 10.21# Employment Agreement, dated as of June 6,2016, by and between the Registrant and LloydP. M. Johnston, Ph.D. S-1/A 333-211555 10.21 6/8/2016 10.22# Employment Agreement, dated October 26,2017, by and between the Registrant and JohnH. Leaman, M.D. 8-K 001-37798 10.1 10/26/2017 10.23# Transition and Release Agreement, dated as ofMarch 6, 2019, by and between the Registrantand John H. Leaman, M.D. 8-K 001-37798 10.1 3/8/2019 10.24# Employment Agreement, dated October 26,2017, by and between the Registrant andStephen Smolinski 10-Q 001-37798 10.3 11/7/2017 10.25† License and Option Agreement, dated as ofDecember 2, 2016, by and between SparkTherapeutics, Inc. and the Registrant 8-K/A 001-37798 10.1 2/14/2017 10.26† Stock Purchase Agreement, dated as ofDecember 2, 2016, by and between SparkTherapeutics, Inc. and the Registrant 8-K/A 001-37798 10.2 12/14/2016 10.27† Letter Agreement, dated June 6, 2017, by andbetween the Registrant and Spark Therapeutics,Inc. 10-Q 001-37798 10.7 8/11/2017 10.28† Patent License Agreement, entered into as ofApril 27, 2017, by and between the U.S.Department of Health and Human Services, asrepresented by The National Cancer Institute anInstitute or Center of the National Institutes ofHealth and the Registrant 10-Q 001-37798 10.1 5/11/2017 10.29 Securities Purchase Agreement, dated June 26,2017, by and among the Registrant and theInvestors named therein 8-K 001-37798 10.1 6/28/2017 10.30 Securities Purchase Agreement, dated June 26,2017, by and between the Registrant andTimothy Springer, Ph.D. 8-K 001-37798 10.2 6/28/2017 10.31 Loan and Security Agreement, dated September12, 2017, by and between the Registrant andSilicon Valley Bank 8-K 001-37798 10.1 9/13/2017 21.1 Subsidiaries of Selecta Biosciences, Inc. S-1 333-211555 21.1 5/24/2016 23.1 Consent of Ernst & Young LLP, IndependentRegistered Public Accounting Firm *31.1 Rule 13a-14(a) / 15d-14(a) Certification ofChief Executive Officer *9331.2 Rule 13a-14(a) / 15d-14(a) Certification ofChief Financial Officer *32.1 Section 1350 Certification of Chief ExecutiveOfficer **32.2 Section 1350 Certification of Chief FinancialOfficer **101.INS XBRL Instance Document *101.SCH XBRL Taxonomy Extension Schema Document *101.CAL XBRL Taxonomy Extension CalculationLinkbase Document *101.DEF XBRL Taxonomy Extension DefinitionLinkbase Document *101.LAB XBRL Taxonomy Extension Label LinkbaseDocument *101.PRE XBRL Taxonomy Extension PresentationLinkbase Document ** Filed herewith.** Furnished herewith.# Indicates management contract or compensatory plan.† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24h-2under the Securities Exchange Act of 1934.Item 16. Form 10-K SummaryNone.94Report of Independent Registered Public Accounting FirmThe Stockholders and the Board of Directors of Selecta Biosciences, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Selecta Biosciences, Inc. and subsidiaries (the Company) as of December 31, 2018 and2017, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the threeyears in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and theresults of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally acceptedaccounting principles.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note1 to the consolidated financial statements, the Company has recurring losses from operations and insufficient cash resources and has stated that substantialdoubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plansregarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from theoutcome of this uncertainty.Adoption of ASU No. 2014-09As discussed in Note 13 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption ofAccounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLPWe have served as the Company's auditor since 2009.Boston, MassachusettsMarch 15, 2019F-1Selecta Biosciences, Inc. and SubsidiariesConsolidated Balance Sheets (Amounts in thousands, except share data and par value) December 31, December 31, 2018 2017 Assets Current assets: Cash, cash equivalents, and restricted cash$37,403 $70,698Short-term deposits and investments— 25,940Prepaid expenses and other current assets4,673 2,042Total current assets42,07698,680Property and equipment, net2,127 2,091Restricted cash and other assets279 329Total assets$44,482$101,100Liabilities and stockholders’ equity Current liabilities: Accounts payable$1,100 $1,606Accrued expenses11,700 8,580Loan payable, current portion21,385 —Deferred revenue, current portion959 787Total current liabilities35,14410,973Non‑current liabilities: Deferred rent and lease incentive34 151Loan payable, net of current portion— 21,042Deferred revenue, net of current portion13,818 15,919Other long‑term liabilities904 1,201Total liabilities49,90049,286Commitments and contingencies (Note 8) Stockholders’ (deficit) equity: Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2018 and December31, 2017, respectively— —Common stock, $0.0001 par value; 200,000,000 shares authorized; 22,471,776 and 22,343,254 shares issued and outstanding as ofDecember 31, 2018 and December 31, 2017, respectively3 3Additional paid-in capital279,539 273,128Accumulated deficit(280,403) (216,897)Accumulated other comprehensive loss(4,557) (4,420)Total stockholders’ (deficit) equity(5,418) 51,814Total liabilities and stockholders’ equity$44,482$101,100The accompanying notes are an integral part of these consolidated financial statements.F-2Selecta Biosciences, Inc. and SubsidiariesConsolidated Statements of Operations and Comprehensive Loss(Amounts in thousands, except share and per share data) Year Ended December 31, 2018 2017 2016 Grant and collaboration revenue$903 $207 $8,083Operating expenses: Research and development47,687 45,165 29,702General and administrative18,238 18,826 13,051Total operating expenses65,92563,991 42,753Loss from operations(65,022) (63,784) (34,670)Investment income1,050 617 234Loss on extinguishment of debt— (673) —Foreign currency transaction gain (loss), net120 (123) (525)Interest expense(1,494) (1,206) (1,253)Other income (expense), net10 (152) 4Net loss(65,336)(65,321) (36,210)Other comprehensive loss: Foreign currency translation adjustment(153) 78 504Unrealized gain (loss) on securities16 20 (36)Total comprehensive loss$(65,473)$(65,223) $(35,742) Net loss$(65,336) $(65,321) $(36,210)Accretion of redeemable convertible preferred stock— — (4,566)Net loss attributable to common stockholders$(65,336)$(65,321) $(40,776) Net loss per share: Basic and diluted$(2.92) $(3.20) $(3.89)Weighted average common shares outstanding: Basic and diluted22,389,286 20,425,050 10,493,939 The accompanying notes are an integral part of these consolidated financial statements.F-3Selecta Biosciences, Inc. and SubsidiariesConsolidated Statements of Changes in Stockholders’ Equity (Deficit)(Amounts in thousands, except share data) Series A Series B Series C Series D Series SRN Series E redeemable redeemable redeemable redeemable redeemable redeemable Accumulated convertible convertible convertible convertible convertible convertible Additional Stock other preferred stock preferred stock preferred stock preferred stock preferred stock preferred stock Common stock paid‑In option Accumulated comprehensive Stockholders’ SharesAmount SharesAmount SharesAmount SharesAmount SharesAmount SharesAmount SharesAmount Capital receivable deficit loss Equity (Deficit)Balance atDecember 31,20152,589,868$3,644 7,437,325$21,448 5,000,002$20,178 8,099,994$42,902 2,111,109$12,082 8,888,888$37,228 2,173,399$— $1 $— $(111,508) $(4,986) $(116,493)Vesting ofrestrictedcommonstock—— —— —— —— —— —— 8,535— 21 — — — 21Issuance ofcommonstock uponexercise ofoptions—— —— —— —— —— —— 71,816— 224 (75) — — 149Stock‑basedcompensationexpense—— —— —— —— —— —— —— 2,030 — — — 2,030Accretion ofpreferredstock toredemptionvalue—75 —449 —446 —1,131 —913 —1,552 —— (708) — (3,858) — (4,566)Exercise ofcommonwarrants—— —— —— —— —— —— 572,003— — — — — —Conversionof convertiblestock uponlisting(2,589,868)(3,719) (7,437,325)(21,897) (5,000,002)(20,624) (8,099,994)(44,033) (2,111,109)(12,995) (8,888,888)(38,780) 10,126,1181 142,047 — — — 142,048Issuance ofcommonstock, Initialpublicoffering netof issuancecosts—— —— —— —— —— —— 5,289,633— 64,465 — — — 64,465Issuance ofcommonstock, licenseagreement—— —— —— —— —— —— 197,238— 2,743 — — — 2,743Conversionof series Dpreferredstockwarrants intowarrants forthe purchaseof commonstock—— —— —— —— —— —— —— 189 — — — 189Conversionof series Epreferredstockwarrants intowarrants forthe purchaseof commonstock—— —— —— —— —— —— —— 113 — — — 113Currencytranslationadjustment—— —— —— —— —— —— —— — — — 504 504Unrealizedgains (losses)on securities—— —— —— —— —— —— —— — — — (36) (36)Net loss—— —— —— —— —— —— —— — — (36,210) — (36,210)Balance atDecember 31,2016—$— —$— —$— —$— —$— —$— 18,438,742$1 $211,125 $(75) $(151,576) $(4,518) $54,957Issuance ofcommonstock underEmployeeStockPurchase Plan—— —— —— —— —— —— 16,263— 180 — — — 180Issuance ofcommonstock uponexercise ofoptions—— —— —— —— —— —— 269,842— 630 75 — — 705Stock‑basedcompensationexpense—— —— —— —— —— —— —— 4,080 — — — 4,080F-4Issuance ofcommonstock, licenseagreement—— —— —— —— —— —— 529,616— 10,000 — — — 10,000Issuance ofcommonstock, Privateplacement netof issuancecosts—— —— —— —— —— —— 3,088,7912 47,113 — — — 47,115Currencytranslationadjustment—— —— —— —— —— —— —— — — — 78 78Unrealizedgains (losses)on securities—— —— —— —— —— —— —— — — — 20 20Net loss—— —— —— —— —— —— —— — — (65,321) — (65,321)Balance atDecember 31,2017—$— —$— —$— —$— —$— —$— 22,343,254$3 $273,128 $— $(216,897) $(4,420) $51,814Adoption ofnewaccountingprinciple—— —— —— —— —— —— —— — — 1,830 — 1,830Issuance ofcommonstock underEmployeeStockPurchase Plan—— —— —— —— —— —— 24,738— 196 — — — 196Issuance ofcommonstock uponexercise ofoptions—— —— —— —— —— —— 103,784— 501 — — — 501Stock‑basedcompensationexpense—— —— —— —— —— —— —— 5,714 — — — 5,714Currencytranslationadjustment—— —— —— —— —— —— —— — — — (153) (153)Unrealizedgains (losses)on securities—— —— —— —— —— —— —— — — — 16 16Net loss—— —— —— —— —— —— —— — — (65,336) — (65,336)Balance atDecember 31,2018—$— —$— —$— —$— —$— —$— 22,471,776$3 $279,539 $— $(280,403) $(4,557) $(5,418)The accompanying notes are an integral part of these consolidated financial statements.F-5Selecta Biosciences, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Amounts in thousands) Year Ended December 31, 2018 2017 2016 Cash flows from operating activities Net loss$(65,336) $(65,321) $(36,210)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation975 750 802Amortization of premiums (accretion of discounts) on investments(101) 233 193(Gain) loss on disposal of property and equipment(81) 36 3Stock‑based compensation expense5,714 4,081 2,051Non‑cash interest expense449 390 263Loss on extinguishment of debt— 673 —Net unrealized losses on investments— — 12Changes in operating assets and liabilities: Accounts receivable— 152 610Prepaid expenses, deposits and other current assets(2,631) 1,225 (831)Accounts payable(516) (2,327) 2,686Deferred revenue(101) 2,432 10,409Contingently repayable grant funding— — (461)Accrued expenses and other liabilities2,467 5,650 716 Net cash used in operating activities(59,161) (52,026) (19,757)Cash flows from investing activities Receipts from the maturity of short-term investments41,655 60,158 6,900Purchases of short-term investments(15,598) (61,527) (28,416)Purchases of property and equipment(884) (733) (586)Proceeds from the sale of property and equipment99 4 2 Net cash provided by (used in) investing activities25,272 (2,098) (22,100)Cash flows from financing activities Proceeds from issuance of long-term debt, net of expenses— 20,957 —Repayments of long-term debt— (12,934) —Proceeds from Initial Public Offering, net of underwriters' discounts and commissions— — 68,870Deferred IPO costs paid— — (4,103)Proceeds from Private Placement, net of issuance costs ($2.9 million)— 47,114 —Proceeds from issuance of common stock— 10,000 2,743Proceeds from exercise of stock options501 706 149Proceeds from issuance of common stock under Employee Stock Purchase Plan196 180 — Net cash provided by financing activities697 66,023 67,659Effect of exchange rate changes on cash(153) 78 463Net change in cash, cash equivalents, and restricted cash(33,345) 11,977 26,265Cash, cash equivalents, and restricted cash at beginning of period71,027 59,050 32,785Cash, cash equivalents, and restricted cash at end of period$37,682 $71,027 $59,050Supplement cash flow information Cash paid for interest$1,134 $905 $972Noncash investing activities Purchase of property and equipment not yet paid$145 $103 $147Unrealized gain (loss) on marketable securities$16 $20 $(36)Reclassification of deferred IPO costs from non-current assets to additional paid-in capital$— $— $4,404Debt issuance costs included in accounts payable$— $— $122Accrued dividends and accretion of preferred stock to redemption value$— $— $4,566 The accompanying notes are an integral part of these consolidated financial statements.F-6Selecta Biosciences, Inc. and SubsidiariesNotes to Consolidated Financial Statements1. Nature of the Business and Basis of PresentationSelecta Biosciences, Inc. (the “Company”) was incorporated in Delaware on December 10, 2007, and is based in Watertown, Massachusetts. The Company isa biopharmaceutical company dedicated to developing the first generation of nanoparticle immunomodulatory drugs for the treatment and prevention ofhuman diseases. Since inception, the Company has devoted its efforts principally to research and development of its technology and product candidates,recruiting management and technical staff, acquiring operating assets, and raising capital. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations,protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing.Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical andclinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnelinfrastructure and extensive compliance-reporting capabilities.The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfullycompleted, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary governmentregulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it isuncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change intechnology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of itsemployees and consultants.The accompanying financial statements have been prepared on a basis that assumes the Company is a going concern, and does not include any adjustmentsto reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from anyuncertainty related to its ability to continue as a going concern.Liquidity and Management's PlanThe future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitableoperations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successfuldevelopment of its product candidates, raising additional capital with favorable terms, protection of proprietary technology and market acceptance of anyapproved future products. The successful development of product candidates requires substantial working capital which may not be available to theCompany on favorable terms.To date, the Company has financed its operations primarily through the initial public offering of its common stock, a private placement of its common stock,issuances of preferred stock, debt, research grants and research collaborations. The Company currently has no source of product revenue, and it does notexpect to generate product revenue for the foreseeable future. All of its revenue to date has been collaboration and grant revenue. The Company has devotedsubstantially all of its financial resources and efforts to developing its ImmTOR technology, identifying potential product candidates and conductingpreclinical studies and its clinical trials. The Company is in the early stages of development of its product candidates, and it has not completed developmentof any ImmTOR-enabled therapies.As of December 31, 2018, the Company’s cash and cash equivalents were $37.4 million, of which $0.4 million was held by its Russian subsidiary designatedsolely for use in its operations. In addition, approximately $31.3 million was raised from an equity offering that closed in January 2019. The Company hasincurred losses and negative cash flows from operating activities since inception. As of December 31, 2018, and December 31, 2017, the Company had anaccumulated deficit of $280.4 million and $216.9 million, respectively. The Company anticipates operating losses to continue for the foreseeable future dueto, among other things, costs related to research, development of its product candidates, conducting preclinical studies and clinical trials, and itsadministrative organization. The Company will require substantial additional financing to fund its operations and to continue to execute its strategy, and theCompany will pursue a range of options to secure additional capital. These conditions raise substantial doubt about its ability to continue as a going concernwithin one year after the date that the financial statements are issued.F-7Management is exploring various sources of funding such as strategic collaborations and the issuance of equity to fund its operations. If the Company raisesadditional funds through strategic collaborations and alliances, which may include existing collaboration partners, the Company may have to relinquishvaluable rights to its technologies or product candidates, or grant licenses on terms that are not favorable to the Company. To the extent that the Companyraises additional capital through the sale of equity, the ownership interest of its existing shareholders will be diluted and other preferences may be necessarythat adversely affect the rights of existing shareholders. The current operating plan includes the cost to prepare for the Phase 3 clinical program for SEL-212.However, prior to beginning the Phase 3 clinical program, the Company expects to conduct the planned head-to-head Phase 2 trial against Krystexxa. TheCompany will require additional external sources of capital to conduct the Phase 3 clinical program. If the Company is unable to raise sufficient capitalthrough the transactions discussed above, it intends to curtail expenses contemplated by the current operating plan, and the Company may be required todelay, limit, reduce or terminate its product development efforts or grant rights to develop and market product candidates that it would otherwise prefer todevelop and market itself. Because of the uncertainty in securing additional capital and the insufficient amount of cash resources at December 31, 2018 andthrough the issuance of additional equity in January 2019, management has concluded that substantial doubt exists with respect to our ability to continue asa going concern within one year after the date of the filing of this Annual Report on Form 10-K.All amounts due under the 2017 Term Loan (Note 9) have been classified as a current liability as of December 31, 2018 due to the considerations discussedabove and the assessment that the material adverse change clause under the 2017 Term Loan is not within the Company's control. The Company has not beennotified of an event of default by the Lender as of the date of the filing of this Annual Report on Form 10-K.Guarantees and IndemnificationsAs permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen byreason of the relationship with, or position held at, the Company. Through December 31, 2018, the Company had not experienced any losses related to theseindemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligationsand, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.2. Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Selecta RUS, LLC (“Selecta (RUS)”), aRussian limited liability corporation, and Selecta Biosciences Security Corporation, a Massachusetts Security Corporation. All significant intercompanyaccounts and transactions have been eliminated.Foreign CurrencyThe functional currency of Selecta (RUS) is the Russian ruble. Assets and liabilities of Selecta (RUS) are translated at period-end exchange rates, whilerevenues and expenses are translated at average exchange rates for the period. Translation gains and losses are reflected in accumulated other comprehensiveloss within stockholders’ deficit. Foreign currency transaction gains or losses are reflected in the consolidated statements of operations and comprehensiveloss. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statementsand the reported amounts of revenues and expenses during the reporting period. The Company’s management considers many factors in selecting appropriatefinancial accounting policies and controls, and bases its estimates on historical experience and other market-specific or other relevant assumptions that itbelieves to be reasonable under the circumstances. In preparing these consolidated financial statements, management used significant estimates in thefollowing areas, among others: revenue recognition, accounting for stock-based compensation and estimating accrued research and development expenses.The Company assesses the above estimates on an ongoing basis; however, actual results could materially differ from those estimates.Segment InformationOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chiefoperating decision maker, the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. TheCompany views its operations and manages its business in one operating segment, the research and development of nanoparticle immunomodulatory drugsfor the treatment and prevention of human diseases.F-8Cash Equivalents, Short-term Investments and Restricted CashCash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. Investments consist of securities with remainingmaturities greater than 90 days when purchased. The Company classifies these investments as available-for-sale and records them at fair value in theaccompanying consolidated balance sheets. Unrealized gains or losses are included in accumulated other comprehensive income (loss). Premiums ordiscounts from par value are amortized to investment income over the life of the underlying investment.Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. The cost of securities sold is determinedbased on the specific identification method for purposes of recording realized gains and losses. During the reporting periods, there were no realized gains orlosses on sales of investments, and no investments were adjusted for other than temporary declines in fair value.As of December 31, 2018, the Company has restricted cash balances relating to a secured letter of credit in connection with its Headquarters Lease (as definedin Note 8). The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet thatsum to the total of the same such amounts shown in the consolidated statement of cash flows: Year Ended December 31, 2018 2017 2016Cash and cash equivalents $37,403 $70,622 $58,656Restricted cash — 76 78Restricted cash included in other assets 279 329 316Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows $37,682 $71,027 $59,050Concentrations of Credit Risk and Off‑Balance Sheet RiskFinancial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and accountsreceivable. Cash and cash equivalents are deposited with federally insured financial institutions in the United States and may, at times, exceed federallyinsured limits. Management believes that the financial institutions that hold the Company’s deposits are financially credit worthy and, accordingly, minimalrisk exists with respect to those balances. Generally, these deposits may be redeemed upon demand and therefore bear minimal interest rate risk. As anintegral part of operating its Russian subsidiary, the Company also maintains cash in Russian bank accounts in denominations of both Russian rubles andU.S. dollars. As of December 31, 2018, the Company maintained approximately $0.4 million in Russian bank accounts, of which $0.4 million was held inU.S. dollars.The Company did not have any off-balance sheet arrangements as of December 31, 2018 and December 31, 2017.Fair Value of Financial InstrumentsThe Company’s financial instruments consist mainly of cash equivalents, short‑term investments, restricted cash, accounts payable, loans payable, andcommon stock warrants. The carrying amounts of cash equivalents, short-term investments, restricted cash, accounts receivable, and accounts payableapproximate their estimated fair value due to their short-term maturities. At December 31, 2018, the carrying amount of the Company's loan payableapproximates its estimated fair value due to the short-term nature of the instrument.Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. A three‑level hierarchy is used to prioritize the inputs to valuation techniques used to measure fair value. Thehierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowestpriority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:Level 1—Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at themeasurement date.Level 2—Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly orindirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset orliability.Level 3—Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at themeasurement date.To the extent that a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requiresmore judgment. Accordingly, the degree of judgment exercised by the Company inF-9determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowestlevel of any input that is significant to the fair value measurement. The fair value of the Company's loan payable was determined using Level 3 inputs.Fair value is a market‑based measure considered from the perspective of a market participant rather than an entity‑specific measure. Therefore, even whenmarket assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the assetor liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of marketdislocation. In periods of market dislocation, the observability of prices and inputs may change for many instruments. This condition could cause aninstrument to be reclassified within levels in the fair value hierarchy. There were no transfers within the fair value hierarchy during the twelve months endedDecember 31, 2018 or the year ended December 31, 2017.Property and EquipmentProperty and equipment are recorded at cost and depreciated using the straight‑line method over the estimated useful lives of the respective assets, generallyseven years for furniture and fixtures, five years for laboratory equipment, software and office equipment and three years for computer equipment. Leaseholdimprovements are amortized over their useful life or the life of the lease, whichever is shorter. Major additions and betterments are capitalized. Maintenanceand repairs, which do not improve or extend the life of the respective assets, are charged to operations as incurred. Costs incurred for construction in progressare recorded as assets and are not amortized until the construction is substantially complete and the assets are ready for their intended use.Impairment of Long‑Lived AssetsThe Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not berecoverable. In order to determine if assets have been impaired, assets are tested at the lowest level for which identifiable independent cash flows areavailable, which is at the entity level ("asset group"). An impairment loss is recognized when the sum of projected undiscounted cash flows is less than thecarrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carryingvalue of the asset group. Based on management's evaluation, the fair value of the asset group, measured as the market capitalization of the Company exceedsits carrying value, and for this reason the Company did not recognize an impairment loss during the twelve months ended December 31, 2018 and 2017.Debt Issuance CostsDebt issuance costs and fees paid to lenders are classified as a debt discount and are recorded as a direct deduction from the face amount of the related debt.Issuance costs paid to third parties that are the direct result of the debt issuance are capitalized as a direct deduction from the face amount of the related debt.Debt issuance costs are amortized over the term of the related debt using the interest method and recorded as interest expense. Costs and fees paid to thirdparties are expensed as incurred.Accumulated Other Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in the equity of a business entity during a period from transactions and other events and circumstancesfrom non‑owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.Comprehensive income (loss) consists of: (i) all components of net loss and (ii) all components of comprehensive loss other than net loss, referred to as othercomprehensive loss. Other comprehensive loss is comprised of foreign currency translation adjustments and the unrealized gains and losses on available-for-sale securities.The components of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands): Foreign currencytranslation adjustment Unrealized gains (losses)on available-for-salesecurities Accumulated othercomprehensive income (loss)Balance at December 31, 2015$(4,986) $— $(4,986)Other comprehensive income (loss) during the year504 (36) 468Balance at December 31, 2016$(4,482) $(36) $(4,518)Other comprehensive income during the year78 20 98Balance at December 31, 2017$(4,404) $(16) $(4,420)Other comprehensive income (loss) during the period(153) 16 (137)Balance at December 31, 2018$(4,557) $— $(4,557)F-10Revenue RecognitionThe Company currently generates its revenue through grants, collaboration and license agreements with strategic collaborators for the development andcommercialization of product candidates. Prior to January 1, 2018, the Company recognized revenue in accordance with ASC Topic 605, RevenueRecognition ("ASC 605"). Under ASC 605, the Company recognized revenue when all of the following criteria were 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.The Company enters into agreements that contain multiple deliverables. Prior to the adoption of ASC 606, when evaluating multiple element arrangements,the Company considered whether the deliverables under the arrangement represent separate units of accounting. In determining the units of accounting,management evaluated certain criteria, including whether the deliverables had standalone value. The consideration received was allocated among theseparate units of accounting using the relative selling price method, and the applicable revenue recognition criteria was applied to each of the separate units.If deliverables had no standalone value, they were grouped together and revenue was recognized over the estimated performance period.Prior to the adoption of ASC 606, the Company determined the estimated selling price for deliverables within each agreement using vendor‑specificobjective evidence (“VSOE”) of selling price, if available, third‑party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of sellingprice if neither VSOE nor TPE was available. Since the Company is a clinical stage company without a marketable product the Company used its bestestimate of selling price to estimate the selling price for licenses and deliverables related to the Company’s proprietary technology.Prior to the adoption of ASC 606, options for future deliverables were considered substantive if, at the inception of the arrangement, the Company is at risk asto whether the collaboration partner will choose to exercise the option. When an option was considered substantive and there is no significant incrementaldiscount, the option is not considered a deliverable in the arrangement and no consideration is allocated to it. Conversely, when an option was notconsidered substantive or it was considered substantive but was priced at an incremental discount, it would have been considered a deliverable at theinception of the arrangement and a corresponding amount would be included in the initial consideration.The Company may receive upfront payments when licensing its intellectual property in conjunction with a manufacturing or a research and developmentagreement. Prior to the adoption of ASC 606, when management believed the license to its intellectual property did not have stand‑alone value from theother deliverables to be provided in the arrangement, the Company generally recognized revenue attributed to the license over the Company’s contractual orestimated performance period. When management believed the license to its intellectual property had stand‑alone value, the Company generally recognizedrevenue attributed to the license upon delivery.Prior to the adoption of ASC 606, at the inception of each agreement that included milestone payments, the Company evaluated whether each milestone issubstantive and at risk to both parties based on the contingent nature of the milestone. Revenues from milestones, if they were nonrefundable and deemedsubstantive, were recognized upon successful accomplishment of the milestones. Milestones that were not considered substantive were accounted for aslicense payments and recognized over the remaining period of performance.Under ASC 605, amounts received prior to satisfying the revenue recognition criteria were recognized as deferred revenue in the Company’s consolidatedbalance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date were classified as deferred revenue,current portion. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date were classified as deferred revenue,net of current portion.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 and its related amendments(collectively referred to as ASC 606) requires that an entity recognize revenue when it transfers promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606, Revenue fromContracts with Customers, on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. Thereported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605,which is also referred to herein as "legacy GAAP" or the "previous guidance". Refer to Note 13 to its consolidated financial statements included elsewhere inthis Annual Report on Form 10-K for the impact of adoption of ASU 2014-09 on the Company’s consolidated financial position, results of operations, equityand cash flows as of the adoption date and for the year ended December 31, 2018.F-11Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expectsto receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract,including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv)allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies each performanceobligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to inexchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, theCompany assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether eachpromised good or service is distinct. If a promised good or service is not distinct, it is combined with other performance obligations. The Company thenrecognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation issatisfied. For example, certain performance obligations associated with Spark (see Note 13 to the Company's consolidated financial statements includedelsewhere in this Annual Report on Form 10-K) will be satisfied over time, and revenue will be recognized using the output method, based on the proportionof actual deliveries to the total expected deliveries over the initial term.Collaboration and Grant RevenueThe Company currently generates its revenue through grants, collaboration and license agreements with strategic collaborators for the development andcommercialization of product candidates. The grants, collaboration and license agreements are within the scope of ASC 606.In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements, the Company performs the five stepsabove. As part of the accounting for the arrangement, the Company must develop assumptions that require judgment to determine the stand-alone sellingprice for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which mayinclude market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success.Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligationsidentified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred tothe customer and the customer is able to use and benefit from the license. If not distinct, the license is combined with other performance obligations in thecontract. For licenses that are combined with other performance obligations, the Company assesses the nature of the combined performance obligation todetermine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuringprogress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure ofperformance and related revenue recognition. Optional licenses are evaluated to determine if they are issued at a discount, and therefore, represent materialrights and accounted for as separate performance obligations.Milestone Payments: At the inception of each arrangement that includes developmental and regulatory milestone payments, the Company evaluates whetherthe achievement of each milestone specifically relates to the Company’s efforts to satisfy a performance obligation or transfer a distinct good or servicewithin a performance obligation. If the achievement of a milestone is considered a direct result of the Company’s efforts to satisfy a performance obligation ortransfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocatedto that distinct good or service. If the milestone payment is not specifically related to the Company’s effort to satisfy a performance obligation or transfer adistinct good or service, the amount is allocated to all performance obligations using the relative standalone selling price method. The Company alsoevaluates the milestone to determine whether they are considered probable of being reached and estimates the amount to be included in the transaction priceusing the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in thetransaction price to be allocated, otherwise, such amounts are constrained and excluded from the transaction price. At the end of each subsequent reportingperiod, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts itsestimate of the transaction price. Any such adjustments to the transaction price are allocated to the performance obligations on the same basis as at contractinception. Amounts allocated to a satisfied performance obligation shall be recognized as revenue, or as a reduction of revenue, in the period in which thetransaction price changes.Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development orcommercial supply at the customer’s discretion are evaluated to determine if they are distinct and optional. For optional services that are distinct, theCompany assesses if they are priced at a discount, and therefore, provide a material right to the licensee to be accounted for as separate performanceobligations.F-12Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be thepredominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when theperformance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied) in accordance with the royaltyrecognition constraint. Research and Development CostsCosts incurred in the research and development of the Company’s products are expensed as incurred. Research and development expenses include costsincurred in performing research and development activities, including salaries and benefits, facilities cost, overhead costs, contract services, supplies andother outside costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensedwhen the activity has been performed or when the goods have been received rather than when the payment is made.Clinical Trial CostsClinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these costs to thirdparties. Third party clinical trial expenses include patient costs, clinical research organization costs and costs for data management. The accrual for site andpatient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. Paymentsfor these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on theconsolidated balance sheets as a prepaid asset or accrued clinical trial cost. These third party agreements are generally cancelable, and related costs arerecorded as research and development expenses as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered forfuture R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. Wealso record accruals for estimated ongoing clinical research and development costs. When evaluating the adequacy of the accrued liabilities, we analyzeprogress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may bemade in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. Thehistorical clinical accrual estimates made by the Company have not been materially different from the actual costs.Income TaxesThe Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financialstatement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences areexpected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more-likely-than-not be realized.The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more-likely-than-not that aposition will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets themore‑likely‑than‑not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of thecontingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. To date, theCompany has not incurred interest and penalties related to uncertain tax positions.WarrantsThe Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meetliability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,and then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or theunderlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares.If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts thatrequire or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurringthat triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification,the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or otherapplicable GAAP. After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity. Liabilityclassified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with allchanges in fair value after the issuance date recorded in the statements of operations as a gain or loss. Equity classified warrants are accounted for at fair valueon the issuance date with no changes in fair value recognized after the issuance date.F-13Stock‑Based CompensationThe Company accounts for all stock‑based compensation granted to employees and non‑employees using a fair value method. Stock‑based compensationawarded to employees is measured at the grant date fair value and is recognized over the requisite service period of the awards, usually the vesting period, ona straight‑line basis, net of estimated forfeitures. Prior to the adoption of ASU 2018-07 during the second quarter of 2018 described below in "RecentAccounting Pronouncements", stock‑based compensation awarded to non‑employees was subject to revaluation over its vesting terms. Subsequent to theadoption of ASU 2018-07, non-employee share-based payment awards are measured on the date of grant, similar to share-based payment awards granted toemployees. The Company reduces recorded stock‑based compensation for estimated forfeitures. To the extent that actual forfeitures differ from theCompany’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were adjusted. Stock‑based compensation expenserecognized in the consolidated financial statements is based on awards that are ultimately expected to vest.Net Loss Per ShareThe Company has reported losses since inception and has computed basic net loss per share by dividing net loss by the weighted average number of commonshares outstanding for the period. The Company has computed diluted net loss per common share after considering all potentially dilutive common shares,including stock options, convertible preferred stock, and warrants outstanding during the period except where the effect of including such securities wouldbe antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti‑dilutive and basic and dilutedloss per share have been the same.Deferred RentRent expense and lease incentives from operating leases are recognized on a straight‑line basis over the lease term. The difference between rent expenserecognized and rental payments is recorded as deferred rent in the accompanying consolidated balance sheets.Contingent LiabilitiesThe Company accounts for its contingent liabilities in accordance with ASC No. 450, Contingencies. A provision is recorded when it is both probable that aliability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted toreflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particularmatter. As of December 31, 2018 and December 31, 2017, the Company was not a party to any litigation that could have a material adverse effect on theCompany’s business, financial position, results of operations or cash flows.Recent Accounting PronouncementsIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 and its related amendments(collectively referred to as ASC 606) requires that an entity recognize revenue when it transfers promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance requires the application of afive-step model to determine the amount and timing of revenue to be recognized. The underlying principle is that revenue is to be recognized for the transferof goods or services to customers that reflects the amount of consideration that the Company expects to be entitled to in exchange for those goods or services.The Company adopted the standard as of the required effective date of January 1, 2018 using the modified retrospective method. See Note 13 for details.In January 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10):Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 supersedes the guidance to classify equitysecurities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities (including otherownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in fairvalue recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fairvalue either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosuresabout those investments. ASU 2016-01 is effective for annual reporting beginning after December 15, 2017, including interim periods within the year ofadoption, and calls for prospective application, with early application permitted. The Company adopted ASU 2016-01 during the first quarter of 2018.Because the Company held no equity investments upon adoption, there was no impact on its consolidated financial statements.In February 2016, the FASB issued Accounting Standards Update No. (“ASU”) 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognizemost leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance based on criteria similar tocurrent lease accounting, with the classification affecting the pattern and classification of expense recognition in the statement of operations.F-14Subsequently, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”), which includes certainamendments to ASU 2016-02 intended to provide relief in implementing the new standard. Among these amendments is the option to not restate comparativeperiods presented in the financial statements. The Company has elected this transition approach, using a cumulative-effect adjustment on the effective date ofthe standard, with comparative periods presented in accordance with the existing guidance in ASC 840. We expect to adopt the new standard on January 1,2019 and use the effective date as our date of initial application.Pursuant to the guidance under ASU 2016-02, the Company expects to take advantage of certain available expedients by electing the transition package ofpractical expedients permitted with ASU 2016-02, which allows the Company the option not to reassess previous accounting conclusions around, (i) whetherexpired or existing contracts contain leases, (ii) lease classification for any expired or existing leases, and (iii) the treatment of initial direct costs for anyexisting leases. The Company also made an accounting policy election to exclude leases with an initial term of 12 months or less from their balance sheet.The adoption of the new standard is expected to result in the recognition of a net additional lease liability up to $2.0 million, and right-of-use assets up to$2.0 million as of January 1, 2019 related to the Company’s operating leases. We further expect to provide enhanced new disclosures about our leasingarrangements. The Company does not expect that the new standard will have a material impact on the Company’s consolidated statement of operations orcash flows.In August 2016, the FASB issued ASU No. 2016-15, Statements of Cash Flows (Topic 230) - Classifications of Certain Cash Receipts and Cash Payments("ASU 2016-15"), to clarify how companies present and classify certain cash receipts and cash payments in the statement of cash flows. This guidance iseffective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoptionpermitted. The adoption of ASU 2016-15 did not have a retrospective impact because it classified cash payments for debt prepayment and debtextinguishment costs as cash outflows for financing activities for the year end 2017.In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, Restricted Cash ("ASU 2016-18"). This guidance requires that a statementof cash flows explain the total change during the period of cash, cash equivalents, and amounts generally described as restricted cash or restricted cashequivalents. Amounts described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginning-of-period and end-of-period to total amounts shown on the statement of cash flows. The Company adopted ASU 2016-18 during the first quarterended March 31, 2018. The adoption of ASU 2016-18 resulted in the Company's cash, cash equivalents and restricted cash being included in the beginningand ending amounts for the periods shown on the statement of cash flows and was applied retroactively and reflected in the balances presented for any priorperiods. The Company believes that the adoption of this guidance did not have a significant impact on its consolidated financial statements.In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (ASU 2017-01), whichclarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets orbusinesses. This ASU is effective for public entities for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of ASU2017-01 did not have a material impact on the Company's consolidated financial statements.Effective January 1, 2018, the Company adopted ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU2017-09"). ASU 2017-09 specifies the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modificationaccounting in accordance with Topic 718. The adoption of ASU 2017-09 did not have a material impact on the Company's consolidated financial statements.In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting" (ASU 2018-07), to simplify theaccounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.This ASU is effective for public entities for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company early adopted ASU2018-07 during the second quarter of 2018. Prior to the adoption of ASU 2018-07, stock‑based compensation awarded to non‑employees was subject torevaluation over its vesting terms. Subsequent to the adoption of ASU 2018-07, non-employee share-based payment awards are measured on the date of grant,similar to share-based payment awards granted to employees. The adoption of ASU 2018-07 did not have a material impact on the Company's consolidatedfinancial statements.In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic606” (ASU 2018-18), which provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for withrevenue under Topic 606. This ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. TheCompany is assessing the impact this standard will have on its consolidated financial statements and disclosures.F-153. Available-for-Sale Marketable SecuritiesAs of December 31, 2018, the Company did not have available-for-sale marketable securities. As of December 31, 2017, the Company’s available-for-salemarketable securities consisted of U.S. government and agency securities and corporate bonds.The following tables summarize the Company’s available-for-sale marketable securities by major type of security as of December 31, 2017 (in thousands): December 31, 2017 Amortized Cost Gross UnrealizedGains Gross UnrealizedLosses Fair ValueU.S. government and agency securities$12,798 $— $(10) $12,788Corporate bonds13,158 — (6) 13,152Total available-for-sale marketable securities$25,956 $— $(16) $25,940All available-for-sale marketable securities are classified in the Company’s consolidated balance sheets as short-term deposits and investments. TheCompany classifies its marketable debt securities based on their contractual maturity dates. The fair values and amortized cost of marketable debt securitiesby contractual maturity were as follows (in thousands): December 31, 2017 Fair Value Amortized CostLess than one year$25,940 $25,9564. Net Loss Per ShareThe Company has reported a net loss for the years ended December 31, 2018, and 2017, and 2016, and for this reason basic and diluted net loss per share arethe same for all periods presented. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share andper‑share data): Year Ended December 31, 2018 2017 2016Numerator: Net loss$(65,336) $(65,321) $(36,210)Less: accretion on preferred stock— — (4,566)Net loss$(65,336) $(65,321)$(40,776)Denominator: Weighted‑average common shares outstanding—basic and diluted22,389,286 20,425,050 10,493,939Net loss per share —basic and diluted$(2.92) $(3.20) $(3.89)All potential dilutive common shares have been excluded from the computation of the diluted net loss per share for all periods presented, as the effect wouldhave been anti-dilutive. Potential dilutive common share equivalents consist of the following: Year Ended December 31, 2018 2017 2016Stock options to purchase common stock4,093,979 2,657,187 2,128,346Unvested restricted stock units175,000 — —Stock warrants to purchase common stock95,619 176,432 97,302Total4,364,598 2,833,619 2,225,648 5. Fair Value MeasurementsThe tables below present information about the Company’s financial assets that are measured and carried at fair value as of December 31, 2018 andDecember 31, 2017, and indicate the level within the fair value hierarchy where each measurement isF-16classified. Below is a summary of assets measured at fair value on a recurring basis (in thousands): December 31, 2018 (Level 1) (Level 2) (Level 3) TotalCash equivalents: Money market funds$10,123 $— $— $10,123Total cash equivalents$10,123 $— $— $10,123 December 31, 2017 (Level 1) (Level 2) (Level 3) TotalCash equivalents: Money market funds$39,478 $—$— $39,478 U.S. government and agency securities— 1,000 — 1,000Total cash equivalents$39,478 $1,000 $— $40,478Short-term investments: Corporate bonds$13,152 $— $— $13,152 U.S. government and agency securities— 12,788 — 12,788Total short-term investments$13,152 $12,788 $— $25,940 At December 31, 2018, cash and cash equivalent investments were held in money market funds maturing within 90 days from the date of purchase. AtDecember 31, 2017, cash and cash equivalent investments were held in money market funds and U.S. government and agency securities maturing within 90days from the date of purchase.The average maturity date for U.S. government and agency securities, included in investments at December 31, 2017, was 179 days. Fair value of U.S.government and agency securities approximated amortized value at the reporting date.The average maturity date for corporate bonds, included in investments at December 31, 2017 was 168 days. Fair value of corporate bonds approximatedamortized value at December 31, 2017.6. Property and EquipmentProperty and equipment consists of the following (in thousands): December 31, December 31, 2018 2017Laboratory equipment$5,379 $5,138Computer equipment and software561 480Leasehold improvements278 278Furniture and fixtures247 235Office equipment135 118Construction in process79 —Total property and equipment6,6796,249Less accumulated depreciation(4,552) (4,158)Property and equipment, net$2,127$2,091 Depreciation expense was $1.0 million, $0.8 million and $0.8 million for the years ended December 31, 2018, 2017 and 2016, respectively.F-177. Accrued ExpensesAccrued expenses consist of the following (in thousands): December 31, December 31, 2018 2017Payroll and employee related expenses$2,497 $1,902Current portion of deferred rent and lease incentive117 72Collaboration and licensing1,222 1,020Accrued patent fees736 268Accrued external research and development costs5,344 3,578Accrued professional and consulting services994 859Accrued grant refund175 175Accrued interest106 89Other509 617 Accrued expenses$11,700$8,5808. Commitments and ContingenciesOperating LeasesThe Company has a non‑cancellable operating lease for its laboratory and office space located at 480 Arsenal Way, Watertown, Massachusetts ("HeadquartersLease"). As part of the Headquarters Lease agreement, the landlord provided the Company a tenant improvement allowance of up to $0.7 million, which theCompany fully utilized during 2012. The tenant improvement allowance is accounted for as a lease incentive obligation and is being amortized as areduction to rent expense over the lease term. The leasehold improvements are capitalized as a component of property and equipment.In connection with the Headquarters Lease, the Company secured a letter of credit for $0.3 million which renews automatically each year and is classified inrestricted cash and other deposits in the accompanying consolidated balance sheets.In August 2016, the Company signed an amendment to the Headquarters Lease, which extends the term through March 31, 2020. The Headquarters Leaseincludes a rent escalation clause, and accordingly, rent expense is being recognized on a straight-line basis over the lease term.In October 2017, the Company entered into a lease for approximately 5,100 square feet of additional office space located in Watertown, Massachusetts. Thelease includes a rent escalation clause, and accordingly, rent expense is being recognized on a straight-line basis over the lease term. In addition, theCompany decided to vacate certain office space in Watertown, MA on January 11, 2019 and consolidated all employees at its corporate headquarters also inWatertown, MA. The lease term expires in March 2020.As of both December 31, 2018 and December 31, 2017, deferred rent and lease incentive liability totaled $0.2 million. The current portion of deferred rentand lease incentive liability is presented within accrued expenses, and was $0.1 million and less than $0.1 million at December 31, 2018 and December 31,2017, respectively.The Company has a month‑to‑month facility agreement for its Moscow, Russia facility. Rent expense is recognized as incurred.Rent expense for the years ended December 31, 2018, 2017 and 2016 was $2.0 million, $1.9 million and $1.6 million, respectively.As of December 31, 2018, the aggregate future minimum lease payments related to these leases are as follows (in thousands):Year ending December 31, 20191,4822020375Total minimum lease payments$1,857OtherAs permitted under Delaware law, the Company indemnifies its directors for certain events or occurrences while the director is, or was, serving at theCompany’s request in such capacity. The term of the indemnification is for the director’s lifetime. The maximum potential amount of future payments theCompany could be required to make is unlimited; however, the Company has directors’ insurance coverage that limits its exposure and enables it to recover aportion of any future amounts paid. The Company also has indemnification arrangements under certain of its facility leases that require it to indemnify thelandlord against certain costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from certain breaches,F-18violations, or non‑performance of any covenant or condition of the Company’s lease. The term of the indemnification is for the term of the related leaseagreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.To date, the Company had not experienced any material losses related to any of its indemnification obligations, and no material claims with respect theretowere outstanding.The Company is a party in various other contractual disputes and potential claims arising in the ordinary course of business. The Company does not believethat the resolution of these matters will have a material adverse effect the Company's business, financial position, results of operations or cash flows.9. Debt2015 Term LoanOn August 9, 2013, the Company entered into a loan and security agreement with Oxford Finance LLC (“Oxford”) and Square 1 Bank (“Square 1”) to borrowup to $7.5 million. The Company initially borrowed $3.0 million in August 2013 and subsequently borrowed an additional $4.5 million in July 2014. InDecember 2015, the Company refinanced this debt facility to increase the amount of the borrowing to $12.0 million and to extend the repayment term. Theamounts borrowed are collectively referred to as the “2015 Term Loan”. The lenders for the refinanced debt facility are Oxford and Pacific Western Bank(“Pacific Western”). Pacific Western had acquired Square 1 since the time of the original loan. Such a change in lender does not constitute third partyfinancing on its own and does not require extinguishment accounting. As a result of the refinancing, the stated interest rate was also adjusted to reflect thecurrent market borrowing rate.Prior to the extinguishment of the 2015 Term Loan debt in September 2017 that is discussed in greater detail below, the 2015 Term Loan was collateralizedby substantially all of the assets of the Company and bore interest at 8.1% per annum. The monthly payments for the 2015 Term Loan were initially interestonly through January 2017. Principal repayments for the 2015 Term Loan were due over 30 monthly installments beginning on February 1, 2017.The 2015 Term Loan could be prepaid at the Company’s option at any time prior to maturity subject to a prepayment fee of 2% if prepaid after the firstanniversary but before the second anniversaries, and 1% if prepaid after the second anniversary. The 2015 Term Loan did not include any financialcovenants. The 2015 Term Loan required a final payment fee of 6.0% on the aggregate principal amounts borrowed upon repayment at maturity, on aprepayment date, or upon default. The final payment fee totaling $0.7 million was recorded as a loan discount.In connection with the 2015 Term Loan, the Company granted the lenders warrants in August 2013 to purchase up to 26,668 shares of the Company’sSeries D Preferred and additional warrants in July 2014 to purchase up to 40,000 shares of the Company’s Series D Preferred. As of the IPO, the warrants topurchase up to 66,668 shares of the Company’s Series D Preferred were converted to warrants to purchase up to 17,888 shares of the Company’s commonstock at an exercise price of $16.77 per share. These warrants are classified as permanent equity in the accompanying consolidated balance sheets and willexpire ten years from the date of issuance.Additionally, with the refinancing of the 2015 Term Loan at December 31, 2015, the Company granted the lenders 37,978 shares of the Company’s Series EPreferred which also was converted at the IPO to warrants to purchase up to 15,094 shares of Company’s common stock at an exercise price of $11.32 pershare. These warrants are classified as permanent equity in the accompanying consolidated balance sheets and will expire ten years from the date of issuance.The initial grant date fair value of the Series D Preferred and Series E Preferred warrants was $0.1 million and $0.1 million for each issuance, respectively andwas recorded as a loan discount.In December 2016, a total of 16,493 warrants to purchase common stock were exercised under a cashless exercise, resulting in a net issuance of 4,697 sharesof common stock. The warrant exercise price had been established at the time the warrants were converted.2017 Term LoanOn September 12, 2017, the Company entered into a term loan facility of up to $21.0 million (the “2017 Term Loan”) with Silicon Valley Bank, a Californiacorporation (“SVB”), the proceeds of which were used to repay the 2015 Term Loan and for general corporate and working capital purposes. The Companyrefers to the 2015 Term Loan and the 2017 Term Loan, collectively, as the “Term Loans.” The 2017 Term Loan is governed by a loan and security agreement,dated September 12, 2017, between the Company and SVB (the “Loan Agreement”). The 2017 Term Loan was funded in full on September 13, 2017 (the“Funding Date”).On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which SVB utilized $10.0 million of the 2017 Term Loan to pay off alloutstanding obligations under the 2015 Term Loan. The Company recognized a loss on extinguishment of debt in the amount of $0.7 million during thethree months ended September 30, 2017.F-19The Company incurred less than $0.1 million in debt issuance costs in connection with the closing of the 2017 Term Loan. Debt issuance costs are presentedin the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.The 2017 Term Loan will mature on February 1, 2022. Each advance under the 2017 Term Loan accrues interest at a floating per annum rate equal to one-halfof one percent above the prime rate (as published in the money rates section of The Wall Street Journal). The 2017 Term Loan provides for interest-onlypayments monthly until August 31, 2019. Thereafter, amortization payments will be payable monthly in equal installments of principal and variable interestto fully amortize the outstanding principal over the remaining term of the loan. The monthly interest is subject to recalculation upon a change in the primerate. The Company may prepay the 2017 Term Loan in full but not in part provided that the Company (i) provides five business days’ prior written notice toSVB, (ii) pays on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, and (B) a prepayment premium of 3% if prepaidbefore the first anniversary, 2% if prepaid after the first anniversary but before the second anniversaries, and 1% if prepaid after the second anniversary.Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 4.0% per annum of the pastdue amount outstanding. The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments ofprincipal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant underthe Loan Agreement or other transaction documents, the occurrence of a material adverse effect, the Company making a false or misleading representation orwarranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assetsin excess of approximately $0.3 million, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness inexcess of approximately $0.3 million. If an event of default occurs, SVB is entitled to take enforcement action, including acceleration of amounts due underthe Loan Agreement.The 2017 Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien onsubstantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Company has alsogranted SVB a negative pledge with respect to its intellectual property.The 2017 Term Loan does not include any financial covenants. The 2017 Term Loan requires a final payment fee of 5% on the aggregate principal amountsborrowed upon repayment at maturity, on a prepayment date, or upon default. The final payment fee totaling $1.1 million is recorded as a loan discount.Under the 2017 Term Loan, the Company is not required to maintain a minimum cash balance. In addition, the 2017 Term Loan contains a subjectiveacceleration clause whereby in an event of default, an immediate acceleration of repayment occurs if there is a material impairment of the lenders’ lien or thevalue of the collateral, a material adverse change in the business condition or operations, or a material uncertainty exists that any portion of the loan may notbe repaid.The Company assessed all terms and features of the 2017 Term Loan in order to identify any potential embedded features that would require bifurcation. Aspart of this analysis, the Company assessed the economic characteristics and risks of the 2017 Term Loan, including any put and call features. The Companydetermined that all features of the 2017 Term Loan were clearly and closely associated with the debt host and did not require bifurcation as a derivativeliability, or the fair value of the embedded feature was immaterial to the Company's consolidated financial statements. The Company reassesses the identifiedfeatures on a quarterly basis to determine if they require bifurcation.As of December 31, 2018 and December 31, 2017, the outstanding principal balance under the 2017 Term Loan was $21.0 million.Future minimum principal and interest payments on the 2017 Term Loan as of December 31, 2018 are as follows (in thousands):20194,74220209,23220218,71820221,754Total minimum debt payments$24,446Less: Amount representing interest(2,396)Less: Debt discount and deferred charges(665)Less: Current portion of loan payable(21,385)Loan payable, net of current portion$—All amounts due under the 2017 Term Loan have been classified as a current liability as of December 31, 2018 due to the considerations discussed in Note 1and the assessment that the material adverse change clause under the 2017 Term Loan is notF-20within the Company's control. The Company has not been notified of an event of default by SVB as of the date of the filing of this Annual Report on Form10-K.During the years ended December 31, 2018, 2017 and 2016, the Company recognized $1.5 million, $1.2 million and $1.3 million respectively, of interestexpense related to the Term Loans.10. Preferred StockPrior to the completion of its IPO, the Company had 37,835,623 authorized shares of preferred stock, par value $0.0001 per share (the "Preferred Stock") as ofDecember 31, 2015. The Company issued Preferred Stock to investors for cash or as settlement for outstanding debt under convertible notes.As of December 31, 2015, the Company had issued and outstanding Preferred Stock of (i) 2,589,868 shares of Series A redeemable convertible preferred stock(“Series A Preferred”), (ii) 7,437,325 shares of Series B redeemable convertible preferred stock (“Series B Preferred”), (iii) 5,000,002 shares of Series Credeemable convertible preferred stock (“Series C Preferred”), (iv) 8,099,994 shares of Series D Preferred, (v) 2,111,109 shares of Series SRN RedeemableConvertible Preferred Stock (“Series SRN Preferred”) and (vi) 8,888,888 shares of Series E Preferred.All outstanding shares of the Company’s convertible preferred stock automatically converted into 10,126,118 shares of the Company’s common stock uponthe closing of the IPO on June 27, 2016.11. Common Stock2017 Shelf Registration StatementOn August 10, 2017, the Company filed a universal shelf registration statement on Form S-3 with the SEC to sell up to $200 million of equity and/or debtsecurities and entered into a sales agreement with Jefferies LLC, as sales agent, pursuant to which the Company may, from time to time, issue and sellcommon stock with an aggregate value of up to $50 million in an at-the-market, or ATM, offering. The shelf registration statement was declared effective bythe SEC on August 28, 2017. As of December 31, 2018, no securities have been issued from this shelf registration statement.PIPE FinancingOn June 26, 2017, the Company entered into a securities purchase agreement (the "Institutional Purchase Agreement") with a select group of institutionalinvestors (the “Institutional Investors”) and a securities purchase agreement with Timothy Springer, Ph.D., a member of the board of directors (the "SpringerPurchase Agreement") for a private placement of the Company's securities (the "2017 PIPE"). The closing of the 2017 PIPE occurred on June 27, 2017.Pursuant to the Institutional Purchase Agreement, the Company agreed to sell an aggregate of 2,750,000 shares of its common stock, par value $0.0001 pershare, at a purchase price equal to $16.00 per share. Pursuant to the Springer Purchase Agreement, the Company agreed to sell to Dr. Springer an aggregate of338,791 shares of common stock at a purchase price equal to $17.71 per share, which was equal to the most recent consolidated closing bid price on theNasdaq Global Market on June 23, 2017, and warrants to purchase up to 79,130 shares of common stock (“Warrant Shares”), exercisable at $17.71 perWarrant Share, and with a term of five years. The purchase price for each warrant was equal to $0.125 for each Warrant Share, consistent with Nasdaq GlobalMarket requirements for an “at the market” offering. Under the terms of the Common Stock Purchase Warrant, the warrants can be settled in unregisteredshares. The Warrant Shares qualify for equity classification. The fair value of the allocated proceeds was determined on the relative fair value basis.After deducting for placement agent fees and offering expenses, the aggregate net proceeds from the 2017 PIPE was approximately $47.1 million. TheCompany expects to use the proceeds from the 2017 PIPE towards working capital requirements and general corporate purposes.On June 27, 2017, in connection with the 2017 PIPE, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) withthe Institutional Investors and Dr. Springer (together, the “Investors”). Pursuant to the Registration Rights Agreement, the Company agreed to prepare and filea registration statement with the Securities and Exchange Commission (the “SEC”) within 20 days after the closing of the 2017 PIPE for purposes ofregistering the resale of the shares of common stock issued and sold in the 2017 PIPE (the “Shares”), the Warrant Shares, and any shares of common stockissued as a dividend or other distribution with respect to the Shares or Warrant Shares. The registration statement was declared effective by the SEC on July21, 2017.The Company agreed to indemnify the Investors, their officers, directors, members, employees and agents, successors and assigns under the registrationstatement from certain liabilities and to pay all fees and expenses (excluding any legal fees of theF-21selling holder(s), and any underwriting discounts and selling commissions) incident to the Company’s obligations under the Registration Rights Agreement.Initial Public OfferingOn June 21, 2016, the Company completed its IPO and issued and sold 5,000,000 shares of common stock at a price to the public of $14.00 per share for netproceeds of $60.8 million after deducting underwriting discounts and commissions and offering expenses. On July 25, 2016, 289,633 additional shares of theCompany’s common stock were sold to the underwriters pursuant to the exercise of their option to purchase additional shares of common stock at a price tothe public of $14.00 per share resulting in additional net proceeds of approximately $3.7 million after deducting underwriting discounts, commissions andoffering expenses, bringing the total IPO net proceeds to $64.5 million. Upon the closing of the Company's IPO on June 27, 2016, all outstanding shares of itsconvertible preferred stock automatically converted into 10,126,118 shares of the Company’s common stock. In addition, at this time, the warrants topurchase shares of the Company’s Series D and Series E convertible preferred stock were converted into warrants to purchase shares of the Company’scommon stock.Common StockAs of December 31, 2018, the Company has 200,000,000 shares of common stock authorized for issuance, $0.0001 par value per share, with 22,471,776shares issued and outstanding. The voting, dividend and liquidation rights of the common stockholders are subject to and qualified by the rights, powers andpreferences of the preferred stock. The common stock has the following characteristics:VotingThe common stockholders are entitled to one vote for each share of common stock held with respect to all matters voted on by the stockholders of theCompany.DividendsThe common stockholders are entitled to receive dividends, if and when declared by the Board of Directors. Through December 31, 2018, no dividends havebeen declared or paid on common stock.LiquidationUpon liquidation of the Company, the common stockholders are entitled to receive all assets of the Company available for distribution to such stockholders.Reserved SharesThe Company has authorized shares of common stock for future issuance as follows: Period ending December 31, 2018 December 31, 2017Exercise of common warrants95,619 176,432Shares available for future stock incentive awards1,586,925 923,440Unvested restricted stock units175,000 —Outstanding common stock options4,093,979 2,657,187Total5,951,5233,757,059 12. Stock Incentive PlansStock OptionsThe Company maintains the 2008 Stock Incentive Plan (the “2008 Plan”) for employees, consultants, advisors, and directors. The 2008 Plan provided for thegranting of incentive and non‑qualified stock option and restricted stock awards as determined by the Board. At inception of the 2008 Plan, a total of2,213,412 shares of common stock were authorized for grants under the 2008 Plan. The Company ceased granting awards under the 2008 Plan upon theeffectiveness of the 2016 Plan (as defined below); however, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan and theapplicable 2008 Plan agreement. Shares subject to awards that were granted under the 2008 Plan and that expire, lapse or terminate following theeffectiveness of the 2016 Plan become available under the 2016 Plan as shares available for future grants. All unvested stock options granted under the 2008Plan may be exercised into restricted stock subject to forfeiture upon termination prior to vesting.The 2008 Plan provided that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the Company's common stockon the grant date for participants who own 10% or less of the total combined voting power of the Company, and not less than 110% for participants who ownmore than 10% of the Company’s voting power. Options andF-22restricted stock awards granted under the 2008 Plan vest over periods as determined by the Board, which are generally four years and, for options, with termsthat generally expire ten years from the grant date.On June 7, 2016, the Company’s stockholders approved the 2016 Incentive Award Plan (the “2016 Plan”), which became effective June 21, 2016. The 2016Plan provides for the granting of incentive and non‑qualified stock option, restricted stock and other stock and cash-based awards as determined by theBoard. Shares subject to awards that are granted under the 2016 Plan and that expire, lapse or terminate are available for future grants under the 2016 Plan. Atinception of the 2016 Plan, a total of 1,947,779 shares of common stock were authorized for future issuance under the 2016 Plan. The number of shares ofcommon stock that may be issued under the 2016 Plan automatically increases on the first day of each calendar year, beginning in 2017 and ending in andincluding 2026, by an amount equal to the lesser of: (i) 4% of the number of shares of the Company’s common stock outstanding on the last day of theapplicable preceding calendar year and (ii) such smaller number of shares as is determined by the Board. During the twelve months ended December 31, 2018and 2017, the number of shares of common stock that may be issued under the 2016 Plan was increased by 893,730 shares and 737,550 shares, respectively.As of December 31, 2018, 1,586,925 shares remain available for future issuance under the 2016 Plan.The 2016 Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the Company's common stockon the grant date for participants who own 10% or less of the total combined voting power of the Company, and not less than 110% for participants who ownmore than 10% of the Company’s voting power. Options and restricted stock awards granted under the 2016 Plan vest over periods as determined by theBoard, which are generally four years and, for options, with terms that generally expire ten years from the grant date.The Company’s 2018 Employment Inducement Incentive Award Plan (the “Inducement Incentive Award Plan”), which was adopted by the Board onSeptember 25, 2018 without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules ("Rule 5635(c)(4)"), provides forthe grant of equity-based awards in the form of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards andother stock or cash based awards. In accordance with Rule 5635(c)(4), awards under the Inducement Incentive Award Plan may only be made to a newly hiredemployee who has not previously been a member of the Board, or an employee who is being rehired following a bona fide period of non-employment by theCompany, as a material inducement to the employee’s entering into employment with the Company. The Company reserved 1,175,000 shares of its commonstock for issuance under the Inducement Incentive Award Plan. Pursuant to an employment agreement entered into with Carsten Brunn, Ph.D., upon Dr.Brunn's commencing employment as the Company’s President and Chief Executive Officer on December 1, 2018, the Company issued Dr. Brunn equityawards from the Inducement Incentive Award Plan consisting of an option to purchase 1,000,000 shares of common stock and 175,000 restricted stock units.As of December 31, 2018, there are no shares available for future grant under the 2018 Inducement Incentive Award Plan.The fair value of each option award was estimated on the grant date using the Black‑Scholes option pricing model. Expected volatilities are based onhistorical volatilities from guideline companies because the Company's common stock has not traded for a period that is at least equal to the expected term ofits stock option awards. The Company uses the “simplified” method to estimate the expected life of options granted and are expected to be outstanding. Therisk‑free interest rate used is the rate for a U.S. Treasury zero coupon issue with a remaining life consistent with the options expected life on the grant date.The Company has not paid and does not expect to pay in the foreseeable future, any cash dividends. Forfeitures are estimated at the time of grant and areadjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated a forfeiture rate of 10% based onhistorical attrition trends. The Company records stock‑based compensation expense only on awards that are expected to vest.The estimated grant date fair values of employee stock option awards granted under the 2008 Plan, 2016 Plan and the Inducement Incentive Award Plan werecalculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions: Year Ended December 31, 2018 2017 2016Risk-free interest rate2.85% 2.03% 1.42%Dividend yield— — —Expected term6.06 5.90 6.04Expected volatility85.17% 84.52% 94.97%Weighted-average fair value of common stock$8.45 $15.32 $13.25 The weighted average grant date fair value of stock options granted to employees during the years ended December 31, 2018, 2017 and 2016 was $6.17,$10.97, and $10.23, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and 2016 was$0.6 million, $2.6 million and $0.8 million, respectively.F-23As of December 31, 2018 and December 31, 2017, total unrecognized compensation expense related to unvested employee stock options was $9.8 millionand $10.2 million, respectively, which is expected to be recognized over a weighted average period of 3.1 years and 2.9 years, respectively.During the year ended December 31, 2017, the status of two executives changed from an employee to a consultant (non-employee). Stock-basedcompensation expense relating to the executives' stock option awards were recognized through the termination date. In accordance with ASC 505-50, 55,073unvested stock option awards were subsequently remeasured using the then-current fair value of the Company's common stock and updated assumptioninputs in the Black-Scholes option pricing model, while 62,546 shares in aggregate were forfeited and expired as of December 31, 2017. The right to exercisevested, exercisable stock option awards (126,457 shares in aggregate) as of December 31, 2017 were extended to March 31, 2019, resulting in a modification;and during the first quarter of 2018, a stock option award to purchase 20,000 shares of the Company's common stock was granted. In connection with theCompany's adoption of ASU 2018-07 during the second quarter of 2018, final remeasurement of the executives' stock option awards were performed as ofApril 1, 2018. Stock-based compensation expense was recognized over the consulting period until services were completed. All granted stock option awardsare presented in the employee awards stock option table below.The Company granted a stock option award covering 95,000 shares to a non-employee director during the second quarter of 2018, with a weighted averagegrant date fair value of $8.71 for consulting services in addition to his responsibilities as a director. Prior to the adoption of ASU 2018-07 during the secondquarter of 2018, the unvested options held by non‑employees were revalued using the Company’s estimate of fair value on each vesting and reporting datethrough the remaining vesting period. Subsequent to the adoption of ASU 2018-07, non-employee share-based payment awards are measured on the date ofgrant, similar to share-based payment awards granted to employees. During the fourth quarter of 2018, an additional stock option award of 75,000 shares wasgranted to the non-employee director, with a weighted average grant date fair value of $4.35.Effective November 30, 2018, an executive officer resigned and immediately entered into a consulting arrangement with the Company for the periodDecember 1, 2018 to November 30, 2019. In connection with his consulting arrangement, (i) all of his unvested equity-based compensation awards continueto vest subject to his continued consulting services (84,604 shares in aggregate) and (ii) his right to exercise the vested and exercisable stock option awards(310,219 shares in aggregate) as of November 30, 2019 was extended 180 days to May 28, 2020, resulting in a modification. In addition, since the consultingagreement was not considered substantive, the Company recorded a charge for the fair value of the options in the fourth quarter for the acceleration of thevesting of his awards.The estimated grant date fair values of non-employee stock option awards granted under the 2016 Plan were calculated using the Black-Scholes optionpricing model, based on the following weighted-average assumptions: Year Ended December 31, 2018 2017 2016Risk-free interest rate2.77% —% 2.06%Dividend yield— — —Expected term5.81 0.00 8.80Expected volatility85.86% —% 87.33%As of December 31, 2018 and 2017, total unrecognized compensation expense related to unvested non‑employee stock options was $1.1 million and $0.6million, respectively, which is expected to be recognized over a weighted average period of 2.2 years years and 1.9 years, respectively.F-24The following table summarizes the activity under the 2008 Plan, 2016 Plan, and Inducement Incentive Award Plan: Weighted‑average remaining Aggregate Number of Weighted-average contractual term intrinsic value options exercise price ($) (in years) (in thousands)Employee Awards Outstanding at December 31, 20172,411,237 $10.58 7.50 $4,729Granted1,625,679 $8.45 Exercised(103,784) $4.85 Forfeited(251,557) $15.03 Outstanding at December 31, 20183,681,575 $9.49 7.77 $300 Vested at December 31, 20181,484,196 $9.01 5.83 $300Vested and expected to vest at December 31, 20182,990,612 $9.27 7.49 $300 Non‑Employee Awards Outstanding at December 31, 2017245,950 $4.32 5.10 $1,351Granted170,000 $9.38 Exercised— $— Forfeited(3,546) $0.39 Outstanding at December 31, 2018412,404 $6.44 6.42 $28 Vested at December 31, 2018223,180 $4.15 3.91 $28Vested and expected to vest at December 31, 2018412,404 $6.44 6.42 $28Restricted Stock UnitsDuring the second quarter of 2018, the Company awarded 40,000 restricted stock units under the 2016 Plan to certain employees subject to the achievementof performance conditions. These restricted stock units will vest in a single installment on the date the performance condition is achieved, on or prior toDecember 31, 2018.The restricted stock units granted during the second quarter of 2018 had a weighted average fair value of $12.75 per share based on the closing price of theCompany’s common stock on the date of grant. These restricted stock units were valued at approximately $0.5 million on their grant date.During the third quarter of 2018, the Company determined that it was not probable the performance criteria would be achieved on or prior to December 31,2018. For this reason, the Company reversed less than $0.1 million of previously-recognized stock-based compensation expense in the third quarter of 2018.The performance condition was not satisfied on or prior to December 31, 2018, therefore the restricted stock units are forfeited for no consideration.During the fourth quarter of 2018, the Company awarded 175,000 restricted stock units under the Inducement Incentive Award Plan. The restricted stockunits granted had a weighted average fair value of $6.03 per share based on the closing price of the Company’s common stock on the date of grant. Theserestricted stock units were valued at approximately $1.1 million. Unrecognized compensation expense is $1.0 million as of December 31, 2018, which isexpected to be recognized over a weighted average period of 3.9 years.The following table summarizes the status of the Company’s restricted stock units: Number of Shares(#) Weighted AverageFair Value ($)Unvested at December 31, 2017— $—Granted215,000 7.28Vested— —Forfeited(40,000) 12.75Unvested at December 31, 2018175,000 $6.03F-25Employee Stock Purchase PlanOn June 7, 2016, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the “ESPP”), which became effective June 21, 2016. TheESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986 with the purpose of providingemployees with an opportunity to purchase the Company's common stock through accumulated payroll deductions.Under the ESPP, the Company has set two six-month offering periods during each calendar year, one beginning March 1st and the other beginning September1st of each calendar year, during which employees may elect to have up to 25% of their eligible compensation deducted on each payday on an after-tax basisfor use in purchasing the Company's common stock on the last trading day of each offering period, subject to limits imposed by the Internal Revenue Code.The purchase price of the shares may not be less than 85% of the fair market value on the first or last trading day of the offering period, whichever is lower.The first ESPP offering period began on March 1, 2017.At inception of the ESPP, a total of 173,076 shares of common stock were authorized and reserved for future issuance under the ESPP. The number of sharesof common stock that may be issued under the ESPP will automatically increase on the first day of each calendar year, beginning in 2017 and ending in andincluding 2026, by an amount equal to the lesser of: (i) 1% of the number of shares of the Company’s common stock outstanding on the last day of theapplicable preceding calendar year and (ii) such smaller number of shares as is determined by the Company’s Board of Directors. During the year endedDecember 31, 2018 and 2017, the number of shares of common stock that may be issued under the ESPP was increased by 223,432 shares and 184,387 shares,respectively. During the year ended December 31, 2018, the Company issued 24,738 shares of common stock under the ESPP. As of December 31, 2018,539,894 shares remain available for future issuance under the ESPP.For the years ended December 31, 2018 and 2017, the Company recognized less than $0.1 million and $0.1 million of stock-based compensation expenseunder the ESPP.The Company recorded stock-based compensation expense related to stock option awards, restricted stock units and the ESPP in the following expensecategories of its consolidated statements of operations and comprehensive loss (in thousands): Year Ended December 31, 201820172016Research and development$2,453 $1,779 $1,183General and administrative3,261 2,302 847 Total stock-based compensation expense$5,714 $4,081 $2,03013. Revenue ArrangementsThe Company adopted ASC 606 on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. Thereported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605,Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance". The adoption of ASC 606 represents a changein accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statementreaders with enhanced disclosures.Financial Statement Impact of Adopting ASC 606The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018, was recorded as anadjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, thefollowing adjustments were made to the Company's accounts on the consolidated balance sheet as of January 1, 2018 (in thousands):F-26 Adjustments As Reported at Due to Balance atConsolidated Balance Sheet December 31, 2017 ASU 2014-09 January 1, 2018Assets Cash, cash equivalents, and restricted cash $70,698 $— $70,698Short-term deposits and investments 25,940 — 25,940Prepaid expenses and other current assets 2,042 — 2,042Total current assets 98,680 — 98,680Property and equipment, net 2,091 — 2,091Restricted cash and other assets 329 — 329 Total assets $101,100 $— $101,100Liabilities and stockholders’ equity Current liabilities: Accounts payable $1,606 $— $1,606Accrued expenses 8,580 — 8,580Deferred revenue, current portion 787 — 787Total current liabilities 10,973 — 10,973Non‑current liabilities: Deferred rent and lease incentive 151 — 151Loan payable 21,042 — 21,042Deferred revenue, net of current portion 15,919 (1,830) 14,089Other long‑term liabilities 1,201 — 1,201 Total liabilities 49,286 (1,830) 47,456Stockholders’ equity: Common stock 3 — 3Additional paid-in capital 273,128 — 273,128Accumulated deficit (216,897) 1,830 (215,067)Accumulated other comprehensive loss (4,420) — (4,420) Total stockholders’ equity 51,814 1,830 53,644 Total liabilities and stockholders’ equity $101,100 $— $101,100In connection with the adoption of ASC 606, the Company identified three collaboration/grant arrangements that required analysis to quantify the impact ofadoption to its opening accumulated deficit balance as of January 1, 2018: Spark Therapeutics, Inc., Skolkovo Foundation and National Institutes of Health.Spark Therapeutics, Inc.Spark License AgreementIn December 2016, the Company entered into a License and Option Agreement (“Spark License Agreement”) with Spark Therapeutics, Inc. (“Spark”)pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets utilizing the ImmTOR technology.The Spark License Agreement provides Spark with certain exclusive, worldwide, royalty bearing licenses to the Company’s intellectual property, allowingSpark to develop and commercialize gene therapies for an initial identified target.In addition to an upfront cash payment of $10.0 million under the Spark License Agreement, additional payments of an aggregate of $5.0 million in twopayments of $2.5 million each were paid within twelve months of December 2, 2016 (“Contract Date”). The first of the two additional payments wasscheduled to be made on or before May 31, 2017 (the “May 2017 License Payment”) (see “Spark Letter Agreement” below) and the second was made onOctober 31, 2017. Spark may also exercise options to research, develop and commercialize gene therapies utilizing the SVP technology for up to fouradditional targets. The Company is eligible to receive a variable fee up to $2.0 million for each additional target option elected, dependent on the incidenceof the applicable indication. As per the agreement, the election period in which Spark can exercise additional targets is a term of three years from the ContractDate, or December 1, 2019.F-27Assuming successful development and commercialization, the Company could receive up to an additional $65.0 million in development and regulatorymilestone payments and $365.0 million in commercialization milestone payments for each indication. If commercialized, the Company would be eligible toreceive tiered royalties on global net sales at percentages ranging from mid-single to low-double digits, all of which apply on a target-by-target basis. Underthe terms of the agreement, the Company will be eligible to receive these royalties commencing on the first commercial sale of the licensed product andterminating upon the later of (i) ten years after the first commercial sale, (ii) expiration of the last to expire valid claim on patents covering the jointlyinvented field specific improvements, or (iii) the expiration of regulatory exclusivity in the applicable country for the licensed product.The Spark License Agreement may be terminated by Spark for convenience upon ninety days’ notice. Either party may terminate the Spark LicenseAgreement on a target-by-target basis for material breach with respect to such target.In December 2016, the Company also entered into a Share Purchase Agreement (the “Spark Purchase Agreement”) with Spark. Pursuant to the Spark PurchaseAgreement, the Company sold 197,238 shares of the Company’s common stock to Spark for gross proceeds of $5.0 million, or $25.35 per share of commonstock, at an initial closing (the “Initial Closing”). The purchase price per share represents an amount equal to 115% of the average daily volume weightedaverage price (“VWAP”) of the common stock during the thirty consecutive calendar days leading up to and ending on the day prior to the Contract Date.Under the Spark Purchase Agreement, Spark has agreed not to dispose of any of the Initial Closing Shares or any Acquisition Right Shares that it may acquireuntil January 1, 2018 and, thereafter, transfers will be contractually subject to volume limitations applicable to an “affiliate” under Rule 144 of the SecuritiesAct. Closings under the Spark Purchase Agreement are subject to customary conditions.Beyond the Initial Closing, the Spark Purchase Agreement contemplated potential future sales of shares by the Company to Spark as follows:•First Acquisition Right. During the period beginning on May 1, 2017 and ending on June 1, 2017, Spark had the right (the “First AcquisitionRight”) to purchase a number of shares of common stock equal to an aggregate price of $5.0 million. See "Spark Letter Agreement" below.•Second Acquisition Right. During the period beginning on October 1, 2017 and ending on November 1, 2017, Spark had the right (the “SecondAcquisition Right”) to purchase a number of shares of common stock equal to an aggregate price of $5.0 million. On October 31, 2017 Sparkexercised this right and purchased 205,254 shares of common stock from the Company for $5.0 million, or $24.36 per share of common stock. Thepurchase price per share represents an amount equal to 115.0% of the average daily VWAP of the common stock during the thirty consecutivecalendar days leading up to and ending on the day prior to the Second Acquisition Right notification date.The First Acquisition Rights and Second Acquisition Rights are collectively referred to herein as the “Acquisition Rights”. The aggregate number of sharesthat the Company may issue pursuant to the Stock Purchase Agreement may not exceed the lesser of (i) 2,758,112 shares and (ii) such number of shares thatwould require the Company to obtain prior shareholder approval under the Nasdaq Marketplace Rules.In connection with the Spark License Agreement and Spark Purchase Agreement, the Company has made contractual payments defined in the MIT licenseagreement (Note 15) totaling $2.2 million for the MIT sub-license provided to Spark, and $0.4 million relative to the calculated premium paid by Spark forthe equity investments made under the Spark Purchase Agreement.Transition of Revenue Recognition from ASC Topic 605 to ASC Topic 606The terms of the Spark Purchase Agreement and the Spark License Agreement were negotiated at the same time between the parties and the terms of the SparkPurchase Agreement are referenced in the Spark License Agreement in multiple sections. The pricing and terms of the agreements are unique and must beconsidered in contemplation with each other. There are provisions within the Spark License Agreement that link to the Spark Purchase Agreement related toprovisions that constitute a material breach of the license agreement. Therefore, the Company concluded that the two agreements must be combined andevaluated as a single agreement. While the Spark Purchase Agreement and the Spark License agreement are considered to be a single agreement, theCompany determined that the purchase of common stock and future acquisition rights are not within the scope of ASC 606. The Company determined thatthe initial purchase of common stock combined with the embedded future stock Acquisition Rights had a fair value of $2.7 million and this amount wasrecorded in equity as of the effective date. The remaining $2.3 million of cash received in exchange for the stock and acquisition rights is included inallocable consideration, as this represents the premium paid by Spark on the purchase of common stock, and should be allocated to the remainingperformance obligations.The Company identified the following promises at the inception of the agreement: (1) certain exclusive, worldwide, royalty bearing licenses to theCompany’s intellectual property and a license to conduct certain research activities under the collaboration, or the License Obligation, (2) options toresearch, develop and commercialize gene therapies utilizing the ImmTOR technology for up to four additional target therapy options, or the OptionObligation, (3) manufactured supply ofF-28preclinical and clinical SVP, or the Supply Obligation at a discount, and (4) option to purchase manufactured supply of commercial SVP, or the CommercialSupply Obligation at fair value. In consideration for these promises, the Company received an upfront payment of $15.0 million. In addition, the Company iseligible to receive additional payments of up to $35.0 million based on the achievement by Spark of future specified development milestones, up to $30.0million based on the achievement by Spark of future specified regulatory milestones, up to $110.0 million based on the achievement by Spark of futurespecified commercial milestones, and up to $255.0 million based on the achievement by Spark of future specified sales milestones. The Company will also beeligible to receive tiered royalty payments that reach low double-digits based on future net sales for the duration of the royalty term.The Company determined that the License Obligation was not capable of being distinct from the Supply Obligation. This is because Spark cannot derivebenefit from the license without the simultaneous transfer of the preclinical and clinical supply. Therefore, the License Obligation and Supply Obligation arecombined as a single performance obligation (the “Combined License and Supply Obligation”). The Company also determined that the Option Obligation,which includes the related Supply Obligation, provides the customer with a material right and is considered a performance obligation in the arrangementsince it was priced at an incremental discount. The Company determined that the optional Commercial Supply Obligation does not provide the customerwith a material right and is not considered to be a performance obligation because Spark can derive benefit from the Combined License and SupplyObligation without the delivery of the Commercial Supply Obligation and is not at an incremental discount. Therefore, the Company determined that theSpark agreement contains five distinct performance obligations: the Combined License and Supply Obligation, and the four separate Option Obligations.In determining the transaction price, the Company considered the future development milestones, regulatory milestones, commercial milestones, salesmilestone, and sales royalties all represent variable consideration. Each of these variable consideration items was evaluated under the most likely amountmethod to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As partof its evaluation of the constraint, the Company considered numerous factors, including that receipt of such milestones is outside the control of theCompany. Separately, any consideration related to sales-based milestones as well as royalties on net sales upon commercialization by Spark, will berecognized when the related sales occur as they were determined to relate predominantly to the intellectual property granted to Spark and, therefore, havealso been excluded from the transaction price in accordance with the royalty recognition constraint. As of the adoption date and as of December 31, 2018, allmilestones were constrained. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as otherchanges in circumstances occur.As a result, the Company determined that the up-front payment of $12.3 million ($15.0 million, less fair value of the equity totaling $2.7 million as discussedabove) was included in the transaction price and was allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company allocated $7.1 million to the Combined License and Supply Obligation and $5.2 million to the discount on the OptionObligation ($1.3 million for each option) using the relative standalone selling price method to each obligation. The standalone selling price for theCombined License and Supply Obligation was determined using a discounted cash flow model. The standalone selling price for the Option Obligation wasdetermined based on the fair value of the license minus the strike price of the option (the probability of exercise was included in the valuation) as well as theestimated discount of the Supply Obligation.The estimated proceeds to be received from the sale of the Supply Obligation was also included in the transaction price for the Combined License and SupplyObligation. The total consideration allocated to the Combined License and Supply Obligation will be recognized using the output method, based on theproportion of actual deliveries to the total expected deliveries over the initial term which is estimated to be approximately four years. The discountassociated with the Option Obligation, along with the proceeds to be received upon exercise and estimated sale of the Supply Obligation, will be recognizedwhen each of the options are exercised, over the related expected deliveries of its supply. If the options expire without exercise, the related deferred revenueassociated with each option will be recognized upon expiration (December 1, 2019).The Company estimated that revenue recognized under ASC 605 is consistent with the revenue recognized in accordance with ASC 606 from contractinception. However, upon the initial adoption of ASC 606 on January 1, 2018, the Company recognized other assets of $2.6 million related to theincremental costs relating to the payments to MIT that would not have been incurred if the contract with Spark had not been obtained. Under the Companyexisting license agreement with MIT (See Note 15), in the event the Company sublicenses the MIT patents to a third party, it will be required to remit to MITa percentage (ranging from 10% to 30%) of sublicense income. The Company concluded that the payments made to MIT were analogous to salescommissions and represented the cost to obtain a contract, which were evaluated under ASC 340-40-25-1. Such amounts were capitalized as they were bothincremental and recoverable. However, upon further review, the Company noted that the amounts paid to MIT represent the cost to fulfill a contract ratherthan a cost to obtain a contract as they represent the costs that were incurred in order to fulfill their supply obligations under the Spark License Agreement.Therefore, the incremental payments to MIT represent part of the cost to fulfill the contract. When determining the appropriate accounting guidance for thecosts to fulfill a customer contract, ASC 340-40-25-6 indicates that any other applicable literature should be considered first. SinceF-29the intellectual property is being used exclusively for research and development, the accounting for the MIT costs were previously accounted for under ASC730-10. Since all of the payments to MIT related to the underlying intellectual property, that does not have alternative future use, such amounts should nothave been capitalized, and instead remained recorded as research and development expense upon adoption of ASC 606.The Company evaluated the impact of the error on previously issued financial statements included in the Form 10-Q for the quarters ended March 31, 2018,June 30, 2018 and September 30, 2018, noting that the impact was not material to the balance sheet, statement of operations or cash flows. However,correcting the error would be material to the quarterly trends in the statement of operations to expense the amount in the fourth quarter. Therefore, suchamounts were corrected by reducing current and long-term assets by $0.2 million and $2.4 million, respectively and increasing accumulated deficit by $2.6million as of January 1, 2018 by reversing the amounts initially recorded in transition. There was no impact to the consolidated statements of operations orcash flows for any of the quarters previously filed and no impact to any of the previously issued annual financial statements.During the twelve months ended December 31, 2018, there were no deliveries and thus no revenue was recognized. The Company recognized revenues of lessthan $0.1 million related to the Spark License Agreement during the twelve months ended December 31, 2017.As of December 31, 2018, there was a contract liability of $14.7 million representing deferred revenue associated with this agreement. A total of $1.0 millionis presented as current and $13.7 million is presented as noncurrent in the accompanying consolidated balance sheet. As of December 31, 2017, there was$14.7 million of deferred revenue related to this agreement.Spark Letter AgreementOn June 6, 2017, the Company and Spark entered into a letter agreement (the “Letter Agreement”), pursuant to which the parties agreed that Spark wouldmake the May 2017 License Payment by June 6, 2017. The May 2017 License Payment was received, and recorded as a liability as of June 30, 2017, ofwhich some or all may potentially constitute the reimbursement described below. The parties also agreed that Spark would be deemed to have deliverednotice on May 31, 2017 exercising its right to purchase the shares pursuant to the First Acquisition Right. The Letter Agreement further outlines a costreimbursement arrangement, pursuant to which the Company agreed to reimburse Spark for all costs and expenses, including the cost of materials providedby the Company, associated with the preclinical research and toxicology studies being performed by Spark for any licensed products for a specified amountof time (the “Reimbursement Period”), up to an agreed upon cap of $2.5 million.Consistent with the First Acquisition Right, Spark purchased 324,362 shares of common stock pursuant to the Spark Purchase Agreement, as amended by theLetter Agreement, for an aggregate purchase price of $5.0 million, or $15.41 per share of common stock. The purchase price per share represents an amountequal to 115.0% of the average daily volume weighted average price (“VWAP”) of the common stock during the thirty consecutive calendar days leading upto and ending on the day prior to the First Acquisition Right notification date. At the initial contract assessment, the Company allocated $2.7 million toequity (representing the fair value of the initial purchase of common stock combined with the embedded future stock Acquisition Rights). Upon exercise ofthe First Acquisition Right, the Company recorded the purchase amount to stockholders’ equity.Under ASC 606, the Company determined that the Letter Agreement resulted in a modification to the original agreement. The amount received totaling $2.5million and the reimbursements pursuant to the Letter Agreement totaling $2.5 million were both included in the transaction price, and a liability wasrecorded for the amount expected to be repaid. As repayments are made, the underlying liability will be reduced. To the extent that an amount is expected tobe applied towards the clinical supply obligation, the analysis of variable consideration will be updated accordingly.The Company utilized the practical expedient relating to contract modifications that occurred prior to January 1, 2018. The practical expedient allows theCompany to reflect the aggregate effect of all modifications that occurred before January 1, 2018 when identifying the satisfied and unsatisfied performanceobligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligations for the modifiedcontract at transition.On October 31, 2017, Spark paid the Company a $2.5 million milestone payment pursuant to the Spark License Agreement, which was included in thetransaction price and allocated to the performance obligations using the relative standalone selling price. In addition, Spark exercised the SecondAcquisition Right set forth in Section 2.4 of the Spark Purchase Agreement and purchased 205,254 shares of common stock from the Company for $5.0million, or $24.36 per share of common stock. The purchase price per share represents an amount equal to 115.0% of the average daily VWAP of the commonstock during the thirty consecutive calendar days leading up to and ending on the day prior to the Second Acquisition Right notification date.F-30Skolkovo FoundationThe Company receives grant funding from the Russia-based Development Fund of New Technologies Development and Commercialization Center("Skolkovo"). On November 28, 2014, the Company executed a grant awarded by Skolkovo for the development of a therapeutic vaccine using nanoparticlesto treat chronic infection caused by human papillomavirus (HPV) and diseases associated with this infection. The grant covered the period from August 1,2014 through July 21, 2017. The grant provided for up to $2.7 million that covers 48.5% of the estimated total cost of the research plan with the remaining51.5% of estimated costs to be contributed by the Company. From grant inception through December 31, 2018, the Company received $2.0 million fromSkolkovo.At any time during the term of the grant agreement, but not more than once per quarter, Skolkovo has the right to request information related to the projectand to conduct an audit of the expenses incurred by the Company. In the event the project or the expenses do not meet predefined requirements, theCompany may be required to reimburse the funds received up to three years after the completion of the project. As a result, in accordance with ASC 605, theCompany determined that the grant funding was not fixed or determinable and the entire amount received through December 31, 2017 was recorded asdeferred revenue in the consolidated balance sheet until the completion of the Skolkovo audit or the expiration of the audit term, which is expected April2021.The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Skolkovo, is a customer. Furthermore,the Company determined that the agreement with Skolkovo has commercial substance, and that the grant should be accounted for as revenue. The Companyidentified the research and development services being provided to Skolkovo as the only performance obligation in the agreement. Based on the guidance inASC 606, the Company concluded that the entire $2.0 million of grant funds received from Skolkovo is variable consideration. Although the Companybelieves it has an enforceable right to the amounts received, there is risk that an audit could result in the Company needing to refund certain amounts back toSkolkovo, resulting in variability in the transaction price. The Company utilized the “expected value” approach in determining the amount that can berecognized. The Company estimated that it will be entitled to revenue of $1.8 million from the Skolkovo grant, and recorded this amount as a cumulative-effect adjustment through accumulated deficit upon adoption of ASC 606. The remainder of $0.2 million was recorded as a contract liability upon adoptionof ASC 606.During the year ended December 31, 2018, the Company made a decision to cease work relating to the Skolkovo grant. As a result, Skolkovo performed aformal review of project expenses incurred by the Company. Skolkovo concluded that the Company should (i) return unused grant funds to Skolkovo in theamount of less than $0.1 million and (ii) reimburse $0.1 million of costs deemed to have been overspent relative to the cost share requirement stipulated inthe grant.As of December 31, 2018, a contract liability of $0.1 million remains on the balance sheet and will not be recognized as revenue until the expiration of thethree-year audit period, or sooner, if resolution is reached with Skolkovo or there is a change in the estimate.National Institutes of HealthOn May 14, 2014, the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health ("NIH"), provided the Company with a Notice ofAward (“NoA”), for a grant relating to the preclinical development and clinical proof of concept for a synthetic nanoparticle (the “Project”). The grant willhelp advance the Company’s development of the nanoparticle from a preclinical through early clinical stage and will provide support for one or more clinicaltrials. Under the terms of the grant, NIDA agreed to provide up to $8.1 million in funding to be used to offset the qualifying expenses incurred by theCompany. The grant was to be funded over the course of three years, according to budget forecasts prepared by the Company.In accordance with ASC 605, revenue associated with this grant was recognized as the related research and development work was performed, and expensesincurred. Revenue under this grant arrangement was recognized using a proportional performance method. Amounts received prior to satisfying the ASC 605revenue recognition criteria (if any) was recorded as deferred revenue on the balance sheet. Through December 31, 2017, the Company received andrecognized under ASC 605 approximately $7.2 million of grant revenue. The remaining $0.9 million available under the grant requires a change to theoverhead rate, which is subject to final reconciliation and approval from NIDA and, therefore, was not recognized under ASC 605.The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, NIDA, is a customer. Furthermore, theCompany determined that the agreement with NIDA has commercial substance, and that the grant should be accounted for as revenue. The Companyidentified the research and development services being provided to NIDA as the only performance obligation in the agreement.Upon adoption of ASC 606, the remaining $0.9 million was not recognized because the change to the overhead rate required approval from NIDA, andtherefore, represents a contract modification. On December 19, 2018, the Company received supervisory review and approval of the overhead rate changefrom NIDA. During the fourth quarter of 2018, the Company recognized the full $0.9 million of grant revenue from NIDA.F-31Impact of New Revenue Guidance on Financial Statement Line ItemsThe following table compares the reported consolidated balance sheet and statement of operations, as of and for the year ended December 31, 2018, to thepro-forma amounts had the previous guidance been in effect (in thousands): As of December 31, 2018Consolidated Balance Sheet As reported Pro forma as if the previousaccounting was in effectAssets Cash, cash equivalents, and restricted cash $37,403 $37,403Prepaid expenses and other current assets 4,673 4,673Total current assets 42,076 42,076Property and equipment, net 2,127 2,127Restricted cash and other assets 279 279 Total assets $44,482 $44,482Liabilities and stockholders’ equity Current liabilities: Accounts payable $1,100 $1,100Accrued expenses 11,700 11,700Loan payable, current portion 21,385 21,385Deferred revenue, current portion 959 959Total current liabilities 35,144 35,144Non‑current liabilities: Deferred rent and lease incentive 34 34Deferred revenue, net of current portion 13,818 15,648Other long‑term liabilities 904 904 Total liabilities 49,900 51,730Stockholders’ equity: Common stock 3 3Additional paid-in capital 279,539 279,539Receivable from stock option exercises — —Accumulated deficit (280,403) (282,233)Accumulated other comprehensive loss (4,557) (4,557) Total stockholders’ equity (5,418) (7,248) Total liabilities and stockholders’ equity $44,482 $44,482Total reported liabilities were $1.8 million less than the pro-forma balance sheet, which assumes the previous guidance remained in effect as of December 31,2018. The lower reported liabilities were due to reductions recognized to deferred revenue balances related to Skolkovo, which would remain deferred underASC 605 as of December 31, 2018.There was no difference in the amounts reported in the statement of operations under ASC 606 during the twelve months ended December 31, 2018, and thepro-forma statement of operations, which assumes the previous guidance remained in effect as of December 31, 2018.Transaction Price Allocated to Future Performance ObligationsRemaining performance obligations represent the transaction price of contracts for which work has not been performed (or has been partially performed) andexcludes unexercised contract options. As of December 31, 2018, the aggregate amount of the transaction price allocated to remaining performanceobligations was $8.6 million. The Company expects to recognize revenue on approximately 8.9% of the remaining performance obligations over the next 12months.F-32Contract Balances from Contracts with CustomersThe following table presents changes in the Company’s contract liabilities during the twelve months ended December 31, 2018 (in thousands): Balance at Balance at Beginning of Period Additions Deductions End of PeriodYear Ended December 31, 2018 Contract liabilities: Deferred revenue $14,876 $903 $(1,002) $14,777 Other liabilities (i) 2,231 — (105) 2,126Total contract liabilities $17,107 $903 $(1,107) $16,903(i) As of December 31, 2018, the current portion of other liabilities in the amount of $1.2 million is presented in the accrued expenses line of the consolidated balance sheet. The non-current portion of other liabilities in the amount of $0.9 million is presented in the other long-term liabilities line of the consolidated balance sheet.Deferred revenueDuring the year ended December 31, 2018, the Company drew down $0.9 million of grant funds from NIDA and received the required written approval fromNIDA on December 19, 2018, however, amounts were not deferred at the beginning of the period.During the year ended December 31, 2018, the Company made a decision to cease work relating to the Skolkovo grant. As a result, Skolkovo performed aformal review of project expenses incurred by the Company. Skolkovo concluded that the Company should return unused grant funds to Skolkovo, whichresulted in a reduction to deferred revenue of less than $0.1 million.Other liabilitiesIn connection with its cost reimbursement arrangement with Spark, the Company received reimbursement invoices during the year ended December 31, 2018amounting to approximately $0.1 million, which reduced the other liability balance to $2.1 million as of December 31, 2018.The timing of revenue recognition and cash collections results in contract liabilities on the consolidated balance sheets. When consideration is received, orsuch consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contractliability is recorded. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenuerecognition criteria have been met.F-3314. Related‑Party TransactionsIn connection with the 2017 PIPE, the Company sold to Timothy Springer, Ph.D., a member of its Board of Directors, an aggregate of 338,791 shares ofcommon stock at a purchase price equal to $17.71 per share, which was equal to the most recent consolidated closing bid price on the Nasdaq Global Marketon June 23, 2017. In addition, the Company sold warrants to Dr. Springer to purchase up to 79,130 shares of common stock (“Warrant Shares”), exercisable at$17.71 per Warrant Share, and with a term of five years. The purchase price for each warrant was equal to $0.125 for each Warrant Share, consistent withNasdaq Global Market requirements for an “at the market” offering.The Company incurred expenses for consulting services provided by its founders totaling $0.2 million, $0.2 million and $0.3 million during the years endedDecember 31, 2018, 2017 and 2016, respectively.15. Technology License AgreementsMassachusetts Institute of TechnologyOn November 25, 2008, the Company entered into an Exclusive Patent License agreement with the Massachusetts Institute of Technology (“MIT”), which isreferred to as the Exclusive Patent License. The Company received an exclusive royalty‑bearing license to utilize patents held by MIT in exchange forupfront consideration and annual license maintenance fees. Such fees are expensed as incurred and have not been material to any period presented. In theevent the Company sublicenses the MIT patents to a third party, it will be required to remit to MIT a percentage (ranging from 10% to 30%) of sublicenseincome. In addition, the Company is obligated to pay MIT a certain amount upon the achievement of defined clinical milestones, up to a total of $1.5million. On December 18, 2008, the Company entered into a patent‑cross‑license agreement with BIND Therapeutics, Inc. whereby each party receives alicense for the use of the other patents in their respective fields of use. In exchange for this license, the Company paid a one‑time expense in 2008.As of December 31, 2018, and in connection with the execution of the Spark License Agreement, the Company has made contractual payments pursuant tothe Exclusive Patent License totaling $2.2 million for the sublicense granted to Spark, and $0.4 million relative to the calculated premium paid by Spark forthe equity investments made under the Spark Purchase Agreement. The Company made no additional payments during the year ended December 31, 2018.Shenyang Sunshine Pharmaceutical Co., LtdIn May 2014, the Company entered into a license agreement with Shenyang Sunshine Pharmaceutical Co., Ltd. (“3SBio”), which is referred to as the 3SBioLicense. Pursuant to the 3SBio License, which was amended and restated in May 2017, the Company was granted an exclusive license to certain pegadricase(formerly pegsiticase)‑related patents and related “know‑how” owned or in‑licensed by 3SBio for the worldwide (except for Greater China and Japan)development and commercialization of products based thereupon for human therapeutic, diagnostic and prophylactic use. Pegadricase is the new UnitedStates Adopted Name (USAN) for pegsiticase. The Company was also granted a worldwide (except for Greater China) exclusive license to develop,commercialize and manufacture or have manufactured products combining the Company’s proprietary ImmTOR technology with pegadricase or relatedcompounds supplied by 3SBio (or otherwise supplied if the Company’s rights to manufacture are in effect) for human therapeutic, diagnostic andprophylactic use. The Company was also granted a co‑exclusive license to manufacture and have manufactured pegadricase and related compounds forpreclinical and clinical use or, if the 3SBio License is terminated for 3SBio’s material breach, for any use under the 3SBio License. Otherwise, the Companyis obligated to obtain all of its supply of such compounds for Phase 3 clinical trials and commercial use from 3SBio under the terms of supply agreements tobe negotiated.Pursuant to the 3SBio License, the Company is required to use commercially reasonable efforts to develop and commercialize a product containingpegadricase or a related compound. If the Company does not commercialize any such product in a particular country in Asia, Africa or South America within48 months after approval of any such product in the United States or a major European country, then 3SBio will have the right to do so, but only until theCompany commercializes a product combining the Company’s ImmTOR technology with any such compound in such country. The Company has paid to3SBio an aggregate of $1.0 million in upfront and milestone‑based payments under the 3SBio License. An additional liability totaling $2.0 million formilestone payments was expensed in 2016 and was included within accounts payable on the balance sheet as of December 31, 2016. The Company isrequired to make future payments to 3SBio contingent upon the occurrence of events related to the achievement of clinical and regulatory approvalmilestones of up to an aggregate of $21.0 million for products containing the Company’s ImmTOR technology, and up to an aggregate of $41.5 million forproducts without the Company’s ImmTOR technology. The Company is also required to pay 3SBio tiered royalties on annual worldwide net sales (on acountry‑by‑country and product‑by‑product basis) related to the pegadricase component of products at percentages ranging from the low‑to‑mid single digitsfor products containing the Company’s ImmTOR technology, and a range of no more than ten percent points from the mid‑single digits to low double‑digitsfor products without the Company’s ImmTOR technology. The Company will pay these royalties to 3SBio, subject to specified reductions, on acountry‑by‑country and product‑by‑product basis until the later ofF-34(i) the date that all of the patent rights for that product have expired in that country, or (ii) a specified number of years from the first commercial sale of suchproduct in such country.The 3SBio License expires on the date of expiration of all of the Company’s royalty payment obligations unless earlier terminated by either party for anuncured material default or for the other party’s bankruptcy. Any such termination by 3SBio for material default may be on a country‑by‑country orproduct‑by‑product basis in certain circumstances. The Company may also terminate the 3SBio License on a country‑by‑country or product‑by‑product basisfor any reason effective upon 60 days’ prior written notice to 3SBio or, with respect to a given product, immediately upon written notice to 3SBio if theCompany identifies a safety or efficacy concern related to such product.Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc.In May 2016, the Company entered into a license agreement with the Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc.(collectively, “MEE”), which is referred to as the MEE License. Under the MEE License, the Company was granted an exclusive commercial worldwidelicense, with the right to grant sublicenses through multiple tiers, to make, have made, use, offer to sell, sell and import certain products and to practicecertain processes, the sale, use or practice of which are covered by patents and proprietary know‑how owned or controlled by MEE, for use of Anc80 genetherapy vectors for gene augmentation therapies expressing certain target sequences.MEE also granted the Company exclusive options to exclusively license certain of their intellectual property rights relating to several additional targetsequences and variations thereof each linked to a specified disease. During a defined option period, the Company may exercise this right for up to adesignated number of target sequences. If the Company exercises its options, under certain circumstances, the Company may substitute alternative targetsequences for previously selected target sequences.The Company agreed to use commercially reasonable efforts to develop and commercialize licensed products pursuant to a development plan, and to marketand sell at least one product for each target sequence for which the Company exercised its option as soon as reasonably practicable. Subject to certainexceptions, following commercial launch, the Company must use commercially reasonable efforts to market, sell, and maintain public availability of licensedproducts in a certain number of specified major markets.Pursuant to the MEE License, the Company agreed to pay MEE a license fee in the low six figures, annual license maintenance fees ranging from themid‑twenty thousands to mid‑seventy thousands and an option maintenance fee in the low five figures for each exercisable option. The Company also agreedto reimburse MEE for a specified percentage of the past patent expenses for the patents licensed to the Company. The Company also agreed to paydevelopment milestones on a licensed product‑by‑licensed product basis, totaling up to an aggregate of between $4.2 million to $37.0 million and salesmilestones on a licensed product‑by‑licensed product basis, totaling up to an aggregate of between $50.0 million to $70.0 million; tiered royalties on alicensed product‑by‑licensed product and country‑by‑country basis equal to a percentage of net sales ranging from mid‑single digits to mid‑teens, subject tothe prevalence of the targeted disease and certain reductions; and a percentage, in a range expected to be in the mid‑teens depending on timing, of anysublicense income the Company receives from sublicensing its rights granted thereunder, subject to certain reductions and exclusions. Upon exercise of eachoption, the Company agreed to pay MEE an option exercise fee ranging from low‑six figures to mid‑six figures, depending on the prevalence of the targeteddisease.The MEE License will continue until the expiration of the last to expire of the patent rights licensed thereunder. The Company may terminate the MEELicense in whole or in part upon prior written notice. MEE may terminate the MEE License on a target sequence‑by‑target sequence basis if the Companyfails to make any scheduled payments in respect of such target sequence or if the Company materially breaches a diligence obligation in respect of suchtarget sequence, in each case if the Company fails to cure within a specified time period. MEE may terminate the MEE License in its entirety if the Companymaterially breaches certain of its obligations related to diligence, representations and warranties, and maintenance of insurance; if the Company challengesthe validity or enforceability of any patents licensed thereunder; if any of the Company’s executive officers are convicted of a felony relating to manufacture,use, sale or importation of licensed products; or upon the Company’s insolvency or bankruptcy.Through December 31, 2018, the Company paid a total of $0.4 million in license fees due under the MEE License. No license fees are accrued under the MEELicense as of December 31, 2018.16. Income TaxesThe Company provides for income taxes under ASC 740. Under ASC 740, the Company provides deferred tax assets and liabilities for the expected future taxconsequences of temporary differences between the Company’s financial statement carrying amounts and the tax bases of assets and liabilities using enactedtax rates expected to be in effect in the years in which the differences are expected to reverse.F-35For the years ended December 31, 2018, 2017 and 2016, the Company did not record a current or deferred income tax expense or benefit. The following tablereconciles the federal statutory income rate to the Company's effective income tax rate: Year Ended December 31, 2018 2017 2016Statutory U.S. federal rate21.0 % 34.0 % 34.0 %State income taxes - net of federal benefit7.0 % 5.8 % 5.8 %Permanent items(0.5)% (0.1)% (1.1)%Research tax credits/other1.6 % 0.5 % 1.3 %Change in enacted rates— % (35.8)% — %Valuation allowance, net(29.1)% (6.7)% (39.8)%Other— % 2.3 % (0.2)%Effective income tax rate— % — % — %The tax effects of temporary differences that give rise to the Company's net deferred tax assets are as follows (in thousands): Year Ended December 31, 2018 2017Deferred Tax Assets Net operating loss carryforwards$59,126 $44,146Research and development credits5,780 4,092Stock-based compensations expense1,946 959Deferred rent and other expenses458 263Deferred revenue4,037 4,021Patent costs/amortization4,881 4,264Gross deferred tax assets76,228 57,745 Deferred Tax Liabilities Depreciation$(66) $(108)Gross deferred tax liabilities(66) (108)Net deferred tax assets76,162 57,637Valuation allowance(76,162) (57,637)Net deferred tax assets$— $—The Company has provided a full valuation allowance against its net deferred tax assets, as the Company believes that it is more likely than not that thedeferred tax assets will not be realized.Realization of future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating losscarryforward period. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and concludedthat it is more likely than not that the Company will not realize the benefit of its deferred tax assets. The valuation allowance increased by $18.5 million and$4.7 million for the years ended December 31, 2018 and 2017, respectively, primarily as a result of an increase in net operating loss. In 2014, the Company'sRussian subsidiary was granted a 10 year tax holiday in Russia. The Company's foreign operations continue to benefit from the tax holiday, which is set toexpire on December 31, 2023, however the Company is in the process of closing down operations in Russia and does not expect any tax liability.At December 31, 2018, the Company had federal and state net operating loss carryforwards of $217.7 million and $212.1 million, respectively, which willexpire at various times through 2038. Of the federal net operating loss carryforwards, $55.2 million can be carried forward indefinitely. The Company alsohas federal and state research and development tax credit carryforwards of $3.6 million and $2.8 million, respectively, available to reduce future taxliabilities, which will expire at various times through 2038.On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act ("Tax Reform Act"). The legislation significantlychanges U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, expanding the tax base andimposing a tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate federal income tax ratefrom a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Company has recognized the impact of the Tax Reform Act in these consolidatedfinancial statements and related disclosures. The impact of the remeasurement of the Company’s U.S. deferred tax assets and liabilities to 21% resulted in thereduction of deferred tax assets of approximately $23.4 million, which was offset by a full valuationF-36allowance, thus there was no net effect. The Company recorded no tax expense related to the deemed repatriation tax because its foreign entity, Selecta (RUS)is a foreign disregarded entity, which is not subject to the repatriation tax.In December 2017, the SEC staff issued SAB 118 to address the application of GAAP in situations when a registrant does not have the necessary informationavailable, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of H.R.1. TheCompany did not record any adjustments in the year ended December 31, 2018 to provisional amounts. As of December 31, 2018, the Company’s accountingtreatment is complete.Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382and 383 of the Internal Revenue Code due to ownership change limitations that have occurred previously, or that could occur in the future. These ownershipchanges may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxableincome and tax, respectively.In January 2019, the Company completed an equity offering that it believes will result in an ownership change under Section 382 of the Internal RevenueCode. Based upon estimates, the Company believes that deferred tax assets of $49.5 million, related to federal and Massachusetts net operating losses andcredits, will no longer be available going forward. Such amounts are offset by a full valuation allowance at December 31, 2018. The Company will finalizethis calculation in 2019.The Company applies ASC 740, Income Taxes to uncertain tax positions. As of the adoption date on January 1, 2010 and through December 31, 2018, theCompany had no unrecognized tax benefits or related interest and penalties accrued.The Company has not, as of yet, conducted a study of its research and development credit carryforwards. This study may result in an adjustment to theCompany’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are beingpresented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if anadjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. As a result, there would be no impact to the consolidatedbalance sheets, statements of operations and comprehensive loss, or cash flows if an adjustment was required.Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statement ofoperations. As of December 31, 2018, the Company had no accrued interest related to uncertain tax positions.The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities is open for tax years since inception. TheCompany files income tax returns in the United States and Massachusetts. There are currently no federal, state or foreign audits in progress.17. Defined Contribution PlanThe Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers allemployees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pretaxbasis. The 401(k) Plan provides for matching contributions on a portion of participant contributions pursuant to the 401(k) Plan’s matching formula. Allmatching contributions vest ratably over 4 years and participant contributions vest immediately. Contributions by the Company totaled $0.2 million, $0.2million and $0.1 million during each of the years ended December 31, 2018, 2017 and 2016, respectively.18. Subsequent EventsCorporate RestructuringOn December 21, 2018, the Board of Directors (the “Board”) of the Company approved a plan to reduce Selecta’s budgeted headcount by approximately 36%(the “Workforce Reduction”) following a strategic review of the Company’s business. The Workforce Reduction aimed to align Selecta’s workforce with theCompany’s recently announced strategy to focus on the development of the Company’s lead product candidate, SEL-212, for the treatment of chronicrefractory gout, and advancement of the Company’s ImmTOR technology in the area of gene therapy, specifically ImmTOR in combination with AAV genetherapy for the treatment of Crigler-Najjar Syndrome (“CN”), as well as the deprioritization of the Company’s oncology development program. While theWorkforce Reduction generally affected employees in all areas of Selecta, primarily affected were those working in research and related general andaccounting functions. The Workforce Reduction resulted in the termination of approximately 17 employment positions effective January 3, 2019, and theaffected employees were notified on the same date. Since the Company does not have a pre-existing severance plan, the restructuring activity will beaccounted for under ASC 420 and since the employees were notified after year end and exited within the minimum retention period, a charge totalingapproximately $0.5 million will be recorded in the first quarter. Following the Workforce Reduction, Selecta expects to have approximately 45 full-timeemployment positions and to be appropriately resourced to continue executing on its current strategy.F-37In addition, the Company decided to vacate certain office space in Watertown, MA on January 11, 2019 and consolidated all employees at its corporateheadquarters also in Watertown, MA. The lease term expires in March 2020.Public OfferingOn January 23, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Stifel, Nicolaus & Company, Incorporated,as representative of the several underwriters named therein (collectively, the “Underwriters”), in connection with the public offering, issuance and sale by theCompany of 20,000,000 shares of the Company’s common stock, $0.0001 par value per share, at a public offering price of $1.50 per share, less underwritingdiscounts and commissions, pursuant to an effective shelf registration statement on Form S-3 (Registration No. 333-219900) and a related prospectussupplement filed with the Securities and Exchange Commission. Under the terms of the Underwriting Agreement, the Company has also granted theUnderwriters an option exercisable for 30 days to purchase up to an additional 3,000,000 shares of its common stock at the public offering price, lessunderwriting discounts and commissions.On January 25, 2019, the Company closed the offering of 20,000,000 shares at a public offering price of $1.50 per share. Effective January 29, 2019, anadditional 2,188,706 shares were sold at a public offering price of $1.50 per share. The total net proceeds from the offering was $31.3 million, after deductingunderwriting discounts and commissions.The Company intends to use the net proceeds of the offering and a portion of its existing cash and cash equivalents to advance the clinical development ofSEL-212, including the completion of a head-to-head (COMPARE) clinical trial of SEL-212 compared to the current FDA-approved uricase therapy,completion of the Phase 2 clinical trial and preparations for a Phase 3 clinical trial, pursue other preclinical programs, including gene therapy developmentwork, and for other operational activities and general corporate purposes.19. Selected Quarterly Financial Data (Unaudited)The following table summarizes unaudited quarterly financial data for the years ended December 31, 2018 and 2017 (in thousands, except per share data). Three Months Ended (unaudited) March 31, June 30, September 30, December 31, 2018 2018 2018 2018Grant and collaboration revenue $— $— $— $903Operating expenses $15,813 $18,769 $15,941 $15,402Net loss $(15,888) $(18,796) $(16,001) $(14,651)Net loss attributable to common stockholders $(15,888) $(18,796) $(16,001) $(14,651) Net loss per share attributable to common stockholders, basic and diluted $(0.71) $(0.84) $(0.71) $(0.65) Three Months Ended (unaudited) March 31, June 30, September 30, December 31, 2017 2017 2017 2017Grant and collaboration revenue $137 $26 $27 $17Operating expenses $14,919 $15,897 $13,881 $19,294Net loss $(15,134) $(15,967) $(14,676) $(19,544)Net loss attributable to common stockholders $(15,134) $(15,967) $(14,676) $(19,544) Net loss per share attributable to common stockholders, basic and diluted $(0.82) $(0.85) $(0.66) $(0.88)F-38SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. SELECTA BIOSCIENCES, INC. Date: March 15, 2019 By:/s/ Carsten Brunn, Ph.D. Carsten Brunn, Ph.D. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in thecapacities and on the dates indicated.SignatureTitleDate /s/ Carsten Brunn, Ph.D.President and Chief Executive Officer, and DirectorMarch 15, 2019Carsten Brunn, Ph.D.(Principal Executive Officer) /s/ John Leaman, M.D.Chief Financial Officer, Head of Corporate Strategy, and TreasurerMarch 15, 2019John Leaman, M.D.(Principal Financial and Accounting Officer) /s/ Omid Farokhzad, M.D.DirectorMarch 15, 2019Omid Farokhzad, M.D. /s/ Timothy C. BarabeDirectorMarch 15, 2019Timothy C. Barabe /s/ Amir Nashat, Ph.DDirectorMarch 15, 2019Amir Nashat, Ph.D /s/ Aymeric SallinDirectorMarch 15, 2019Aymeric Sallin /s/ Timothy Springer, Ph.D.DirectorMarch 15, 2019Timothy Springer, Ph.D. /s/ Patrick ZennerDirectorMarch 15, 2019Patrick Zenner F-39AMENDMENT TO CONSULTING AGREEMENTThis Amendment to Consulting Agreement (the "Amendment") is made as of December 31, 2018 between Selecta Biosciences,Inc., a Delaware corporation (the "Company"), and Omid Farokhzad, M.D. (the "Consultant").WHEREAS, the parties entered into a Consulting Agreement dated as of May 30, 2018 (the "Agreement") and wish to amendcertain terms of the Agreement.NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants set forth herein and in theAgreement, the parties hereby agree as follows:1.Defined Terms. Capitalized terms used, but not defined, herein shall have the meanings ascribed to them in the Agreement.2.Term. The parties agree to delete Section 4 of the Agreement in its entirety and replace it with the following:Term. The term of this Agreement will begin on April 1, 2018 and will end on December 31, 2019; provided, however,that the term may be extended by mutual agreement of the Company and the Consultant. The Company may terminate thisAgreement at any time for any reason, without cause and without prior notice.3.Schedule A: The parties agree the following shall be added to "2. Compensation" set forth in Schedule A:On December 2, 2018, the Company granted the Consultant an option to purchase 75,000 shares of the Company'scommon stock (the "Option"), subject to the terms and conditions of the Company's 2016 Incentive Award Plan (the "2016Plan") and a stock option agreement between the Company and the Consultant. Subject to its terms, the Option shall continue tovest after termination of this Agreement, for as long as the Consultant serves the Company as a Service Provider (as defined inthe 2016 Plan).The Company shall compensate Consultant in consideration of Consultant's performance of the Services hereunder, for theperiod beginning January 1, 2019 and ending December 31, 2019, in the amount of $85,000, to be paid quarterly in arrearsbeginning on March 31, 2019 and prorated for any partial period of service.4.All other terms and conditions of the Agreement that are not amended by this Amendment shall remain in full force andeffect. If there is conflict between this Amendment and the Agreement, the terms of the Amendment will prevail.IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed as an agreement under seal as of the datefirst written above.SELECTA BIOSCIENCES,INC CONSULTANT By:/s/Carsten Brunn, Ph.D. By:/s/Omid Farokhzad, M.D.Name:Carsten Brunn, Ph.D. Name:Omid Farokhzad, M.D.Title:President and Chief Executive Officer Title:Chairman Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-8, File No. 333-212215) pertaining to the 2008 Stock Incentive Plan, as amended, the 2016Incentive Award Plan and the 2016 Employee Stock Purchase Plan of Selecta Biosciences, Inc.,(2)Registration Statement (Form S-8, File No. 333-224109) pertaining to the 2016 Incentive Awards Plan and the 2016 EmployeeStock Purchase Plan,(3)Registration Statement (Form S-8, File No. 333-228264) pertaining to the 2018 Employment Inducement Incentive AwardPlan,(4)Registration Statement (Form S-3, File No. 333-219262), and(5)Registration Statement (Form S-3, File No. 333-219900);of our report dated March 15, 2019 with respect to the consolidated financial statements of Selecta Biosciences, Inc. included in thisAnnual Report (Form 10-K) of Selecta Biosciences, Inc. for the year ended December 31, 2018. /s/ Ernst & Young LLP Boston, MassachusettsMarch 15, 2019Exhibit 31.1CERTIFICATIONSI, Carsten Brunn, certify that:1.I have reviewed this Annual Report on Form 10-K of Selecta Biosciences, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined inExchange 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and reportfinancial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. March 15, 2019 /s/ Carsten Brunn, Ph.D. Carsten Brunn, Ph.D. President and Chief Executive Officer, and DirectorExhibit 31.2CERTIFICATIONSI, John Leaman, certify that:1.I have reviewed this Annual Report on Form 10-K of Selecta Biosciences, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined inExchange 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and reportfinancial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. March 15, 2019 /s/ John Leaman, M.D. John Leaman, M.D. Chief Financial Officer, Head of CorporateStrategy and TreasurerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Carsten Brunn, President and Chief Executive Officer of Selecta Biosciences, Inc. (the “Company”), hereby certify, pursuant to 18U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:1.The Annual Report on Form 10-K of the Company for the period ended December 31, 2018 (the “Report”) fully complies withthe requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company. March 15, 2019 /s/ Carsten Brunn, Ph.D. Carsten Brunn, Ph.D. President and Chief Executive Officer, and DirectorExhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, John Leaman, Chief Financial Officer of Selecta Biosciences, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. §1350, asadopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:1.The Annual Report on Form 10-K of the Company for the period ended December 31, 2018 (the “Report”) fully complies withthe requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company. March 15, 2019 /s/ John Leaman, M.D. John Leaman, M.D. Chief Financial Officer, Head of Corporate Strategy andTreasurer

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