®
2018 Annual Report
To Our Shareholders,
I came to Voyager in mid-2018 to join an exceptional group of people working together on a mission to change the lives of people
suffering from severe neurological diseases. As the fi eld of gene therapy has blossomed, we see the potential with this modality
to develop great medicines for some of the most intractable neurological conditions. Our combined expertise in gene therapy and
neuroscience gives us the focus and ability to lead in this area and make a true difference for patients.
In 2018, we initiated RESTORE-1, the fi rst of two anticipated pivotal trials for VY-AADC in patients with Parkinson’s
disease. This came on the back of clinical results from our Phase 1b trial showing improvements in patients’ motor function
and quality of life over sustained periods following a one-time administration. These results were recently published in the peer-
reviewed Annals of Neurology. To further our efforts in this devastating but all too common disease, we recently entered into a
collaboration agreement with Neurocrine Biosciences to co-develop and co-promote VY-AADC. Neurocrine’s experience and
capabilities within the movement disorder specialty are already evident in the early days of our collaboration. Our current joint
efforts are focused on screening and enrolling patients in the RESTORE-1 trial, and on preparing for the initiation of the RESTORE-2
trial targeted for next year.
Our preclinical pipeline has also advanced over the past year. At the European Society of Gene and Cell Therapy conference in
the fall of 2018, we presented positive preclinical results of VY-HTT01 for Huntington’s disease and VY-SOD102 for ALS. The results
refl ected the optimization efforts undertaken around the delivery of these gene therapies aimed at suppressing the expression of
disease-causing genes. In the case of our Huntington’s disease program, we achieved meaningful reductions of Huntingtin gene
expression in both the deeper and outer layers of the brain of non-human primates. For our ALS-SOD1 program, intended for a
subset of patients with a particularly fast-progressing form of ALS, our preclinical work showed that direct injection of VY-SOD102
in the cervical motor neurons also generated meaningful reductions of the toxic SOD1 gene in multiple locations throughout a large
animal spinal cord, including the regions most critical for maintaining respiratory function. Preclinical pharmacology and toxicology
studies are underway to support the potential fi ling of IND applications for both programs later this year.
As we apply learnings from our more advanced programs and from the broader fi eld, we are intensifying our efforts
on our research pipeline. Our use of AAV has initially been directed at gene replacement and gene knock-down, and many
compelling targets remain in both applications. Through a pair of new collaborations with AbbVie, we are now also using AAV to
vectorize antibodies. By utilizing our novel blood-brain barrier penetrant capsids, we aim to overcome one of the major limitations of
biologic therapies for neurodegenerative diseases: the suffi cient transport of therapeutic antibodies across the blood-brain barrier.
Our initial programs in this additional application of AAV are targeted at pathological species of tau for Alzheimer’s disease and
other tauopathies and alpha-synuclein for Parkinson’s and other synucleinopathies. In addition to building on this work, we plan to
further our efforts towards expanding the portfolio and continuing to enhance our gene therapy platform.
Signifi cant progress has already been made in 2019, and we anticipate that this year will be pivotal for Voyager as we continue
to build on the exciting momentum established in recent months and advance our lead and preclinical pipeline programs. As
our organization continues to grow, we remain doggedly focused on connecting and listening to our science partners, healthcare
providers, and most importantly patients, each of whom inform our decisions and fuel our drive.
Sincerely,
Andre Turenne
President and Chief Executive Offi cer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37625
Voyager Therapeutics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
75 Sidney Street,
Cambridge, Massachusetts
(Address of Principal Executive Offices)
46-3003182
(IRS Employer
Identification No.)
02139
(Zip Code)
(857) 259-5340
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
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
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of Common Stock held by non-affiliates of the registrant computed by reference to the price of the registrant’s Common Stock as of
June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $442.0 million (based on the last reported sale
price on the Nasdaq Global Select Market as of such date).
As of February 22, 2019, there were 32,616,999 shares of the registrant’s common stock, par value $0.001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual
Report on Form 10-K where indicated. Such Proxy Statement is expected to be filed with the U.S. Securities and Exchange Commission not later than 120 days after
the end of the fiscal year to which this report relates.
Table of Contents
Page
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
4
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F-37
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16.
Signatures
2
[This page intentionally left blank]
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and
uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-K,
including statements regarding our strategy, future operations, future financial position, future revenue, projected costs,
prospects, plans, objectives of management and expected market growth, are forward-looking statements. These
statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by the forward-looking statements.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,”
“target,” “potential,” “contemplate,” “anticipate,” “goals,” “will,” “would,” “could,” “should,” “continue,” and similar
expressions are intended to identify forward-looking statements, although not all forward-looking statements contain
these identifying words. These forward-looking statements include, among other things, statements about:
our plans to develop and commercialize our product candidates based on adeno-associated virus, or AAV, gene
therapy;
our ability to identify and optimize product candidates and novel AAV gene therapy capsids;
our ongoing and planned clinical trials and related timelines, including our ability to continue to advance VY-
AADC as a treatment for Parkinson’s disease through the ongoing Phase 1b clinical trial and the RESTORE-1
Phase 2 clinical trial, and our preclinical development efforts and studies;
formulation changes to our product candidates may require us to conduct additional clinical studies to bridge
our modified product candidates to earlier versions;
the timing of and our ability to submit applications for, and obtain and maintain regulatory approvals for our
product candidates, including our ability to file Investigational New Drug applications for our programs
including VY-SOD102 for the treatment of a monogenic form of amyotrophic lateral sclerosis, VY-HTT01 for
the treatment of Huntington’s disease, and VY-FXN01 for the treatment of Friedreich’s ataxia;
our estimates regarding expenses, future revenues, capital requirements, and needs for additional financing;
our ability to continue to develop our gene therapy platform;
our ability to develop a manufacturing capability compliant with current good manufacturing practices for our
product candidates;
our ability to access, develop, and obtain regulatory clearance for devices to deliver our AAV gene therapies to
critical targets of neurological disease;
our intellectual property position and our ability to obtain, maintain and enforce intellectual property protection
for our proprietary assets;
our estimates regarding the size of the potential markets for our product candidates and our ability to serve those
markets;
the rate and degree of market acceptance of our product candidates for any indication once approved;
our strategic collaborations with Sanofi Genzyme Corporation, or Sanofi Genzyme; AbbVie Biotechnology Ltd
and AbbVie Ireland Unlimited Company, or collectively AbbVie, and Neurocrine Biosciences, Inc., including
the possibility and timing of Sanofi Genzyme or AbbVie exercising their respective options to certain of our
programs as specified in the applicable collaboration agreements;
3
our plans and ability to raise additional capital, including through equity offerings, debt financings,
collaborations, strategic alliances, and licensing arrangements;
our competitive position and the success of competing products that are or become available for the indications
that we are pursuing;
the impact of government laws and regulations including in the United States, the European Union, and other
important geographies such as Japan;
our ability to maintain consistency with results from our ongoing Phase 1b clinical trial and our separate Phase
1 clinical trial focused on posterior trajectory in future clinical trials; and
our ability to enter into future collaborations, strategic alliances, or licensing arrangements.
These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements. You should not place undue reliance on our forward-looking
statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have based these forward-looking statements largely on our current
expectations and projections about future events and trends that we believe may affect our business, financial condition
and operating results. We have included important factors in the cautionary statements included in this Annual Report on
Form 10-K, particularly in “Part I, Item 1A - Risk Factors” that could cause actual future results or events to differ
materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to the
Annual Report on Form 10-K with the understanding that our actual future results may be materially different from what
we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise, except as required by applicable law.
ITEM 1.
BUSINESS
PART I
We are a clinical-stage gene therapy company focused on developing life-changing treatments for patients
suffering from severe neurological diseases. We focus on neurological diseases where we believe an adeno-associated
virus, or AAV, gene therapy approach that either increases or decreases the production of a specific protein can slow or
reduce the symptoms experienced by patients, and therefore have a clinically meaningful impact. We have built a gene
therapy platform that we believe positions us to be a leading company at the intersection of AAV gene therapy and
severe neurological disease. Our gene therapy platform enables us to engineer, optimize, manufacture and deliver our
AAV-based gene therapies that have the potential to provide durable efficacy following a single administration.
Additionally, we are working to identify novel AAV capsids, which are the outer viral protein shells that
enclose the genetic material of the virus payload. Our team of experts in the fields of AAV gene therapy and
neuroscience first identifies and selects severe neurological diseases that are well-suited for treatment using AAV gene
therapy. We then engineer and optimize AAV vectors for delivery of the virus payload to the targeted tissue or cells. Our
manufacturing process employs an established system that we believe will enable production of high quality AAV
vectors at commercial-scale. In addition to our capsid optimization efforts, we leverage novel delivery paradigms,
established routes of administration, and advances in dosing techniques to optimize delivery of our AAV gene therapies
to target tissues, regions and cell types that are critical to the disease of interest. We believe we can achieve this directly,
with targeted infusions to discrete regions of the brain or spinal cord, or systemically, in conjunction with our novel
capsids.
Our business strategy focuses on discovering, developing, manufacturing and commercializing our gene therapy
programs. As part of this strategy, we have developed core competencies specific to AAV gene therapy development and
manufacturing and are beginning to build our commercial infrastructure. This business strategy also includes business
development activities that may include in-licensing activities or partnering certain programs in specific geographies
4
with collaborators, as we have demonstrated through our collaborations, including those with Sanofi Genzyme, AbbVie,
and Neurocrine. Since our inception, our operations have focused on organizing and staffing our company, business
planning, raising capital, establishing our intellectual property portfolio, determining which neurological diseases to
pursue, advancing our product candidates including delivery and manufacturing, and conducting preclinical studies and
clinical trials. We do not have any product candidates approved for sale and have not generated any revenue from
product sales. We have funded our operations primarily through private placements of redeemable convertible preferred
stock, public offerings of our common stock, our collaboration with Sanofi Genzyme, or the Sanofi Genzyme
Collaboration, which commenced in February 2015 and our collaboration with AbbVie focusing on tau-related diseases,
or the AbbVie Tau Collaboration, which commenced in February 2018. Additionally, we recently entered into
collaborations with Neurocrine, or the Neurocrine Collaboration, which we expect to commence in the first half of 2019,
and with AbbVie focusing on pathological species of alpha-synuclein, or the AbbVie Alpha-Synuclein Collaboration.
Our pipeline of gene therapy programs is summarized in the table below:
Our pipeline consists of programs for severe neurological indications, including Parkinson’s disease; a
monogenic form of amyotrophic lateral sclerosis, or ALS; Huntington’s disease; Friedreich’s ataxia; tau-related diseases
including Alzheimer’s disease, frontotemporal dementia, or FTD, and progressive supranuclear palsy; or PSP, Alpha-
synuclein related diseases for Parkinson’s disease and other synucleinopathies; and severe, chronic pain. We may seek
orphan drug designation, breakthrough therapy designation, or other expedited review processes for certain of our
product candidates in the United States, Europe, and Japan.
Our most advanced clinical candidate, VY-AADC for the treatment of Parkinson’s disease, is being evaluated
for safety and efficacy of escalating doses in an open-label, Phase 1b clinical trial. We have completed enrolling the
Phase 1b trial of VY-AADC and continue to monitor results. Preliminary data from Cohorts 1 through 3 from this trial
were reported beginning in late 2016 and most recently in November 2018.
5
In December 2018, we announced randomization of the first patient in our RESTORE-1 Phase 2, randomized,
double-blind, placebo-surgery controlled trial evaluating the safety and efficacy of VY-AADC for the treatment of
Parkinson’s disease in patients with motor fluctuations that are refractory to medical management. The RESTORE-1
Phase 2 trial will enroll patients who have been diagnosed with Parkinson’s disease for at least four years, are not
responding adequately to oral medications, and have at least three or more hours of OFF time during the day as measured
by a validated self-reported patient diary. Patients who meet the eligibility criteria will be randomized (1:1) to one-time
administration of VY-AADC (for a total dose of up to 2.5×1012 vector genomes, or vg) or placebo surgery.
We are pursuing additional product candidates in the preclinical stages of development, including treatment
programs for ALS, Huntington’s disease, Friedreich’s ataxia, tau-related neurodegenerative diseases and the treatment of
severe, chronic pain. If preclinical studies prove successful, we plan to file investigational new drug, or IND,
applications for our ALS and Huntington’s disease programs during 2019.
In late 2017, we initiated additional preclinical studies to further optimize our ALS program’s therapeutic
approach, including exploration of additional routes of administration and novel AAV capsids in large animal models.
VY-SOD102, our clinical candidate for the treatment of a monogenic form of ALS, is composed of an adeno-associated
virus capsid and a proprietary transgene that selectively knocks down, or reduces, levels of SOD1 mRNA. VY-SOD102
has the potential to durably reduce the levels of toxic mutant SOD1 protein in the spinal cord to slow the progression of
disease. In late 2018, we presented data on VY-SOD102 administered with a novel delivery paradigm comprising a one-
time, intraparenchymal infusion after laminectomy to the cervical spinal cord of the mini-pig, which has a spinal cord
similar in length and diameter to the human spinal cord. This delivery approach yielded safe and significant reduction of
SOD1 at 4 weeks post-dosing at the site of the infusion and throughout the spinal cord, most notably in the cervical and
thoracic regions critical for respiratory function. Further preclinical studies are underway with VY-SOD102 which, if
successful, will support a potential filing of an IND application in 2019.
In 2017, we selected VY-HTT01 as our clinical candidate for the treatment of Huntington’s disease. Recent
preclinical delivery studies have further optimized the dosing paradigm to support filing of a potential IND application.
VY-HTT01 is composed of an adeno-associated virus capsid (AAV1) and proprietary transgene that harnesses the RNA
interference pathway to selectively knock down, or reduce, levels of HTT mRNA. In late 2018, we presented results
demonstrating significant reduction of HTT mRNA at five weeks post-dosing in adult non-human primates using a
magnetic resonance imaging, or MRI, guided surgical delivery of VY-HTT01 and a novel delivery paradigm targeting
both the putamen and thalamus. Targeting the thalamus in addition to the putamen leverages more extensive and more
preserved neuronal pathways to the cortex than delivery to the putamen alone. This novel dosing paradigm with VY-
HTT01 resulted in safe and significant suppression of HTT in the striatum and in cortical neurons, which are critical in
the progression of disease. Further preclinical studies are underway with VY-HTT01 which, if successful, will support a
potential filing of an IND application in 2019.
Additional preclinical studies are underway including steps to optimize a lead clinical candidate for the
treatment of Friedreich’s ataxia. Additionally, we are collaborating with AbbVie on the research and development of
specified vectorized antibody compounds comprised of an AAV or other viral capsid and a virus vector genome that
encodes one or more antibodies that target and bind to a tau protein. We are also conducting proof-of-concept studies on
our VY-NAV01 program for the treatment of severe, chronic pain.
In January 2019, we announced the Neurocrine Collaboration focused on the development and
commercialization of our VY-AADC gene therapy program for Parkinson’s disease and VY-FXN01 gene therapy
program for Friedreich’s ataxia, as well as rights to two programs to be determined. Agreements related to the
Neurocrine Collaboration including the collaboration and license agreement are subject to certain conditions, including
the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and other customary closing conditions. We expect our work to commence under the Neurocrine
Collaboration in the first half of 2019. In February 2019, we announced the AbbVie Alpha-Synuclein Collaboration to
develop and commercialize vectorized antibodies directed at pathological species of alpha-synuclein for the potential
treatment of Parkinson’s disease and other diseases characterized by the abnormal accumulation of misfolded alpha-
synuclein protein, or synucleinopathies.
6
In addition to the programs described above, we continue to evaluate additional severe neurological diseases
that could be treated using AAV gene therapy through application of either a gene replacement or a gene knockdown
approach and are also actively exploring additional potential treatment methods that can utilize an AAV vector.
Finally, we developed our own real-time, intra-operative, MRI compatible device, the Variable Trajectory
Array Guide, or V-TAG™, that can be used with other neuro-navigational systems for the administration of drug to the
putamen and other surgical procedures to avoid blood vessels and reduce the risk of potential hemorrhage during surgery
and to maximize drug coverage of the putamen. In July 2018, the Center for Devices and Radiological Health, or the
CDRH, of the FDA provided 510(k) clearance for V-TAG. We are currently working with a collaborator on process
development and manufacturing of the device. Investigators have used an alternative MRI-compatible device called the
ClearPoint® System in our Phase 1b clinical trial of VY-AADC and Phase 1 posterior trajectory trial. We expect to use
both our own V-TAG and the ClearPoint System in our RESTORE-1 Phase 2 clinical trial.
Sanofi Genzyme Collaboration
In February 2015, we entered into a strategic collaboration with Sanofi Genzyme to leverage our combined
expertise and assets to develop AAV gene therapies for certain severe neurological diseases. Under the agreement, we
received $65.0 million in upfront cash, a $30.0 million upfront equity investment, and an in-kind commitment of $5.0
million, totaling $100.0 million. At the inception of the agreement, we were eligible to receive up to $745.0 million in
option and milestone payments while retaining U.S. commercial rights to most programs. Under the terms of the
collaboration, we granted Sanofi Genzyme an exclusive option (i) to license, develop and commercialize ex-U.S. rights
to the VY-AADC program, VY-FXN01, VY-HTT01, and a future program to be designated by Sanofi Genzyme, which
we refer to collectively as the Split Territory Programs; (ii) to license, develop and commercialize worldwide rights to
VY-SMN101; and (iii) to co-commercialize VY-HTT01 in the United States. Each of Sanofi Genzyme’s options to a
Split Territory Program is triggered following the completion of the first proof-of-principle human clinical study, or POP
Study, on a program-by-program basis.
In October 2017, Sanofi Genzyme notified us that it had decided not to exercise its option for the ex-U.S. rights
to VY-AADC for Parkinson’s disease. As a result, we are no longer entitled to receive $45.0 million and $60.0 million
of regulatory and commercial milestone payments from Sanofi Genzyme, respectively, related to the Parkinson’s
program under the Sanofi Genzyme Collaboration. If we use certain Sanofi Genzyme technology in VY-AADC, Sanofi
Genzyme is entitled to receive low-single-digit royalty payments based on a percentage of net sales by us, and we may
be obligated to make certain regulatory milestone payments to a third-party licensor.
AbbVie Tau Collaboration
In February 2018, we entered into an exclusive collaboration and option agreement with AbbVie for the
research, development, and commercialization of AAV and other virus-based gene therapy products for the treatment of
diseases of the central nervous system and other neurodegenerative diseases related to defective or excess aggregation of
tau protein in the human brain, including Alzheimer’s disease. Under the terms of the agreement, we received an upfront
payment of $69.0 million and may receive future option fees, development and regulatory milestone payments and
royalties. Under the terms of the agreement, we will perform specified research, preclinical, and Phase 1 development
activities regarding vectorized antibodies directed against tau, after which AbbVie may select one or more vectorized
antibodies to proceed into IND-enabling studies and clinical development. We will be responsible for the research, IND-
enabling studies, and Phase 1 clinical trial activities and costs. Following the completion of Phase 1 clinical
development, AbbVie has an option to license the vectorized tau antibody program and would then lead further clinical
development and global commercialization for the product candidates pursuant to the agreement. We may earn up to
$215.0 million in option exercise fees for such preclinical and Phase 1 development activities. In addition to the upfront
payment and the potential option exercise payments, we are eligible to receive up to $895.0 million in development and
regulatory milestones for each vectorized tau antibody compound. We are also eligible to receive tiered, escalating
royalties in a range, subject to certain specified exceptions, from a high-single digit to a mid-to-high teen percentage of
the global net sales of the vectorized antibodies for tauopathies, including Alzheimer’s disease and other
neurodegenerative diseases. We also have an option to share in the costs of clinical development for higher royalty rates.
Under the terms of the agreement, each party will own the entire right, title and interest in and to all know-how and
7
patent rights first made or invented solely by it or its affiliates or its or their sublicensees in the course of the
collaboration, with certain specified exceptions. We have also agreed to grant AbbVie a worldwide license to certain
know-how and patent rights developed by us or jointly by the parties arising from the collaboration.
Neurocrine Collaboration
In January 2019, we entered into the Neurocrine Collaboration Agreement for the research, development and
commercialization of four programs including our Parkinson’s disease program, or AADC Program, our Friedreich’s
ataxia program, or FA Program, and two programs, or the Discovery Programs. The Neurocrine Collaboration
Agreement is not yet effective and remains subject to customary closing conditions, including certain antitrust approvals,
that have not been satisfied as of the date of this Annual Report on Form 10-K. Under the terms of the agreement, we
will receive an upfront payment of $165.0 million, inclusive of $50.0 million for the sale of 4,179,728 shares of our
common stock, and may receive future development and regulatory milestone payments and royalties. We will use
commercially reasonable efforts to develop the products in each of these programs. Neurocrine will be responsible for all
costs incurred by us in conducting these activities for each program, in accordance with an agreed budget.
Under the terms of the agreement for the AADC Program, Neurocrine will fund the clinical development of the
RESTORE-1 Phase 2 clinical trials for VY-AADC. After the data readout of the RESTORE-1 Phase 2 trial, we have the
option to either: (1) co-commercialize VY-AADC with Neurocrine in the U.S. under a 50/50 cost- and profit-sharing
arrangement and receive milestones and royalties based on ex-U.S. sales, or (2) grant Neurocrine full global commercial
rights in exchange for milestone payments and royalties based on global sales. Under the terms of the agreement for the
FA Program, Neurocrine will fund the development through the Phase 1 clinical trial of VY-FXN01. After the data
readout of the Phase 1 trial, we have the option to either: (1) co-commercialize VY-FXN01 with Neurocrine in the U.S.
under a 60/40 cost- and profit-sharing arrangement, or (2) grant Neurocrine full worldwide commercial rights in
exchange for milestone payments and royalties based on global sales, subject to Sanofi Genzyme’s option to
commercialize the FA Program in countries outside the United States. Under the terms of the agreement for the two
Discovery Programs, Neurocrine will fund the development of those programs and we have the right to earn milestone
payments and royalties based on global sales.
In addition to the upfront payment, we are eligible to receive aggregate development milestone payments under
(i) the AADC Program of up to $170.0 million, (ii) the FA Program of up to $195.0 million, and (iii) each of the
Discovery Programs of up to $130.0 million each. We may also be entitled to receive aggregate commercial milestone
payments for each collaboration product of up to $275.0 million, subject to an aggregate cap on commercial milestone
payments across all programs of $1.1 billion. We are also eligible to receive royalties, based on future net sales of the
collaboration products. Such royalty percentages, for net sales in and outside the United States, as applicable, range (i)
for the AADC Program, from the mid-teens to thirty and the low-teens to twenty, respectively; (ii) for the FA Program,
from the low-teens to high-teens and high-single digits to mid-teens, respectively; and (iii) for each Discovery Program,
from the high-single digits to mid-teens and mid-single digits to low-teens, respectively.
AbbVie Alpha-Synuclein Collaboration
In February 2019, we entered into an exclusive collaboration and option agreement with AbbVie for the
development and commercialization of vectorized antibodies directed against pathological species of alpha-synuclein for
the potential treatment of Parkinson’s disease and other diseases characterized by the abnormal accumulation of
misfolded alpha-synuclein protein, or synucleinopathies. Under the terms of this agreement, we will receive and upfront
payment of $65.0 million and may receive future option fees, development, regulatory, and commercial milestone
payments, and royalties. Under the terms of the agreement, we and AbbVie have agreed to collaborate on the research
and development of specified vectorized antibody compounds, or research compounds, comprised of an AAV or other
viral capsid and a virus vector genome that encodes one or more antibodies that target and bind to the alpha-synuclein
protein. The collaboration is comprised of a research period and a development period. We are obligated to conduct
research activities directed to constructing one or more virus vectors that encode antibodies designated by AbbVie. We
are obligated to use diligent efforts to conduct antibody engineering and other research activities to create the Research
Compounds and to develop product candidates containing or comprised of such Research Compounds, which we refer to
as Product Candidates. We are solely responsible for the costs and expenses during the research period. During a
8
specified portion of the Research Period, AbbVie may exercise one or more of its exclusive development options to
select up to a total of four Research Compounds and their corresponding Product Candidates to proceed to the
development period, after which AbbVie may exercise its option to license such Product Candidates following Phase 1
results, for which we may earn up to $245.0 million in option exercise payments in aggregate. In addition to the upfront
payment and the potential option exercise payments, we are eligible to receive up to $727.5 million in development and
regulatory milestones for each Licensed Compound. We are also eligible to receive tiered, escalating royalties, in the
mid-single-digit percentage range on aggregate net sales of Licensed Products on a Licensed Compound by Licensed
Compound basis, as well as up to $500.0 million in commercial milestones based on aggregate annual net sales
thresholds of Licensed Products. The royalties are subject to potential reductions for biosimilar market penetration,
patent claim expiration, and other provisions, subject to specified limits. Subject to certain exceptions, each of AbbVie
and the Company has agreed to be financially responsible for all payments owed to a third party with which it has
contracted for any use of in-licensed intellectual property under the Collaboration Agreement.
Mission and Strategy
Our mission is to become the world leader in AAV gene therapy focused on treating severe neurological
diseases by developing transformative therapies. Our strategy to achieve this mission is to:
Optimize and advance VY-AADC for the treatment of Parkinson’s disease. We continue to evaluate the
dosing and delivery of VY-AADC to determine the optimal and safe dose to achieve meaningful clinical
benefit for patients with Parkinson’s disease. The November 2018 interim results from the ongoing Phase
1b clinical trial include data from all 15 patients treated in Cohorts 1, 2 and 3 (five patients in each Cohort)
including data from patients in Cohort 1 at three years, Cohort 2 at two years and Cohort 3 at 18 months.
The results continue to demonstrate durable improvements across multiple measures of patients’ motor
function after a one-time administration of the gene therapy, as evidenced by the patients’ diaries, the
Unified Parkinson’s Disease Rating Scale, or UPDRS, UPDRS-II and UPDRS-III, and quality of life
assessments. The average measure of motor function by UPDRS, or UPDRS-III, on medication score was
13.5 and UPDRS-III off medication score was 37.1, the average measure of activities of daily living by
UPDRS, or UPDRS-II. The update of results from the ongoing Phase 1b clinical trial of VY-AADC include
a 2.1-hour mean improvement in good ON time from baseline to three years for patients in Cohort 1, a 2.7-
hour mean improvement from baseline to 2 years in Cohort 2, and a mean improvement of 1.7 hours from
baseline to eighteen months in Cohort 3.
For the RESTORE-1 Phase 2 clinical trial, we have selected a dose of up to 2.5 x 1012 vector genomes,
which is defined as a maximum total bilateral dose. This dose is between the up-to-maximum total vector
genome doses administered in Cohorts 2 and 3 from the Phase 1b trial when considering the higher volume
administered with the posterior trajectory and vector produced using the baculovirus system. Having
selected a dose for the RESTORE-1 Phase 2 trial between the two highest dose Cohorts from the Phase 1b
trial, we have performed a combined analysis of the outcomes from the ten patients in Cohorts 2 and 3.
Results from the combined ten patients in Cohorts 2 and 3 demonstrated mean increases from baseline in
good ON time of 2.4 hours per day at 12 months, the timepoint for the primary endpoint in the RESTORE-
1 Phase 2 trial, and 2.6 hours per day at 18 months, the latest timepoint measured for both Cohorts. Of the
combined ten patients in Cohorts 2 and 3, seven patients would have met the eligibility criteria for the
RESTORE-1 Phase 2 trial based on limits in severity of dyskinesia and minimum OFF time at baseline. For
these seven patients, the RESTORE-1 Phase 2 trial relevant group, the mean improvements in good ON
time were 2.8 hours at 12 months and 2.5 hours at 18 months. These results were achieved with clinically
meaningful and sustained reductions in daily oral levodopa and related medications. In December 2018, we
randomized the first patient in the RESTORE-1 Phase 2 clinical trial.
Build and advance a pipeline of gene therapy programs focused on severe neurological diseases. Beyond
our clinical-stage program for Parkinson’s disease, we have a deep pipeline of AAV gene therapy programs
in various stages of preclinical development. We plan to file two additional INDs for our preclinical
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programs in 2019. We believe that our leadership position in AAV gene therapy for severe neurological
diseases and our gene therapy platform provide us with the necessary capabilities to evaluate and capitalize
on external opportunities. As such, we plan to opportunistically expand our pipeline through acquisition, in-
licensing or other strategic transactions.
Continuously invest in our AAV gene therapy platform. We plan to continuously invest in our gene
therapy platform to maintain our leadership in AAV gene therapy for neurological diseases. Specifically,
we intend to further develop and enhance our gene therapy platform by focusing on (i) vector engineering
and optimization; (ii) manufacturing; and (iii) dosing and delivery techniques. We plan to continue
generating novel AAV vectors by engineering and optimizing vectors best suited to a targeted disease. We
have built an onsite, state-of-the-art process research and development facility to enable the manufacturing
of high quality AAV gene therapy vectors at laboratory scale. We expect to utilize established and novel
techniques for dosing and delivery of our AAV gene therapies to the central nervous system, or CNS.
Establish a leadership position in commercial-scale, high quality AAV manufacturing. We believe that
manufacturing capacity and expertise are critical to successfully treating patients using gene therapy. We
have established relationships with multiple current good manufacturing practices, or cGMP, contract
manufacturers. Previously, through one of our collaborations, with MassBiologics, an FDA-licensed
manufacturer affiliated with the University of Massachusetts Medical School, we initiated cGMP
production activities. More recently, we announced additional agreements with Brammer Bio and with
Fujifilm Diosynth Biotechnologies, established contract manufacturers that specialize in gene therapy and
AAV vectors. We are using the baculovirus/Sf9 AAV production system, a technology for producing AAV
vectors at scale in insect-derived cells, originally invented and developed by several current and former
members of our production team while at the National Institutes of Health, or NIH, which we continue to
improve upon. We believe that having oversight through these key relationships over our own commercial
manufacturing process is critical to ensuring quality product with commercial yields.
Retain commercialization rights to our programs. We hold worldwide rights for our ALS, and severe,
chronic pain programs. We have retained co-development and co-commercialization rights for our
Parkinson’s disease and Friedreich’s ataxia programs under our Neurocrine Collaboration and for our
Huntington’s disease program under our Sanofi Genzyme Collaboration, respectively. As these and other
programs advance through late-stage clinical development, we intend to build our own sales and marketing
infrastructure and leverage our partnerships to support our programs where we have retained
commercialization rights. These collaborations also represent an important advance in our strategy to
leverage our AAV gene therapy platform and programs through collaborative partnerships with
biopharmaceutical companies that bring complementary expertise, capabilities, and experience, in addition
to capital.
Expand our intellectual property portfolio. We seek to have an industry leading intellectual property
portfolio. To that end, we seek patent rights for various aspects of our programs, including vector
engineering and construct design, our production process, and all features of our clinical products including
compositions and methods of delivery. We expect to continue to expand our intellectual property portfolio
by aggressively seeking patent rights for promising aspects of our gene therapy platform and product
candidates.
AAV Gene Therapy for Neurological Diseases
Gene therapy is an approach whereby gene expression is directly altered in patients to address the underlying
cause or predominant manifestations of disease. We believe that the targeted nature of gene therapy may enable powerful
treatment options and provide these patients with meaningful and durable benefits.
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While AAV gene therapy can potentially be harnessed for multiple treatment methods, we are currently focused
on gene replacement and gene knockdown approaches. Gene replacement is intended to restore the expression of a
protein that is not expressed, expressed at abnormally low levels or functionally mutated with loss of function. Gene
knockdown, or gene silencing, is intended to reduce the expression of a pathologically mutated protein that has
detrimental effects.
Our gene therapy approach uses AAV vectors which we believe are ideal vectors for gene therapy for several
reasons:
Broad Applicability. AAV is able to transduce, or transfer a therapeutic gene, into numerous cell types
including target cells in the CNS.
Safety. AAV is believed to be safe and is not known to cause any disease in humans. No vector-related serious
adverse effects, or SAEs, have been reported in the more than 1,500 patients, including over 200 patients for
neurological indications, treated with AAV gene therapy to date.
Does Not Readily Integrate. AAV does not readily integrate into the genome of the target cell, reducing the
potential for oncogenesis, or the induction of cancer.
Scalability. AAV is able to be manufactured at commercial quality and scale.
We believe that neurological diseases are well-suited for treatment with AAV gene therapy for the following
reasons:
Validated Targets. Many neurological diseases are caused by well-defined mutations in genes and these genes
represent genetically validated drug targets for AAV gene therapy.
Targeted Delivery. Advances in delivery techniques allow for direct delivery of AAV vectors to discrete
regions in the brain or broader delivery throughout the spinal cord via the cerebrospinal fluid, or CSF.
Durable Expression. Long-term gene expression may be achievable in the CNS following one-time dosing and
transfer of the therapeutic gene with an AAV vector. Neurons in the CNS are terminally differentiated, or no
longer divide, eliminating the potential for cell division to dilute expression of the therapeutic gene. Repeated or
continual dosing with direct injection of drugs into the CNS is complex, therefore a one-time AAV gene therapy
has significant advantages.
Immune Privileged Site. There is a reduced risk of harmful immune response or reduced efficacy due to
localized delivery in a self-contained system.
While we are currently focused on gene replacement and gene knockdown approaches, we are also actively
exploring additional potential treatment methods that can utilize an AAV vector, including the direct delivery of
monoclonal antibodies to the CNS (such as in our collaborations with AbbVie), as well as gene editing to correct or
delete a gene in the cell genome.
The Voyager Gene Therapy Platform
We have built a gene therapy platform that we believe positions us to be the leading company at the intersection
of AAV gene therapy and severe neurological diseases. Our team of experts in the fields of AAV gene therapy and
neuroscience first identifies and selects severe neurological diseases that are well-suited for treatment using AAV gene
therapy. We then engineer and optimize AAV vectors for delivery of the virus payload to the targeted tissue or cells.
Finally, we leverage established routes of administration and advances in dosing techniques to optimize delivery of our
AAV gene therapies to target cells that are critical to the disease of interest either directly to discrete regions of the brain,
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or, more broadly, to the spinal cord region. We believe that optimizing each of these parameters is a key factor for
overall program success. We expect that our current and future pipeline programs will make use of technological
advances generated with our gene therapy platform.
Disease Selection
We assess potential product programs based upon the following criteria:
Unmet Need. There is a significant unmet medical need for the indication and substantial commercial potential.
Target Validation. There is strong evidence that expression of a specific gene, or lack thereof, is causing, or
critical to, the disease state.
Delivery Using AAV. There is strong evidence supporting the ability to target the relevant tissue and cells
using an AAV vector to achieve sufficient target gene expression.
Clinical Readouts. The clinical impact of an AAV gene therapy can be clearly measured, including through
well-accepted clinical endpoints and the use of both existing and novel biomarkers.
Scalability of Manufacturing. Sufficient AAV vector to supply late-stage clinical development and
commercialization can be manufactured.
In addition to the criteria above, we also look for groups of diseases where our knowledge can be transferred.
For instance, we believe that some of the delivery parameters and imaging techniques that are employed in our VY-
AADC program can be applied to AAV gene therapy delivery for Huntington’s disease or other diseases where direct,
targeted delivery to the brain is warranted.
Vector Engineering and Optimization
We have advanced or intend to advance our multiple preclinical programs towards selection of lead clinical
candidates using AAV vectors that we believe are best suited for each of our programs either through use of our existing
capsids, through exercising a non-exclusive worldwide commercial license to capsid sequences covered by third parties,
or by engineering or optimizing novel capsids. The key components of an AAV vector include: (i) the capsid; (ii) the
therapeutic gene, or transgene; and (iii) the promoter, or the DNA sequence that drives the expression of the transgene.
Members of our team have co-discovered many of the known naturally occurring AAV capsids and have also
created promising genetically engineered AAV capsids. Genetically engineered capsids have yielded vectors with
desirable properties, such as higher biological potency and enhanced tissue specificity. We believe that there is an
opportunity to further optimize AAV capsids to confer desired characteristics relating to properties such as tissue
specificity and immunogenicity. We have a significant effort dedicated to designing and screening for novel AAV
capsids using a number of different scientific approaches. We believe that the information generated by this work will
enhance our ability to rationally design AAV capsids with specific properties for particular therapeutic applications. In
September 2016, we announced a co-exclusive worldwide license agreement with the California Institute of Technology,
or Caltech, related to novel AAV capsids. The license agreement covers all fields of use and includes novel AAV capsids
that have demonstrated enhanced blood-brain barrier penetration for the potential treatment of neurological diseases
following systemic administration of an AAV gene therapy vector.
With respect to the target DNA delivered through AAV gene therapy, we are selecting promoters that we
believe have the appropriate activity and tissue, selectively for our specific gene therapy programs. We are also
designing transgenes to provide optimal expression once delivered to the targeted cells.
Manufacturing at Commercial Quality and Scale
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The ability to produce high quality AAV vectors at commercial-scale is a critical success factor in AAV gene
therapy. While at the NIH, former members of our production team invented and developed a baculovirus/Sf9 AAV
production system, which we use and have continued to improve. This system has a number of attributes that we believe
will enable high quality commercial-scale manufacturing, including:
High Yield. A single manufacturing run at 500-liter scale can yield many thousands of doses of an AAV gene
therapy.
High Purity. A relatively high percentage of AAV vectors contain the therapeutic DNA, reducing the number
of empty capsids compared to alternative manufacturing approaches. In addition, the baculovirus/Sf9 system
eliminates the risk of introducing mammalian cell derived impurities.
Scalability. This process has been reproduced at volumes ranging from 0.02 liters to 250 liters. We believe the
existing process is scalable to substantially higher volumes.
We have built a state-of-the-art process research and development production facility for manufacturing
research-grade AAV vectors onsite at our Cambridge, Massachusetts headquarters. We have also established multiple
contract manufacturing relationships with companies specializing in the manufacture of gene therapy and AAV vectors.
Optimized Delivery and Route of Administration
Identifying the optimal route of administration and delivery parameters for AAV gene therapy, such as infusion
volume, flow rate, vector concentration and dose and formulation for a specific disease, are critical to achieving safe and
effective levels of transgene expression in the targeted location in the CNS. We aim to develop clinically feasible
protocols that yield reproducible results across patients. For our Parkinson’s disease and Huntington’s disease programs,
we are pursuing direct injection into the brain, called intraparenchymal injection. For our ALS SOD1 and Friedreich’s
ataxia programs, we are evaluating multiple routes of administration including injection into the CSF within the
cerebrospinal space, called intrathecal injection, as well as intravenous injection, intraparenchymal injection, and other
delivery alternatives.
VTAGTM Intraparenchymal Injection to the Brain
The surgical approach that we are using for VY-AADC is similar, in some respects, to the stereotactic approach
used for deep brain stimulation, or DBS, a marketed device-based treatment for Parkinson’s disease. One primary
difference with our approach is the ability to assist the physician in visualizing the delivery of VY-AADC to the putamen
using real-time, intra-operative, magnetic resonance imaging, or MRI, to avoid specific blood vessels to reduce the risk
of potential hemorrhages during the surgical procedure and to maximize the coverage of the putamen.
Investigators in the Phase 1b clinical trial of VY-AADC and the separate Phase 1 posterior trajectory trial use
the real-time, intra-operative, MRI system called the ClearPoint System® from MRI Interventions, Inc. However, not all
neuro-surgical units within the United States utilize this system and may employ other neuro-navigational systems that
are not compatible with real-time MRI imaging.
Consequently, we developed the Voyager Trajectory Array Guide, or V-TAG™, as our own device for use as a
real-time, intra-operative, MRI-compatible device that can be used with other neuro-navigational systems for this and
other surgical procedures. We received 510(k) clearance from the FDA in July 2018. We are currently working with a
collaborator on process development and manufacturing of the device. We believe that our experience gained from our
VY-AADC program, including the use of V-TAG, can be applied to AAV gene therapy delivery for our Huntington’s
disease program and possibly other projects as well.
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Overview of Intraparenchymal Delivery
Overview of Our Pipeline
Courtesy of: Okinawa Institute of Science and Technology.
We have leveraged our gene therapy platform to assemble a pipeline of novel AAV gene therapies for the
treatment of severe neurological diseases with high unmet medical need. Depending on the disease, our current AAV
gene therapies will use either a gene replacement or gene knockdown approach. Our goal is to address the underlying
cause or the predominant manifestations of a specific disease by significantly increasing or decreasing expression of the
relevant proteins at targeted sites within the CNS.
Parkinson’s Disease Program: VY-AADC
Disease and VY-AADC Overview
Parkinson’s disease is a chronic, progressive and debilitating neurodegenerative disease that affects
approximately 1 million people in the United States and 6 million people worldwide. Parkinson’s disease is characterized
by a loss of dopamine and its function. Dopamine is a chemical “messenger” that is produced in the brain and is involved
in the control of movement. Some chemicals, like dopamine, are made from other chemicals by proteins called enzymes.
Dopamine is made in the brain when the enzyme AADC (aromatic l-amino acid decarboxylase) converts the chemical
levodopa to dopamine. Levodopa, AADC, and dopamine are each present at normal levels in healthy people.
When dopamine levels decrease in the brain and there is no longer enough to control movement, the motor
symptoms of Parkinson’s disease including tremors, slow movement or loss of movement, rigidity, and postural
instability, may occur. When this happens, a doctor may prescribe a levodopa medication, which is converted into
dopamine by AADC in substantially the same way that naturally occurring levodopa is converted to dopamine.
As Parkinson’s disease worsens, there is less AADC enzyme in parts of the brain where it is needed to convert
levodopa to dopamine. Therefore, the amount of dopamine that is produced from each dose of levodopa medicine may
be reduced. When this happens, patients’ motor function may worsen and a less predictable response to medications may
occur.
Our investigational gene therapy VY-AADC is designed to put the AADC enzyme into brain cells where it can
convert levodopa to dopamine. To do this, the AADC gene is delivered inside a transporter called “adeno-associated
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viral vector,” which we refer to as AAV, much like a letter that carries the instructions the brain needs to make the
AADC enzyme with the AAV as the envelope that carries the letter.
Preclinical Studies
Preclinical studies conducted by Krystof Bankiewicz, M.D., Ph.D., one of our co-founders, and his colleagues
at the University of California San Francisco, or UCSF, evaluated the safety, efficacy and pharmacological activity of
AAV2-AADC gene therapy, a gene therapy substantially similar to VY-AADC, delivered directly to the putamen in a
non-human primate model of Parkinson’s disease. Overall, the procedure and vector were well-tolerated with no serious
toxicity issues.
Positron emission tomography, or PET, imaging with tracers specific for AADC enzyme activity demonstrated
a significant and sustained increase of activity in the brain region where the vector had been delivered. Increased
responsiveness to levodopa was also evidenced by significant behavioral improvements observed post-treatment with the
gene therapy compared to pre-treatment. In five animals, the mean improvement in behavior was determined at various
doses of levodopa both one month before treatment, as a baseline measure for comparison purposes, and then again six
months after treatment. A strong PET signal was observed in all five animals following treatment, confirming delivery of
AADC into the putamen. Animals were significantly more sensitive to levodopa six months following treatment with the
gene therapy when compared to baseline, as shown below.
Behavioral Response to Various Doses of levodopa Pre- and Post-Treatment with AAV2-AADC in Non-Human
Primates(1)
(1) Adapted by permission from Macmillan Publishers Ltd; Forsayeth et al, Molecular Therapy (2006), 14 (4); 571-577, copyright 2006. Blue line
represents base line measurements and yellow line represents six months post-treatment measurements.
*
A result is considered to be statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the
treatment, is sufficiently low. The conventional method for measuring the statistical significance of a result is known as the “p-value,” which
represents the probability that chance caused the result (e.g., a p-value = 0.001 means that there is a 0.1% or less probability that the difference
between the control group and the treatment group is purely due to random chance).
The results of these preclinical studies provided support for the initiation of clinical trials.
15
Previous Phase 1 Clinical Trials
The UPDRS is a standard and widely used four-part clinical rating scale for Parkinson’s disease that evaluates
cognitive, functional, and motor deficits, as well as medication-related complications. UPDRS Part III measures motor
function by physician examination. The UPDRS is conducted when patients are taking their Parkinson’s disease
medications (referred to as “on” medication) and when patients are not taking their Parkinson’s disease medications
(referred to as “off” medication). In addition, a patient-completed Hauser diary records the patient’s motor response over
the course of several days as ON time when they have good mobility with or without non-troublesome dyskinesia, or
uncontrolled, involuntary movement; OFF time when they have poor mobility; and ON time with troublesome
dyskinesia when they have uncontrolled movements. As shown in the figure below, diary ON time decreases, while OFF
time and dyskinesias increase as patients progress from the early honeymoon period into later stages of Parkinson’s
disease.
Overview of Progression of Parkinson’s Disease (PD)
In a completed open-label Phase 1 clinical trial conducted at UCSF, VY-AADC was delivered directly to the
putamen of Parkinson’s disease patients. The primary endpoints of this trial were safety and tolerability of VY-AADC.
These endpoints were met as VY-AADC was well-tolerated and no treatment related SAEs were reported. Furthermore,
pharmacologic activity of VY-AADC was observed. This trial was completed prior to our involvement in the program.
The Phase 1 clinical trial at UCSF was conducted in a total of 10 patients with Parkinson’s disease. Two doses
of VY-AADC were tested, 9×1010 vector genomes, or vg, and 3×1011 vg, with five patients per dose Cohort. The
infusion volume was 100µl per putamen, or 200µl per patient. Patients in both Cohorts treated with VY-AADC showed
modest improvements in motor fluctuations. At six months following treatment, diary OFF time was observed to be
reduced by an average of approximately three hours and a corresponding increase in diary ON time without dyskinesias
was also observed. In addition, at six months following treatment, an approximately 30% improvement in UPDRS total
score both on-medication and off-medication UPDRS Total score, was observed, as shown in the table below.
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Summary of UPDRS Results from Phase 1 Trial(1)
(1) Christine et al, Neurology (2009), 73: 1662-1669. The row titled “Low-dose Cohort” represents data from the five patients treated with 9 X 1010 vg of
VY-AADC01. The row titled “High-dose Cohort” represents data from the five patients treated with 3 X 1011 vg of VY-AADC01. The row titled
“Combined Cohorts” represents data from all ten patients treated with VY-AADC01. The data in the columns under the header “Off medications”
represents periods during which patients’ medications were not working as measured by a patient’s total UPDRS score at baseline, before treatment
with VY-AADC01, and at six months following treatment with VY-AADC01, along with percent change from baseline to six months and the
corresponding p-value. The data in the columns under the header “On medications” represents periods during which patients’ medications were
working as measured by a patient’s total UPDRS score at baseline, before treatment with VY-AADC01 and at six months following treatment with
VY-AADC01, along with percent change from baseline to six months and the corresponding p-value. A result is considered to be statistically
significant when the probability of the result occurring by random chance, rather than from the efficacy of the treatment, is sufficiently low. The
conventional method for measuring the statistical significance of a result is known as the “p-value,” which represents the probability that chance
caused the result (e.g., a p-value = 0.001 means that there is a 0.1% or less probability that the difference between the control group and the treatment
group is purely due to random chance). Because of the small size of this trial, the p-values may not be reliable or repeatable, and may not be
duplicated in future trials.
While no gene therapy related SAEs were reported, three patients experienced minor hemorrhages related to the
surgical procedure. Two of the hemorrhages were asymptomatic, noticed only on imaging, and one was symptomatic
with the patient making an almost complete recovery. Nevertheless, the stereotactic injection protocol used in the
surgical procedure was modified to avoid specific blood vessels and no further hemorrhages were reported. In our
ongoing Phase 1b clinical trial, we implemented the use of real-time, intra-operative MRI guidance. The use of this intra-
operative MRI guidance is a significant advancement in vector delivery.
The 10 patients in this Phase 1 clinical trial were followed for up to four years after treatment, and a durable,
dose-dependent expression of AADC enzyme activity was observed. Patients treated with both doses of the gene therapy
had an increased PET signal, or uptake of the [18F]fluoro-L-m-tyrosine tracer indicative of AADC enzyme activity that
persisted for up to four years. Patients treated with the high dose gene therapy had a greater PET signal on average when
compared to the low dose Cohort.
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Long-Term AADC Expression as Measured by PET Imaging in Patients Treated with High and Low Doses of
AAV Gene Therapy in a Previous Phase 1 Clinical Trial (1)
(1) Mittermeyer et al, Human Gene Therapy (2012), 23: 377-381. The publisher for this copyrighted material is Mary Ann Liebert, Inc. publishers. Blue
lines represent patients treated with the low dose and yellow lines represent patients treated with the high dose.
A similar Phase 1 clinical trial was conducted at Jichi Medical University, or JMU, in Japan using the same
vector that was used in the UCSF trial. The primary endpoint of this trial was safety of the treatment. This endpoint was
met as the treatment was well-tolerated and no treatment related SAEs were reported. Six patients were treated in this
trial and an enhanced PET signal was observed in a subset of patients monitored 96 weeks following treatment. A
second, open-label Phase 1/2 trial is currently being conducted at JMU. The primary endpoint of this trial is also safety.
This trial is using lower infusion volumes and total doses compared to our ongoing Phase 1b and Phase 2 clinical trials.
Importantly, the JMU trial is not using real-time, intra-operative MRI guidance.
While the prior UCSF and JMU clinical results were encouraging and provided evidence of long-term AADC
enzyme expression, the magnitude of the clinical benefits observed did not exceed placebo effects observed in previous
surgical therapy trials in Parkinson’s disease patients, and the UCSF and JMU trials were not blinded. Further, based on
post-operative imaging and our current work using real-time, intra-operative MRI monitoring, we estimate that less than
10% of the putamen volume was covered by the infusion in these trials, which reflects suboptimal distribution of the
gene therapy vector in the putamen. We believe that by further optimizing the delivery, dose and infusion volume to
substantially increase the coverage of the putamen, a more substantial clinical benefit can be achieved.
Voyager VY-AADC Phase 1b Trial
In 2014, UCSF initiated an open-label Phase 1b clinical trial to optimize the development of VY-AADC. The
IND for the Phase 1b trial was filed by UCSF in July 2013 and was transferred to us in October 2015. In November
2017, we completed enrolling this open-label, dose-escalating Phase 1b trial of VY-AADC. The trial included 15
patients with Parkinson’s disease and was designed to evaluate the safety and efficacy of escalating doses of VY-AADC.
In this trial, one-time administration of VY-AADC led to improvements in patients’ motor function, and patients were
able to reduce their daily levodopa and other Parkinson’s disease medications. To date, administration of VY-AADC has
been well-tolerated. In patients treated in this trial, there have been no vector-related serious adverse events reported.
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Patients in three Cohorts of five patients each were treated with a single administration of ascending doses of
VY-AADC administered under MRI guidance to the putamen, a region of the brain associated with impaired motor
function in Parkinson’s disease. The primary endpoints of this trial are safety and tolerability of the treatment. This trial
incorporates three key design features:
Use of real-time, intra-operative MRI system during surgery to assist the physician in visualizing the
delivery of VY-AADC to the putamen and to avoid specific blood vessels during the surgical procedure,
with the goal of reducing the risk of hemorrhages.
Larger infusion volumes designed to increase coverage of the putamen with VY-AADC.
Higher concentrations of VY-AADC vector compared to the previously completed UCSF Phase 1 trial.
Secondary endpoints of this trial, which are being used to assess the potential pharmacologic activity of VY-
AADC, include UPDRS, AADC PET imaging, quality of life, a patient-completed Hauser diary monitoring good ON
time without troublesome dyskinesia, and a behavioral test using intravenous levodopa treatment to measure changes in a
patients’ sensitivity to levodopa as well as endpoints to measure motor functions.
In November 2018, we updated interim results from the ongoing, open-label Phase 1b clinical trial of VY-
AADC for the treatment of Parkinson’s disease. Interim results include data from all 15 patients treated in Cohorts 1, 2
and 3 (five patients in each Cohort) including data from patients in Cohort 1 at three years, Cohort 2 at two years and
Cohort 3 at 18 months. Cohort 1 patients received a single administration of VY-AADC at a concentration of 8.3×1011
vg per milliliter, or vg/ml, using an infusion volume of up to 450 µL per putamen, or up to 900 µL per patient, for a total
dose of 7.5×1011 vg. Cohort 2 patients received a single administration of VY-AADC at a concentration of 8.3×1011
vg/ml, using an infusion volume of up to 900 µL per putamen, or up to 1,800 µL per patient, for a total dose of 1.5×1012
vg. Cohort 3 patients received a three-fold higher vg concentration of 2.6×1012 with the same infusion volumes of VY-
AADC similar to those received by Cohort 2 patients (up to 900 µL per putamen), for a total dose of up to 4.5×1012 vg.
Administration of VY-AADC has been well-tolerated in all fifteen patients treated in the three Cohorts with no
reported vector-related SAEs. Fourteen of the 15 patients were discharged from the hospital within two days following
surgery. As previously reported, one patient experienced two SAEs: a pulmonary embolism or blood clot in the lungs,
and related heart arrhythmia or irregular heartbeat. Investigators determined that these SAEs were most likely related to
immobility during the administration of the product; consequently, deep vein thrombosis prophylaxis has been added to
the clinical trial protocol.
Key findings from this trial to date include:
The use of real-time, MRI-guided delivery and increasing infusion volumes resulted in progressively
greater coverage of the putamen, 21% mean coverage of the volume of the putamen with VY-AADC in
Cohort 1, 34% mean coverage in Cohort 2, and 42% mean coverage in Cohort 3.
VY-AADC treatment resulted in a 13% increase, a 56% increase, and a 79% increase in mean putaminal
AADC enzyme activity in Cohort 1, 2, and 3, respectively, at six months relative to baseline as measured
by 18F-Dopa PET scan. Coverage of the putamen and AADC enzyme activity were highly correlated
(r=0.84, p=0.0002).
One-time administration of VY-AADC resulted in reduced daily doses of oral levodopa and related
medications. Six months after VY-AADC administration, patients in Cohort 1 had a reduction in levodopa
equivalent daily dose, or LED, of 15%, Cohort 2 had a LED reduction of 33%, and Cohort 3 had a LED
reduction of 42%. LED reductions were maintained through last follow up in Cohort 2 (24 months) and
Cohort 3 (18 months).
Patients enrolled in Cohorts 1, 2 and 3 were:
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On average, 58 years of age with a Parkinson’s disease diagnosis for an average of 10 years.
Candidates for surgical intervention including deep-brain stimulation due to disabling motor complications
despite treatment with optimal anti-Parkinsonian medication.
At baseline, the average patient diary ON time without troublesome dyskinesia was 10.5 hours and, average
diary OFF time was 4.6 hours; both diary measures were normalized to a 16-hour waking day.
Average UPDRS-III (motor function) on medication score was 13.5 and UPDRS-III off-medication score
was 37.1; average UPDRS-II (activities of daily living) on medication score was 3.9 and UPDRS-II off
medication score was 16.5. Patients in Cohort 3 entered the trial with more severe dyskinesia at baseline
than patients in Cohorts 1 and 2 based on the Unified Dyskinesia Rating Scale, with a mean score of 30.2
for Cohort 3 compared with a mean score of 19.2 and 17.4 for Cohorts 1 and 2, respectively.
At baseline, patients were treated with optimal levels of multiple dopaminergic medications including, in
many cases, amantadine for the treatment of dyskinesia, or uncontrolled or involuntary movements.
Patients’ average amount of Parkinson’s disease medications at baseline was 1,526 mg of oral LEDs per
day.
The results continue to demonstrate durable improvements across multiple measures of patients’ motor function
after a one-time administration of the gene therapy, as evidenced by the patients’ diaries and UPDRS-III, and quality of
life assessments. The update of results from the ongoing Phase 1b trial of VY-AADC include a 2.1-hour mean
improvement in good ON time from baseline to three years for patients in Cohort 1, a 2.7-hour mean improvement from
baseline to two years in Cohort 2, and a mean improvement of 1.7 hours from baseline to 18 months in Cohort 3 as
shown in the table below.
For the RESTORE-1 Phase 2 clinical trial, we have selected a dose of up to 2.5 x 1012 vg, which is defined as a
maximum total bilateral dose. This dose is between the up-to-maximum total vector genome doses administered in
Cohorts 2 and 3 from the Phase 1b trial when considering the higher volume administered with the posterior trajectory
and vector produced using the baculovirus system. Having selected a dose for the RESTORE-1 Phase 2 trial between the
two highest dose Cohorts from the Phase 1b trial, we have performed a combined analysis of the outcomes from ten
patients in Cohorts 2 and 3. Results from the combined ten patients in Cohorts 2 and 3 demonstrated mean increases
from baseline in good ON time of 2.4 hours per day at 12 months, the timepoint for the primary endpoint in the
RESTORE-1 Phase 2 trial, and 2.6 hours per day at 18 months, the latest timepoint measured for both Cohorts as shown
in the table below. Of the combined ten patients in Cohorts 2 and 3, seven patients would have met the eligibility criteria
for the RESTORE-1 Phase 2 trial based on limits in severity of dyskinesia and minimum OFF time at baseline. For these
seven patients, the RESTORE-1 Phase 2 trial relevant group, the mean improvements in good ON time were 2.8 hours at
12 months and 2.5 hours at 18 months. These results were achieved with clinically meaningful and sustained reductions
in daily oral levodopa and related medications.
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Voyager Phase 1 Posterior Trajectory Clinical Trial
In a separate Phase 1 clinical trial, we have changed the trajectory for administration of VY-AADC to a
posterior, or back of the head, approach into the putamen, compared to a transfrontal, or top of the head, delivery
approach used in Cohorts 1 through 3 of the ongoing Phase 1b clinical trial described above. A posterior approach better
aligns the infusion of VY-AADC with the anatomical structure of the putamen, which reduces the number of trajectories
needed and potentially reduces the total procedure time and increases the total coverage of the putamen. Administration
of VY-AADC with this posterior approach has been well-tolerated in the eight patients treated with no reported SAEs.
Most patients were discharged from the hospital the day after surgery. This trial utilized the same dose concentration as
Cohort 3 of our Phase 1b clinical trial at a higher volume, yielding a total dose of up to 9.0×1012 vg compared with a
total dose of up to 4.5×1012 vg in Cohort 3. As we announced in July 2018, interim results suggest that the posterior
approach is associated with greater average putaminal coverage (approximately 50%), reduced total procedure times
compared with the transfrontal approach by two to three hours, and improvements in patients’ motor function at six
months, which were consistent with improvements achieved from patients in Cohorts 2 and 3 at the same time point in
our Phase 1b trial with VY-AADC. We have determined that the posterior approach is the preferred surgical route of
administration for the RESTORE-1 Phase 2 clinical trial.
We continue to follow patients from Cohorts 1 through 3 in the Phase 1b clinical trial of VY-AADC and
patients in the Phase 1 posterior trajectory trial, and plan to report updated results from these trials from time to time.
Voyager VY-AADC RESTORE-1 Phase 2 and RESTORE-2 Phase 3 Clinical Trials
In December 2017, we submitted an IND for VY-AADC which has become effective. As part of this IND, the
chemistry, manufacturing, and controls section included data demonstrating comparability between VY-AADC using our
baculovirus/Sf9 manufacturing process and VY-AADC produced using a mammalian cell system consisting of triple-
transfection of HEK293 cells, which was used in our two Phase 1 clinical trials. Both were produced under good
manufacturing practice or GMP. Our baculovirus/Sf9 manufacturing process is designed for production of AAV vectors
at clinical and commercial scale, with the potential for increased yields and efficient scalability compared with
mammalian-based systems. We have demonstrated that this production platform change resulted in comparable vector
quality and activity. We are using VY-AADC manufactured in our baculovirus/Sf9 system in our global RESTORE-1
Phase 2 clinical trial and the planned RESTORE-2 Phase 3 clinical trial. In June 2018, the FDA granted RMAT
designation for our VY-AADC gene therapy treatment, which provides for an enhanced level of interactions between the
company sponsor and the FDA throughout the development program. The designation was based on our Phase 1b
clinical data with VY-AADC. Previously, the FDA also granted fast-track designation for VY-AADC.
In December 2018, we announced randomization of the first patient in RESTORE-1 Phase 2, randomized,
double-blind, placebo-surgery controlled trial evaluating the safety and our efficacy of VY-AADC for the treatment of
Parkinson’s disease in patients with motor fluctuations that are refractory to medical management. The RESTORE-1
Phase 2 trial will enroll patients who have been diagnosed with Parkinson’s disease for at least four years, are not
responding adequately to oral medications, and have at least three or more hours of OFF time during the day as measured
by a validated self-reported patient diary. Patients who meet the eligibility criteria will be randomized (1:1) to one-time
21
administration of VY-AADC (for a total dose of up to 2.5×1012 vg) or placebo surgery. In December 2018, we
randomized the first patient in the RESTORE-1 Phase 2 clinical trial.
The primary endpoint of RESTORE-1 is good ON time, as measured by a validated self-reported patient diary
at 12 months. Secondary endpoints include diary OFF time, other motor function UPDRS-II and UPDRS-III scores,
assessments from the Parkinson’s Disease Questionnaire (PDQ-39), and patient’s global function as measured by the
proportion of participants with improvement on the Clinical Global Impression, or CGI, score. The trial will also
measure non-motor symptoms from the Non-Motor Symptom Scale, or NMSS, as well as safety.
Biomarker data include measurements of the coverage of the putamen, the specific region of the brain targeted
with VY-AADC, and measurements of AADC enzyme expression and activity in the putamen measured by PET using
fluorodopa F-18. Changes in patients’ daily doses of oral levodopa and related medications will also be recorded.
In December 2018, we held a Type B meeting with the FDA to discuss the overall development program for
VY-AADC. Based on the meeting discussion and subsequent written feedback from the FDA, we plan to submit a
revised trial protocol that will include an increase in the target number of patients in the RESTORE-1 Phase 2 trial,
resulting in 75 to 100 total patients in the trial, and to conduct a staggered-parallel RESTORE-2 Phase 3 trial of similar
size and design to RESTORE-1. These updates incorporate guidance from the FDA from the Type B meeting to conduct
two adequate and well-controlled clinical trials for a large patient population such as Parkinson’s disease.
We expect that the RESTORE-1 Phase 2 trial will enroll 75 to 100 patients. Movement disorder specialists will
identify and screen potential patients prior to referring to a surgical site for VY-AADC administration and provide
clinical and safety follow-up after VY-AADC administration.
We expect patient enrollment to take 15 to 21 months from first patient enrolled, for the RESTORE-1 Phase 2
clinical trial. We plan to begin enrolling the RESTORE-2 Phase 3 clinical trial in the first half of 2020. We anticipate
that, if positive, results from the RESTORE-1 Phase 2 clinical trial and the planned RESTORE-2 Phase 3 clinical trial
could potentially form the basis for submission of a BLA, to the FDA for VY-AADC for the treatment of Parkinson’s
disease.
In January 2019, we entered into the Neurocrine Collaboration Agreement for the research, development, and
commercialization of four programs including our Parkinson’s disease program.
ALS Program: VY-SOD102
Disease Overview
ALS is a fatal neurodegenerative disease that leads to muscle atrophy, spasticity and weakness as well as
impaired speech, swallowing and breathing, with many patients requiring ventilator support as the disease progresses.
The average age of onset of ALS is 55 years, and median survival is approximately three years after initial symptoms
appear. It is estimated that there are approximately 20,000 patients in the United States who are living with the disease.
Familial, or inherited, ALS accounts for approximately 10% of ALS cases, and an estimated 20% of familial ALS is
caused by mutations in the superoxide dismutase 1, or SOD1, gene. Therefore, there are an estimated 400-800 patients in
the United States with ALS caused by mutations in the SOD1 gene.
The normal function of the SOD1 protein is to catalyze the conversion of superoxide anion (O2
-) to hydrogen
peroxide (H2O2) and oxygen (O2). Mutations in SOD1 have been shown to lead to the formation of toxic aggregates of
the SOD1 protein, resulting in the dysfunction and death of motor neurons. Patients with familial ALS caused by certain
mutations in the SOD1 gene progress more rapidly than patients with other forms of ALS, although the reason for this
more rapid progression is unknown.
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There are currently only two FDA-approved treatments for ALS, Riluzole by Sanofi, which has been shown to
have only modest efficacy, prolonging life by a few months, and Edaravone, which has been shown to slow decline of
daily functioning.
Our Treatment Approach
We believe that AAV gene therapy is an attractive approach to treating monogenic ALS caused by SOD1
mutations. Since the SOD1 gene mutations that cause ALS are toxic gain-of-function mutations, we believe that we can
employ an AAV gene therapy approach that targets the knockdown of SOD1 gene expression. In addition, the primary
target cells - motor neurons - reside within the spinal cord, which we believe can be effectively transduced with AAV
gene therapy through intraparenchymal injection as well as other routes of administration. The mechanism of action of
VY-SOD102 is knockdown of SOD1 expression in motor neurons, thereby potentially reducing the level of toxicity
associated with mutated protein, and slowing functional decline and prolonging ventilator-independent survival.
We believe that there is also the potential to leverage our approach for the treatment of other genetically defined
forms of ALS.
Preclinical Studies Targeting SOD1 for Monogenic ALS
Results from our preclinical studies using intraparenchymal delivery of AAV vector to the spinal cord support
targeting mutant SOD1 for the treatment of monogenic ALS. In the mini-pig, used as an animal model as it has a spinal
cord similar in size to the human spinal cord, significant knockdown of SOD1 expression was observed following
intraparenchymal spinal cord injection of an AAV vector carrying a transgene designed to inhibit SOD1 expression. This
novel delivery approach with VY-SOD102 reduced SOD1 mRNA in the spinal cord on average by 70% and 50% in the
cervical and thoracic regions, respectively, both regions critical for respiratory function, and 82% near the site of cervical
injection. In addition, VY-SOD102 reduced SOD1 mRNA by 22% in the lumbar region.
The knockdown of SOD1 has also been reported to provide significant survival benefits in animal models of
ALS. As shown in the example below, mice with a SOD1 mutation treated with an AAV vector to knock down
expression of the mutant human SOD1 gene extended median survival by 87 days compared to mice treated with a
control vector.
Improved Survival Post Knockdown of SOD1(1)
(1) Reprinted by permission from Macmillan Publishers Ltd: Foust et al, Molecular Therapy (2013), 21 (12); 2148-2159, copyright (2013). Purple line
represents mice treated with AAV gene therapy, while gray line represents control mice.
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These studies provide proof-of-principle for our approach to treating monogenic ALS due to SOD1 mutations
with VY-SOD102.
Our Program Status
In late 2016, we identified VY-SOD101 as a lead clinical candidate after screening a series of capsids,
microRNA expression cassettes, (a segment of DNA that contains the sequence that targets SOD1 gene expression
selectively for knockdown), and encoded payloads. We screened more than 100 RNAi sequences, each represented by a
bar in the graph below, and successfully identified multiple, highly-potent RNAi sequences targeting SOD1, as
highlighted by the yellow bars in the figure below:
Overview of miRNA Target Sequences for Knockdown of SOD1
The most potent RNAi sequences targeting SOD1 gene expression were evaluated in multiple microRNA
expression cassettes and with a number of vector genome configurations. We have completed the necessary experiments
to evaluate these potential lead candidates based upon criteria that include safety, selectivity, potency, and efficiency and
precision of microRNA processing.
In late 2017, we initiated additional preclinical studies to further optimize our ALS program’s therapeutic
approach, including exploration of additional routes of administration and novel AAV capsids in large animal models.
Based on these studies, we selected VY-SOD102 as our lead candidate. VY-SOD102, our clinical candidate for the
treatment of a monogenic form of ALS, is composed of an adeno-associated virus capsid and a proprietary transgene to
selectively knock down levels of SOD1 mRNA. VY-SOD102 has the potential to durably reduce the levels of toxic
mutant SOD1 protein in the spinal cord to slow the progression of disease. In late 2018 we presented data on VY-
SOD102 administered with a novel delivery paradigm comprising a one-time, intraparenchymal infusion after
laminectomy to the cervical spinal cord of the mini-pig, which has a spinal cord similar in length and diameter to the
human spinal cord. This delivery approach yielded safe and significant reduction of SOD1 at four weeks post-dosing at
the site of the infusion in the spinal cord, most notably in the cervical and thoracic regions critical for respiratory
function. Further preclinical studies are underway with VY-SOD102 which, if successful, will support a potential filing
of an IND application in 2019.
Friedreich’s ataxia Program: VY-FXN01
Disease Overview
Friedreich’s ataxia is a debilitating neurodegenerative disease resulting in poor coordination of legs and arms,
progressive loss of the ability to walk, generalized weakness, loss of sensation, scoliosis, diabetes and cardiomyopathy as
well as impaired vision, hearing and speech. The typical age of onset is 10 to 12 years, and life expectancy is severely
reduced with patients generally dying of neurological and cardiac complications between the ages of 35 and 45.
24
According to the Friedreich’s Ataxia Research Alliance, there are approximately 6,400 patients living with the disease in
the United States. There are currently no FDA-approved treatments for the disease.
Friedreich’s ataxia patients have mutations of the FXN gene that reduce production of the frataxin protein,
resulting in the degeneration of sensory pathways and a variety of debilitating symptoms. Friedreich’s ataxia is an
autosomal recessive disorder, meaning that a person must obtain a defective copy of the FXN gene from both parents in
order to develop the condition. One healthy copy of the FXN gene, or 50% of normal frataxin protein levels, is sufficient
to prevent the disease phenotype. We therefore believe that restoring FXN protein levels to at least 50% of normal levels
by AAV gene therapy might lead to a successful therapy.
Our Treatment Approach
We are developing an AAV gene therapy approach that we believe will deliver a functional version of the FXN
gene to the sensory pathways through intravenous injection. We think this approach has the potential to improve balance,
ability to walk, sensory capability, coordination, strength and functional capacity of Friedreich’s ataxia patients. Most
Friedreich’s ataxia patients produce low levels of the frataxin protein, which although insufficient to prevent the disease,
exposes the patient’s immune system to frataxin. This reduces the likelihood that the FXN protein expressed by AAV
gene therapy will trigger a harmful immune response.
Preclinical Studies
We initially conducted preclinical studies in non-human primates and achieved high FXN expression levels
within the target sensory ganglia, or clusters of neurons, along the spinal region following intrathecal injection. More
recently, we conducted preclinical studies in non-human primates with intravenous injection and achieved target FXN
expression levels within sensory ganglia and the heart. The levels of FXN expression observed using an AAV vector
were, on average, greater than FXN levels present in control normal human brain tissue. FXN expression was also
observed in the cerebellar dentate nucleus, another area of the CNS that is often affected in Friedreich’s ataxia, and that
is often considered difficult to target therapeutically.
Our Program Status
VY-FXN01 is currently in preclinical development. We are in the process of identifying a lead candidate which
will comprise an optimal capsid, promoter, and FXN transgene. We are completing several AAV capsid screening
experiments to identify capsids that effectively distribute to disease target tissues in a desired manner following
intravenous injection. Criteria for evaluating these capsids include safety, overall level of transgene expression achieved,
distribution of transgene expression and the specific cell types transduced. In addition, we are optimizing the promoter
for VY-FXN01. To evaluate the therapeutic potential of our vectors, we have conducted testing in a new genetic mouse
model of Friedreich’s ataxia. In this preclinical model of Friedreich’s ataxia, our gene therapy candidates durably
improved sensory function, and rescued the Friedreich’s ataxia phenotype based on multiple functional tests. In
physiological and behavioral assays, our gene therapy candidates demonstrated dose-dependent and durable responses
for more than 10 months after a single administration, preventing central and peripheral disease progression. We also
have a significant effort focused on better understanding the clinical course of Friedreich’s ataxia and identifying
potential clinical endpoints for future clinical trials.
Once we identify a lead candidate for this program, we plan to complete IND enabling studies to evaluate its
safety and efficacy.
In January 2019, we entered into the Neurocrine Collaboration Agreement for the research, development, and
commercialization of four programs including our Friedreich’s ataxia program.
Huntington’s Disease Program: VY-HTT01
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Disease Overview
Huntington’s disease is a fatal, inherited neurodegenerative disease that results in the progressive decline of
motor and cognitive functions and a range of behavioral and psychiatric disturbances. The average age of onset is 39
years, with patients typically dying approximately 15 to 20 years following diagnosis. According to the Huntington’s
Disease Society of America, Huntington’s disease affects approximately 30,000 patients in the United States.
Huntington’s disease is caused by mutations in the huntingtin, or HTT, gene. Huntington’s disease is an autosomal
dominant disorder, which means that an individual is at risk of inheriting the disease if only one parent is affected. More
than 200,000 individuals in the United States are at risk for inheriting the mutant gene from an affected parent. While the
exact function of the HTT gene in healthy individuals is unknown, it is essential for normal development before birth and
mutations in the HTT gene ultimately lead to the production of abnormal intracellular huntingtin protein aggregates that
cause neuronal cell death. Currently, there are no approved treatments targeting the underlying cause of the disease and
only one drug, tetrabenazine, has been approved for the treatment of the specific motor symptoms of Huntington’s
disease.
Our Treatment Approach
We believe that AAV gene therapy is an attractive approach to treating Huntington’s disease. Since HTT
mutations that cause Huntington’s disease are toxic gain-of-function mutations, we believe that we can employ an AAV
gene therapy approach designed to knock down expression of the HTT gene. In addition, the targeted cells for treatment
primarily reside in discrete regions of the brain - the striatum and the cortex - that can be targeted with AAV gene
therapy delivered directly into the brain. The mechanism of action of VY-HTT01 is knockdown of HTT expression in
neurons in the striatum and cortex, thereby reducing the level of toxicity associated with mutated protein in these brain
regions, and slowing the progression of cognitive and motor symptoms. We believe that we can use the same surgical
approach for this program that has been used for VY-AADC delivery to the brain, allowing us to leverage prior clinical
experience.
Preclinical Studies
Our collaborators at Sanofi Genzyme have completed significant preclinical work focused on AAV gene
therapy for Huntington’s disease. Sanofi Genzyme’s preclinical studies in a mouse model of Huntington’s disease
demonstrated the safety and efficacy of AAV gene therapy targeting the knockdown of the HTT gene in the CNS.
As shown in the figure below, using an AAV vector delivered directly to the CNS, HTT gene expression was
observed to be reduced by over 50%, on average, in the treatment group as compared to the control group. No signs of
toxicity were reported.
Knockdown of HTT Following AAV Delivery(1)
(1) Stanek et al, Human Gene Therapy (2014); 25; 461-474. The publisher for this copyrighted material is Mary Ann Liebert, Inc. publishers.
*
p<0.05
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In addition, significant functional benefit was observed in the treatment group, as measured by the rotarod test
to assess motor function, and the Porsolt Swim Test to measure depressive behavior in mice. In the figure below, both
normal or wild type mice, and mice with the HTT mutation, or YAC128, were evaluated following treatment with either
an AAV vector targeting the knockdown of the HTT gene, labeled as AAV2/1-miRNA-Htt below, or a negative control
vector, labeled as AAV2/1-Null below. As expected, knocking down HTT in the control mice was observed to have no
functional impact, whereas knocking down HTT in YAC128 mice was observed to have significant functional benefit.
Reduction of Behavioral Deficits in an Animal Model of Huntington’s Disease(2)
(2) Stanek et al, Human Gene Therapy (2014); 25; 461-474. The publisher for this copyrighted material is Mary Ann Liebert, Inc. publishers.
*
p<0.05
Our Program Status
VY-HTT01 is in preclinical development. Sanofi Genzyme’s Huntington’s disease gene therapy program was
combined with our efforts in connection with entering into the Sanofi Genzyme Collaboration agreement in February
2015. Through our gene therapy platform, we also constructed and screened a series of microRNA expression cassettes
and encoded payloads. Multiple rounds of optimization have resulted in potential candidates that are potent and selective
for knocking down HTT. In addition, many construct configurations were evaluated toward the identification of one
which would provide excellent yield and genome integrity for manufacturing scale-up in our baculovirus/Sf9 AAV
manufacturing system in insect-derived cells.
We also conducted the necessary experiments to evaluate these potential lead candidates based upon criteria
that include safety, selectivity, potency, and efficiency and precision of microRNA processing, leveraging the learnings
from the VY-SOD101 program, including the miRNA cassettes and vector genome configurations that we designed for
the VY-SOD101 program. In June 2017, we reported that we had selected a lead clinical candidate.
In preclinical studies, a single administration of VY-HTT01 was well-tolerated and resulted in robust and
widespread knockdown of HTT messenger RNA at five weeks post-dosing in disease-relevant regions of the non-human
primate central nervous system. The extent of HTT mRNA suppression (greater than 50%) and high precision and
efficiency of primary microRNA processing in our preclinical studies supported the selection of our lead clinical
candidate. Additionally, preclinical data in large mammals have demonstrated that a single intraputaminal administration
results in robust knockdown of HTT in the putamen.
Recent preclinical delivery studies have further optimized the dosing paradigm. VT-HTT01 is composed of an
adeno-associated virus capsid (AAV1) and proprietary transgene that harnesses the RNA interference pathway to
selectively knock down, or reduce, levels of HTT mRNA. In late 2018, we presented results demonstrating significant
27
reduction of HTT mRNA at five weeks post-dosing in adult non-human primates using an MRI-guided surgical delivery
of VY-HTT01 and a novel delivery paradigm targeting both the putamen and thalamus. Targeting the thalamus in
addition to the putamen leverages more extensive and more preserved neuronal pathways to the cortex than delivery to
the putamen alone. This novel dosing paradigm with VY-HTT01 resulted in safe and significant suppression of HTT in
the striatum and in cortical neurons, which are critical in the progression of disease. A combined infusion of VY-HTT01
into the putamen and thalamus significantly reduced HTT mRNA by 68% in the caudate, 67% in the putamen, and 73%
in the thalamus, on average, as measured from tissue punches, and by 32% on average, in laser captured cortical neurons,
which was also supported by in situ hybridization for HTT mRNA. Further preclinical studies are underway with VY-
HTT01 which, if successful, will support a potential filing of an IND application in 2019.
Tau Program
Disease Overview
In healthy individuals, tau is an abundant soluble cytoplasmic protein that binds to microtubules, which are key
structural proteins in cells, to promote their stability and function. In Alzheimer’s disease and other tauopathies, tau
aggregates and forms insoluble tau-containing neurofibrillary tangles. The progressive spread of tau pathology along
distinct anatomical pathways in the brain closely correlates with disease progression and severity in a number of
tauopathies, including Alzheimer’s disease, FTD, and PSP. In addition, mutations in the tau gene have been shown to
cause inherited forms of tauopathies, including FTD and PSP. Because the extent of tau pathology in Alzheimer’s
disease and other tauopathies closely correlates with the severity of neurodegeneration, synapse loss, and cognitive
deficits, attempts to prevent, reduce, or slow the development of tau pathology have become important therapeutic
strategies for these diseases.
In previous preclinical studies in animal models, despite high weekly or biweekly systemic doses of anti-tau
monoclonal antibodies administered over three to six months, only very low levels of antibody reached the brain,
resulting in a modest reduction of tau pathology by ~40–50%. This incomplete and modest reduction in tau pathology
following treatment with very high and frequent systemic doses of these antibodies may pose therapeutic challenges in
humans with various tauopathies. To address these limitations, our AbbVie Tau Collaboration attempts to develop AAV
gene therapies to deliver monoclonal antibodies to the brain directed against tau as potential new treatments for
Alzheimer’s disease and other tau-related neurodegenerative diseases.
Our Program Status
The tau program is currently in the preclinical stage. We have agreed to collaborate with AbbVie on the
research and development of specified vectorized antibody compounds comprised of an AAV or other viral capsid and a
virus vector genome that encodes one or more antibodies that target and bind to a tau protein. During the research period
of our collaboration, we and AbbVie agreed to each identify up to five potential antibodies for evaluation during the
AbbVie Tau Collaboration. Under the agreement, up to three research antibodies may be selected as candidates for
creation of research compounds. AbbVie has the right to select two of the three research antibodies. During a specified
portion of the research period, AbbVie may exercise one or more of its exclusive development options to select up to a
total of three research compounds and their corresponding product candidates to proceed to the development period.
Severe, Chronic Pain Program: VY-NAV01
Disease Overview
Nav1.7 is a sodium ion channel that is required for transmission of pain signals to the CNS. We believe that an
AAV gene therapy approach targeting the knockdown of Nav1.7 in sensory neurons could be an effective treatment for
certain forms of severe, chronic pain. A major challenge for the successful development of small molecules and
antibodies targeting Nav1.7 has been the selective inhibition of Nav1.7 over closely related sodium channels such as
Nav1.5 which are important for cardiac function. MicroRNAs, which work by harnessing the RNA interference pathway,
28
can achieve a high level of specificity for their messenger RNA targets, and can inhibit Nav1.7 selectively over other
sodium channel subtypes. Such an approach could avoid the dose-limiting side effects associated with the non-selective
profile of many current drugs used to treat severe, chronic pain, and also achieve a durable clinical benefit following a
single administration of the therapy. VY-NAV01 leverages our extensive experience designing novel microRNA
knockdown cassettes and delivering them using AAV, an approach that we are using for our ALS and Huntington’s
disease programs.
Our Program Status
VY-NAV01 is currently in the research stage. We are in the process of conducting proof-of-concept studies to
establish the level of Nav1.7 knockdown needed to relieve pain in animal models. We will then identify a lead candidate
which will comprise an optimal capsid, promoter, and microRNA targeting Nav1.7. We have also initiated proof-of-
concept studies to evaluate knockdown of another sodium channel subtype implicated in chronic pain that may be
combined with Nav1.7 knockdown. We are completing several AAV capsid screening experiments to identify capsids
that effectively distribute to pain sensory neurons in a desired manner. We are comparing capsids in non-human primates
following intrathecal and intravenous injection, and evaluating these capsids based upon multiple criteria including
safety, overall level of transgene expression achieved, distribution of transgene expression and the specific cell types
transduced.
Future Programs
We are evaluating additional severe neurological diseases that could be treated using AAV gene therapy
through application of either a gene replacement or a gene knockdown approach.
Collaborations and License Agreements
Sanofi Genzyme Collaboration
In February 2015, we entered into a strategic collaboration with Sanofi Genzyme to leverage our combined
expertise and assets to develop AAV gene therapies for neurological diseases. Under the agreement, we retained U.S.
rights to VY-AADC and VY-FXN01, as well as at least co-commercialization rights to VY-HTT01 in the United States.
In October 2017, Sanofi Genzyme decided not to exercise its option for the ex-U.S. rights to VY-AADC, returning
global rights to VY-AADC to us. VY-SOD102 is not included as part of the Sanofi Genzyme collaboration and we retain
unencumbered worldwide rights to this program. Sanofi Genzyme maintains exclusive options to license, develop and
commercialize (i) the Split Territory Programs outside the United States with an incremental option to co-commercialize
VY-HTT01 in the United States, and (ii) VY-SMN101 worldwide. Sanofi Genzyme’s option for the Split Territory
Programs and VY-SMN101 is triggered following the completion of the first POP Study on a program-by-program basis.
In November 2016, we and Sanofi Genzyme elected to deprioritize the development of VY-SMN101 for spinal muscular
atrophy due to, among other things, the significant progress we have made in our other preclinical programs and the
evolving competitive landscape.
Prior to any option exercise by Sanofi Genzyme, we will collaborate with Sanofi Genzyme in the development
of products under each Split Territory Program and VY-SMN101 pursuant to a written development plan and under the
guidance of an alliance joint steering committee, comprised of an equal number of our employees and Sanofi Genzyme
employees.
We are required to use commercially reasonable efforts to develop products under each Split Territory Program
and VY-SMN101 through completion of the applicable POP Study. During the development of our joint programs, our
and Sanofi Genzyme’s activities are guided by a Development Advisory Committee, which we refer to as the DAC. The
DAC may elect to utilize certain Sanofi Genzyme technology relating to the VY-AADC program, the VY-HTT01
Program, or generally with the manufacture of Split Territory Program products. If we use certain Sanofi Genzyme
technology in VY-AADC, Sanofi Genzyme is entitled to received low single digit royalty payments based on a
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percentage of net sales by us, and we may be obligated to make certain regulatory milestone payments to a third-party
licensor.
We will be solely responsible for all costs incurred in connection with the development of Split Territory
Programs and VY-SMN101 products prior to option exercise, subject to the following: (i) Sanofi Genzyme may agree to
provide additional funds in return for agreed-upon payback or other agreed economic terms; (ii) we may request, and
upon mutual agreement, Sanofi Genzyme will provide in-kind services valued at up to $5.0 million; and (iii) expenses of
certain activities under the VY-HTT01 development plan may be funded to the extent such activities are reimbursed
through financial support that Sanofi Genzyme may receive from a disease foundation group.
Excluding the VY-AADC program, if we do not initiate a POP Study for a given Split Territory Program by
December 31, 2026 (or for the Future Program by the tenth anniversary of the date the Future Program is nominated by
Sanofi Genzyme), and Sanofi Genzyme has not terminated this agreement with respect to such Collaboration program,
then Sanofi Genzyme shall be entitled, at its sole and exclusive remedy, to a credit of $10.0 million for each such
program against other amounts payable by Sanofi Genzyme under the Collaboration. However, if we do not initiate a
POP Study by such date as a result of a regulatory delay or a force majeure event, such time period shall be extended for
so long as such regulatory delay or force majeure event continues and we shall not be deemed to have failed to initiate a
POP Study.
Post-Option Exercise
Upon Sanofi Genzyme’s exercise of its option to license a given product in a Split Territory Program, which we
refer to as a Split Territory Licensed Product, we will have sole responsibility for the development of such Split Territory
Licensed Product in the United States and Sanofi Genzyme shall have sole responsibility for development of such Split
Territory Licensed Product in the rest of the world. We and Sanofi Genzyme will have shared responsibility for
execution of ongoing development of such Split Territory Licensed Product that is not specific to either of our territories,
including costs associated therewith.
A steering committee for each program will review and approve a written plan and budget for each relevant
program. In addition, all development activities to be undertaken with respect to each Split Territory Licensed Product
by or on behalf of either party will be set forth in a written development plan.
Sanofi Genzyme shall have the sole right to develop VY-SMN101 worldwide. Sanofi Genzyme shall be
responsible for all of the development costs that occur after the option exercise date for VY-SMN101.
Commercialization
We shall be solely responsible, at our expense, for all commercialization activities relating to Split Territory
Licensed Products in the United States. Sanofi Genzyme shall be solely responsible, at its expense, for all
commercialization activities relating to Split Territory Licensed Products in the rest of the world. For VY-HTT01, if
Sanofi Genzyme has exercised its option to co-commercialize VY-HTT01 in the United States, then Sanofi Genzyme
will be the lead party responsible for all VY-HTT01 commercialization activities in the United States, and these
activities will be set forth in reasonable detail in a written commercialization plan.
Sanofi Genzyme shall be solely responsible, at its expense, for all commercialization activities relating to VY-
SMN101 worldwide. Sanofi Genzyme shall use commercially reasonable efforts to commercialize VY-SMN101 in each
major market specified in the agreement where Sanofi Genzyme has obtained required governmental approvals.
Financial Terms
We received $65.0 million in upfront cash, a $30.0 million upfront equity investment and an in-kind
commitment of $5.0 million, totaling $100.0 million. If Sanofi Genzyme exercises its option for a collaboration program,
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Sanofi Genzyme is required to make an option exercise payment of $20.0 million or $30.0 million for each program. We
are no longer entitled to receive the regulatory and commercial milestone payments from Sanofi Genzyme related to VY-
AADC. Sanofi Genzyme shall pay us up to $540.0 million across the remaining product programs upon the achievement
of specified regulatory and commercial milestones.
In addition, to the extent any Split Territory Licensed Product or the VY-SMN101 Product is commercialized,
we are entitled to receive tiered royalty payments ranging from the mid-single digits to mid-teens based on a percentage
of net sales. Sanofi Genzyme is entitled to receive royalty payments from us related to sales of the Split Territory
Licensed Products ranging from the low-single digits to mid-single digits, depending on whether we use Sanofi
Genzyme technology in a Split Territory Licensed Product or the VY-SMN101 Product. If Sanofi Genzyme exercises its
option to co-commercialize VY-HTT01 in the United States, we will share any profits or losses from VY-HTT01
product sales.
Term and Termination; Remedies
Our collaboration agreement with Sanofi Genzyme will continue in effect until the later of (i) the expiration of
the last to expire of the option rights and (ii) the expiration of all payment obligations unless sooner terminated by us or
Sanofi Genzyme.
We and Sanofi Genzyme have customary termination rights including the right to terminate for an uncured
material breach of the agreement committed by the other party and Sanofi Genzyme has the right to terminate for
convenience.
AbbVie Tau Collaboration
In February 2018, we entered into an exclusive collaboration and option agreement with AbbVie, or the AbbVie
Tau Collaboration Agreement, for the research, development, and commercialization of AAV and other virus-based gene
therapy products for the treatment of neurodegenerative diseases related to defective or excess aggregation of tau protein
in the human brain, including Alzheimer’s disease.
Under the AbbVie Tau Collaboration Agreement, we have agreed to collaborate with AbbVie on the research
and development of specified vectorized antibody compounds comprised of an AAV or other viral capsid and a virus
vector genome that encodes one or more antibodies that target and bind to a tau protein. The collaboration is comprised
of a research period, a development period, and an exclusive license option.
Research Period and AbbVie Development Option
During the research period, each party has agreed to identify up to five antibodies for inclusion in the
collaboration. Subject to certain conditions and exceptions, the parties will then select up to three antibodies, or the
Research Antibodies, as candidates for creation of research compounds, or the Research Compounds, with AbbVie
having the right to select two of the three Research Antibodies. We are obligated to use diligent efforts to conduct
antibody engineering and other research activities to create Research Compounds and to develop product candidates
containing or comprised of such Research Compounds. We will be solely responsible for the costs and expenses during
the Research Period. During a specified portion of the Research Period, or the Development Option Period, AbbVie may
exercise one or more of its exclusive development options, each of which we refer to as a Development Option, to select
up to a total of three Research Compounds, or the Selected Research Compounds, and their corresponding product
candidates, or the Selected Product Candidates, to proceed to the development period.
Development Period and AbbVie License Option
During the development period, we are obligated to use diligent efforts to conduct development activities,
including IND-enabling and Phase 1 clinical trial activities, for the Selected Research Compounds and corresponding
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Selected Product Candidates. We will be solely responsible for the costs and expenses during the development period.
During a specified portion of the development period, or the License Option Period, AbbVie may exercise its exclusive
license option, or the License Option, to further develop and commercialize all of the Research Compounds, or the
Licensed Compounds, and corresponding product candidates, or the Licensed Products. Upon AbbVie’s exercise of its
License Option, we have agreed to grant to AbbVie an exclusive, worldwide license, with the right to sublicense, under
certain of our intellectual property rights to develop and commercialize the Licensed Compounds and the Licensed
Products for all human diagnostic, prophylactic and therapeutic uses. In addition, after AbbVie’s exercise of the License
Option, we have certain obligations to complete any remaining research and development activities that have not been
completed for any Research Compounds and Product Candidates.
Governance
Our research and development activities will be conducted pursuant to the plans agreed to by the parties and
overseen by a joint governance committee, or JGC, comprised of an equal number of representatives from each party.
Prior to AbbVie’s exercise of its License Option, we will have final decision-making authority within the JGC, subject to
specified limitations; thereafter, AbbVie will have final decision-making authority, subject to specified limitations. Any
material amendment to the research or development plans, however, must be mutually agreed to by the parties, which
may be through the JGC.
Commercialization
Under the AbbVie Tau Collaboration Agreement, AbbVie is required to use commercially reasonable efforts to
develop and commercialize at least one Licensed Product in each of the United States, Japan, the United Kingdom,
Germany, France, Italy and Spain. After exercise of the License Option, AbbVie is solely responsible for all
development and commercialization activities relating to Licensed Compounds and Licensed Products at its sole cost and
expense (subject to our obligation to complete any remaining research and development activities set forth in the agreed-
upon plans), except that we may elect to share in AbbVie’s development costs relating to a Licensed Product on an
indication-by-indication basis in exchange for a specified increase in royalties. If we exercise this cost-sharing option, we
may either reimburse AbbVie for AbbVie’s applicable development costs or, in the case of certain budget overruns,
AbbVie may instead deduct applicable development costs, up to a specified cap, from milestone and royalty payments
owed by AbbVie to us.
Manufacturing
During both the research period and the development period, we will be solely responsible for the manufacture
and supply of all pre-clinical and clinical requirements for the Research Compounds and Product Candidates. If AbbVie
were to exercise its License Option, we would be required, at AbbVie’s request, to effect a full transfer of the
manufacturing process for each Licensed Compound and corresponding Licensed Product to AbbVie. Following such
transfer, we have agreed to disclose, on a continuing basis, all modifications, enhancements and improvements to
manufacturing processes for the Licensed Products, and AbbVie has agreed to grant to us a non-exclusive, royalty-free
license to modifications to the manufacturing process made by AbbVie, in each case subject to specified limitations.
Financial Terms
Under the terms of the AbbVie Tau Collaboration Agreement, AbbVie paid us an upfront payment of $69.0
million in February 2018. AbbVie has also agreed to pay us within 30 days after the applicable exercise date: (1) upon
AbbVie’s exercise of a Development Option, (a) $80.0 million for the first Selected Research Compound and its
corresponding Selected Product Candidate and (b) $30.0 million each for up to two additional Selected Research
Compounds and their corresponding Selected Product Candidates, and (2) upon AbbVie’s exercise of the License
Option, a one-time payment of $75.0 million. We will be eligible to receive (1) specified development and first-sale
milestone payments for each Licensed Compound of up to an aggregate of $550.0 million in the case of an Alzheimer’s
disease indication, up to $230.0 million in the case of the first indication other than Alzheimer’s disease, and $115.0
million for subsequent non-Alzheimer’s disease indication; and (2) tiered, escalating royalties, in a range from a high-
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single digit to a mid-to-high teen (or, if we have exercised our cost-sharing option, low-twenties) percentage of aggregate
net sales of Licensed Products on a Licensed Compound by Licensed Compound basis. The royalties are subject to
potential reductions for biosimilar market penetration, patent claim expiration, and other provisions, subject to specified
limits. For each Licensed Product, AbbVie may make a one-time request either to decrease its royalty payments to a
specified low-single digit percentage or to terminate them altogether in exchange for a one-time payment by AbbVie at a
fair market value to be negotiated by the parties. If the parties are not able to agree to the terms of such buy-down, the
parties may seek a fair market value determination for the buy-down pursuant to dispute resolution procedures specified
in the agreement.
Intellectual Property
Under the terms of the AbbVie Tau Collaboration Agreement, each party will own the entire right, title and
interest in and to all know-how and patent rights first made or invented solely by it or its affiliates or its or their
sublicensees in the course of the collaboration, with certain specified exceptions. Also subject to specified exceptions,
the parties will jointly own all rights, title and interest in and to all know-how and patent rights first made or invented
jointly by such party or its affiliates or its or their sublicensees in the course of the collaboration. Regardless of whether
AbbVie has exercised a Development Option or the License Option, we have agreed to grant AbbVie perpetual,
exclusive or non-exclusive (as the case may be), worldwide licenses to certain know-how and patent rights developed by
us or jointly by the parties arising from the collaboration.
Exclusivity
During the term of the AbbVie Tau Collaboration Agreement, (1) neither party nor any of its respective
affiliates is permitted to directly or indirectly exploit any vectorized antibody compound targeting a tau protein, which
we refer to as Vectorized Antibody Exclusivity, and (2) neither we nor any of our affiliates is permitted to directly
exploit any Research Antibody targeting a tau protein, which we refer to as Research Antibody Exclusivity, in each case
subject to specified exceptions, including our conduct of basic research.
Termination
Unless earlier terminated, the AbbVie Tau Collaboration Agreement will expire on the earliest to occur of the
expiration of (1) the Development Option Period, without AbbVie’s exercise of a Development Option; (2) the License
Option Period, without AbbVie’s exercise of its License Option; and (3) the last-to-expire royalty term with respect to all
Licensed Products in all countries. Subject to a cure period, either we or AbbVie may terminate the AbbVie Tau
Collaboration Agreement, in whole or, in the case of us, in part, subject to specified conditions, in the event of the other
party’s uncured material breach. Either we or AbbVie may also terminate, subject to specified conditions, for insolvency
of the other party, certain failures or delays to obtain certain regulatory clearances of the collaboration, or a joint
determination of scientific infeasibility by the parties. AbbVie may terminate the AbbVie Tau Collaboration Agreement
(1) without cause, in its entirety or, after its exercise of the License Option, on a country-by-country basis, with 180
days’ prior written notice or (2) for our non-compliance with certain anti-bribery or anti-corruption covenants. We may
terminate the AbbVie Tau Collaboration Agreement, subject to specified conditions, if AbbVie or its affiliates challenge
the validity or enforceability of certain of our, or jointly-held intellectual property rights.
Upon termination in certain cases, AbbVie has agreed to grant to us reversionary licenses to certain Licensed
Compounds. In such case, we may be required to pay royalties to AbbVie in a range from a low to high single digit
percentage of net sales of Licensed Products containing or comprised of such License Compound, subject to potential
reduction in some cases. Additionally, upon termination in certain cases, the Vectorized Antibody Exclusivity and
Research Antibody Exclusivity will survive until the third anniversary of the termination date. If the parties mutually
agree to terminate for infeasibility or AbbVie terminates for our failure to deliver a final research or development report,
neither us nor any of its affiliates may directly or indirectly exploit a vectorized antibody compound that targets or binds
to a tau protein for 18 months after the termination date.
Neurocrine Collaboration
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In January 2019, we entered into the Neurocrine Collaboration Agreement for the research, development and
commercialization of certain of our AAV gene therapy products. Under the Neurocrine Collaboration Agreement, upon
the expiration or termination of applicable waiting periods and the receipt of any required approvals or clearances
including antitrust clearance, we have agreed to collaborate on the conduct of four collaboration programs, which we
refer to collectively as the Neurocrine Programs: the AADC Program for the treatment of Parkinson’s disease, our FA
Program for the treatment of Friedreich’s ataxia including the development of the VY-FXN01 product candidate, which
together with the AADC Program, we refer to as the Existing Programs, and two programs to be determined by us and
Neurocrine at a later date, which we refer to as the Discovery Programs.
Collaboration and Licenses
Under the terms of the Neurocrine Collaboration Agreement, subject to the rights retained by us thereunder, we
have agreed to collaborate with Neurocrine on, and to grant, exclusive, royalty-bearing, non-transferable, sublicensable
licenses to certain of our intellectual property rights, for all human and veterinary diagnostic, prophylactic, and
therapeutic uses, for the research, development, and commercialization of gene therapy products, which we refer to as
the Collaboration Products, under (i) the AADC Program, on a worldwide basis; (ii) the FA Program, in the United
States and, upon expiration of Sanofi Genzyme’s option to the FA Program pursuant to the Sanofi Genzyme
Collaboration without exercise of such option, all countries in the world in which the Neurocrine Collaboration
Agreement remains in effect with respect to the FA Program; and (iii) each Discovery Program, on a worldwide basis.
Pursuant to development plans to be agreed by the parties, which will be overseen by a joint steering committee,
or JSC, we have operational responsibility, subject to certain exceptions, for the conduct of each Neurocrine Program
prior to the Transition Event for each Program, as described below, and are required to use commercially reasonable
efforts to develop the Collaboration Products. Neurocrine has agreed to be responsible for all costs incurred by us in
conducting these activities for each Neurocrine Program, in accordance with an agreed budget. If we breach our
development responsibilities or in certain circumstances upon a change in control of us, Neurocrine has the right but not
the obligation to assume the activities under such Neurocrine Program.
Upon the occurrence of a specified event for each Neurocrine Program, or a Transition Event, Neurocrine has
agreed to assume responsibility for development, manufacturing and commercialization activities for such Neurocrine
Program from us and to pay milestones and royalties on future net sales as described further below. For each Existing
Program, we have the option, or a Co-Co Option, to co-develop and co-commercialize such Neurocrine Program upon
the occurrence of a specified event, or a Co-Co Trigger Event. Should we elect to exercise our Co-Co Option, we have
agreed to enter into a cost- and profit-sharing arrangement with Neurocrine, or a Co-Co Agreement, whereby we have
agreed to jointly develop and commercialize Collaboration Products for such Neurocrine Program, or Co-Co Products,
and share in its costs, profits and losses, and we agree to forfeit certain milestones and royalties on net sales in the United
States during the effective period of the applicable Co-Co Agreement. The Transition Events are (i) with respect to the
AADC Program, our receipt of topline data for the ongoing RESTORE-1 Phase 2 clinical trial for VY-AADC; (ii) with
respect to the FA Program, our receipt of topline data for the initial Phase 1 clinical trial for an Friedreich’s ataxia
program product candidate; and (iii) with respect to each Discovery Program, the preparation by us and the approval by
Neurocrine of an investigational new drug application to be filed with the FDA by Neurocrine for the first development
candidate in such Discovery Program. The Co-Co Trigger Events are (i) with respect to the AADC Program, our receipt
of topline data for the ongoing RESTORE-1 Phase 2 clinical trial for VY-AADC and (ii) with respect to the FA
Program, the achievement of milestones or metrics specified in the applicable development plan, as determined by the
JSC.
Subject to exceptions specified in the Neurocrine Collaboration Agreement, profits and losses under our Co-Co
Option are agreed to be allocated (i) 50% to Neurocrine and 50% to us for a Collaboration Product from the VY-AADC
program and (ii) 60% to Neurocrine and 40% to us for a Collaboration Product from the FA Program; provided,
however, that Neurocrine may elect, within a specified period following the acceptance for filing of a BLA from the
FDA, to pay a $35.0 million rate-shifting fee to us to change the allocation for the VY-AADC Program to 55% to
Neurocrine and 45% to us. The parties have agreed that each Co-Co Agreement will provide us the right to terminate for
any reason upon prior written notice to Neurocrine and Neurocrine the right to terminate in certain circumstances upon
our change of control.
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Governance
Our research and development activities under the Neurocrine Collaboration Agreement are to be conducted
pursuant to plans agreed to by the parties, on a program-by-program basis, and overseen by the JSC, which is composed
of an equal number of representatives from the parties. The JSC may delegate matters within its authority to
subcommittees of the JSC. In addition, the Neurocrine Collaboration Agreement establishes working groups to handle
specified matters on a subject matter-by-subject matter basis. If a working group or subcommittee cannot agree on a
matter within its purview within a specified time, such matter is to be referred sequentially to the JSC and then the
executive officers of the parties. If the executive officers are not able to resolve the matter, then (i) with respect to each
Existing Program, subject to specified exceptions, (x) Neurocrine has the right to resolve such matter prior to our
exercise of our Co-Co Option with regard to such Co-Co Product or if such Co-Co Option expires or goes unexercised
and (y) following the timely exercise by us of our Co-Co Option, depending on the subject of such matter, either
Neurocrine, in certain instances, or the parties jointly or the JSC, in other instances, would have the right to resolve such
matter, and (ii) with respect to Discovery Programs, subject to specified exceptions, Neurocrine has the right to resolve
such matter.
Candidate Selection
The parties have committed, following the effective date of the Neurocrine Collaboration Agreement, to agree
on a list of up to eight target genes, or Targets, from which Neurocrine has the right to nominate Targets for the two
Discovery Programs. Each Target for the Discovery Programs must be approved by a consensus of the JSC or the
executive officers.
Manufacturing
Prior to the Transition Event for a Neurocrine Program, we are responsible for the manufacture of any
Collaboration Products for the Program. Following the Transition Event, the parties shall negotiate the manufacturing
and supply responsibilities, subject to the terms of any applicable Co-Co Agreement.
Financial Terms
Under the terms of the Neurocrine Collaboration Agreement, Neurocrine has agreed to pay us an upfront
payment of $115.0 million within five business days after the effective date, and $50.0 million as an equity purchase of
4,179,728 shares to purchase our common stock. The Neurocrine Collaboration Agreement provides for aggregate
development milestone payments from Neurocrine to us for Collaboration Products under (i) the AADC Program of up
to $170.0 million; (ii) the FA Program of up to $195.0 million, and (iii) each of the two Discovery Programs of up to
$130.0 million per Discovery Program. We may be entitled to receive aggregate commercial milestone payments for
each Collaboration Product of up to $275.0 million, subject to an aggregate cap on commercial milestones across all
Neurocrine Programs of $1.1 billion.
Neurocrine has also agreed to pay us royalties, based on future net sales of the Collaboration Products. Such
royalty percentages, for net sales in and outside the United States, as applicable, range (i) for the VY-AADC program,
from the mid-teens to thirty and the low-teens to twenty, respectively; (ii) for the FA Program, from the low-teens to
high-teens and high-single digits to mid-teens, respectively; and (iii) for each Discovery Program, from the high-single
digits to mid-teens and mid-single digits to low-teens, respectively. On a country-by-country and program-by-program
basis, royalty payments would commence on the first commercial sale of a Collaboration Product and terminate on the
later of (a) the expiration of the last patent covering the Collaboration Product or its method of use in such country,
(b) 10 years from the first commercial sale of the Collaboration Product in such country and (c) the expiration of
regulatory exclusivity in such country, or the Royalty Term. Royalty payments may be reduced by up to 50% in
specified circumstances, including expiration of patents rights related to a Collaboration Product, approval of biosimilar
products in a given country or required payment of licensing fees to third parties related to the development and
commercialization of any Collaboration Product. Additionally, the licenses granted to Neurocrine shall automatically
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convert to fully paid-up, non-royalty bearing, perpetual, irrevocable, exclusive licenses on a country-by-country and
product-by-product basis upon the expiration of the Royalty Term applicable to such Collaboration Product in such
country.
Intellectual Property
Under the terms of the Neurocrine Collaboration Agreement and subject to specified exceptions therein, each
party owns the entire right, title and interest in and to all intellectual property rights made solely by its employees or
agents in the course of the collaboration. The parties jointly own all rights, title and interest in and to all intellectual
property rights made or invented jointly by employees or agents of both parties.
Exclusivity
During the term of the Neurocrine Collaboration Agreement, neither party nor any of its respective affiliates is
permitted to directly or indirectly exploit any AAV-based gene therapy products directed to a Target to which a
Collaboration Product is directed, subject to specified exceptions, including the parties’ conduct of basic research and
our activities under the Sanofi Genzyme Collaboration.
Termination
Unless earlier terminated, the Neurocrine Collaboration Agreement expires on the later of (i) the expiration of
the last to expire Royalty Term with respect to a Collaboration Product in all countries in the relevant territory or (ii) the
expiration or termination of all Co-Co Agreements. Neurocrine may terminate the Neurocrine Collaboration Agreement
in its entirety or on a program-by-program or country-by-country basis by providing at least (x) 180-day advance notice
if such notice is provided prior to the first commercial sale of the Collaboration Product to which the termination applies
or (y) one-year advance notice if such notice is provided after the first commercial sale of the Collaboration Product to
which the termination applies. We may terminate the Neurocrine Collaboration Agreement, subject to specified
conditions, if (i) Neurocrine fails to make the equity purchase of 4,179,728 shares of our common stock, for an aggregate
purchase price of approximately $50.0 million, or (ii) Neurocrine challenges the validity or enforceability of certain of
our intellectual property rights. Subject to a cure period, either party may terminate the Neurocrine Collaboration
Agreement in the event of a material breach by the other party in whole or in part, subject to specified conditions. Either
party may also terminate the Neurocrine Collaboration Agreement if specified regulatory agencies seek to enjoin the
transaction or if the parties are unable to obtain antitrust clearance within 180 days of the applicable antitrust filings.
Upon termination in certain cases, Neurocrine has agreed to grant to us licenses to certain Neurocrine
intellectual property, subject to a negotiation between the parties to establish royalty rates for use of such intellectual
property. In the event of a breach by us with respect to a Neurocrine Program, if such termination were to occur after a
Transition Event, then (i) if a Co-Co Agreement is in effect with respect to such program, Neurocrine can terminate the
Co-Co Agreement for such program and we would no longer have co-development and co-commercialization rights with
respect to the Collaboration Product and (ii) subject to any license agreements, Neurocrine would no longer have any
obligations with respect to any Collaboration Products resulting from such program.
AbbVie Alpha-Synuclein Collaboration
In February 2019, we entered into an exclusive collaboration and option agreement, the AbbVie Alpha-
Synuclein Collaboration Agreement, with AbbVie, for the research, development and commercialization of AAV and
other virus-based gene therapy products directed against pathological species of alpha-synuclein for the potential
treatment of indications including Parkinson’s disease and other synucleinopathies.
Collaboration and AbbVie Options
Under the AbbVie Alpha-Synuclein Collaboration Agreement, we and AbbVie have agreed to collaborate on
the research and development of specified vectorized antibody compounds comprised of an AAV or other viral capsid
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and a virus vector genome that encodes one or more antibodies that target and bind to the alpha-synuclein protein. The
collaboration is comprised of a research period and a development period.
Research Period and AbbVie Development Option
During the research period, we are obligated to conduct research activities directed to constructing one or more
virus vectors that encode antibodies designated by AbbVie, or AbbVie Designated Antibodies, which initially are to be
antibodies provided by AbbVie. We are obligated to use diligent efforts to conduct research activities to create research
compounds and to develop product candidates containing or comprised of such research compounds. We are solely
responsible for the costs and expenses during the research period. During a specified portion of the research period,
AbbVie may exercise one or more of its exclusive development options to select up to a total of four research
compounds and their corresponding Product candidates to proceed to the development period.
Development Period and AbbVie License Option
During the development period, we are obligated to use diligent efforts to conduct development activities,
including IND application-enabling and Phase 1 clinical trial activities, for the selected research compounds and
corresponding selected product candidates. We are solely responsible for the costs and expenses during the development
period. During a specified portion of the development period, AbbVie may exercise its exclusive license option to further
develop and commercialize all of the research compounds and corresponding product candidates. Upon AbbVie’s
exercise of its license option, we have agreed to grant to AbbVie an exclusive, worldwide license, with the right to
sublicense, under certain of our intellectual property rights to develop and commercialize the licensed compounds and
the licensed products for all human diagnostic, prophylactic and therapeutic uses. In addition, after AbbVie’s exercise of
the license option, we have certain obligations to complete any remaining research and development activities that have
not been completed for any research compounds and product candidates.
Governance
Our research and development activities are to be conducted pursuant to the plans agreed to by the parties and
overseen by a joint governance committee, or the ASN JGC, comprised of an equal number of representatives from each
of us and AbbVie. Prior to AbbVie’s exercise of its License Option, we have final decision-making authority within the
ASN JGC, subject to specified limitations; thereafter, AbbVie is entitled to final decision-making authority, subject to
specified limitations. Any material amendment to the research or development plans, however, must be mutually agreed
to by the parties, which may be through the ASN JGC.
Commercialization
Under the AbbVie Alpha-Synuclein Collaboration Agreement, AbbVie is required to use commercially
reasonable efforts to develop and commercialize at least one licensed product in each of the United States, Japan, the
United Kingdom, Germany, France, Italy and Spain. After exercise of the license option, AbbVie is solely responsible
for all development and commercialization activities relating to licensed compounds and licensed products at its sole cost
and expense, subject to our obligation to complete any remaining research and development activities set forth in the
agreed-upon plans.
Manufacturing
During both the research period and the development period, we are solely responsible for the manufacture and
supply of all pre-clinical and clinical requirements for the research compounds and product candidates. If AbbVie were
to exercise its license option, we would be required, at AbbVie’s request, to effect a full transfer of the manufacturing
process for each licensed compound and corresponding licensed product to AbbVie. Following such transfer, we have
agreed to disclose, on a continuing basis, all modifications, enhancements and improvements to manufacturing processes
for the licensed products, and AbbVie has agreed to grant to us a non-exclusive, royalty-free license to modifications to
the manufacturing process made by AbbVie, in each case, subject to specified limitations.
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Financial
Under the terms of the AbbVie Alpha-Synuclein Collaboration Agreement, AbbVie has agreed to pay us an
upfront payment of $65.0 million within 15 business days of entry into the AbbVie Alpha-Synuclein Collaboration
Agreement. AbbVie has also agreed to pay to us, within 30 days after the applicable exercise date: (1) upon AbbVie’s
exercise of a development option, (a) $80.0 million for the first selected research compound and its corresponding
selected product candidate and (b) $30.0 million each for up to three additional selected research compounds and their
corresponding selected product candidates, and (2) upon AbbVie’s exercise of the license option, a one-time payment of
$75.0 million. We are eligible to receive (1) specified regulatory milestone payments for each licensed compound of up
to an aggregate of $450.0 million in the case of a Parkinson’s disease indication and up to $185.0 million in the case of
the first indication other than Parkinson’s disease and $92.5 million for a subsequent non-Parkinson’s disease indication;
(2) specified commercial milestone payments for all licensed products for all indications up to an aggregate of $500.0
million; and (3) tiered, escalating royalties, in the mid-single digit percentage range for aggregate net sales of licensed
products on a licensed compound by licensed compound basis. The royalties are subject to potential reductions for
biosimilar market penetration, patent claim expiration, and other provisions, subject to specified limits. Subject to certain
exceptions, we and AbbVie have agreed to be financially responsible for all payments owed to a third party with which it
has contracted for any use of in-licensed intellectual property under the AbbVie Alpha-Synuclein Collaboration
Agreement.
Intellectual Property
Under the terms of the AbbVie Alpha-Synuclein Collaboration Agreement, each party owns the entire right,
title and interest in and to all know-how and patent rights first made or invented solely by it or its affiliates or its or their
sublicensees in the course of the collaboration, with certain specified exceptions. Also subject to specified exceptions,
the parties jointly own all rights, title and interest in and to all know-how and patent rights first made or invented jointly
by such party or its affiliates or its or their sublicensees in the course of the collaboration. Regardless of whether AbbVie
has exercised a development option or the license option, we have agreed to grant AbbVie perpetual, exclusive or non-
exclusive (as the case may be), worldwide licenses to certain know-how and patent rights developed by the Company or
jointly by the parties arising from the collaboration.
Exclusivity
During the term of the AbbVie Alpha-Synuclein Collaboration Agreement, (1) neither party nor any of its
respective affiliates is permitted to directly or indirectly exploit any vectorized antibody compound targeting the alpha-
synuclein protein, or Vectorized Antibody Exclusivity and (2) neither us nor any of our affiliates is permitted to directly
or indirectly exploit any AbbVie Designated Antibody, in each case subject to specified exceptions, including AbbVie’s
conduct of basic research.
Termination
Unless earlier terminated, the AbbVie Alpha-Synuclein Collaboration Agreement expires on the earliest to
occur of the expiration of (1) the development option period, without AbbVie’s exercise of a development option; (2) the
license option period, without AbbVie’s exercise of its license option; and (3) the last-to-expire royalty term with respect
to all licensed products in all countries. Subject to a cure period, either party may terminate the AbbVie Alpha-Synuclein
Collaboration Agreement, in whole or, in the case of us, in part, subject to specified conditions, in the event of the other
party’s uncured material breach. Either party may also terminate, subject to specified conditions, for insolvency of the
other party, certain failures or delays to obtain certain regulatory clearances of the collaboration, or a joint determination
of scientific infeasibility by the parties. AbbVie may terminate the AbbVie Alpha-Synuclein Collaboration Agreement
(1) without cause, in its entirety or, after its exercise of the license option, on a country-by-country basis, with 180 days’
prior written notice or (2) for our non-compliance with certain anti-bribery or anti-corruption covenants. We may
terminate the AbbVie Alpha-Synuclein Collaboration Agreement, subject to specified conditions, if AbbVie or its
affiliates challenge the validity or enforceability of certain of our or jointly-held intellectual property rights.
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Upon termination in certain cases, the Vectorized Antibody Exclusivity and AbbVie Designated Exclusivity
survives until the third anniversary of the termination date. If the parties mutually agree to terminate for infeasibility or
AbbVie terminates for our failure to deliver a final research or development report, neither we nor any of our affiliates
may directly or indirectly exploit a vectorized antibody compound that targets or binds to the alpha-synuclein protein for
18 months after the termination date.
License Agreement with University of Massachusetts
On January 30, 2014, we entered into a license agreement with the University of Massachusetts, or UMass,
pursuant to which UMass granted us an exclusive, worldwide, royalty-bearing license to certain of its licensed patents to
make, have made, use, offer for sale, sell, have sold and import certain licensed products in the field of human diseases
that use gene therapy applications. Our license is subject to any rights that may be required to be granted to the
government of the United States, and UMass reserves the right to use the licensed patents for education and research and,
with our consent, for non-commercial patient care, without the payment of any compensation to us.
In consideration for rights granted to us under the agreement, we made an upfront payment of $0.2 million to
UMass. We are obligated to pay UMass (i) low-single digit royalty payments based on net sales of the licensed products,
(ii) annual maintenance payments of $30.0 thousand, which are creditable against royalties payable in such period,
(iii) minimum aggregate annual royalty payments that are creditable against royalties payable in such period, with the
minimum aggregate amount payable being in the low-six digits for each of the first four years of this agreement and a
minimum aggregate amount payable being in the mid-six digits for each year, thereafter, (iv) milestone payments of up
to $1.8 million, per licensed product for the first five licensed products, based on the achievement of development and
regulatory milestones and (v) a percentage of sublicensing income that decreases over time from low double digit
percentages to a mid-single digit percentage. We also agreed to reimburse UMass approximately $0.7 million for patent
related expenses incurred by UMass as of the effective date of the agreement over a two-year period.
Under the agreement, we agreed to use commercially reasonable efforts to develop licensed products and to
introduce such licensed products into the commercial market, and further agreed to certain development milestones.
The agreement will terminate on the date that is the later of (i) seven years after the first commercial sale of the
last licensed product under the agreement or (ii) such time as there are no valid claims covering a licensed product. We
have the right to terminate the agreement for any reason upon 90 days prior written notice, and we and UMass have the
right to terminate the agreement if the other party fails to cure a written breach within 60 days of receiving written notice
of such breach.
MassBiologics and UMass Collaboration Agreement
On October 20, 2014, we entered into a Collaboration Agreement with UMass and MassBiologics, pursuant to
which we shall (i) fund certain projects that will be conducted by UMass or MassBiologics, (ii) fund certain educational
programs of UMass, including post-doctoral research at our laboratories beginning in 2015 and an annual lecture series
beginning in 2015 and (iii) collaborate with MassBiologics to establish scalable processes for manufacturing
recombinant AAV vector products using cGMP.
In November 2014, we agreed to the first project under this agreement whereby we funded approximately
$2.9 million over a 16-month period for certain research and development services performed by MassBiologics. The
project commenced in January 2015 and completed during 2016. We and UMass and/or MassBiologics may agree to
conduct other projects in the future, the terms of which will be agreed upon at such time.
This agreement will remain in effect for a period of five years and automatically renews for additional one-year
periods. Either party has the right to terminate this agreement, once in each renewal period, for any reason upon
providing the other party with 90 days written notice or in the event of a material breach of the agreement by the other
party that is not cured within 60 days of written notice.
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We will own all intellectual property rights generated under this agreement, either by our employees, UMass
and/or MassBiologics employees, or jointly by our employees and UMass and/or MassBiologics employees, that cover
AAV materials. We and UMass and/or MassBiologics, as applicable, will jointly own any intellectual property rights
generated under this agreement jointly by our employees and the employees of UMass and/or MassBiologics, as
applicable, that do not cover AAV materials.
License Agreement with REGENX
In May 2014, we entered into a license agreement with REGENXBIO Inc., formerly known as ReGenX
Biosciences, LLC, or REGENX, for the development and commercialization of gene therapies to treat ALS, Friedreich’s
ataxia and Huntington’s disease. Under this license agreement, REGENX granted us a non-exclusive worldwide license
to make, have made and use its technology solely for internal research and preclinical development for the identification
of specific vectors that could be commercialized. Following identification, we have an option to obtain a non-exclusive
worldwide license under the licensed intellectual property to a single specified AAV vector to make, have made, use,
import, sell and offer for sale licensed products using the selected vector, which can be exercised for each of ALS,
Friedreich’s ataxia, or Huntington’s disease. Under the terms of this license agreement, we paid REGENX an upfront fee
of $0.5 million, an extension fee of $0.1 million and are required to pay an annual maintenance fee.
In November 2016, we exercised commercial options for the use of REGENX’s NAV® Technology Platform,
or NAV, vectors for the development and commercialization of gene therapies for specific neurological diseases. Upon
exercise of the options, REGENX has granted us a non-exclusive worldwide commercial license, with rights to
sublicense, to three specific NAV vector sequences covered by REGENX’s NAV Technology Platform, each for the
treatment of a specific neurological disease. In return for these rights, we paid upfront payments of $1.05 million and
have paid to REGENX an annual maintenance fee payment of five digits based on the number of disease indication
options exercised. In addition, we will be required to pay to REGENX up to $5.0 million in milestone fees per disease
indication, mid- to high-single digit royalty percentages on net sales of licensed products, and low- to mid-single digit
percentages of any sublicense fees that we receive from sublicensees for the licensed intellectual property rights.
Our license agreement with REGENX will expire upon the expiration, lapse, abandonment, or invalidation of
the last claim of the licensed intellectual property to expire, lapse, or become abandoned or unenforceable in all the
countries of the world
We may terminate the license agreement upon a specified number of days prior written notice. REGENX may
terminate the license agreement if we, our affiliates, or sublicensees experience insolvency, if we are more than a
specified number of days late in paying money due under the license agreement, or, effective immediately, if we or our
affiliates commence any action against REGENX or its licensors to declare or render any claim of the licensed patent
rights invalid or unenforceable. Either party may terminate the license agreement for material breach that is not cured
within a specified number of days.
In February 2019, we provided notice to REGENX of our intent to terminate our commercial license. Upon the
effective date of the termination, we are required to grant to REGENX a non-exclusive, perpetual, irrevocable,
worldwide, royalty-free, transferable, sublicensable license to certain improvements made by us during the term of the
license (including any intellectual property rights with respect thereto). This grant back will allow for REGENX’s use of
the improvements in the research, development or commercialization of products in any therapeutic indication.
Competition
The biopharmaceutical industry is characterized by intense and dynamic competition to develop new
technologies and proprietary therapies. Any product candidates that we successfully develop into products and
commercialize may compete with existing therapies and new therapies that may become available in the future. While
we believe that our gene therapy platform, product programs, product candidates and scientific expertise in the fields of
gene therapy and neuroscience provide us with competitive advantages, we face potential competition from various
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sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as
well as from academic institutions, governmental agencies and public and private research institutions.
We are aware of several companies focused on developing AAV gene therapies in various indications,
including Abeona Therapeutics, Inc., Adverum Biotechnologies, Inc., Aevitas Therapeutics, Inc., Agilis Biotherapeutics,
LLC, which was acquired by PTC Therapeutics, Inc. in 2018, Applied Genetic Technologies Corporation, Asklepios
BioPharmaceutical, Inc., Audentes Therapeutics, Inc., AveXis, Inc., or AveXis which was acquired by Novartis in 2018,
Axovant Sciences Ltd., GenSight Biologics SA, LogicBio Therapeutics, Inc., Lysogene SA, MeiraGTx Ltd., NightstaRx
Ltd, Prevail Therapeutics, Inc., REGENXBio Inc., Sarepta Therapeutics, Inc., Solid Biosciences, Inc., uniQure NV, or
uniQure, Pfizer, Inc., or Pfizer, and Spark Therapeutics, Inc., or Spark, as well as several companies addressing other
methods for modifying genes and regulating gene expression. Any advances in gene therapy technology made by a
competitor may be used to develop therapies that could compete against any of our product candidates.
We expect that VY-AADC will compete with a variety of therapies currently marketed and in development for
Parkinson’s disease, including DBS marketed by Medtronic plc, Abbott Laboratories (acquired from St. Jude Medical in
2017), and other medical device companies, DUOPA/Duodopa marketed by AbbVie Inc., as well as other novel, non-
oral forms of levodopa in development, including Mitsubishi Tanabe Pharma’s ND0612 (acquired from NeuroDerm in
2017), Acorda Therapeutics’ inhaled levodopa, INBRIJA (CVT-301), and Sunovion Pharmaceuticals’, or Sunovion’s,
sublingual apomorphine, APL-130277. Gene therapy competition for Parkinson’s disease previously included AMT-090
or AAV-GDNF, but this was deprioritized by uniQure in 2016. Axovant Sciences Ltd. is developing a second generation
LentiVector gene therapy, AXO-Lenti-PD (previously OXB-102, licensed from Oxford Biomedica in 2018). MeiraGTx
is developing AAV-GAD, acquired from Vector Neurosciences, Inc. in 2018.
We expect that our preclinical programs will compete with a variety of therapies in development, including:
VY-SOD102 for a monogenic form of ALS will potentially compete with IONIS-SOD1Rx being developed
by Ionis Pharmaceuticals, Inc., or Ionis, in collaboration with Biogen Inc., or Biogen, and a gene therapy
being developed by AveXis;
VY-FXN01 for Friedreich’s ataxia will potentially compete with AAV gene therapies being developed by
Pfizer and by Agilis Biotherapeutics, LLC (acquired by PTC Therapeutics, Inc. in 2018), and BMN 290
being developed by BioMarin Pharmaceutical Inc.;
VY-HTT01 for Huntington’s disease will potentially compete with IONIS-HTTRx being developed by
Ionis in collaboration with F. Hoffmann-La Roche Ltd., or Roche, WVE-120101 and WVE-120102 being
developed by WAVE Life Sciences in collaboration with Takeda Pharmaceuticals, a Zinc Finger Protein
(ZFP) therapy being developed by Sangamo Therapeutics, Inc. in collaboration with Shire plc, and gene
therapies being developed by uniQure and Spark;
Our Tau program for tauopathies including Alzheimer’s disease, PSP, and FTD will potentially compete
with tau antibodies being developed by Roche Genentech Inc. in collaboration with AC Immune SA, Eli
Lilly & Co., AbbVie Inc., Biogen, and several other companies, as well as an antisense oligonucleotide
program being developed by Ionis in collaboration with Biogen; and
VY-NAV01 for severe, chronic pain will potentially compete with Nav1.7 inhibitors being developed by
Biogen, Sunovion, Amgen, Inc., and Astellas Pharma Inc, and Nav1.8 inhibitors being developed by Vertex
Pharmaceuticals, or Vertex.
In addition, companies that are currently engaged in gene therapy for non-neurological diseases could at any
time decide to develop gene therapies for neurological diseases.
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Many of our competitors, either alone or with their strategic partners, have substantially greater financial,
technical and human resources than we do and significantly greater experience in the discovery and development of
product candidates, obtaining FDA and other regulatory approvals of product candidates and commercializing those
product candidates. Accordingly, our competitors may be more successful than us in obtaining approval for product
candidates and achieving widespread market acceptance. Our competitors’ product candidates may be more effective, or
more effectively marketed and sold, than any product candidate we may commercialize and may render our treatments
obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product
candidates.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources
being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting
and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration
for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or
early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with
large and established companies.
We anticipate that we will face intense and increasing competition as new product candidates enter the market
and advanced technologies become available. We expect any product candidates that we develop and commercialize to
compete on the basis of, among other things, efficacy, safety, convenience of administration and delivery, price, and the
availability of reimbursement from government and other third-party payers.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive
than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their
product candidates more rapidly than we may obtain approval for ours, which could result in our competitors
establishing a strong market position before we are able to enter the market.
Manufacturing
The manufacture of gene therapy products is technically complex, and necessitates substantial expertise and
capital investment. Production difficulties caused by unforeseen events may delay the availability of material for our
clinical studies. To meet the requirements of our current and planned future trials we have developed a proprietary
manufacturing platform that provides a robust and scalable process for AAV production. We are using the
baculovirus/Sf9 AAV production system, a technology for producing AAV vectors at scale in insect-derived cells. We
focus on developing internal processes and capabilities to produce high-yield and high-quality gene therapies. The
process has been successfully transferred to our contract manufacturing organizations where it is used in manufacturing
of clinical materials in accordance with the FDA’s cGMP. We have entered into agreements with Brammer Bio and
Fujifilm Diosynth Biotechnologies to further expand our manufacturing capabilities to support the development of our
gene therapy programs. We have also built an onsite, state-of-the-art process research and development facility to enable
the manufacturing of high quality AAV gene therapy vectors at laboratory scale.
We presently contract with third parties for the manufacturing of our program materials. We currently have no
plans to build our own clinical or commercial scale manufacturing capabilities. The use of contracted manufacturing and
reliance on collaboration partners is relatively cost efficient and has eliminated the need for our direct investment in
manufacturing facilities and additional staff early in development. Although we rely on contract manufacturers, we have
personnel with manufacturing and quality experience to oversee our contract manufacturers.
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Intellectual Property
Overview
We strive to protect the proprietary technology, inventions, and know-how to enhance improvements that are
commercially important to the development of our business, including seeking, maintaining, and defending patent rights,
whether developed internally or licensed from third parties. We also rely on trade secrets and know-how relating to our
proprietary technology platform, on continuing technological innovation and on in-licensing opportunities to develop,
strengthen and maintain the strength of our position in the field of gene therapy that may be important for the
development of our business. We additionally may rely on regulatory protection afforded through data exclusivity,
market exclusivity and patent term extensions where available.
Our commercial success may depend in part on our ability to: obtain and maintain patent and other protections
for commercially important technology, inventions and know-how related to our business; defend and enforce our
patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and
intellectual property rights of third parties. Our ability to stop third parties from making, having made, using, selling,
offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable
licenses, patents or trade secrets that cover these activities. In some cases, these rights may need to be enforced by third-
party licensors. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents
will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by
us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future
will be commercially useful in protecting our commercial products and methods of manufacturing the same.
We have 182 patent applications pending in the United States and foreign jurisdictions. At least 28 patent
applications have been filed and are pending in the United States and foreign jurisdictions by or on behalf of universities
which have granted us exclusive license rights to the technology. To date, 72 patents have issued to our licensors which
have granted us exclusive license rights to the technology. To date, 148 patents have issued to our licensors which have
granted us non-exclusive license rights to the technology with 64 applications pending. Our policy is to file patent
applications to protect technology, inventions and improvements to inventions that are commercially important to the
development of our business. We seek United States and international patent protection for a variety of technologies,
including: research tools and methods, methods for transferring genetic material into cells, AAV-based biological
products, methods of designing novel AAV constructs, methods for treating diseases of interest and methods for
manufacturing our AAV-based products. We also intend to seek patent protection or rely upon trade secret rights to
protect other technologies that may be used to discover and validate targets and that may be used to identify and develop
novel biological products. We seek protection, in part, through confidentiality and proprietary information agreements.
We are a party to various other license agreements that give us rights to use specific technologies in our research and
development.
Company-Owned Intellectual Property
Parkinson’s Disease
We own four pending patent families with one issued patent and 35 patent applications directed to AAV
constructs encoding the gene AADC for therapeutic uses. Patents that grant from these patent families are generally
expected to start to expire in 2035, subject to possible patent term extensions.
ALS
We own four pending patent families with 19 patent applications directed to targeting SOD1 for the treatment
of ALS, and we have an ownership interest in a fifth patent family with 2 patent applications directed to pharmaceutical
compositions and methods for the treatment of ALS to protect our intellectual property arising from a funded grant from
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The Amyotrophic Lateral Sclerosis Association. Patents that grant from these patent families are generally expected to
start to expire in 2035, subject to possible patent term extensions.
Friedreich’s Ataxia
We own two pending patent families with seven patent applications and we have an ownership interest in one
pending patent family with two patent applications directed to AAVs encoding frataxin constructs for the treatment of
Friedreich’s ataxia. Patents that grant from these patent families are generally expected to start to expire in 2036, subject
to possible patent term extensions.
Huntington’s Disease
We own three pending patent families with 19 patent applications directed to pharmaceutical compositions and
methods for targeting HTT for the treatment of Huntington’s disease, and we have an ownership interest in a fourth
patent family with one patent application directed to protect our work for additional pharmaceutical compositions and
methods for targeting HTT for the treatment of Huntington’s disease. Patents from this family are generally expected to
start to expire in 2037, subject to possible patent term extensions.
Tauopathies and Antibodies
We own five pending patent families directed to antibodies with 11 patent applications. The first patent family
has four patent applications directed to assays for the detection of neutralizing antibodies. The next three patent families
have six patent applications directed to vectorized antibodies and other therapies. The last patent family has one patent
application directed to vectored augmentation of proteins. Patents from these families are generally expected to start to
expire in 2036, subject to possible patent term extensions.
We also have one pending patent family with one patent application directed to pharmaceutical compositions
and methods for the treatment of Alzheimer’s Disease. Patents from this family are generally expected to start to expire
in 2039, subject to possible patent term extensions.
Neuropathic Pain
We own one pending patent family with two patent applications directed to pharmaceutical compositions and
methods for the treatment of neuropathic pain. Patents from this family are generally expected to start to expire in 2039,
subject to possible patent term extensions.
Regulatable Expression
We own two pending patent families with four patent applications directed to regulatable expression control of
AAV transgenes. Patents that grant from this patent family are generally expected to start to expire in 2036, subject to
possible patent term extensions.
Delivery
We own one pending patent family with five patent applications directed to the delivery of AAV gene therapies
to the CNS. Patents that grant from this patent family are generally expected to start to expire in 2036, subject to possible
patent term extensions.
We own one pending patent family with one patent application directed to cannula delivery system and methods
of use. Patents that grant from this patent family are generally expected to start to expire in 2039, subject to possible
patent term extensions.
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We have an ownership interest in two pending patent families directed to trajectory array delivery devices,
including the V-TAG device and methods of use. Patents that grant from these patent families are generally expected to
start to expire in 2037, subject to possible patent term extensions.
Engineering
We own seven pending patent families with 14 patent applications directed to AAV production and/or
engineering of the capsid and we have an ownership interest in one patent family with one patent application directed to
engineering of the capsid. Patents that grant from these patent families are generally expected to start to expire in 2035,
subject to possible patent term extensions.
We own three patent families with 33 patent applications directed to engineering of the vector genome. Patents
that grant from these patent families are generally expected to start to expire in 2035, subject to possible patent term
extensions.
Production; Chemistry, Manufacturing, and Controls
We own 14 pending patent families with 22 patent applications directed to AAV production and CMC. Patents
that grant from this patent family are generally expected to start to expire in 2035, subject to possible patent term
extensions.
Licensed Intellectual Property
We have obtained exclusive licenses and non-exclusive licenses to patents directed to both compositions of
matter and methods of use.
We have licensed six families of patents and patent applications, in the exclusive field of gene therapy for
human diseases, directed to RNAi constructs as vector payloads, their design and use in the treatment of neurological
disorders from the University of Massachusetts. These families of patents and applications are pending and/or granted in
the United States and other territories and comprises 67 granted patents and 15 applications. Patents have been granted in
the United States, Canada, Europe, Israel, Japan, Korea and Australia. Nationalization for some members has taken place
in Germany, Spain, France, Great Britain, Italy, and Netherlands. Patents that grant from these patent families are
generally expected to expire between 2022 and 2025, subject to possible patent term extensions.
We have exclusively licensed three families of patents and patent applications directed to novel AAV capsids
from the University of Massachusetts. These families of patents and applications, pending and/or granted in the United
States and other territories, and comprises 32 granted patents and 18 applications. Patents have been granted in the
United States, Europe and Japan. Nationalization for some members has taken place in Switzerland, Germany, Denmark,
Spain, France, Great Britain, Ireland, Italy, Netherlands, and Sweden. Patents that grant from these patent families are
generally expected to expire between 2030 and 2035, subject to possible patent term extensions.
We have non-exclusively licensed a patent family directed to production methods for AAV in insect cells from
the NIH, U.S. Department of Health and Human Services. This family of patents is granted in the United States, Canada,
Australia and Europe and further nationalized in Germany, France and Great Britain and comprises 8 granted patents.
Patents that grant from this patent family are generally expected to expire in 2022, subject to possible patent term
extensions.
We have non-exclusively licensed two families of patents and patent applications directed to novel AAV
capsids from the Board of Trustees of the Leland Stanford Junior University. These families of patents and applications,
pending and/or granted in the United States, comprise 7 granted patents and one application. Patents that grant from
these patent families are generally expected to expire between 2027 and 2032, subject to possible patent term extensions.
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We have non-exclusively licensed two families of patents and patent applications directed to AAV capsids from
REGENX. These families of patents and patent applications are pending and/or granted in the United States and other
territories and comprise 79 granted patents and 16 applications. Patents have been granted in Australia, Brazil, Canada,
China, Europe, Hong Kong, Israel, India, Japan, Korea, Mexico, New Zealand, Philippines, Singapore, and the United
States. Patents that grant from these patent families are generally expected to expire between 2022 and 2026, subject to
possible patent term extensions. Notice of termination of this license was sent to REGENX in February 2019.
We have non-exclusively licensed two families of patents and patent applications from Ablexis, LLC. These
families of patents and patent applications are pending and/or granted in the United States and other territories and
comprise 24 granted patents and 21 applications. Patents have been granted in Australia, Canada, Europe, Korea, New
Zealand and the United States. Nationalization for some members has taken place in Austria, Belgium, Denmark, France,
Germany, Ireland, Italy, Netherlands, Poland, Spain, Switzerland, and United Kingdom. Patents that grant from these
patent families are generally expected to expire between 2029 and 2030, subject to possible patent term extensions.
We have non-exclusively licensed two families of patents and patent applications directed to AAV capsids from
the California Institute of Technology. These families of patents and patent applications are pending in the United States
and internationally and comprise three granted patents and 21 applications. Patents have been granted in the United
States. Patents that grant from these patent families are generally expected to start to expire in 2034, subject to possible
patent term extensions.
Trademark Protection
We own U.S. Reg. Nos. 4,545,283 for the service mark VOYAGER THERAPEUTICS and 4,621,083 for the
service mark VOYAGER THERAPEUTICS Logo for “pharmaceutical research and development in the field of gene
therapy.” These marks were granted registration on the Principal Register of the United States Patent and Trademark
Office, or USPTO, on June 3, 2014 and October 14, 2014, respectively.
We also own pending trademark applications in the USPTO for the marks V-TAG and the V-TAG Logo, for
“medical system comprised of a surgical device for guiding, locating or placing a diagnostic device or therapeutic
device, namely, stents, probes, needles, leads, grafts, pumps, syringes, catheters, and implants during a medical
procedure and related software sold as a unit, for use in the field of neurology; MRI-compatible medical system
comprised of an MRI-compatible surgical device for guiding, locating or placing a diagnostic device or therapeutic
device, namely, stents, probes, needles, leads, grafts, pumps, syringes, catheters, and implants during a MRI-guided
procedure and related software sold as a unit, for use in the field of neurology,” as well as European Community
trademark registrations for VOYAGER TRAJECTORY ARRAY GUIDE (No. 017430042, registered May 8, 2018) and
V-TAG (No. 017430182, registered May 8, 2018)for these same goods.
We plan to register trademarks in connection with our biological products.
Trade Secret Protection
Finally, we may rely, in some circumstances, on trade secrets to protect our technology. We seek to protect our
proprietary technology and processes, in part, by entering into confidentiality agreements with our employees,
consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and
trade secrets by maintaining physical security of our premises and physical and electronic security of our information
technology systems. While we have confidence in these individuals, organizations and systems, agreements or security
measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may
otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors
or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in
related or resulting know-how and inventions.
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Government Regulation and Product Approval
In the United States, biological products, including gene therapy products, are licensed by FDA for marketing
under the Public Health Service Act, or PHS Act, and regulated under the Federal Food, Drug, and Cosmetic Act, or
FDCA. Both the FDCA and the PHS Act and their corresponding regulations govern, among other things, the testing,
manufacturing, safety, purity, potency, efficacy, labeling, packaging, storage, record keeping, distribution, import,
export, reporting, advertising and other promotional practices involving biological products. FDA clearance must be
obtained before clinical testing of biological products, and each clinical study protocol for a gene therapy product is
reviewed by the FDA and, in some instances, the NIH, through its RAC. FDA licensure also must be obtained before
marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and
financial resources.
Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products.
Within CBER, the Office of Tissues and Advanced Therapies (OTAT) is responsible for gene therapy review and
evaluation. CBER works closely with the NIH and its RAC, which makes recommendations to the NIH on gene therapy
issues and engages in a public discussion of scientific, safety, ethical and societal issues related to proposed and ongoing
gene therapy protocols. The FDA and the NIH have published guidance documents with respect to the development and
submission of gene therapy protocols. The FDA also has published guidance documents related to, among other things,
gene therapy products in general, their preclinical assessment, observing subjects involved in gene therapy studies for
delayed adverse events, viral shedding, environmental assessments, potency testing, and chemistry, manufacturing and
control information in gene therapy INDs. FDA guidance documents provide the agency’s current thinking about a
particular subject but are not legally binding.
U.S. Biological Products Development Process
The process required by the FDA before a biological product may be marketed in the United States generally
involves the following:
completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or
GLPs, and applicable requirements for the humane use of laboratory animals or other applicable
regulations;
preparation of clinical trial material in accordance with good manufacturing practices, or GMPs;
submission to the FDA of an application for an IND, which must become effective before human clinical
trials may begin;
approval by an institutional review board, or IRB, reviewing each clinical site before each clinical trial may
be initiated;
approval by an institutional biosafety committee, or IBC, assessing the safety of the clinical research and
identifying any potential risk to public health or the environment;
performance of adequate and well-controlled human clinical trials according to the FDA’s regulations
commonly referred to as good clinical practice, or GCPs, and any additional requirements for the protection
of human research subjects and their health information, to establish the safety, purity, potency, and
efficacy, of the proposed biological product for its intended use;
submission to the FDA of a BLA, for marketing approval that includes substantive evidence of safety,
purity, potency, and efficacy from results of nonclinical testing and clinical trials;
satisfactory completion of an FDA inspection prior to BLA approval of the manufacturing facility or
facilities where the biological product is produced to assess compliance with cGMP, to assure that the
facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality
and purity;
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potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the
BLA;
potential FDA Advisory Committee meeting to elicit expert input on critical issues and including a vote by
external Committee members;
FDA review and approval, or licensure, of the BLA, and payment of associated user fees; and
compliance with any post approval requirements, including the potential requirement to implement a Risk
Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post approval
studies.
Before testing any biological product candidate, including a gene therapy product, in humans, the product
candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical tests, include laboratory
evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and
activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and
requirements including GLPs.
Previously, when a gene therapy study was conducted at, or sponsored by, institutions receiving NIH funding
for recombinant DNA research, prior to the submission of an IND to the FDA, a protocol and related documentation was
to be submitted to and the study was registered with the NIH Office of Biotechnology Activities, or OBA, pursuant to
the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Compliance with the NIH
Guidelines was mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA,
however many companies and other institutions not otherwise subject to the NIH Guidelines had voluntarily followed
them. Under an FDA and NIH proposal in 2018, the role of the Recombinant DNA Advisory Committee, or RAC, in
reviewing gene therapy protocols would be entirely eliminated and sponsors would no longer be required to submit
reports to NIH on such protocols. Going forward, NIH says the RAC will continue to function as an advisory board to
NIH on emerging fields such as gene editing, synthetic biology and neurotechnology.
The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing
information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part
of the IND. Some preclinical testing typically continues after the IND is submitted. An IND is an exemption from the
FDCA that allows an unapproved product to be shipped in interstate commerce for use in an investigational clinical trial
and a request for FDA authorization to administer an investigational product to humans. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA requests certain changes to a protocol before the study can
begin, or the FDA places the clinical study on a clinical hold within that 30-day time period. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. With gene therapy
protocols, if the FDA allows the IND to proceed, but the RAC decides that full public review of the protocol is
warranted, the FDA will request at the completion of its IND review that sponsors delay initiation of the protocol until
after completion of the RAC review process. The FDA may also impose clinical 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 a clinical hold,
studies may not recommence without FDA authorization and then only under terms authorized by the FDA.
Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that,
once begun, issues will not arise that suspend or terminate such studies.
Clinical trials involve the administration of the biological product candidate to healthy volunteers or subjects
under the supervision of qualified investigators, generally physicians not employed by or under the study sponsor’s
control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical study,
dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety,
including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol
and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted
and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement
that all research subjects provide informed consent. Further, each clinical study must be reviewed and approved by an
independent IRB, at or servicing each institution at which the clinical study will be conducted. An IRB is charged with
protecting the welfare and rights of study participants and considers such items as whether the risks to individuals
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participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also
approves the form and content of the informed consent that must be signed by each clinical study subject or his or her
legal representative and must monitor the clinical study until completed. Additionally, some trials are overseen by an
independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or
committee. Clinical trials involving recombinant or synthetic (or both) nucleic acid molecules performed at or sponsored
by an institution that receives any NIH funding for such research also must be reviewed by an IBC, a local institutional
committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety
of the research and identifies any potential risk to public health or the environment.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In
the case of some products for severe or life-threatening diseases, especially when the product may be too
inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in
patients. Guidelines on clinical trials with gene therapy products issued by OTAT state that the FDA has
determined that the benefit-risk ratio of these products does not warrant their evaluation in healthy human
subjects.
Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse
effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases
and to determine dosage tolerance, optimal dosage and dosing schedule.
Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency and safety in an
expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended
to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial
marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the
intended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends that sponsors observe
subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of five
years of annual examinations followed by ten years of annual queries, either in person or by questionnaire, of trial
subjects.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all
clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical
trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, the NIH and
the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals
or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an
IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The
sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven
calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2, and Phase 3 clinical trials may not
be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring
board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or
patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a
clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if
the biological product has been associated with unexpected serious harm to patients.
Human gene therapy products are a new category of therapeutics. Because this is a relatively new and
expanding area of novel therapeutic interventions, there can be no assurance as to the length of the study period, the
number of patients the FDA will require to be enrolled in the studies in order to establish the safety, efficacy, purity and
potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDA to
support marketing approval. The NIH and the FDA have a publicly accessible database, the Genetic Modification
Clinical Research Information System which includes information on gene transfer studies and serves as an electronic
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tool to facilitate the reporting and analysis of adverse events on these studies. The FDA has issued various guidance
documents regarding gene therapies, including draft guidance documents released in July 2018 relating to gene therapies
for human retinal disorders and gene therapies for rare diseases, and on January 15, 2019, the FDA issued a statement
that it would issue additional guidance to facilitate the development of gene therapy products.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop
additional information about the physical characteristics of the biological product as well as finalize a process for
manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of
the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of
manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be
capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must
develop methods for testing the identity, strength, quality, potency and purity of the final biological product.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate
that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
Information about certain clinical trials must be submitted within specific timeframes to the NIH for public
dissemination on its ClinicalTrials.gov website.
Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products
outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there
are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are
intended to improve access to investigational drugs for patients who may benefit from investigational therapies. FDA
regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment
purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency
settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug
under a treatment protocol or Treatment IND Application.
When considering an IND application for expanded access to an investigational product with the purpose of
treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability
when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition,
and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the
potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the
context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not
interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product
or otherwise compromise the potential development of the product.
On December 13, 2016, the 21st Century Cures Act established (and the 2017 Food and Drug Administration
Reauthorization Act later amended) a requirement that sponsors of one or more investigational drugs for the treatment of
a serious disease(s) or condition(s) make publicly available their policy for evaluating and responding to requests for
expanded access for individual patients. Although these requirements were rolled out over time, they have now come
into full effect. This provision requires drug and biologic companies to make publicly available their policies for
expanded access for individual patient access to products intended for serious diseases.
Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or
Phase 3 study; or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track product, or
regenerative medicine advanced therapy.
In addition, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides
a federal framework for certain patients to access certain investigational new drug products that have completed a Phase
I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can
seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access
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program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a
result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests
according to that policy.
U.S. Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA, must be obtained before
commercial marketing of the biological product. The BLA must include results of product development, laboratory and
animal studies, human studies, information on the manufacture and composition of the product, proposed labeling and
other relevant information. In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a
BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all
relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which
the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless
otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan
designation has been granted. The testing and approval processes require substantial time and effort and there can be no
assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely
basis, if at all.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a
significant user fee. Under federal law, the submission of most applications is subject to an application user fee, which
for federal fiscal year 2019 is $2,588,478 for an application requiring clinical data. The sponsor of an approved
application is also subject to an annual program fee, which for fiscal year 2019 is $309,915. Fee waivers or reductions
are available in certain circumstances, including a waiver of the application fee for the first application filed by a small
business. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the
product candidate also includes a non-orphan indication.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is
substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems
incomplete or not properly reviewable at the time of submission and may request additional information. In this event,
the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review
before the FDA accepts it for filing. The application also needs to be published and submitted in an electronic format that
can be processed through the FDA’s electronic systems. If the electronic submission is not compatible with FDA’s
systems, the BLA can be refused to file. Once the submission is accepted for filing, the FDA begins an in-depth
substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed
product is safe, potent, and effective, for its intended use, and has an acceptable purity profile, and whether the product is
being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality,
potency and purity. The FDA may refer applications for novel biological products or biological products that present
difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other
experts, for review, evaluation and a recommendation as to whether the application should be approved and under what
conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions. During the biological product approval process, the FDA also will
determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the
biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the
FDA will not approve the 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 determines that the manufacturing processes and facilities are in compliance with
cGMP requirements and adequate to assure consistent production of the product within required specifications.
Additionally, before approving a BLA, the FDA will typically inspect one or more clinical trial sites to assure that the
clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP and
GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training,
record keeping, production, and quality control.
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Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA
does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always
conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to
approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the
specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring
labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter
may include recommended actions that the applicant might take to place the application in a condition for approval. If a
complete response letter is issued, the applicant may either resubmit the BLA, addressing all 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 otherwise be limited, which could restrict the commercial value of the product.
Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling.
The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk
management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical
trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and
effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been
commercialized. As a condition for approval, the FDA may also require additional non-clinical testing as a Phase 4
commitment.
One of the performance goals agreed to by the FDA under the PDUFA is to review standard BLAs in 10 months
from filing and priority BLAs in six months from filing, whereupon a review decision is to be made. The FDA does not
always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time
to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA
sponsor otherwise provides additional information or clarification regarding information already provided in the
submission within the last three months before the PDUFA goal date.
Post-Approval Requirements
Maintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the
expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products
continues after approval, particularly with respect to cGMP. We will rely, and expect to continue to rely, on third parties
for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturers of
our products are required to comply with applicable requirements in the cGMP regulations, including quality control and
quality assurance and maintenance of records and documentation. Following approval, the manufacturing facilities are
subject to biennial inspections by the FDA’s biologics team and such inspections may result in an issuance of FDA Form
483 deficiency observations or a warning letter, which can lead to plant shutdown and other more serious penalties and
fines. Prior to the institution of any manufacturing changes, a determination needs to be made whether FDA approval is
required in advance. If not done in accordance with FDA expectations, the FDA may restrict supply and may take further
action. Annual product reports are required to be submitted annually. Other post-approval requirements applicable to
biological products, include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety
of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy
information, and complying with electronic record and signature requirements. After a BLA is approved, the product
also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform
certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by
the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a
summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot.
The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing
the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory
standards on the safety, purity, potency, and effectiveness of biological products. Systems need to be put in place to
record and evaluate adverse events reported by health care providers and patients and to assess product complaints. An
increase in severity or new adverse events can result in labeling changes or product recall. Defects in manufacturing of
commercial products can result in product recalls.
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We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-
to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described
in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities,
and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply
with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the
product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S.
requirements at any time during the product development process, approval process or after approval, may subject an
applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions
could include refusal to approve pending applications, withdrawal of an approval or license revocation, clinical hold,
warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors,
debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action
could have a material adverse effect on us.
Biological product manufacturers and other entities involved in the manufacture and distribution of approved
biological products are required to register their establishments with the FDA and certain state agencies, and are subject
to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality
control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on
a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In
addition, changes to the manufacturing process or facility generally require prior FDA approval before being
implemented and other types of changes to the approved product, such as adding new indications and additional labeling
claims, are also subject to further FDA review and approval.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant Orphan Drug Designation, or ODD, to a drug or biological
product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than
200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no
reasonable expectation that the cost of developing and making a drug or biological product available in the United States
for this type of disease or condition will be recovered from sales of the product. ODD must be requested before
submitting a BLA. After the FDA grants ODD, the identity of the therapeutic agent and its potential orphan use are
disclosed publicly by the FDA. ODD does not convey any advantage in or shorten the duration of the regulatory review
and approval process.
If a product that has ODD receives the first FDA approval for the disease or condition for which it has such
designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other
applications to market the same biological product for the same indication for seven years, except in limited
circumstances, such as not being able to supply the product for patients or showing clinical superiority to the product
with orphan exclusivity. This is the case despite an earlier court opinion holding that the Orphan Drug Act
unambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.
Competitors, however, may receive approval of different products for the indication for which the orphan
product has exclusivity or obtain approval for the same product but for a different indication for which the orphan
product has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years
if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is
determined to be contained within the competitor’s product for the same indication or disease. If a biological product
designated as an orphan product receives marketing approval for an indication broader than what is designated, it may
not be entitled to orphan product exclusivity.
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Expedited Review and Approval Programs
The FDA has various programs, including fast track designation, priority review, accelerated approval, and
breakthrough therapy designation, that are intended to expedite or simplify the process for the development and FDA
review of biological products that are intended for the treatment of serious or life-threatening diseases or conditions and
demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new
biological products to patients earlier than under standard FDA review procedures. To be eligible for a fast track
designation, the FDA must determine, based on the request of a sponsor, that a biological product is intended to treat a
serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The
FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or
provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. In addition to
other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a
Fast Track BLA before the application is complete, a process known as rolling review.
The FDA may give a priority review designation to biological products that treats a serious condition and, if
approved, would provide a significant improvement in safety or effectiveness. A priority review means that the goal for
the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA
guidelines. Most products that are eligible for fast track designation may also be considered appropriate to receive a
priority review.
In addition, biological products studied for their safety and effectiveness in treating serious or life-threatening
illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and
may be approved on the basis of adequate and well-controlled clinical trials establishing that the biological product has
an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be
measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible
morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and
the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a
biological product receiving accelerated approval to perform post-marketing studies to verify and describe the predicted
effect on irreversible morbidity or mortality or other clinical endpoint, and the biological product may be subject to
accelerated withdrawal procedures.
Moreover, under the Food and Drug Administration Safety and Innovation Act enacted in 2012, a sponsor can
request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a
biological product 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 indicates that the biological product may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. Biological products designated as breakthrough therapies are
also eligible for accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing
advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no
longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be
shortened. Furthermore, fast track designation, priority review, accelerated approval and breakthrough therapy
designation, do not change the standards for approval and may not ultimately expedite the development or approval
process.
Expedited programs for regenerative medicine therapies for serious conditions
As part of the 21st Century Cures Act, Congress amended the FDCA to create an expedited development and
approval program for regenerative medicine advanced therapies, which include cell therapies, therapeutic tissue
engineering products, human cell and tissue products, and combination products using any such therapies or products. As
of November 2017, the FDA has interpreted this definition as follows: gene therapies, including genetically modified
cells, that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine advanced
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therapy. The FDA has now determined that ‘in vitro’ gene therapies will qualify as a regenerative medicine advanced
therapy based on this definition. VY-AADC is an ‘in vitro’ gene therapy for Parkinson’s disease and received this
designation on June 18, 2018. Regenerative medicine advanced therapies do not include those human cells, tissues, and
cellular and tissue-based products regulated solely under section 361 of the Public Health Service Act and 21 CFR Part
1271. The new program is intended to facilitate efficient development and expedite review of regenerative medicine
advanced therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or
condition.
A drug sponsor may request that the FDA designate a drug as a regenerative medicine advanced therapy
concurrently with or at any time after submission of an IND. The FDA has 60 calendar days to determine whether the
drug meets the criteria, including whether there is preliminary clinical evidence indicating that the drug has the potential
to address unmet medical needs for a serious or life-threatening disease or condition. A new drug application or BLA for
a regenerative medicine advanced therapy may be eligible for priority review or accelerated approval through (1)
surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data
obtained from a meaningful number of sites. Benefits of such designation also include early interactions with the FDA to
discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A regenerative
medicine advanced therapy that is granted accelerated approval and is subject to post-approval requirements may fulfill
such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real
world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval
monitoring of all patients treated with such therapy prior to its approval.
U.S. Patent Term Restoration
Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates,
some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent
Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman
Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term
of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally
one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the
submission date of a BLA and the approval of that application, less any time the applicant failed to act with due
diligence. Only one patent applicable to an approved biological product is eligible for the extension and the application
for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in
consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the
future, we may intend to apply for restoration of patent term for one of our currently owned or licensed patents to add
patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors
involved in the filing of the relevant BLA.
Market and Data Exclusivity
The 2010 Patient Protection and Affordable Care Act, or the ACA, which was signed into law on March 23,
2010, included a subtitle called the Biologics Price Competition and Innovation Act of 2009 or BPCIA. The BPCIA
established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. As of
January 1, 2019, the FDA has approved 17 biosimilar products for use in the United States. No interchangeable
biosimilars have been approved. The FDA has issued several guidance documents outlining an approach to review and
approval of biosimilars. Additional guidance is expected to be finalized by FDA in the near term.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is
“biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order for
the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the
reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA to approve a
biosimilar product as interchangeable with a reference product, the FDA must find that the biosimilar product can be
expected to produce the same clinical results as the reference product, and (for products administered multiple times) that
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the biologic and the reference biologic may be switched after one has been previously administered without increasing
safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years
following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years
from the date on which the reference product was approved. Even if a product is considered to be a reference product
eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full
BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical
trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods
for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed
“interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy
law.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent exclusivity in the United States and, if granted, provides for
the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity or
patent protection, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an
application sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data
do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to
fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are
submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of
exclusivity or patent protection cover the product are extended by six months. Thus, pediatric exclusivity adds six
months to existing exclusivity periods applicable to biological products under the BPCIA—namely, the four-year period
during which the FDA will not consider an application for a biosimilar product, and the 12-year period during which the
FDA will not approve a biosimilar application.
Other Healthcare Laws
Although we currently do not have any products on the market, we may be subject to additional healthcare
regulation and enforcement by the federal government and by authorities in the states in which we conduct our business.
Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security
and physician sunshine laws and regulations, many of which may become more applicable to us if our product
candidates are approved and we begin commercialization. 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, the curtailment or restructuring of
our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which
could adversely affect our ability to operate our business and our financial results.
In addition, the ACA is intended to broaden access to health insurance, reduce or constrain the growth of
healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and
health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms.
With regard to biopharmaceutical products, in addition to the Biologics Price Competition and Innovation Act of 2009
included in the ACA, among other things, the ACA expanded and increased industry rebates for drugs covered under
Medicaid programs and made changes to the coverage requirements under the Medicare prescription drug benefit. Some
of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and
Congressional challenges. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, that while
not a law, is widely viewed as the first step toward the passage of legislation that would repeal certain aspects of the
ACA.
The current administration has also taken executive actions to undermine or delay implementation of the ACA.
Since January 2017, President Trump has signed two Executive Orders which delay the implementation of certain
provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.
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One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant
exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical
devices. The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.
Several state Attorneys General filed suit to stop the Trump administration from terminating the subsidies, but their
request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, the Center
for Medicare & Medicaid Services has recently proposed regulations that would give states greater flexibility in setting
benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the
essential health benefits required under the ACA for plans sold through such marketplaces. Further, on June 14, 2018,
U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12
billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in
reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are
not yet known.
With enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22,
2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry
a minimal level of health insurance, became effective January 1, 2019. According to the Congressional Budget Office,
the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in
insurance markets may rise. Additionally, on January 22, 2018, President Trump signed a continuing resolution on
appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-
called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health
insurance providers based on market share, and the medical device excise tax on non-exempt medical devices.
Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and
enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the
relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform
government program reimbursement methodologies for drug products. For example, there have been several recent U.S.
congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things,
bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug
products. At the federal level, Congress and the Trump administration have each indicated that it will continue to seek
new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Trump
administration issued a plan to lower drug prices. Under this blueprint for action, the Trump administration indicated that
the Department of Health and Human Services will: take steps to end the gaming of regulatory and patent processes by
drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the
inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by
clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on
value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan
sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a
lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update
Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that
prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require
that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug
price increases.
At the state level, individual states are increasingly aggressive in passing legislation and implementing
regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional
health care authorities and individual hospitals are increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in their prescription product and other health care
programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our
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product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any
of which could limit the amounts that federal and state governments will pay for healthcare products and services, which
could result in reduced demand for our product candidates or additional pricing pressures.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous
substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the
Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of
various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our
operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable
for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws
and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict,
however, how changes in these laws may affect our future operations.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, to which we are subject, prohibits corporations and individuals from
engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. It is
illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government
staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a
person working in an official capacity.
Review and Clearance of Companion Diagnostics in the United States
If safe and effective use of a therapeutic depends on an in vitro diagnostic, then the FDA generally will require
approval or clearance of that diagnostic, known as a companion diagnostic, at the same time that the FDA approves the
therapeutic product. In August 2014, the FDA issued final guidance clarifying the requirements that will apply to
approval of therapeutic products and in vitro companion diagnostics. According to the guidance, for novel drugs, a
companion diagnostic device and its corresponding therapeutic should be approved or cleared contemporaneously by the
FDA for the use indicated in the therapeutic product’s labeling. In July 2016, the FDA issued a draft guidance intended
to assist sponsors of the drug therapeutic and in vitro companion diagnostic device on issues related to co-development
of the products.
If FDA determines that a companion diagnostic device or delivery device (combination product) is essential to
the safe and effective use of a novel therapeutic product or indication, FDA generally will not approve the therapeutic
product or new therapeutic product indication if the companion diagnostic or delivery device is not approved or cleared
for that indication. Approval or clearance of the companion diagnostic or delivery device will ensure that the device has
been adequately evaluated and has adequate performance characteristics in the intended population. The review of in
vitro companion diagnostics in conjunction with the review of our therapeutic treatments for cancer will, therefore, likely
involve coordination of review by the FDA’s Center for Drug Evaluation and Research and the FDA’s CDRH Office.
Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In
the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations
govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance
or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing
clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing
authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket
approval, or PMA approval.
The PMA process, including the gathering of clinical and preclinical data and the submission to and review by
the FDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must
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prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about
the device and its components regarding, among other things, device design, manufacturing and labeling. PMA
applications are subject to fees for medical device product review. For federal fiscal year 2019, the standard fee for
review of a PMA was $322,147 and the small business fee was $80,537.
A 510(k) must demonstrate that the proposed device is substantially equivalent to another legally marketed
device, or predicate device, that did not require premarket approval. In evaluating a 510(k), the FDA will determine
whether the device has the same intended use as the predicate device, and (a) has the same technological characteristics
as the predicate device, or (b) has different technological characteristics, and (i) the data supporting substantial
equivalence contains information, including appropriate clinical or scientific data, if deemed necessary by the FDA, that
demonstrates that the device is as safe and as effective as a legally marketed device, and (ii) does not raise different
questions of safety and effectiveness than the predicate device. Most 510(k)s do not require clinical data for clearance,
but the FDA may request such data. The FDA seeks to review and act on a 510(k) within 90 days of submission, but it
may take longer if the agency finds that it requires more information to review the 510(k). If the FDA concludes that a
new device is not substantially equivalent to a predicate device, the new device will be classified in Class III and the
manufacturer will be required to submit a PMA to market the product. On July 23, 2018, the CDRH of the FDA cleared
the 510(k) for our V-TAGTM device that is compatible for use with MRIs.
Government Regulation Outside of the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions
governing, among other things, clinical trials 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 the commencement of clinical trials or marketing of the product in those
countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical
trial application much like the IND prior to the commencement of human clinical trials, e.g., a clinical trial application
for each clinical trial for each EU country in which the trial is conducted; a clinical trial notification is required in Japan.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things,
fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and
criminal prosecution.
Coverage, Pricing and Reimbursement for Biopharmaceutical Products
Sales of our products, when and if approved for marketing, will depend, in part, on the extent to which our
products will be covered by third-party payors, such as federal, state, and foreign government health care programs,
commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing
reimbursements for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign
governments have continued implementing cost containment programs, including price controls, restrictions on coverage
and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures,
could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidates or a
decision by a third-party payor not to cover our product candidates could reduce physician usage of our products once
approved and have a material adverse effect on our sales, results of operations and financial condition.
Our Corporate Information
We were incorporated under the laws of Delaware in June 2013. Our principal executive offices are located at
75 Sidney Street, Cambridge, MA 02139. Other operations, including laboratory space, are located at 64 Sidney Street,
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Cambridge, MA 02139. We lease our office and laboratory space, which consist of approximately 74,000 square feet
located in two locations in Cambridge, Massachusetts. Our lease expires in 2026.
Employees
As of December 31, 2018, we employed 123 full-time employees in the United States, including 92 in research
and development and 31 in general and administrative, and one part-time employee. Thirty-nine of our employees have
either an MD, PhD, or PharmD. We have never had a work stoppage, and none of our employees is represented by a
labor organization or under any collective-bargaining arrangements. We consider our employee relations to be positive.
Legal Proceedings
As of the date of this Annual Report on Form 10-K, we were not party to any material legal matters or claims.
In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution
of which we do not anticipate would have a material adverse impact on our financial position, results of operations or
cash flows.
Available Information
Our Internet address is http://www.voyagertherapeutics.com. We make available, free of charge, on or through
our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
statements and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
and Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the
Securities and Exchange Commission. The information on our website is not part of this Annual Report for the year
ended December 31, 2018.
ITEM 1A.
RISK FACTORS
The following risk factors and other information in this Annual Report on Form 10-K, including our financial
statements and related notes thereto, should be carefully considered. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less
significant may also impair our business operations. Please see page 3 of this Annual Report on Form 10-K for a
discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks
occur, our business, financial condition, results of operations and future growth prospects could be materially and
adversely affected.
Risks Related to Our Financial Position and Need for Capital
We have incurred significant losses since inception and anticipate that we will continue to incur losses for the
foreseeable future and may never achieve or maintain profitability.
We are a clinical-stage gene therapy company with a limited operating history and have not yet generated
revenues from the sales of our product candidates. Investment in biotechnology companies is highly speculative because
it entails substantial upfront capital expenditures and significant risk that the product candidate will fail to obtain
regulatory approval or become commercially viable. We have not yet demonstrated the ability to complete any clinical
trials of our product candidates, obtain marketing approvals, manufacture a commercial-scale product or conduct sales
and marketing activities necessary for successful commercialization. We continue to incur significant expenses related to
research and development, and other operations in order to commercialize our product candidates. As a result, we are not
and have never been profitable and have incurred losses since our inception. Our net losses were $88.3 million,
$70.7 million, and $40.2 million for the years ended December 31, 2018, 2017, and 2016 respectively. As of
December 31, 2018, we had an accumulated deficit of $269.1 million.
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We historically have financed our operations primarily through private placements of our redeemable
convertible preferred stock, public offerings of our common stock; and strategic collaborations, including those with
Sanofi Genzyme, AbbVie, and Neurocrine, which we collectively refer to our Strategic Collaborations. On November
16, 2015 we closed our initial public offering whereby we sold 5,750,000 shares of common stock at a public offering
price of $14.00 per share, including 750,000 shares of common stock issued upon the full exercise by the underwriters of
their option to purchase additional shares, resulting in net proceeds to us of $72.9 million after deducting underwriting
discounts, commissions and offering expenses payable by us. On November 7, 2017, we sold 5,175,000 shares of
common stock to the public at an offering price of $12.00 per share, including 675,000 shares of common stock issued
upon the full exercise by the underwriters of their option to purchase additional shares, resulting in net proceeds to us of
$58.0 million after deducting underwriting discounts, commissions, and offering expenses payable by us. On January 28,
2019, in connection with our collaboration with Neurocrine, we agreed to sell 4,179,728 shares of common stock to
Neurocrine at a price of $11.9625 per share, for an aggregate purchase price of approximately $50.0 million. The sale of
shares to Neurocrine is subject to customary closing conditions, including certain antitrust approvals, that have not been
satisfied as of the date of this Annual Report on Form 10-K. As a result, we have not yet issued such shares to
Neurocrine, but, if the applicable closing conditions are met, we expect to do so promptly.
To date, we have devoted substantially all of our financial resources to building our gene therapy platform,
selecting product programs, conducting research and development, including preclinical development of our product
candidates, building our intellectual property portfolio, building our team, and establishing Strategic Collaborations. We
expect that it could be several years, if ever, before we have a commercialized product candidate. We expect to continue
to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may
fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if, and as, we:
continue investing in our gene therapy platform to optimize vector engineering, manufacturing and dosing
and delivery techniques;
continue to advance our clinical candidate, VY-AADC, as a treatment for Parkinson’s disease through the
ongoing Phase 1b clinical trial and into our RESTORE-1 Phase 2 clinical trial;
initiate additional preclinical studies and clinical trials for, and continue research and development of, our
other programs;
conduct joint research and development under our Strategic Collaborations for the research, development,
and commercialization of certain of our pipeline programs;
continue our process research and development activities, as well as establish our research-grade and
commercial manufacturing capabilities;
identify additional neurological diseases for treatment with our AAV gene therapies and develop additional
programs or product candidates;
work to identify and optimize novel AAV capsids;
develop, obtain and maintain regulatory clearances for devices to deliver our AAV gene therapies;
seek marketing and regulatory approvals for VY-AADC or other product candidates or devices that arise
from our programs that successfully complete clinical development;
maintain, expand, protect and enforce our intellectual property portfolio;
identify, acquire or in-license other product candidates and technologies;
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develop a sales, marketing and distribution infrastructure to commercialize any product candidates for
which we may obtain marketing approval;
expand our operational, financial and management systems and personnel, including personnel to support
our clinical development, manufacturing and commercialization efforts and our operations as a public
company;
increase our product liability and clinical trial insurance coverage as we expand our clinical trials and
commercialization efforts; and
continue to operate as a public company.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are
unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve
profitability. Our expenses will increase if:
we are required by the U.S. Food and Drug Administration, or FDA, or the European Medicines Agency, or
EMA, or other regulatory agencies to perform trials or studies in addition to those currently expected;
there are any delays in receipt of regulatory clearance to begin our planned clinical programs or to use
companion devices required in such clinical programs; or
there are any delays in enrollment of patients in or completing our clinical trials or the development of our
product candidates.
To become and remain profitable, we must develop and eventually commercialize, alone or with our
collaborators, product candidates with significant market potential, which will require us to be successful in a range of
challenging activities. These activities can include completing preclinical studies and clinical trials of our product
candidates; obtaining marketing approval for these product candidates; developing and obtaining marketing approval of
any required companion devices; manufacturing at clinical and commercial scale; marketing and selling those products
that are approved; satisfying any post-marketing requirements and achieving an adequate level of market acceptance of
and obtaining and maintaining adequate coverage and reimbursement from third-party payors for such products; and
protecting our rights to our intellectual property portfolio. We may never succeed in any or all of these activities and,
even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do
achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to
become and remain profitable would decrease the value of our company and could impair our ability to raise capital,
maintain our research and development efforts, expand our business or continue our operations. A decline in the value of
our company also could cause our stockholders to lose all or part of their investment.
We may not be able to generate sufficient revenue from the commercialization of our product candidates and may
never be profitable.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with our collaborative
partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize,
our current and future product candidates. Our lead product candidate VY-AADC is being evaluated in a Phase 1b
clinical trial, and we are randomizing patients in our RESTORE-1 Phase 2 clinical trial. We do not anticipate generating
revenues from product sales for the next several years, and we may never succeed in doing so. Our ability to generate
future revenues from product sales depends heavily on our and our collaborators’ success in:
completing preclinical and clinical development of our product candidates and any required companion
devices and identifying new product candidates;
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seeking and obtaining regulatory and marketing approvals for product candidates for which we complete
clinical trials;
launching and commercializing product candidates for which we obtain regulatory and marketing approval
by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a
commercialization partner;
obtaining and maintaining adequate coverage and reimbursement by government and third-party payors for
our product candidates if and when approved;
maintaining and enhancing a sustainable, scalable, reproducible and transferable manufacturing process for
our vectors and product candidates;
establishing and maintaining supply and manufacturing relationships with third parties that can provide
adequate products and services, in both amount and quality, to support clinical development and the market
demand for our product candidates, if and when approved;
obtaining an adequate level of market acceptance of our product candidates as a viable treatment option;
addressing any competing technological and market developments;
implementing additional internal systems and infrastructure, as needed;
negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter
and performing our obligations in such collaborations;
obtaining, maintaining, protecting, enforcing and expanding our portfolio of intellectual property rights,
including patents, trade secrets and know-how;
avoiding and defending against third-party claims of interference or infringement; and
attracting, hiring and retaining qualified personnel.
Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate
incurring significant costs associated with commercializing any approved product candidate. Our expenses could
increase beyond expectations if we are required by the FDA, EMA, or other regulatory authorities to perform preclinical
studies and clinical trials in addition to those that we currently anticipate. Even if we are able to generate revenues from
the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue
operations.
We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain
this necessary capital when needed may force us to delay, limit or terminate certain of our product development
efforts or other operations.
We expect our expenses to increase in connection with our ongoing and planned activities, particularly as we
continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our
product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur
significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution. Since the
completion of our IPO on November 16, 2015, we have also incurred costs associated with operating as a public
company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing
operations. If we are unable to raise capital or enter into business development transactions when needed or on
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acceptable terms, we could be forced to delay, reduce or eliminate certain of our research and development programs or
any future commercialization efforts.
Our operations have consumed significant amounts of cash since inception. As of December 31, 2018, our cash,
cash equivalents, and marketable debt securities were $155.8 million. Based upon our current operating plan, we expect
that our existing cash, cash equivalents, and marketable debt securities, as well as amounts expected from the upfront
payment and expected reimbursement of development costs from the Neurocrine Collaboration Agreement and the
upfront payment from the AbbVie Alpha-Synuclein Collaboration Agreement entered into in 2019, will enable us to
fund our operating expenses and capital expenditure requirements into mid-2022.
Our future capital requirements will depend on many factors, including:
the scope, progress, results, and costs of product discovery, preclinical studies and clinical trials for our
product candidates and any required companion devices;
the scope, progress, results, costs, prioritization, and number of our research and development programs;
the progress and status of our Strategic Collaborations including any research and development costs for
which we are responsible, the potential exercise by our collaboration partners of options to develop or
license certain products and product candidates, and our potential receipt of future milestone payments and
royalties from our collaboration partners;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, preclinical development
and clinical trial costs, or the achievement of milestones or occurrence of other developments that trigger
payments, under any other collaboration agreement to which we might become a party;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to establish and maintain collaboration, distribution, or other marketing arrangements for our
product candidates on favorable terms, if at all;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies or acquire or invest
in other businesses, such as our investment in MRI Interventions, Inc., or MRIC;
the costs related to evaluating possible alternative devices that may be useful in the delivery of our product
candidates, including our ongoing development of V-TAG;
the costs of securing manufacturing arrangements for pre-commercial and commercial production;
the level of product sales from any product candidates for which we obtain marketing approval in the
future; and
the costs of establishing or contracting for sales, manufacturing, marketing, distribution, and other
commercialization capabilities if we obtain regulatory approvals to market our product candidates.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-
consuming, expensive, and uncertain process that takes years to complete. We may never generate the necessary data or
results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved,
may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments
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under our collaboration agreements, will be derived from sales of products that may not be commercially available for
many years, if at all. Accordingly, we will need to continue to rely on additional financing and business development to
achieve our business objectives. Adequate additional financing or business development transactions may not be
available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market
conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating
plans.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish
rights to our technologies or product candidates.
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to
finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and
licensing arrangements. We do not have any committed external source of funds other than the amounts we are entitled
to receive from our collaboration partners for potential option exercises, the achievement of specified regulatory and
commercial milestones, and royalty payments under our collaboration agreements. To the extent that we raise additional
capital through the sale of equity or equity-linked securities, including convertible debt, our stockholders’ ownership
interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect our existing stockholders’ rights as holders of our common stock. Debt financing and preferred equity financing, if
available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such
as incurring additional debt, obtaining additional capital, acquiring or divesting businesses, making capital expenditures
or declaring dividends. Our issuance of additional securities, whether equity or debt, or the possibility of such issuance,
may cause the market price of our common stock to decline. Further, our existing stockholders may not agree with the
terms of such financings.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or
product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market products or product candidates
that we would otherwise prefer to develop and market ourselves. Such collaborations, alliances, or licensing
arrangements could therefore cause the market price of common stock to decline.
Our limited operating history may make it difficult for our stockholders to evaluate the success of our business to date
and to assess our future viability.
We are an early-stage company. Our operations to date have been limited to building our team, business
planning, raising capital, establishing our intellectual property portfolio, determining which neurological diseases to
pursue, advancing our product candidates including delivery and manufacturing and conducting preclinical studies and
clinical trials. Consequently, any predictions about our future success or viability may not be as accurate as they could be
if we had a longer operating history.
In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and
other known and unknown factors. To achieve our current goals, we will need to transition in the future from a company
with a research and development focus to a company capable of supporting commercial activities. We may not be
successful in such a transition.
We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-
quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, our
stockholders should not rely upon the results of any quarterly or annual periods as indications of future operating
performance.
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Risks Related to the Development and Regulatory Approval of Our Product Candidates
Our AAV gene therapy product candidates are based on a relatively novel technology, which makes it difficult to
predict the time and cost of development and of subsequently obtaining regulatory approval, if at all. Only one AAV
gene therapy product has been approved in the United States. In Europe, only two AAV gene therapy products have
been approved.
We have concentrated our research and development efforts to date on our gene therapy platform, identifying
our initial targeted disease indications, and our initial product candidates. Our future success depends on our successful
development of viable AAV gene therapy product candidates. Currently, only one of our product candidates, VY-
AADC, is in clinical development, and the remainder of our product candidates are in preclinical development. We
cannot accurately predict when or if any of our product candidates will prove effective or safe in humans or whether
these product candidates will receive marketing approval. There can be no assurance that we will not experience
problems or delays in developing our product candidates and that such problems or delays will not cause unanticipated
costs, or that any such development problems can be solved. We also may experience unanticipated problems or delays
in expanding our manufacturing capacity.
The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these
regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type,
complexity, novelty and intended use and market of the product candidate. The regulatory approval process for novel
product candidates such as gene therapies can be more expensive and take longer than for other, better known or more
extensively studied product candidates. Until August 2017, the FDA had never approved a gene therapy product. Since
that time, it has approved Luxturna, an AAV gene therapy product by Spark Therapeutics, Inc., or Spark, for patients
with an inherited form of vision loss. The FDA has also approved two other non-AAV gene therapy products, Kymriah
by Novartis International AG, for pediatric and young adult patients with a form of acute lymphoblastic leukemia and
Yescarta by Kite Pharma, Inc., for adult patients with certain forms of non-Hodgkin lymphoma. In Europe, two AAV
gene therapy products, Glybera by uniQure N.V., or uniQure, and Luxturna by Spark Therapeutics, Inc., or Spark, have
been granted marketing authorization; however, uniQure decided not to pursue renewal of such authorization in 2017
and has since withdrawn Glybera from the European market. The European Commission also approved two other non-
AAV gene therapy products, Kymriah by Novartis International AG, and Yescarta by Kite Pharma, Inc.
It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our
product candidates in either the United States or the European Union or how long it will take to commercialize our
product candidates. The few regulatory approvals to date may not be indicative of what the FDA, European Commission,
or other regulatory authorities may require for approval or whether different or additional preclinical studies or clinical
trials may be required to support regulatory approval in a particular jurisdiction. Delay or failure to obtain, or unexpected
costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could decrease our
ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects
may be harmed.
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to
change in the future. Such requirements may lengthen the regulatory requirements review process, require us to
perform additional studies, and increase our development costs or may force us to delay, limit, or terminate certain of
our programs.
The Center for Biologics Evaluation and Research, or CBER, of the FDA regulates biological products for
human use. The Office of Tissues and Advanced Therapies, or OTAT, formerly known as the Office of Cellular, Tissue
and Gene Therapies, within CBER reviews gene therapy and related products and has established the Cellular, Tissue
and Gene Therapies Advisory Committee to advise CBER in its review.
NIH-funded institutions need to have their institutional biosafety committee, or IBC, as well as their
institutional review board, or IRB, review proposed clinical trials to assess the safety of the trial. The Phase 1b clinical
trial of VY-AADC and the separate Phase 1 trial exploring the delivery of VY-AADC using a posterior trajectory are
being conducted at the University of California San Francisco, or UCSF, and University of Pittsburgh Medical Center, or
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UPMC, and two other sites and therefore are subject to oversight by these authorities. Such trials will need to be re-
reviewed by the respective institutional IRBs if the protocol for the trial is further amended. For any new clinical trial
protocols, including those of our RESTORE-1 Phase 2 clinical trial, the same processes and issues apply.
Adverse developments in clinical trials of gene therapy products conducted by us or others may cause the FDA
or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, EMA and
local health authorities of individual countries within the European Union may issue new guidelines concerning the
clinical development and marketing authorization for gene therapy medicinal products and require that we comply with
these new guidelines. The EMA and agencies at both the federal and state level in the United States have expressed an
interest in further regulating new biotechnologies, including gene therapy. In addition, gene therapy products are
considered genetically-modified organism, or GMO, products and are regulated as such in each country. Designation of
the type of GMO product and subsequent handling and disposal requirements can vary across countries and is variable
throughout the EU. Addressing each specific country requirement and obtaining approval to commence a clinical trial in
these countries could result in delays in starting, conducting, or completing a clinical trial. Similar issues could be faced
in other regions of the world including the Asia-Pacific region.
These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen
the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes
in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates
or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required
to consult with these regulatory and advisory groups, and comply with applicable guidelines. We have requested
feedback from the FDA on among other matters, the regulatory pathway for VY-AADC and design of our proposed
pivotal program, including a randomized, placebo-controlled RESTORE-1 Phase 2 clinical trial and, if required, a
randomized, placebo-controlled RESTORE-2 Phase 3 clinical trial. We had multiple interactions with the FDA
throughout 2018 and received certain written feedback requiring additional clarification. In December 2018, we held a
Type B meeting with the FDA to discuss the overall development and pivotal program for VY-AADC. Based on the
meeting discussion and subsequent written feedback from the FDA, we plan to submit a revised trial protocol that will
include an increase in the target number of patients in the RESTORE-1 Phase 2 trial, resulting in 75 to 100 total patients
in the trial, and to conduct, in staggered-parallel, the RESTORE-2 Phase 3 trial of similar size and design to RESTORE-
1. These updates incorporate guidance from the FDA from the Type B meeting to conduct two adequate and well-
controlled clinical trials for a large patient population such as Parkinson’s disease. We plan to continue to seek and
incorporate FDA guidance in our ongoing development plans. If we fail to consult or solicit guidance from regulators,
we may be required to delay or discontinue development of certain of our product candidates. These additional processes
may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of
increased or lengthier regulatory approval process and further restrictions on development of our product candidates can
be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and commercialize our
current and future product candidates in a timely manner, if at all.
Results from preclinical studies and early-stage clinical trials may not be indicative of efficacy in late-stage clinical
trials.
All of our product candidates are in early stages of development. Clinical testing is expensive, is difficult to
design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical
trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive
of the success of later stage clinical trials, interim results of a clinical trial do not necessarily predict final results and
results from one completed clinical trial may not be replicated in a subsequent clinical trial with a similar study design.
Some of our clinical trials, including our Phase 1 clinical trials and our Phase 1b clinical trial for VY-AADC, were
conducted with small patient populations and were not blinded or placebo-controlled, making it difficult to predict
whether the favorable results that we observed in such trials will be repeated in larger and more advanced clinical trials.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies
that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have
nonetheless failed to obtain marketing approval of their products.
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A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks
in late-stage clinical trials even after achieving promising results in early-stage clinical trials. If a larger population of
patients does not experience positive results, if these results are not reproducible, or if our products show diminishing
activity over time, our products may not receive approval from the EMA or the FDA. Data obtained from preclinical and
clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In
addition, we may encounter regulatory delays or rejections as a result of many factors, including changes in regulatory
policy during the period of product development. Failure to confirm favorable results from earlier trials by demonstrating
the safety and effectiveness of our products in late-stage clinical trials with larger patient populations could harm our
business and we may never succeed in commercialization or generating product revenue.
The doses and coverage of the putamen being employed in the ongoing VY-AADC Phase 1b clinical trial and the
RESTORE-1 Phase 2 clinical trial are higher than those used in prior trials and may need to be further optimized or
we may not generate sufficient clinical data in a placebo-controlled trial to achieve market authorization. Further,
any favorable results which we obtain from our Phase 1b clinical trial might not be replicated in subsequent trials.
The clinical trial results of some of our collaborators have been negatively affected by factors that had not been
fully anticipated prior to the examination of the trial results. For example, the magnitude of some of the clinical
responses seen in the Phase 1 clinical trial of AAV2-AADC conducted by UCSF were similar to placebo effects
observed in previous surgical therapies for Parkinson’s disease. As a result, we are unable to rely on the results of this
Phase 1 trial for an indication of the efficacy of treatment with VY-AADC. We believe that there is a need to optimize
the dose and volume of infusion of VY-AADC to substantially increase the coverage of the putamen, the region of the
brain targeted by VY-AADC, to achieve a clinical benefit. However, we can provide no assurances that we will be able
to optimize these parameters and thereby achieve sufficient coverage of the putamen to achieve a clinical benefit.
The ongoing Phase 1b clinical trial of VY-AADC incorporated several design features in an attempt to increase
the area of the putamen, particularly the posterior putamen, which receives VY-AADC treatment. We employed larger
infusion volumes and higher doses of VY-AADC, and we used the ClearPoint® System to provide real-time, intra-
operative, magnetic resonance imaging, or MRI, assistance to the physician surgically administering VY-AADC to the
patient.
In a separate Phase 1 clinical trial, we are also exploring posterior, or back of the head, delivery of drug into the
putamen, compared to a transfrontal, or top of the head, delivery approach used in Cohorts 1 through 3 of the ongoing
Phase 1b clinical trial described above. A posterior approach better aligns the infusion of VY-AADC with the anatomical
structure of the putamen to potentially reduce the total procedure time and increase the total coverage of the putamen.
Administration of VY-AADC with this posterior approach has been well-tolerated with no reported serious adverse
events, or SAEs, with most patients discharged from the hospital the day after surgery.
Due to the nature of the techniques used in the Phase 1b clinical trial and the numerous variables that can be
changed, it is possible that the data generated from this trial may not provide evidence of clinical benefit. For example,
physicians may use cannulas, which are small tubes, of differing lengths in the infusion procedure, or may use differing
infusion speeds or infusion angles. These differences could affect the dose of VY-AADC that ultimately reaches the
putamen, leading to highly variable results. Similarly, we have limited experience to date with the posterior delivery
approach which is the preferred surgical route of administration for the RESTORE-1 Phase 2 clinical trial, and it may not
generate outcomes that are clinically superior to those of the transfrontal approach.
For the RESTORE-1 Phase 2 clinical trial, we have selected a dose of up to 2.5 x 1012 vector genomes, which is
defined as a maximum total bilateral dose. This dose is between the up to maximum total vector genome doses
administered in Cohorts 2 and 3 from the Phase 1b trial when considering the higher volume administered with the
posterior trajectory and vector produced using the baculovirus system. We have not previously evaluated this dose in a
clinical trial. The dose concentration and volume we have selected for the RESTORE-1 Phase 2 clinical trial may not
achieve the desired safety and efficacy in the RESTORE-1 Phase 2 randomized, controlled clinical trial.
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We expect that the RESTORE-1 Phase 2 trial will enroll 75-100 patients. Movement disorder specialists will
identify and screen potential patients prior to referring to a surgical site for VY-AADC administration and provide
clinical and safety follow-up after VY-AADC administration.
The RESTORE-1 Phase 2 trial is a randomized, double-blind, placebo-surgery controlled trial with a planned
enrollment of 75 to 100 patients who have been diagnosed with Parkinson’s disease for at least four years, are not
responding adequately to oral medications, and have at least three hours of OFF time during the day as measured by a
validated self-reported patient diary. Patients will be randomized 1:1 to either VY-AADC or placebo surgery.
The primary efficacy endpoint of the RESTORE-1 Phase 2 trial is the mean improvement from baseline to 12
months on time without troublesome dyskinesia, or good ON time, as measured by a validated self-reported patient diary
at 12 months. Secondary endpoints include diary OFF time, other motor function and quality of life measures from the
United Parkinson’s Disease Rating Scales (UPDRS-II,-III scores), the Parkinson’s Disease Questionnaire (PDQ-39), and
patient’s global function as measured by the proportion of participants with improvement on the Clinical Global
Impression (CGI) score. The trial will also measure non-motor symptoms from the Non-Motor Symptom Scale (NMSS),
as well as safety.
Biomarker data include measurements of the coverage of the putamen, the specific region of the brain targeted
with VY-AADC, and measurements of AADC enzyme expression and activity in the putamen measured by positron
emission tomography (PET) using fluorodopa F-18. Changes in patients’ daily doses of oral levodopa and related
medications will also be recorded.
We are using a different manufacturing process for our AAV gene therapy vector in our global RESTORE-1
Phase 2 clinical trial and our planned RESTORE-2 Phase 3 clinical trial. We have begun to manufacture VY-AADC
using our baculovirus/Sf9 system as opposed to manufacturing in HEK 293 cells, which were used in our Phase 1
clinical trials. We have conducted studies to demonstrate comparability between the current version and the new version.
It is possible, however, that the results of our RESTORE-1 Phase 2 clinical trial and our planned RESTORE-2 Phase 3
clinical trial in Parkinson’s disease may differ from the results of our Phase 1b or our Phase 1 posterior clinical trials
based on VY-AADC manufactured using our baculovirus/Sf9 system.
We intend to conduct, and may in the future conduct, clinical trials for product candidates at sites outside the United
States, and the FDA may not accept data from trials conducted in such locations.
To date, we have only conducted clinical trials in the United States. However, we may in the future choose to
conduct, one or more of our clinical trials or include sites in current or future clinical trials outside the United States. We
generally plan to conduct our later stage and pivotal clinical trials of our product candidates globally. We currently plan
to include sites located in Poland in our RESTORE-1 Phase 2 clinical trial.
Although the FDA may accept data from sites or clinical trials outside the United States, acceptance of these
data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted
and performed by qualified investigators in accordance with ethical principles. The trial population must also adequately
represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways
that the FDA deems clinically meaningful. In addition, while these clinical trials or trial sites are subject to the applicable
local laws, FDA acceptance of the data will depend on its determination that the trials or trial sites also complied with all
applicable U.S. laws and regulations. If the FDA does not accept the data from any trial or trial site outside the United
States, it would likely result in the need for additional trials, which would be costly and time-consuming and would delay
or permanently halt our development of the applicable product candidates.
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Other risks inherent in conducting international clinical trials or using international trial sites include:
foreign regulatory requirements that could restrict or limit our ability to conduct our clinical trials;
administrative burden of complying with a variety of foreign laws, medical standards and regulatory
requirements, including the regulation of pharmaceutical and biotechnology products and treatment;
failure of enrolled patients to adhere to clinical protocols or inadequate collection and assessment of
clinical data as a result of differences in healthcare services or cultural customs;
foreign exchange fluctuations;
diminished or loss of protection of intellectual property in the relevant jurisdiction; and
political and economic risks relevant to foreign countries.
We may encounter substantial delays or difficulties in commencement, enrollment or completion of our clinical trials
or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities, which could
prevent us from commercializing our current and future product candidates on a timely basis, if at all.
Before obtaining marketing approval from regulatory authorities for the sale of our current and future product
candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates.
Clinical trials are expensive, time-consuming and their outcomes are uncertain.
We have very limited experience with clinical trials. The RESTORE-1 Phase 2 clinical trial of VY-AADC is
being conducted at several locations including UCSF and UPMC. We cannot guarantee that any clinical trials will be
conducted as planned or completed on schedule, if at all. A clinical trial failure can occur at any stage of testing.
Similarly, there may be delays or difficulties in our initiation of future clinical trials. Due to the additional regulatory
uncertainties associated with gene therapy products, we did not initiate our RESTORE-1 Phase 2 clinical trial for our
clinical candidate, VY-AADC, as a treatment for Parkinson’s disease until we met with OTAT to discuss our proposed
trial design and overall development plan. While we have received OTAT’s feedback, and incorporated it as appropriate
in our plans, the clinical trial as designed may not achieve the prospectively defined primary clinical endpoints or
provide a favorable benefit to risk ratio to support a BLA filing or approval.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our
success. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or
desired characteristics, to complete our clinical trials in a timely manner or at all pursuant to the requirements of the
FDA, EMA, or other regulatory authorities. Patient enrollment and trial completion are affected by many factors
including:
perceived risks and benefits of AAV gene therapy approaches for the treatment of neurological diseases;
perceived risks of the delivery procedure, such as intracranial infusion for VY-AADC;
formulation changes to our product candidates may require us to conduct additional clinical studies to
bridge our modified product candidates to earlier versions;
size of the patient population and process for identifying patients;
design of the trial protocol;
eligibility and exclusion criteria;
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patients with preexisting antibodies to the gene therapy vector that preclude their participation in the trial;
perceived risks and benefits of the product candidate under study;
availability of competing therapies and clinical trials;
severity of the disease under investigation;
availability of genetic testing for potential patients;
proximity and availability of clinical trial sites for prospective patients;
lack of adequate compensation of patients;
ability to obtain and maintain patient consent;
risk that enrolled patients will drop out before completion of the trial;
our ability to locate appropriately trained physicians to conduct such clinical trials, which may be
particularly difficult for the VY-AADC RESTORE-1 Phase 2 and RESTORE-2 Phase 3 clinical trials. We
have historically used, and expect to use, the ClearPoint System, which is only available at a small number
of academic medical centers in the United States;
our ability to commercially launch V-TAG, our real-time, intra-operative, MRI-compatible device, and to
train physicians to conduct clinical trials using the device;
willingness of patients to participate in a placebo-controlled trial;
patient referral practices of physicians; and
ability to monitor patients adequately during and after treatment.
Further, we plan to seek marketing approvals in the United States, the European Union and other jurisdictions,
which may require that we conduct clinical trials in foreign countries. Our ability to successfully initiate, enroll and
complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign
countries, including:
difficulty in establishing or managing relationships with clinical research organizations, or CROs, and
physicians;
different standards for the conduct of clinical trials;
absence in some countries of established groups with sufficient regulatory expertise for review of AAV
gene therapy protocols;
our inability to locate qualified local partners or collaborators for such clinical trials; and
the potential burden of complying with a variety of foreign laws, medical standards and regulatory
requirements, including the regulation of pharmaceutical and biotechnology products and treatment.
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If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may
need to delay, limit or terminate ongoing or planned clinical trials, any of which would harm our business, financial
condition, results of operations and prospects.
Other events that may prevent successful or timely completion of clinical development include:
delays in reaching a consensus with regulatory authorities on trial design;
delays in reaching agreement on acceptable terms with prospective CROs, and clinical trial sites;
delays in opening clinical trial sites or obtaining required IRB or independent ethics committee approval at
each clinical trial site;
imposition of a clinical hold by regulatory authorities as a result of a serious adverse event or after an
inspection of our clinical trial operations or trial sites; or our decision or the requirement of regulators or
institutional review boards to suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements or a finding that the participants are being exposed to
unacceptable health risks;
failure by us, any CROs we engage, or any other third parties to adhere to clinical trial protocols or
regulatory requirements;
failure by us, any CROs we engage, or any other third parties to perform in accordance with the FDA’s
good clinical practices, or GCPs, or applicable regulatory guidelines in the European Union;
failure by physicians to adhere to delivery protocols leading to variable results;
delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites,
including delays by third parties with whom we have contracted to perform certain of those functions;
insufficient or inadequate supply or quality of our product candidates or other materials necessary to
conduct clinical trials of our product candidates, including potential delays in our RESTORE-1 Phase 2
clinical trial in Parkinson’s disease associated with the commercial availability of V-TAG;
delays in having patients complete participation in a trial or return for post-treatment follow-up;
clinical trial sites or patients dropping out of a trial at a rate higher than we anticipate;
selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the
resulting data;
receipt of negative or inconclusive clinical trial results;
occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its
potential benefits;
occurrence of serious adverse events in trials of the same class of agents conducted by other sponsors;
changes in regulatory requirements and guidance that require amending or submitting new clinical
protocols; or
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the cost of clinical trials of our product candidates may be greater than we anticipate.
Any inability to successfully complete preclinical studies and clinical trials could result in additional costs to us
or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties.
In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct
additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays also could shorten
any periods during which we may have the exclusive right to commercialize our product candidates or allow our
competitors to bring products to market before we do, which could impair our ability to successfully commercialize our
product candidates and may harm our business, financial condition, results of operations and prospects.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse
events associated with our product candidates, we may:
be delayed in obtaining marketing approval for our product candidates, if at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to changes in the way the product is administered;
be required to perform additional clinical trials to support approval or be subject to additional
post-marketing testing requirements;
have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its
distribution in the form of a Risk Evaluation and Mitigation Strategy, or REMS;
be subject to the addition of labeling statements, such as warnings or contraindications;
be sued; or
experience damage to our reputation.
Our product candidates or the process for administering our product candidates may cause undesirable side effects or
have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result
in significant negative consequences following any potential marketing approval.
In past clinical trials that were conducted by others with non-AAV gene therapy vectors, several significant side
effects were caused by gene therapy treatments, including reported cases of leukemia and death. Other potential side
effects could include an immunologic reaction and insertional oncogenesis, which is the process whereby the insertion of
a functional gene near a gene that is important in cell growth or division results in uncontrolled cell division, which
could potentially enhance the risk of malignant transformation. If our vectors demonstrate a similar adverse effect, or
other adverse effects, we may be required to halt or delay further clinical development of our product candidates or
withdraw the product from the market post-approval. For example, in a recently published review of patients with
hepatocellular carcinomas, it was shown that a small subset contained an integrated genome sequence of wild-type
AAV2 and it was suggested that AAV2 may be associated with insertional oncogenesis.
In addition to side effects caused by the product candidate, the administration process or related procedures also
can cause side effects. VY-AADC and VY-HTT01 will be administered directly to the targeted areas and cells in the
brain, requiring the patient to undergo brain surgery. In a previous Phase 1 clinical trial conducted by UCSF, three
patients experienced hemorrhages caused by the surgical procedure for administering VY-AADC. In the RESTORE-1
Phase 2 clinical trial of VY-AADC, we are using the ClearPoint System, which has only been used in limited gene
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therapy neurosurgeries to date to provide accurate placement of the cannula in the putamen, to allow for real-time,
intra-operative MRI to assist the physician in visualizing the delivery of VY-AADC to the putamen and to avoid specific
blood vessels during the duration of the surgical procedure, with the goal of reducing the risk of hemorrhages. One
patient in the ongoing Phase 1b trial at UCSF experienced two SAEs, a pulmonary embolism, or blood clot in the lungs,
and related heart arrhythmia, or irregular heartbeat, which were determined to be related to the surgical procedure and
prolonged immobility, not VY-AADC. In our Phase 2 and future trials, we may use V-TAG, a proprietary real-time,
intra-operative, MRI-compatible device that we are currently developing. For VY-SOD102 in the treatment for ALS, the
product candidate is planned to be injected directly into the spinal cord. Limited clinical data are available for this route
of administration. If other side effects were to occur in connection with the surgical procedure, or problems were
encountered with the use of V-TAG, our clinical trials could be suspended or terminated.
If in the future we are unable to demonstrate that such side effects were caused by the administration process or
related procedures or are unable to modify the trial protocol adequately to address such side effects, the FDA, the
European Commission, the EMA or other regulatory authorities could order us to cease further development of, or deny
approval of, our product candidates for any or all targeted indications. For products that “knock down” or reduce the
amount of a gene or its encoded protein, their effects on other parts of the body, or “off target” effects, could result in
unforeseen toxicity. Even if we are able to demonstrate that any future SAEs are not product-related, and regulatory
authorities do not order us to cease further development of our product candidates, such occurrences could affect patient
recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to delay,
suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of such product
candidates may be harmed and our ability to generate product revenues from any of these product candidates may be
delayed or eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may
harm our business, financial condition and prospects significantly.
Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a
REMS to ensure that the benefits outweigh its risks. Such REMS may include, among other things, a medication guide
outlining the risks of the product for distribution to patients and a communication plan to health care practitioners or the
limitation of the use of the product to specifically trained neurosurgeons and/or certain centers. Furthermore, adverse
events which were initially considered unrelated to the study treatment of the clinical trial may later be found to be
caused by the study treatment. If we or others later identify undesirable side effects caused by our product candidate,
several potentially significant negative consequences could result, including:
regulatory authorities may suspend or withdraw approvals of such product candidate;
regulatory authorities may require additional warnings on the label;
we may be required to change the way a product candidate is administered or conduct additional clinical
trials;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our product
candidates and could significantly harm our business, prospects, financial condition and results of operations.
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We may be unable to obtain orphan drug designation or exclusivity for any of our product candidates for which we
seek such designation. If our competitors are able to obtain orphan drug exclusivity for products that constitute the
same drug and treat the same indications as our product candidates, we may not be able to have competing products
approved by the applicable regulatory authority for a significant period of time. For products for which we may
obtain orphan drug designation or exclusivity, we may be unable to prevent the approval or marketing authorization
of other similar products based upon regulator decisions regarding product “sameness”.
Regulatory authorities in some jurisdictions, including the United States and the European Union, may
designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, or the
Orphan Drug Act, the FDA may designate a product candidate as an orphan drug or biological product if it is intended to
treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000
individuals in the United States, or a patient population greater than 200,000 in the United States where there is no
reasonable expectation that the cost of developing the drug or biological product will be recovered from sales in the
United States. We have received feedback from the FDA that VY-AADC for the treatment of Parkinson’s disease does
not qualify for orphan disease designation because the potential for its use in earlier stages of Parkinson’s disease
exceeds the 200,000 patient population criteria in the United States. In the European Union, EMA’s Committee for
Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for
the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than
five in 10,000 persons in the European Union. Additionally, orphan designation is granted for products intended for the
diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when,
without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary
investment in developing the drug or biologic product. We have received feedback from the Committee for Orphan
Medicinal Products that orphan designation likely would not be granted for VY-AADC in Parkinson’s disease since the
Committee does not grant such status for products targeting more severe stages of a disease.
Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the
indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes
the FDA or the European Commission from approving another marketing application for a product that constitutes the
same drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another
sponsor receives such approval before we do (regardless of our orphan drug designation), we may be precluded from
receiving marketing approval for our product for the applicable exclusivity period. The applicable period is seven years
in the United States and 10 years in the European Union. The exclusivity period in the United States can be extended by
nine months if the BLA sponsor submits pediatric data that adequately respond to a written request from the FDA for
such data. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the
criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer
justified. Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation
was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of
patients with the rare disease or condition.
We believe that all of our current programs may qualify for orphan drug designation except for VY-AADC for
Parkinson’s disease. Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not
effectively protect the product candidate from competition because different drugs or biological products can be
approved for the same condition. In the United States, even after an orphan drug is approved, the FDA may subsequently
approve another drug or biological product for the same condition if the FDA concludes that the latter drug or biological
product is not the same drug or biological product or is clinically superior in that it is shown to be safer, more effective
or makes a major contribution to patient care. In the European Union, marketing authorization may be granted to a
similar medicinal product for the same orphan indication if:
the second applicant can establish in its application that its medicinal product, although similar to the
orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior;
the holder of the marketing authorization for the original orphan medicinal product consents to a second
orphan medicinal product application; or
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the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient
quantities of orphan medicinal product.
Even if we seek orphan drug designation from the FDA, the European Commission or other regulatory agencies
for a product candidate, there can be no assurances that the regulatory agency or agencies will grant such designation.
Additionally, the designation of any of our product candidates as an orphan drug does not guarantee that any regulatory
agency will ultimately approve that product candidate or prevent other products from receiving marketing authorization
due to decisions of the applicable regulatory agency regarding “sameness” of the products.
On August 3, 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among
other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the
clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease
in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug
Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical
superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if,
when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any
changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and
policies, our business could be adversely impacted.
A potential breakthrough therapy designation by the FDA for our product candidates may not lead to a faster
development or regulatory review or approval process, and it does not increase the likelihood that our product
candidates will receive marketing approval.
We have sought and may in the future seek a breakthrough therapy designation for some of our product
candidates. A breakthrough therapy is defined as a drug or biological product 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
indicates that the drug or biological product may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For
drugs or biological products that have been designated as breakthrough therapies, interaction and communication
between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while
minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by
the FDA may also be 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 criteria for designation as a breakthrough therapy, the FDA may disagree and instead
determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product
candidate may not result in a faster development process, review or approval compared to drugs considered for approval
under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more
of our product candidates qualify as breakthrough therapies, the FDA may later decide that the drugs or biological
products no longer meet the conditions for qualification.
A potential regenerative medicine advanced therapy designation by the FDA for our product candidates may not lead
to a faster development or regulatory review or approval process, and it does not increase the likelihood that our
product candidates will receive marketing approval.
We have sought and may in the future seek a regenerative medicine advanced therapy, or RMAT, designation
for some of our product candidates. Under the 21st Century Cures Act, or the Cures Act, to be eligible to receive RMAT
designation from the FDA, a product candidate must be (i) considered a “regenerative medicine therapy” as defined in
the Cures Act; (ii) intended to treat, modify, reverse, or cure one or more serious or life-threatening diseases or
conditions; and (iii) indicated, in preliminary clinical evidence, to have the potential to address unmet medical needs for
such diseases or conditions. Gene therapies, including genetically modified cells, that lead to a durable modification of
cells or tissues may meet the definition in the Cures Act of a regenerative medicine therapy.
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The RMAT program is intended to facilitate efficient development and expedite review of such therapies. A
new drug application or a BLA for a product candidate that has received an RMAT designation may be eligible for
priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-
term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites. Benefits of such designation
also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support
accelerated approval. A product candidate that has received an RMAT designation that is granted accelerated approval
and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence,
clinical studies, patient registries, or other sources of real world evidence, such as electronic health records; the
collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to
its approval.
In June 2018, the FDA granted RMAT designation for our VY-AADC gene therapy treatment for Parkinson’s
disease in patients with motor fluctuations that are refractory to medical management. The designation was based on data
from our Phase 1b clinical trial.
RMAT designation is within the discretion of the FDA. Accordingly, even if we believe one of our other
product candidates meets the criteria for RMAT designation, the FDA may disagree and instead determine not to make
such designation. In any event, the receipt of RMAT designation for a product candidate may not result in a faster
development process, review or approval compared to drugs considered for approval under conventional FDA
procedures and does not assure ultimate approval by the FDA. In addition, the FDA may later decide that product
candidate that received RMAT designation no longer meets the conditions for designation.
Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval
process and does not assure FDA approval of our product candidate.
If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the
potential to address unmet medical need for this condition, the drug sponsor may apply for FDA fast track designation.
VY-AADC has been granted fast track designation by the FDA. We may seek such a designation for our other product
candidates. A fast track designation does not ensure that the product candidate will receive marketing approval or that
approval will be granted within any particular timeframe. Thus, fast track products may not experience a faster
development process, review or approval compared to conventional FDA procedures. In addition, the FDA may
withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical
development program. Fast track designation alone does not guarantee qualification for the FDA’s priority review
procedures.
Priority review designation by the FDA may not lead to a faster regulatory review or approval process and, in
any event, does not assure FDA approval of our product candidate.
If the FDA determines that a product candidate offers major advances in treatment or provides a treatment
where no adequate therapy exists, the FDA may designate the product candidate for priority review. A priority review
designation means that the FDA’s goal to review an application is six months, rather than the standard review period of
ten months. We may request priority review for our product candidates. The FDA has broad discretion with respect to
whether or not to grant priority review status to a product candidate, so even if we believe a particular product candidate
is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation
does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to
approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee
approval within the six-month review cycle or thereafter.
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Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive,
time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all
of our product candidates. If we or any current or future collaborators are not able to obtain, or if there are delays in
obtaining, required regulatory approvals, we or they may not be able to commercialize our products, and our ability to
generate revenue may be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including
their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion,
sale and distribution, export and import, are subject to comprehensive regulation by the FDA and other regulatory
agencies in the United States and by the EMA and comparable regulatory authorities in other countries. Failure to obtain
marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not
received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only
limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on
third-party contract research organizations to assist us in this process.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting
information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s
safety and efficacy. Securing regulatory approval also requires the submission of information about the product
manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our product
candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side
effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit
commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive; may take
many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a
variety of factors, including the type, complexity and novelty of the product candidates involved. In the United States,
for example, the submission fee to obtain U.S. marketing approval is more than $2.0 million, and may be higher in the
future. Changes in marketing approval policies during the development period, in or the enactment of additional statutes
or regulations, or in regulatory review for each submitted product application, may cause delays in the approval or
rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the
approval process and may refuse to accept any application or may decide that our data are insufficient for approval and
require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from
preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing
approval we, or any future collaborators, ultimately obtain may be limited or subject to restrictions or post-approval
commitments that render the approved product not commercially viable.
Accordingly, if we or any future collaborators experience delays in obtaining approval or if we or they fail to
obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our
ability to generate revenues will be materially impaired.
Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory
oversight.
Even if we obtain any regulatory approval for our product candidates, they will be subject to ongoing regulatory
requirements for manufacturing, labeling, packaging, storing, advertising, promoting, sampling, record-keeping and
submitting safety and other post-market information. Any regulatory approvals that we receive for our product
candidates also may be subject to a REMS, limitations on the approved indicated uses for which the product may be
marketed or to the conditions of approval or contain requirements for potentially costly post-marketing testing, including
Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product. For example, the holder
of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the
specifications in the BLA. FDA guidance advises that patients treated with some types of gene therapy undergo
follow-up observations for potential adverse events for as long as 15 years. The holder of an approved BLA also must
submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product
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labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject
to FDA review, in addition to other potentially applicable federal and state laws.
In addition, product manufacturers and their facilities are subject to payment of user fees and continual review
and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, requirements and
adherence to commitments made in the BLA or foreign marketing application. If we, or a regulatory authority, discover
previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems
with the facility where the product is manufactured or such regulatory authority disagrees with the promotion, marketing
or labeling of that product, the regulatory authority may impose restrictions relative to that product, the manufacturing
facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following approval of any of our product
candidates, a regulatory authority may:
issue a warning letter asserting that we are in violation of the law;
seek an injunction or impose administrative, civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending BLA or comparable foreign marketing application, or any supplements thereto,
submitted by us or our strategic partners;
restrict the marketing or manufacturing of the product;
seize or detain the product or otherwise require the withdrawal of the product from the market;
refuse to permit the import or export of products; or
refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and
resources in response and could generate negative publicity. The occurrence of any event or penalty described above
may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition,
results of operations and prospects.
In addition, FDA policies, and those of equivalent foreign regulatory agencies, may change and additional
government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which
would harm our business, financial condition, results of operations and prospects.
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We face significant competition in an environment of rapid technological change and the possibility that our
competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than
ours, which may harm our business and financial condition, and our ability to successfully market or commercialize
our product candidates.
The biopharmaceutical industry is characterized by intense and dynamic competition to develop new
technologies and proprietary therapies. Any product candidates that we successfully develop into products and
commercialize may compete with existing therapies and new therapies that may become available in the future. While
we believe that our gene therapy platform, product programs, product candidates and scientific expertise in the fields of
gene therapy and neuroscience provide us with competitive advantages, we face potential competition from various
sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as
well as from academic institutions, governmental agencies and public and private research institutions.
We are aware of several companies focused on developing AAV gene therapies in various indications,
including Abeona Therapeutics, Inc., Adverum Biotechnologies, Inc., Aevitas Therapeutics, Inc., Agilis Biotherapeutics,
LLC (acquired by PTC Therapeutics, Inc. in 2018), Applied Genetic Technologies Corporation, Asklepios
BioPharmaceutical, Inc., Audentes Therapeutics, Inc., AveXis, Inc. (acquired by Novartis in 2018), Axovant Sciences
Ltd., GenSight Biologics SA, LogicBio Therapeutics, Inc., Lysogene SA, MeiraGTx Ltd., NightstaRx Ltd, Prevail
Therapeutics, Inc., REGENXBio Inc., Sarepta Therapeutics, Inc., Solid Biosciences, Inc., uniQure, Pfizer, and Spark
Therapeutics, Inc., as well as several companies addressing other methods for modifying genes and regulating gene
expression. Any advances in gene therapy technology made by a competitor may be used to develop therapies that could
compete against any of our product candidates.
We expect that VY-AADC will compete with a variety of therapies currently marketed and in development for
Parkinson’s disease, including DBS marketed by Medtronic plc, Abbott Laboratories (acquired from St. Jude Medical in
2017), and other medical device companies, DUOPA/Duodopa marketed by AbbVie Inc., as well as other novel, non-
oral forms of levodopa in development, including Mitsubishi Tanabe Pharma’s ND0612 (acquired from NeuroDerm in
2017), Acorda Therapeutics’ inhaled levodopa, INBRIJA (CVT-301), and Sunovion Pharmaceuticals’ sublingual
apomorphine, APL-130277. Gene therapy competition for Parkinson’s disease previously included AMT-090 or AAV-
GDNF, but this was deprioritized by uniQure in 2016. Axovant is developing a second generation LentiVector gene
therapy, AXO-Lenti-PD (previously OXB-102, licensed from Oxford Biomedica in 2018). MeiraGTx is developing
AAV-GAD, acquired from Vector Neurosciences, Inc. in 2018.
We expect that our preclinical programs will compete with a variety of therapies in development, including:
VY-SOD102 for a monogenic form of ALS will potentially compete with IONIS-SOD1Rx being developed
by Ionis Pharmaceuticals, Inc., or Ionis, in collaboration with Biogen Inc., or Biogen, and a gene therapy
being developed by AveXis (acquired by Novartis in 2018);
VY-FXN01 for Friedreich’s ataxia will potentially compete with AAV gene therapies being developed by
Pfizer and by Agilis Biotherapeutics, LLC (acquired by PTC Therapeutics, Inc. in 2018), and BMN 290
being developed by BioMarin Pharmaceutical Inc.;
VY-HTT01 for Huntington’s disease will potentially compete with IONIS-HTTRx being developed by
Ionis in collaboration with F. Hoffmann-La Roche Ltd., or Roche, WVE-120101 and WVE-120102 being
developed by WAVE Life Sciences in collaboration with Takeda Pharmaceuticals, a Zinc Finger Protein
(ZFP) therapy being developed by Sangamo Therapeutics, Inc. in collaboration with Shire plc, and gene
therapies being developed by uniQure and Spark;
Our Tau program for tauopathies including Alzheimer’s disease, PSP, and FTD will potentially compete
with tau antibodies being developed by Roche Genentech Inc. in collaboration with AC Immune SA, Eli
Lilly & Co., AbbVie Inc., Biogen, and several other companies, as well as an antisense oligonucleotide
program being developed by Ionis in collaboration with Biogen; and
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VY-NAV01 for severe, chronic pain will potentially compete with Nav1.7 inhibitors being developed by
Biogen, Sunovion, Amgen, Inc., and Astellas Pharma Inc, and Nav1.8 inhibitors being developed by Vertex.
We are also aware of several companies and institutions who have developed or are developing real-time, intra-
operative, MRI-compatible devices that would compete with V-TAG. Investigators in the Phase 1b, the separate Phase 1
posterior trajectory trial, and the RESTORE-1 Phase 2 clinical trial of VY-AADC, have used and are using the
ClearPoint System from MRIC.
Many of our potential competitors, alone or with their strategic partners, have substantially greater financial,
technical and other resources, such as larger research and development, clinical, marketing and manufacturing
organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more
resources being concentrated among a smaller number of competitors. Smaller and other early stage companies may also
prove to be significant competitors, particularly through collaborative agreements with large and established companies.
Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are
safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products
that we may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly or
earlier than us or may obtain orphan drug or other marketing exclusivity, which could result in our competitors
establishing a strong market position before we are able to enter the market or reducing the number of available subjects
for enrollment in our clinical trials to support regulatory submissions and approvals of our product. Additionally,
technologies developed or acquired by our competitors may render our potential product candidates uneconomical or
obsolete, and we may not be successful in marketing our product candidates against competitors. These third parties also
compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial
sites, and registering patients for clinical trials.
In addition, as a result of the expiration or successful challenge of our patent rights, we could face more
litigation with respect to the validity and scope of patents relating to our competitors’ products. The availability of our
competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop
and commercialize. If we are not able to compete effectively against potential competitors, our business will not grow
and our financial condition and operations will be harmed.
Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for
our product candidates outside of the United States, which would limit our market opportunities and adversely affect
our business.
Approval of a product candidate in the United States by the FDA does not ensure approval of such product
candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority
does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of our product
candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and
marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory
authorities of foreign countries also must approve the manufacturing and marketing of the product candidates in those
countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review
periods different from, and more onerous than, those in the United States, including additional preclinical studies or
clinical trials or manufacturing control requirements. In many countries outside the United States, a product candidate
must be separately approved for reimbursement before it can be approved for sale in that country. In some cases, the
price that we intend to charge for our products, if approved, is also subject to approval. We intend to submit a marketing
authorization application to EMA for approval of our product candidates in the European Union but obtaining such
approval from the European Commission following the opinion of EMA is a lengthy and expensive process. Even if a
product candidate is approved, the FDA or the European Commission may limit the indications for which the product
may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming
additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United
States and the European Union also have requirements for approval of product candidates with which we must comply
prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory
requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of
our product candidates in certain countries.
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Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other
countries. Regulatory approval for any of our product candidates may be withdrawn. If we fail to comply with the
regulatory requirements, our target market will be reduced and our ability to realize the full market potential of our
product candidates will be harmed and our business, financial condition, results of operations and prospects will be
harmed.
Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European
Union, commonly referred to as Brexit. On March 29, 2017, the country formally notified the European Union of its
intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Since a significant proportion of the regulatory
framework in the United Kingdom is derived from European Union directives and regulations, the referendum could
materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or
the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or
otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European
Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur,
we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union
for our product candidates, which could significantly and materially harm our business.
The United Kingdom has a period of a maximum of two years from the date of its formal notification to
negotiate the terms of its withdrawal from, and future relationship with, the European Union. If no formal withdrawal
agreement is reached between the United Kingdom and the European Union, then it is expected the United Kingdom’s
membership of the European Union will automatically terminate two years after the submission of the notification of the
United Kingdom’s intention to withdraw from the European Union. Discussions between the United Kingdom and the
European Union focused on finalizing withdrawal issues and transition agreements are ongoing. However, limited
progress to date in these negotiations and ongoing uncertainty within the UK Government and Parliament sustains the
possibility of the United Kingdom leaving the European Union on March 29, 2019 without a withdrawal agreement and
associated transition period in place, which is likely to cause significant market and economic disruption.
Risks Related to Third Parties
To date, all of our revenue has been derived from our collaborations with Sanofi Genzyme and AbbVie, and if any of
these, our other Strategic Collaborations, or future collaboration agreements were to be terminated, our business
financial condition, results of operations and prospects would be harmed.
In February 2015, we entered into the Sanofi Genzyme Collaboration Agreement to leverage our combined
expertise and assets in gene therapy for neurological diseases. Under the Sanofi Genzyme Collaboration Agreement, we
received an upfront commitment of approximately $100.0 million. Pursuant to the agreement, we granted Sanofi
Genzyme an exclusive option to license, develop and commercialize (i) ex-U.S. rights to our Parkinson’s disease,
Friedreich’s ataxia and Huntington’s disease programs and a future program, or the Split Territory Programs, with an
incremental option to co-commercialize the product candidate from our Huntington’s disease program in the United
States and (ii) worldwide rights to our spinal muscular atrophy program. If Sanofi Genzyme exercises an option for a
Split Territory Program, except for our Parkinson’s disease program, it is required to make an option exercise payment to
us. Furthermore, at the inception of the agreement, we were eligible to receive up to $745.0 million in the aggregate upon
the achievement of specified regulatory and commercial milestones, as well as tiered royalty payments based on a
percentage of net sales of product candidates from the programs for which Sanofi Genzyme exercised its option, or the
Optioned Programs. Our research and development activities in connection with the collaboration might not be
successful. We cannot accurately predict when or if any of our product candidates will prove effective or safe in humans
or whether these product candidates will receive marketing approval. There can be no assurance that we will not
experience problems or delays in developing our product candidates and that such problems or delays will not cause
unanticipated costs, or that any such development problems can be solved. If Sanofi Genzyme were to elect not to
exercise an option, we would have incurred significant development expenses but not receive the option exercise
payment or be eligible to receive future milestone or royalty payments related to such program. For example, in October
2017, Sanofi Genzyme notified us that it had decided not to exercise its option for the ex-U.S. rights to VY-AADC and
terminated the portion of its collaboration with us concerning Parkinson’s disease. As a result of Sanofi Genzyme’s
decision, the Company is no longer entitled to receive up to $105.0 million of milestone payments related to the
Parkinson’s program.
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If Sanofi Genzyme exercises one or more options, following such exercise, Sanofi Genzyme will have sole
responsibility for the development and commercialization of the product candidates from such program in the applicable
territory. Sanofi Genzyme will have the sole discretion to determine and direct its efforts and resources, including the
ability to discontinue all efforts and resources it applies to the development and, if approval is obtained,
commercialization and marketing of the product candidates covered by the Optioned Programs in the applicable
territories. Sanofi Genzyme may not be effective in obtaining approvals for the product candidates developed from the
Optioned Programs or in marketing, or arranging for necessary supply, manufacturing or distribution relationships for,
any approved products. Furthermore, Sanofi Genzyme may change its strategic focus or pursue alternative technologies
in a manner that results in reduced, delayed or no revenue to us. Sanofi Genzyme has a variety of marketed products and
product candidates under collaboration with other companies, including some of our competitors, and its own corporate
objectives may not be consistent with our best interests. If Sanofi Genzyme fails to develop, obtain regulatory approval
for or ultimately commercialize any product candidate from the Optioned Programs in the applicable territories, or if
Sanofi Genzyme terminates our collaboration, our business, financial condition, results of operations and prospects
would be harmed.
In addition, any dispute or litigation proceedings we may have with Sanofi Genzyme in the future could delay
development programs, create uncertainty as to ownership of or access to intellectual property rights, distract
management from other business activities and generate substantial expense. Finally, we also may not be able to seek
and obtain a viable, alternative collaborator to partner with for the development and commercialization of the Split
Territory Programs or the Optioned Programs.
In February 2018, we entered into an exclusive collaboration and option agreement with AbbVie, which we
refer to as the AbbVie Tau Collaboration Agreement, for the research, development, and commercialization of AAV
gene therapy products for the treatment of diseases of the central nervous system and other neurodegenerative diseases
related to defective or excess aggregation of tau protein in the human brain, including Alzheimer’s disease. Under the
terms of the AbbVie Tau Collaboration Agreement, we received an upfront payment of $69.0 million and may receive
option exercise payments, future development and regulatory milestone payments and royalties.
Under the AbbVie Tau Collaboration Agreement, we are obligated to use diligent efforts to conduct research
and development activities, including IND-enabling and Phase 1 clinical trial activities, for which we are solely
financially responsible. As described above, our research and development activities in connection with a collaboration
might not be successful. The AbbVie Tau Collaboration Agreement shall automatically terminate if AbbVie decides not
to exercise one or more of its options prior to the expiration of the specified periods of the collaboration. If AbbVie did
not exercise one or more of its options, we would have incurred significant research and development expenses but
would not receive any future option exercise, milestone payments, or royalty payments under the collaboration.
Such research and development activities shall be pursuant to plans agreed to by the parties and overseen by a
joint governance committee, or JGC. Initially, we will have final decision-making authority within the JGC, subject to
specified limitations. If AbbVie exercises its license option, however, AbbVie will assume final decision-making
authority within the JGC. If AbbVie exercises its license option, it will also be solely responsible for all development and
commercialization activities relating to compounds and products licensed pursuant to the agreement, and, at AbbVie’s
request, we could be required to effect a full transfer of the manufacturing process for such compound and products.
Even if AbbVie does not exercise any of its options under the AbbVie Tau Collaboration Agreement, we have agreed to
grant AbbVie perpetual, exclusive or non-exclusive (as the case may be), worldwide licenses to certain know-how and
patent rights developed by us or jointly by us and AbbVie arising from the collaboration.
AbbVie might not be effective in administering the JGC, obtaining approvals for the product candidates arising
from our collaboration, or commercializing or manufacturing the resulting products. Further, AbbVie’s objectives in
connection with the collaboration may not be consistent with our best interests. AbbVie could use its leadership of the
JGC or intellectual property it has licensed under the AbbVie Tau Collaboration Agreement in a manner adverse to us, or
it could halt, slow, or deprioritize its development and commercialization efforts under the collaboration. In any such
instances, our business, financial condition, results of operations and prospects could be materially harmed.
In January 2019, we entered into the Neurocrine Collaboration Agreement for the research, development and
commercialization of four programs including our Parkinson’s disease program, or AADC Program, our Friedreich’s
ataxia program, or FA Program, and two programs to be determined by us and Neurocrine at a later date, or the
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Discovery Programs. Under the terms of the agreement, we will receive an upfront payment of $165.0 million, inclusive
of $50.0 million for 4,179,728 shares of our common stock and may receive future development and regulatory
milestones and royalties. The Neurocrine Collaboration Agreement is subject to certain conditions, including the
expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and other customary closing conditions.
Under the Neurocrine Collaboration Agreement, upon the expiration or termination of applicable waiting
periods and the receipt of any required approvals or clearances including antitrust clearance, we have agreed to
collaborate on the conduct of four collaboration programs: the AADC Program for the treatment of Parkinson’s disease,
our FA Program for the treatment of Friedreich’s ataxia including the development of the VY-FXN01 product candidate,
and two programs Discovery Programs.
Under the terms of the Neurocrine Collaboration Agreement, subject to the rights retained by us thereunder, we
have agreed to collaborate with Neurocrine on, and to grant, exclusive, royalty-bearing, non-transferable, sublicensable
licenses to certain of our intellectual property rights for all human and veterinary diagnostic, prophylactic, and
therapeutic uses for the research, development, and commercialization of gene therapy Collaboration Products, under (i)
the AADC Program, on a worldwide basis; (ii) the FA Program, in the United States and, upon expiration of Sanofi
Genzyme’s option to the Friedreich’s ataxia program pursuant to the Sanofi Genzyme Collaboration without exercise of
such option, all countries in the world in which the Neurocrine Collaboration Agreement remained in effect with respect
to the FA Program; and (iii) each Discovery Program, on a worldwide basis.
Pursuant to development plans to be agreed by the parties, which will be overseen by a joint steering committee,
we have operational responsibility, subject to certain exceptions, for the conduct of each Neurocrine Program (prior to
specified transition events for each program), and are required to use commercially reasonable efforts to develop the
Collaboration Products. Neurocrine has agreed to be responsible for all costs incurred by us in conducting these activities
for each Neurocrine Program in accordance with an agreed budget. If we breach our development responsibilities or in
certain circumstances upon a change in control of us, Neurocrine has the right but not the obligation to assume the
activities under such Neurocrine Program.
Upon the occurrence of specified events for each program, Neurocrine has agreed to assume responsibility for
development, manufacturing and commercialization activities for such program and to pay us milestones and royalties on
future net sales. For each Existing Program, we have the option to co-develop and co-commercialize such Program upon
the occurrence of a specified event. Should we elect to exercise our co-development and co-commercialization option,
we and Neurocrine have agreed to enter into a cost- and profit-sharing arrangement whereby we and Neurocrine agree to
jointly develop and commercialize Collaboration Products for such program and share in its costs, profits and losses, and
we have agreed to forfeit certain milestones and royalties on net sales in the United States during the effective period of
the applicable co-development and co-commercialization agreement. As described above, our research and development
activities in connection with a collaboration might not be successful. Neurocrine may terminate the collaboration
agreement in its entirety or on a program-by-program or country-by-country basis by providing at least 180-day advance
notice if such notice is provided prior to the first commercial sale of the Collaboration Product to which the termination
applies or one-year advance notice if such notice is provided after the first commercial sale of the Collaboration Product
to which the termination applies. If Neurocrine were to terminate the agreement, we would become responsible for all
research and development expenses relating to the Neurocrine Programs, and would not receive any future milestone
payments or royalty payments under the Neurocrine Collaboration Agreement. The Neurocrine Collaboration Agreement
may also be terminated if specified regulatory agencies seek to enjoin the transaction or if we are unable to obtain
antitrust clearance within 180 days of the applicable antitrust filings, which would prevent us from receiving any
payments from Neurocrine under the agreement.
Neurocrine might not be successful in obtaining approvals for the product candidates arising from our
collaboration, or commercializing or manufacturing the resulting products. Further, Neurocrine’s objectives in
connection with the collaboration may not be consistent with our best interests. With respect to the rights granted to
Neurocrine by us, Neurocrine could take actions that may be adverse to us, or it could halt, slow, or deprioritize its
development and commercialization efforts under the collaboration. In any such instances, our business, financial
condition, results of operations and prospects could be materially harmed.
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In February 2019, we entered into the AbbVie Alpha-Synuclein Collaboration Agreement for the research,
development, and commercialization of AAV gene therapy products directed against alpha-synuclein for indications
including Parkinson’s disease and other synucleinopathies. Under the terms of the AbbVie Alpha-Synuclein
Collaboration Agreement, we received an upfront payment of $65.0 million and may receive option exercise payments,
future development and regulatory milestone payments and royalties.
Under the terms of the agreement, we and AbbVie have agreed to collaborate on the research and development
of the specified vectorized antibody compounds, or the Research Compounds. We are obligated to conduct research
activities directed to constructing one or more virus vectors that encode antibodies designated by AbbVie. We are
obligated to use diligent efforts to conduct antibody engineering and other research activities to create Research
Compounds and to develop product candidates containing or comprised of such Research Compounds, which we refer to
as Product Candidates. We are solely responsible for the costs and expenses during the research period. During a
specified portion of the Research Period, AbbVie may exercise one or more of its exclusive development options to
select up to a total of four Research Compounds and their corresponding product candidates to proceed to the
Development Period. As described above, our research and development activities in connection with a collaboration
might not be successful. The AbbVie Alpha-Synuclein Collaboration Agreement shall automatically terminate if AbbVie
decides not to exercise one or more of its options prior to the expiration of the specified periods of the collaboration. If
AbbVie did not exercise one or more of its options, we would have incurred significant research and development
expenses but would not receive any future option exercise, milestone payments, or royalty payments under the
collaboration.
Such research and development activities shall be pursuant to plans agreed to by the parties and overseen by a
JGC. Initially, we will have final decision-making authority within the JGC, subject to specified limitations. If AbbVie
exercises its license option, however, AbbVie will assume final decision-making authority within the JGC. If AbbVie
exercises its license option, it will also be solely responsible for all development and commercialization activities
relating to compounds and products licensed pursuant to the agreement, and, at AbbVie’s request, we could be required
to effect a full transfer of the manufacturing process for such compound and products. Even if AbbVie does not exercise
any of its options under the AbbVie Alpha-Synuclein Collaboration Agreement, we have agreed to grant AbbVie
perpetual, exclusive or non-exclusive (as the case may be), worldwide licenses to certain know-how and patent rights
developed by us or jointly by us and AbbVie arising from the collaboration.
AbbVie might not be effective in administering the JGC, obtaining approvals for the product candidates arising
from our collaboration, or commercializing or manufacturing the resulting products. Further, AbbVie’s objectives in
connection with the collaboration may not be consistent with our best interests. AbbVie could use its leadership of the
JGC or intellectual property it has licensed under the AbbVie Alpha-Synuclein Collaboration Agreement in a manner
adverse to us, or it could halt, slow, or deprioritize its development and commercialization efforts under the
collaboration. In any such instances, our business, financial condition, results of operations and prospects could be
materially harmed.
We have only used the ClearPoint System to deliver our product candidates. While other devices for delivery may be
used in the future, any issues with the ClearPoint System or the manufacturer of the ClearPoint System, may result in
delays in the development and commercialization of certain of our product candidates, which could have an adverse
impact on our business.
The surgical approach that we are using for VY-AADC is similar, in some respects, to the stereotactic approach
used for DBS. One primary difference with our approach is the ability to assist the physician in visualizing the delivery
of VY-AADC to the putamen using real-time, intra-operative, MRI to avoid specific blood vessels to potentially reduce
the risk of hemorrhages during the surgical procedure and to maximize the coverage of the putamen.
Investigators in the Phase 1b clinical trial, the separate Phase 1 posterior trajectory trial, and the RESTORE-1
Phase 2 clinical trial for VY-AADC, have used and are using the real-time, intra-operative, MRI system called the
ClearPoint System from MRIC. However, not all neurosurgical units within the United States utilize this system and may
employ other neuro-navigational systems that are not compatible with real-time MRI imaging. We intend to use the
ClearPoint System at certain sites in our RESTORE-1 Phase 2 clinical trial and may choose to use it in future clinical
trials of VY-AADC and any other of our product candidates that are injected directly into the brain. Therefore, any
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issues with the ClearPoint System, such as a finding that use of the ClearPoint System causes adverse events or a product
recall, or issues with the manufacturer of the ClearPoint System, such as bankruptcy or a decision to stop production of
the system due to lack of profitability, could delay the development or commercialization of certain of our product
candidates, including VY-AADC, as there currently is no other manufacturer of the ClearPoint System. Outside the
United States, the ClearPoint System is not widely available or utilized in neurosurgical units.
Management of MRIC, the manufacturer of the ClearPoint System, has expressed substantial doubt as to the
ability of MRIC to continue as a going concern on several occasions. As of September 30, 2018, MRIC reported cash
and cash equivalents of $3.7 million and secured debt (senior and junior) totaling approximately $3.3 million on its
balance sheet. MRIC also reported a net loss of $1.4 million and $4.9 million for the three and nine months ended
September 30, 2018.
We developed V-TAG as our own real-time, intra-operative, MRI-compatible device that can be used with
other neuro-navigational systems to dose VY-AADC and for other surgical procedures. We believe that the experience
we have gained from delivering VY-AADC in our clinical trials to date and our work to develop V-TAG may inform
AAV gene therapy delivery for our Huntington’s disease program and other projects. In July 2018, we received 510(k)
regulatory clearance of V-TAG from the Center for Devices and Radiological Health of the FDA. There are additional
steps needed in making this device available for use including the manufacture of the product and compliance with state
and federal laws and regulations for medical devices.
We are currently exploring collaborations for V-TAG and expect to rely on third parties in the development and
manufacture of the device. In May 2018, for example, we entered into a master services and supply agreement with
MRIC which provides for MRIC to perform certain manufacturing, supply, development, and services as requested by
us, including the supply of the ClearPoint System and cannula devices as well as to collaborate on V-TAG.
Collaborations, including our collaboration with MRIC, are subject to risks similar to those described elsewhere in this
“Risk Factors” section, and the corporate objectives of such current and potential future collaborators may not be
consistent with our best interests. If we are unable to enter into additional collaborations or any collaborations are not
successful, use of V-TAG in our clinical trials could be adversely affected, and our clinical trials, including our
RESTORE-1 Phase 2 clinical trial, could be delayed.
We may seek to enter into collaborations in the future with other third parties. If we are unable to enter into such
collaborations, or if these collaborations are not successful, our business could be adversely affected.
We may seek to enter into additional collaborations in the future, including sales, marketing, distribution,
development, licensing, and/or broader collaboration agreements. Our likely collaborators include large and mid-size
pharmaceutical companies, regional and national pharmaceutical companies, biotechnology companies, and medical
device manufacturers. However, we may not be able to enter into additional collaborations on favorable terms or at all.
Our ability to generate revenues from our collaborations will depend on our and our collaborators’ abilities to
successfully perform the functions assigned to each of us in these arrangements. In addition, our collaborators might
have the ability to abandon research or development projects and terminate applicable agreements. Moreover, an
unsuccessful outcome in any clinical trial for which our collaborator is responsible could be harmful to the public
perception and prospects of our gene therapy platform.
Our relationship with any future collaborations may pose several risks, including the following:
collaborators have significant discretion in determining the amount and timing of the efforts and resources
that they will apply to these collaborations;
collaborators may not perform their obligations as expected;
the preclinical studies and clinical trials conducted as part of these collaborations may not be successful;
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collaborators may not pursue development and commercialization of any product candidates that achieve
regulatory approval or may elect not to continue or renew development or commercialization programs
based on preclinical study or clinical trial results, changes in the collaborators’ strategic focus or available
funding or external factors, such as an acquisition, that divert resources or create competing priorities;
collaborators may delay preclinical studies and clinical trials, provide insufficient funding for preclinical
studies and clinical trials, stop a preclinical study or clinical trial or abandon a product candidate, repeat or
conduct new preclinical studies or clinical trials or require a new formulation of a product candidate for
preclinical studies or clinical trials;
we may not have access to, or may be restricted from disclosing, certain information regarding product
candidates being developed or commercialized under a collaboration and, consequently, may have limited
ability to inform our stockholders about the status of such product candidates;
collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our product candidates if the collaborators believe that competitive products are more likely
to be successfully developed or can be commercialized under terms that are more economically attractive
than ours;
product candidates developed in collaboration with us may be viewed by our collaborators as competitive
with their own product candidates or products, 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 commit sufficient resources to the marketing and distribution of any such
product candidate;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or
the preferred course of development of any product candidates, may cause delays or termination of the
research, development or commercialization of such product candidates, may lead to additional
responsibilities for us with respect to such product candidates or may result in litigation or arbitration, any
of which would 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 invite litigation that could jeopardize or invalidate our
intellectual property or proprietary information or expose us to potential litigation;
disputes may arise with respect to the ownership or inventorship of intellectual property developed
pursuant to our collaborations;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation
and potential liability;
the terms of our collaboration agreement may restrict us from entering into certain relationships with other
third parties, thereby limiting our options; and
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be
required to raise additional capital to pursue further development or commercialization of the applicable
product candidates.
Collaboration agreements may not lead to the development or commercialization of product candidates in the
most efficient manner, or at all. If our collaborations do not result in the successful development and commercialization
of products, or if one of our collaborators terminates its agreement with us, we may not receive any future research
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funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these
agreements, our development of our product candidates could be delayed, and we may need additional resources to
develop our product candidates. Additionally, subject to its contractual obligations to us, if a collaborator of ours were to
be involved in a business combination, it might deemphasize or terminate the development or commercialization of any
product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more
difficult to attract new collaborators, and the perception of us in the business and financial communities could be
adversely affected. All of the risks relating to product development, regulatory approval and commercialization
described in this periodic report also apply to the activities of our collaborators.
We will face significant competition in seeking appropriate collaborators, and the negotiation process is time-
consuming and complex. Our ability to reach a definitive collaboration agreement with any future collaborators will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions
of the proposed collaboration and the proposed collaborator’s evaluation of several factors. Those factors may include
the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the
United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and
delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with
respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the
merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative
product candidates or technologies for similar indications that may be available to collaborate on and whether such a
collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under
future license agreements from entering into agreements on certain terms with potential collaborators. In addition, there
have been a significant number of recent business combinations among large pharmaceutical companies that have
resulted in a reduced number of potential future collaborators.
If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all,
we may 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 its potential commercialization or reduce the scope of any sales or marketing
activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If
we elect to fund and undertake development or commercialization activities on our own, we may need to obtain
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 do not have sufficient funds or expertise to undertake the necessary development and
commercialization activities, we may not be able to further develop our product candidates or bring them to market or
continue to develop our gene therapy platform. If we license rights to product candidates, we may not be able to realize
the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company
culture.
We have relied, and we expect to continue to rely on third parties to conduct, supervise and monitor our clinical trials,
and if these third parties perform in an unsatisfactory manner, our business could be harmed.
We expect to rely on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on
time. We may also engage third parties such as clinical data management organizations, medical institutions and clinical
investigators to conduct or assist in our clinical trials or other clinical development work. While we will have agreements
governing their activities, we will have limited influence over their actual performance. We will control only certain
aspects of our third-party service providers’ activities. Nevertheless, we will be responsible for ensuring that each of our
clinical studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards. Our
reliance on these third-parties does not relieve us of our regulatory responsibilities. For example, our Phase 1b clinical
trial of VY-AADC and our separate Phase 1 trial exploring the delivery of VY-AADC using a posterior trajectory were
conducted at several locations, including UCSF and UPMC. We expect to conduct our RESTORE-1 Phase 2 clinical trial
at over twenty clinical trial sites, including neurosurgical and neurology patient referral sites in the United States and
Europe. If any locations terminate the clinical trial, we would be required to find another party to conduct any new trials.
We may be unable to find a new party to conduct new trials of our product candidates or obtain clinical supply of our
product candidates or AAV vectors for such trials.
We and our third-party service providers are required to comply with the FDA’s GCPs for conducting,
recording and reporting the results of IND-enabling studies and clinical studies to assure that the data and reported
results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are
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protected. We are also required to register ongoing clinical trials and post the results of completed clinical trials on a
government-sponsored database, ClinicalTrials.gov, within specified timeframes. The FDA enforces these GCPs through
periodic inspections of trial sponsors, principal investigators and clinical trial sites at which the FDA may determine that
our clinical trials did not comply with GCPs. If we or our third-party service providers fail to comply with applicable
GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA may require us to
perform additional clinical trials before approving any marketing applications. In addition, our future clinical trials will
require a sufficient number of patients to evaluate the safety and effectiveness of our product candidates. Accordingly, if
we or our third-party service providers fail to comply with these regulations or fail to recruit a sufficient number of
patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process. Failure to
comply can also result in fines, adverse publicity, and civil and criminal sanctions.
Our third-party service providers are not our employees, and we are therefore unable to directly monitor
whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These third-party
service providers may also have relationships with other commercial entities, including our competitors, for whom they
may also be conducting clinical trials or other drug development activities that could harm our competitive position. If
our third-party service providers do not successfully carry out their contractual duties or obligations, fail to meet
expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to
adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended,
delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our
product candidates. As a result, our financial results and the commercial prospects for our product candidates would be
harmed, our costs could increase, and our ability to generate revenues could be delayed.
Risks Related to Manufacturing
Gene therapies and their companion diagnostics are novel, complex and difficult to manufacture. We could
experience manufacturing problems that result in delays in the development or commercialization of our product
candidates or otherwise harm our business.
The manufacture of gene therapy products is technically complex and necessitates substantial expertise and
capital investment. Production difficulties caused by unforeseen events may delay the availability of material for our
clinical studies. To meet the requirements of our current and planned future trials we have developed a proprietary
manufacturing platform that provides a robust and scalable process for AAV production. We are using the
baculovirus/Sf9 AAV production system, a technology for producing AAV gene therapy vectors at scale in insect-
derived cells. The process has been successfully transferred to our contract manufacturing organizations where it is used
in manufacturing clinical materials in accordance with the FDA’s current good manufacturing practices, or cGMPs. We
have also built an onsite, state-of-the-art process research and development facility to enable the manufacturing of high
quality AAV gene therapy vectors at laboratory scale.
We presently contract with third parties for the manufacturing of our program materials. We currently have no
plans to build our own clinical or commercial scale manufacturing capabilities. The use of contracted manufacturing and
reliance on collaboration partners is relatively cost efficient and has eliminated the need for our direct investment in
manufacturing facilities and additional staff early in development. Although we rely on contract manufacturers, we have
personnel with manufacturing and quality experience to oversee our contract manufacturers.
To date, our third-party manufacturers have met our manufacturing requirements for our program materials. We
expect third-party manufacturers to be capable of providing sufficient quantities of our program materials to meet
anticipated clinical trial scale demands. To meet our projected needs for commercial manufacturing, third parties with
whom we currently work might need to increase their scale of production or we will need to secure alternate suppliers.
We believe that there are alternate sources of supply for our program materials that can satisfy our clinical and
commercial requirements, although we cannot be certain that identifying and establishing relationships with such
sources, if necessary, would not result in significant delay or material additional costs.
To date, our third-party manufacturers have met our quality standards for our program materials. The
manufacturers of pharmaceutical products must comply with strictly enforced cGMP requirements, state and federal
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regulations, as well as foreign requirements when applicable. Any failure of us or our contract manufacturing
organizations to adhere to or document compliance to such regulatory requirements could lead to a delay or interruption
in the availability of our program materials for clinical study. If we or our manufacturers were to fail to comply with the
FDA, EMA, or other regulatory authority, it could result in sanctions being imposed on us, including clinical holds,
fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and
adversely affect supplies of our product candidates. Our potential future dependence upon others for the manufacture of
our product candidates may also adversely affect our future profit margins and our ability to commercialize any product
candidates that receive regulatory approval on a timely and competitive basis.
Biological products are inherently difficult to manufacture. Our program materials are manufactured using
technically complex processes requiring specialized equipment and facilities, highly specific raw materials, cells, and
reagents, and other production constraints. Our production process requires a number of highly specific raw materials,
cells, and reagents with limited suppliers. Even though we aim to have backup supplies of raw materials, cells, and
reagents whenever possible, we cannot be certain they will be sufficient if our primary sources are unavailable. A
shortage of a critical raw material, cell line, or reagent, or a technical issue during manufacturing may lead to delays in
clinical development or commercialization plans. Any changes in the manufacturing of components of the raw materials
we use could result in unanticipated or unfavorable effects in our manufacturing processes, resulting in delays.
Companion diagnostic devices may be required to diagnose a genetic disease or to determine patient antibody
levels to certain components in a product, and could also require a sophisticated, technically complex manufacturing
processes. If we or our contract manufacturing organizations fail to manufacture such diagnostics or comply with
relevant regulatory requirements or approvals, we might seek to transition such manufacturing processes to another
contract manufacturing organization. We might not be able to transition such processes in a timely manner or at all, and
our commercialization and development efforts could be delayed.
Delays in obtaining regulatory approval of our or our collaborators’ manufacturing process and facility or
disruptions in our manufacturing process may delay or disrupt our commercialization efforts. Until recently, no
cGMP gene therapy manufacturing facility in the United States had received approval from the FDA for the
manufacture of an approved gene therapy product.
Before we can begin to commercially manufacture our product candidates in our own facility, or the facility of a
collaborator, we must obtain regulatory approval from the FDA for our manufacturing process and our collaborator’s
facility. A manufacturing authorization must also be obtained from the appropriate European Union regulatory
authorities. Until recently, no cGMP gene therapy manufacturing facility in the United States had received approval from
the FDA for the manufacture of an approved gene therapy product and, therefore, the timeframe required for us to obtain
such approval is uncertain. In addition, we must pass a pre-approval inspection of our or our collaborator’s
manufacturing facility by the FDA and other relevant regulatory authorities before any of our product candidates can
obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and
equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any
of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays
or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to
identify suitable replacement vendors. The cGMP requirements govern quality control of the manufacturing process and
documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort
in production, record keeping and quality control to assure that the product meets applicable specifications and other
requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may
not be permitted to sell any products that we may develop.
Failure to comply with ongoing regulatory requirements could cause us to suspend production or put in place costly
or time-consuming remedial measures.
The regulatory authorities may, at any time, following approval of a product for sale, audit the manufacturing
facilities for such product, or institute biennial inspections. If any such inspection or audit identifies a failure to comply
with applicable regulations, or if a violation of product specifications or applicable regulations occurs independent of
such an inspection or audit, the relevant regulatory authority may require remedial measures that may be costly or
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time-consuming to implement and that may include the temporary or permanent suspension of a clinical trial or
commercial sales or the temporary or permanent closure of a manufacturing facility. Any such remedial measures
imposed upon our third-party manufacturers or us could harm our business, financial condition, results of operations and
prospects.
If our third-party manufacturers or we fail to comply with applicable cGMP regulations, FDA and foreign
regulatory authorities can impose regulatory sanctions including, among other things, refusal to approve a pending
application for a new product candidate or suspension or revocation of a pre-existing approval. Such an occurrence may
cause our business, financial condition, results of operations and prospects to be harmed.
Additionally, if supply from any third-party manufacturers is delayed or interrupted, there could be a significant
disruption in the supply of our clinical or commercial material. We have agreements in place with our contract
manufacturers pursuant to which we are collaborating on cGMP manufacturing processes and analytical methods for the
manufacture of our AAV product candidates. Therefore, if we are unable to enter into an agreement with our contract
manufacturers to manufacture clinical or commercial material for our product programs, or if our agreement with our
contract manufacturers were terminated, we would have to find suitable alternative manufacturers. This could delay our
or our collaborators’ ability to conduct clinical trials or commercialize our current and future product candidates. The
regulatory authorities also may require additional trials if a new manufacturer is relied upon for commercial production.
Switching manufacturers may involve substantial costs and could result in a delay in our desired clinical and commercial
timelines.
Any contamination in the manufacturing process for our products or product candidates, shortages of raw materials,
cells or reagents, or failure of any of our key suppliers to deliver necessary components could result in delays in our
clinical development or marketing schedules.
Given the nature of biologics manufacturing, there is a risk of contamination. Any contamination could
adversely affect our ability to produce product candidates on schedule and could, therefore, harm our results of
operations and cause reputational damage.
Some of the raw materials required in our manufacturing process are derived from biologic sources. Such raw
materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination,
recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could
adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could adversely
affect our development timelines and our business, financial condition, results of operations and prospects.
Interruptions in the supply of product candidates or inventory loss may harm our operating results and financial
condition.
Our product candidates are manufactured using technically complex processes requiring specialized facilities,
highly specific raw materials and other production constraints. The complexity of these processes, as well as strict
government standards for the manufacture and storage of our product candidates, subjects us to manufacturing risks.
While product candidate batches released for use in clinical trials or for commercialization undergo sample testing, some
defects may only be identified following product release. In addition, process deviations or unanticipated effects of
approved process changes may result in these intermediate products not complying with stability requirements or
specifications. Our product candidates must be stored and transported at temperatures within a certain range. If these
environmental conditions deviate, our product candidates’ remaining shelf-lives could be impaired or their efficacy and
safety could be negatively impacted, making them no longer suitable for use.
The occurrence, or suspected occurrence, of manufacturing and distribution difficulties can lead to lost
inventories and, in some cases, product recalls, with consequential reputational damage and the risk of product liability.
The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales
and delays of new product launches. Any interruption in the supply of finished products or the loss thereof could hinder
our ability to timely distribute our products and satisfy customer demand. Any unforeseen failure in the storage of the
product or loss in supply could delay our clinical trials and, if our product candidates are approved, result in a loss of our
market share and negatively affect our business, financial condition, results of operations and prospects.
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Risks Related to Our Business Operations
We may not be successful in our efforts to identify or discover additional product candidates and may fail to capitalize
on programs or product candidates that may be a greater commercial opportunity, or for which there is a greater
likelihood of success.
The success of our business depends upon our ability to identify, develop and commercialize product candidates
generated through our gene therapy platform. Research programs to identify new product candidates require substantial
technical, financial and human resources. Although VY-AADC is currently in clinical development and our other
product candidates are in preclinical development, we may fail to identify other potential product candidates for clinical
development for several reasons. For example, our research may be unsuccessful in identifying potential product
candidates or our potential product candidates may be shown to have harmful side effects, may be commercially
impracticable to manufacture or may have other characteristics that may make the products unmarketable or unlikely to
receive marketing approval.
Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain
programs or product candidates or for indications that later prove to have greater commercial potential. Our spending on
current and future research and development programs may not yield any commercially viable products. If we do not
accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that
product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been
more advantageous for us to retain sole development and commercialization rights to such product candidate.
Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been
more advantageous to enter into a partnering arrangement.
If any of these events occur, we may be forced to abandon our development efforts with respect to a particular
product candidate or fail to develop a potentially successful product candidate, which could harm our business, financial
condition, results of operations and prospects.
Our future success depends on our ability to retain key members of our management team, and to attract, retain and
motivate qualified personnel.
We are highly dependent on the management, technical, and scientific expertise of principal members of our
management, scientific, and clinical teams including our former President and Chief Executive Officer, Steven M. Paul,
M.D., who now serves as a senior advisor, director, and member of our Science and Technology Committee, and G.
Andre Turenne, who joined us as President and Chief Executive Officer in July 2018. While we have entered into
employment agreements or offer letters with each of our executive officers, any of them could leave our employment at
any time, as all of our employees are “at will” employees. We currently do not have “key person” insurance on any of
our employees. The loss of the services of one or more of our current employees might impede the achievement of our
research, development and commercialization objectives.
Recruiting and retaining other qualified employees, consultants and advisors for our business, including
scientific and technical personnel is also critical to our success. There currently is a shortage of skilled individuals with
substantial gene therapy experience, which is likely to continue. As a result, competition for skilled personnel, including
in gene therapy research and vector manufacturing, is intense and the turnover rate can be high. We may not be able to
attract and retain personnel on acceptable terms, if at all, given the competition among numerous pharmaceutical and
biotechnology companies and academic institutions for individuals with similar skill sets. Our consultants and advisors
may be employed by employers other than us and may have commitments under consulting or advisory contracts with
other entities that may limit their availability to us. In addition, failure to succeed in preclinical or clinical trials or
applications for marketing approval may make it more challenging to recruit and retain qualified personnel. The inability
to recruit, or loss of services of certain executives, key employees, consultants or advisors, may impede the progress of
our research, development and commercialization objectives and could harm our business, financial condition, results of
operations and prospects.
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If we are unable to manage expected growth in the scale and complexity of our operations, our performance may
suffer.
If we are successful in executing our business strategy, we will need to expand our managerial, operational,
financial and other systems and resources to manage our operations, continue our research and development activities
and, in the longer term, build a commercial infrastructure to support commercialization of any of our product candidates
that are approved for sale. We can provide no assurances that we will have sufficient resources in the future to manage
all of our planned programs. Future growth would impose significant added responsibilities on members of management,
may lead to significant added costs, and may divert our management and business development resources. It is likely that
our management, finance, development personnel, systems and facilities currently in place may not be adequate to
support this future growth. Our need to effectively manage our operations, growth and product candidates requires that
we continue to develop more robust business processes and improve our systems and procedures in each of these areas
and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these
tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other
improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants
and commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations
or the regulations applicable in the European Union and other jurisdictions, provide accurate information to the FDA, the
European Commission and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in
the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In
particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and
regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and
regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Such misconduct also could involve the improper use of
information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which
could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct
applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks
or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to
comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial
condition, results of operations and prospects, including the imposition of significant fines or other sanctions.
Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain
marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.
In the United States and some foreign jurisdictions, there have been and continue to be a number of legislative
and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or
delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or
the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval.
We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in
more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators,
may receive for any approved products.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act, which we refer to, collectively, as the ACA. Among the provisions
of the ACA of potential importance to our business and our product candidates are the following:
an annual, non-deductible fee on any entity that manufactures or imports specified branded
prescription drugs and biologic agents;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug
Rebate Program;
expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal
Anti-Kickback Statute, new government investigative powers and enhanced penalties for
noncompliance;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer
50% point-of-sale discounts off negotiated prices;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing
program;
new requirements to report certain financial arrangements with physicians and teaching hospitals;
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 with funding for such research.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These
changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare
payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to
the statute, will stay in effect through 2025 unless additional congressional action is taken, and the American Taxpayer
Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased
the statute of limitations period for the government to recover overpayments to providers from three to five years. These
new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we
may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which
any such product candidate is prescribed or used. Further, there have been several recent U.S. congressional inquiries
and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing,
review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare
and reform government program reimbursement methodologies for drug products.
We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the
future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria,
new payment methodologies and additional downward pressure on the price that we receive for any approved product
and/or the level of reimbursement physicians receive for administering any approved product we might bring to market.
Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our
products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private payors.
With enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22,
2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry
a minimal level of health insurance, became effective January 1, 2019. According to the Congressional Budget Office,
the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in
insurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed to repeal or
repeal and replace portions of the ACA. Although none of these measures has been enacted by Congress to date,
Congress may consider other legislation to repeal and replace elements of the ACA in the future.
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The Trump administration has also taken executive actions to undermine or delay implementation of the ACA.
Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain
provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.
One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant
exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical
devices. The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.
Several state Attorneys General filed suit to stop the Trump administration from terminating the subsidies, but their
request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has
recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the
individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required
under the ACA for plans sold through such marketplaces. Further, on June 14, 2018, U.S. Court of Appeals for the
Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor
payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party
payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.
Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and
enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the
relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform
government program reimbursement methodologies for drug products. For example, there have been several recent U.S.
congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things,
bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug
products. At the federal level, Congress and the Trump administration have each indicated that it will continue to seek
new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Trump
administration issued a plan to lower drug prices. Under this blueprint for action, the Trump administration indicated that
the Department of Health and Human Services will: take steps to end the gaming of regulatory and patent processes by
drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the
inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by
clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on
value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan
sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a
lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update
Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that
prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require
that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug
price increases.
At the state level, individual states are increasingly aggressive in passing legislation and implementing
regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional
health care authorities and individual hospitals are increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.
These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product
pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of
which could limit the amounts that federal and state governments will pay for healthcare products and services, which
could result in reduced demand for our product candidates or additional pricing pressures.
Finally, legislative and regulatory proposals have also been made to expand post-approval requirements and
restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative
changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact
of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by
the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as
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subject us and any future collaborators to more stringent product labeling and post-marketing testing and other
requirements.
Under the Cures Act and the Trump Administration’s regulatory reform initiatives, the FDA’s policies, regulations
and guidance may be revised or revoked and that could prevent, limit or delay regulatory approval of our product
candidates, which would impact our ability to generate revenue.
In December 2016, the Cures Act was signed into law. The Cures Act, among other things, is intended to
modernize the regulation of drugs and spur innovation, but its ultimate implementation is unclear. If we are slow or
unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able
to maintain regulatory compliance, 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 Trump administration may impact our business and industry. Namely, the Trump administration has taken several
executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or
otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as the
implementation of statutes through rulemaking, issuance of guidance, and review and approval of marketing
applications. An under-staffed FDA could result in delays in the FDA’s responsiveness or in its ability to review
submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely
fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive
agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued
in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law.
These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality
provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed
regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive
Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the
total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the
Office of Information and Regulatory Affairs within OMB on February 2, 2017, the Trump administration indicates that
the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance
documents. In addition, on February 24, 2017, President Trump issued an executive order directing each affected agency
to designate an agency official as a “Regulatory Reform Officer” and establish a “Regulatory Reform Task Force” to
implement the two-for-one provisions and other previously issued executive orders relating to the review of federal
regulations, however it is difficult to predict how these requirements will be implemented, and the extent to which they
will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the
FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively
impacted.
We may be subject, directly or indirectly, to federal, state, and foreign healthcare laws and regulations, including
fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply,
or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the
United States, our operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to
various federal and state laws and regulations, including, without limitation, the federal Anti-Kickback Statute, the
federal civil and criminal false claims act, and the Physician Payments Sunshine Act and regulations. These laws will
impact, among other things, our proposed sales, marketing and educational programs. In addition, we may be subject to
data privacy laws by both the federal government and the states in which we conduct our business. Such laws that may
constrain the business or financial arrangements and relationships through which we conduct our operations include, but
are not limited to:
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from
knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for either
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the referral of an individual for, or the purchase, recommendation, leasing or furnishing of, an item or
service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.
This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the
one hand, and prescribers, purchasers and formulary managers on the other. Further, the ACA amended the
intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it;
the federal civil and criminal false claims laws and civil monetary penalty laws, including the civil False
Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or
causing to be presented, claims for payment or approval from Medicare, Medicaid or other government
payors that are false or fraudulent, or making a false statement to avoid, decrease, or conceal an obligation
to pay money to the federal government. The ACA provided and recent government cases against
pharmaceutical and medical device manufacturers support the view that federal Anti-Kickback Statute
violations and certain marketing practices, including off-label promotion, may implicate the civil False
Claims Act;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created
additional federal criminal statutes that prohibit a person from knowingly and willfully executing or
attempting to execute a scheme or from making false or fraudulent statements to defraud any healthcare
benefit program, regardless of the payor (e.g., public or private);
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or
HITECH, and its implementing regulations, and as amended again by the final HIPAA omnibus rule,
Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under
HITECH and the Genetic Information Nondiscrimination Act; Other Modifications to HIPAA, published in
January 2013, which imposes certain requirements relating to the privacy, security and transmission of
individually identifiable health information without appropriate authorization by entities subject to the rule,
such as health plans, health care clearinghouses and health care providers;
federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the
ACA, that requires certain manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific
exceptions, to report annually to Center for Medicare & Medicaid Services, or CMS, information related to
payments and other transfers of value provided to physicians and teaching hospitals, and ownership and
investment interests held by physicians and their immediate family members, by the 90th day of each
subsequent calendar year, and disclosure of such information is made by CMS on a publicly available
website; and
state and/or foreign law equivalents of each of the above federal laws, such as state anti-kickback and false
claims laws that may apply to arrangements and claims involving health care items or services reimbursed
by non-governmental third-party payors; state laws that require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures; state laws that require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the
federal government; and state and foreign laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways and may not have the same
effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available,
it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our
operations are found to be in violation of any of the laws described above or any other government regulations that apply
to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation
in government health care programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational
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harm, diminished profits and future earnings, imprisonment and the curtailment or restructuring of our operations, any of
which could adversely affect our ability to operate our business and our results of operations.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation,
endorsement, purchase, supply, order or use of medicinal products is prohibited in the European Union. The provision of
benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member
States, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover,
agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his
or her competent professional organization and/or the regulatory authorities of the individual European Union Member
States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable
in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public
reprimands, administrative penalties, fines or imprisonment.
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU,
including personal health data, is subject to the EU General Data Protection Regulation, or the GDPR, which became
effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that
process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of
the individuals to whom the personal data relates, providing information to individuals regarding data processing
activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of
data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on
the transfer of personal data to countries outside the EU, including the U.S., and permits data protection authorities to
impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global
revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer
associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for
damages resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive
process that may increase the cost of doing business or require companies to change their business practices to ensure
full compliance. Compliance with the GDPR has been and will continue to be a rigorous and time-intensive process that
has increased and will continue to increase our cost of doing business or require us to change our business practices, and
despite those efforts, there is a risk that we or our collaborators may be subject to fines and penalties, litigation, and
reputational harm in connection with any European activities, which could adversely affect our business, prospects,
financial condition and results of operations.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization
of any product candidates 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 may face an even greater risk if we commercialize any products that we may develop. If we cannot
successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial
liabilities. Regardless of merit or eventual outcome, liability claims may result in:
decreased demand for any product candidates that we may develop;
loss of revenue;
substantial monetary awards to trial participants or patients;
significant time and costs to defend the related litigation;
withdrawal of clinical trial participants;
the inability to commercialize any product candidates that we may develop; and
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injury to our reputation and significant negative media attention.
Although we maintain product liability insurance coverage in the amount of $5.0 million per occurrence and
$5.0 million in the aggregate, and clinical testing liability insurance in the amount of $10.0 million per occurrence and
$10.0 million in the aggregate, this insurance may not be adequate to cover all liabilities that we may incur. We
anticipate that we will need to increase our insurance coverage each time we commence a clinical trial and if we
successfully commercialize any product candidate. Insurance coverage is increasingly expensive. We may not be able to
maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we, our collaborators, or any third-party manufacturers engaged by us or our collaborators fail to comply with
environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs
that could harm our business.
We, our collaborators, and any third-party manufacturers we engage are subject to numerous environmental,
health and safety laws and regulations, including those governing laboratory procedures and the generation, handling,
use, storage, treatment, manufacture, transportation and disposal of, and exposure to, hazardous materials and wastes, as
well as laws and regulations relating to occupational health and safety. Our operations involve the use of hazardous and
flammable materials, including chemicals and biologic and radioactive materials. Our operations also produce hazardous
waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot
eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from
our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our
resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain general liability insurance and workers’ compensation insurance for certain costs and
expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-
related injuries, this insurance may not provide adequate coverage against potential liabilities. We do not maintain
insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or
disposal of biologic, 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, which have tended to become more stringent over time. These current or future laws and
regulations may impair our research, development or production efforts. Failure to comply with these laws and
regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could harm our business,
financial condition, results of operations and prospects.
Further, with respect to the operations of any current or future collaborators or third-party contract
manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety
laws and regulations or properly dispose of wastes associated with our products, we could be held liable for any resulting
damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or
products.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of
operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the
global financial markets. The most recent global financial crisis caused extreme volatility and disruptions in the capital
and credit markets. A severe or prolonged economic downturn, such as the most recent global financial crisis, could
result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise
additional capital when needed on acceptable terms, if at all. This is particularly true in the European Union, which is
recovering from a severe economic crisis. A weak or declining economy could strain our suppliers, possibly resulting in
supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the
foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and
financial market conditions could adversely impact our business.
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Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer
security breaches, which could result in a material disruption of our product development programs.
Our internal computer systems and those of our current and any future collaborators and other contractors or
consultants are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, sabotage, natural
disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material
system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our
operations or the operations of those third parties with which we contract, it could result in a material disruption of our
development programs and our business operations, whether due to a loss of our trade secrets or other proprietary
information or other similar disruptions, and could require a substantial expenditure of resources to remedy. For
example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data. We could also be subject to risks
caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information
maintained in our information systems and networks, including personal information of our employees. Outside parties
may attempt to penetrate our systems or those of the third parties with which we contract or to fraudulently induce our
employees or employees of such third parties to disclose sensitive information to gain access to our data.
The number and complexity of these threats continue to increase over time. Although we develop and maintain
systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate
threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing
monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated.
Despite our efforts, the possibility of these events occurring cannot be eliminated entirely. Although we maintain cyber
risk insurance for certain costs we may incur due to a cyber-related event, this insurance may not provide adequate
coverage against potential liabilities. 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, our competitive position and the market perception of the effectiveness of our security measures could be
harmed, our credibility could be damaged, and the further development and commercialization of our product candidates
could be delayed.
The Tax Cuts and Jobs Act of 2017 could adversely affect our business and financial condition.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017, or TCJA, which
significantly revised the Internal Revenue Code of 1986, as amended. The TCJA, among other things, contains
significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to
a flat rate of 21%, limitation of the tax deduction for net interest expense to 30% of adjusted earnings (except for certain
small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and
elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December
31, 2017 (though any such net operating losses may be carried forward indefinitely), one-time taxation of offshore
earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject
to certain important exceptions), immediate deductions for certain new investments instead of deductions for
depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the
reduction in the corporate income tax rate, the overall impact of the TCJA is uncertain and our business and financial
condition could be adversely affected. In addition, it is uncertain how various states will respond to the TCJA. The
impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our
stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax
consequences of investing in or holding our common stock.
We might not be able to utilize a significant portion of our net operating loss carryforwards.
As of December 31, 2018, we had both federal and state net operating loss carryforwards of $162.9 million and
$163.8 million, respectively, which expire beginning in 2033. These net operating loss carryforwards could expire
unused and be unavailable to offset our future income tax liabilities. Under the newly enacted federal income tax law,
federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility
of such federal net operating losses is limited. It is uncertain how various states will respond to the newly enacted federal
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tax law. If our ability to use our historical net operating loss carryforwards is materially limited, it would harm our future
operating results by effectively increasing our future tax obligations.
Risks Related to the Commercialization of Our Product Candidates
The affected populations for our product candidates may be smaller than we or third parties currently project, which
may affect the addressable markets for our product candidates.
Our projections of the number of people who have the diseases we are seeking to treat, as well as the subset of
people with these diseases who have the potential to benefit from treatment with our product candidates, are estimates
based on our knowledge and understanding of these diseases. The total addressable market opportunity for our product
candidates will ultimately depend upon a number of factors including the diagnosis and treatment criteria included in the
final label, if approved for sale in specified indications, acceptance by the medical community, patient access and
product pricing and reimbursement. Prevalence estimates are frequently based on information and assumptions that are
not exact and may not be appropriate, and the methodology is forward-looking and speculative. The process we have
used in developing an estimated prevalence range for the indications we are targeting has involved collating limited data
from multiple sources. While we believe these sources are reliable, we have not independently verified the data.
Accordingly, the prevalence estimates included in our periodic reports and other reports filed with or furnished to the
SEC should be viewed with caution. Further, the data and statistical information used in such reports, including estimates
derived from them, may differ from information and estimates made by our competitors or from current or future studies
conducted by independent sources.
The use of such data involves risks and uncertainties, and such data is subject to change based on various
factors. Our estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of
the diseases we seek to address. The number of patients with the diseases we are targeting in the United States, the
European Union and elsewhere may turn out to be lower than expected or may not be otherwise amenable to treatment
with our products, or new patients may become increasingly difficult to identify or access, all of which would harm our
results of operations and our business.
If we are unable to establish sales, medical affairs and marketing capabilities or enter into agreements with third
parties to market and sell our product candidates, we may be unable to generate any product revenue.
To successfully commercialize any products that may result from our clinical development programs, we will
need to further develop these capabilities, either on our own or with others. The establishment and development of our
own commercial team or the establishment of a contract sales force to market any products we may develop will be
expensive and time-consuming and could delay any product launch. Moreover, we cannot be certain that we will be able
to successfully develop this capability.
Under our collaboration agreement with Sanofi Genzyme, Sanofi Genzyme has an exclusive option to license,
develop and commercialize ex-U.S. rights to our Friedreich’s ataxia program, a future program to be designated by
Sanofi Genzyme and our Huntington’s disease program. Additionally, we have granted Sanofi Genzyme an incremental
option to co-commercialize our Huntington’s disease program in the United States and to acquire worldwide rights to our
spinal muscular atrophy program. If Sanofi Genzyme exercises any of these options, we would be eligible to receive
specified option fees. In addition, we would be eligible to receive specified milestone payments and royalties for any
product developed in such programs.
Under our collaboration and option agreement with AbbVie related to defective or excess aggregation of tau
protein in the human brain, AbbVie has options to advance certain compounds into further development and to obtain an
exclusive, worldwide license, with the right to sublicense, under certain of our intellectual property rights to develop and
commercialize such compounds and corresponding products for all human diagnostic, prophylactic and therapeutic uses.
If AbbVie exercises any of these options, we would be eligible to receive specified option fees. In addition, we would be
eligible to receive specified development and regulatory milestone payments and tiered royalties on the global
commercial net sales products developed under our tau collaboration.
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Under our collaboration agreement with Neurocrine, Neurocrine will fund the clinical development through the
readout of the RESTORE-1 Phase 2 clinical trial for VY-AADC. After the data readout of the RESTORE-1 Phase 2 trial,
we have the option to either: (1) co-commercialize VY-AADC with Neurocrine in the U.S. under a 50/50 cost- and
profit-sharing arrangement and receive milestones and royalties based on ex-U.S. sales, or (2) grant Neurocrine full
global commercial rights in exchange for milestone payments and royalties based on global sales. Under the terms of the
agreement for the FA Program, Neurocrine will fund the development through the Phase 1 clinical trial of VY-FXN01.
After the data readout of the Phase 1 trial, we have the option to either: (1) co-commercialize VY-FXN01 with
Neurocrine in the U.S. under a 60/40 cost- and profit-sharing arrangement, or (2) grant Neurocrine full worldwide
commercial rights in exchange for milestone payments and royalties based on global sales, subject to Sanofi Genzyme’s
option to commercialize the FA Program in countries outside the United States. Under the terms of the agreement for the
two Discovery Programs, Neurocrine will fund the development of those programs and we have the right to earn
milestone payments and royalties based on global sales. Under the terms of the agreement for the two Discovery
Programs, Neurocrine will fund the development of the programs and we have the right to earn milestone payments and
royalties based on global sales.
Under our collaboration and option agreement with AbbVie directed against pathological species of alpha-
synuclein for the potential treatment of Parkinson’s disease and other synucleinopathies, AbbVie has options to advance
certain compounds into further development and to obtain an exclusive, worldwide license, with the right to sublicense,
under certain of our intellectual property rights to develop and commercialize such compounds and corresponding
products for all human diagnostic, prophylactic and therapeutic uses. If AbbVie exercises any of these options, we would
be eligible to receive specified option fees. In addition, we would be eligible to receive specified regulatory and
commercial milestone payments and tiered royalties on the global commercial net sales products developed under our
alpha-synuclein collaboration.
In the future, we may seek to enter into collaborations regarding other of our product candidates with other
entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such
agreements on favorable terms, if at all. If any current or future collaborators do not commit sufficient resources to
commercialize our products, or we are unable to develop the necessary capabilities on our own, we will be unable to
generate sufficient product revenue to sustain our business. We compete with many companies that currently have
extensive, experienced and well-funded medical affairs, marketing and sales operations to recruit, hire, train and retain
marketing and sales personnel. We also face competition in our search for third parties to assist us with the sales and
marketing efforts of our product candidates. We might face unforeseen costs and expenses associated with creating an
independent sales and marketing organization. Our sales personnel might also face difficulties obtaining access to
physicians or being able to persuade adequate numbers of physicians to use or prescribe our products or selling our
products if we lack complementary products, which could disadvantage us compared to companies with more extensive
product lines. Without an internal team or the support of a third party to perform marketing and sales functions, we may
be unable to compete successfully against these more established companies.
Our efforts to educate the medical community and third-party payors on the benefits of our product candidates
may require significant resources and may never be successful. Such efforts may require more resources than are
typically required due to the complexity and uniqueness of our potential products. If any of our product candidates is
approved but fails to achieve market acceptance among physicians, patients, or third-party payors, we will not be able to
generate significant revenues from such product, which could harm our business, financial condition, results of
operations and prospects.
The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or
maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to
market those products and decrease our ability to generate product revenue.
We expect the cost of a single administration of gene therapy products, such as those we are developing, to be
substantial, when and if they receive regulatory approval. We expect that coverage and reimbursement by government
and private payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of our
product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our
product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare
management organizations, or will be reimbursed by government authorities, private health coverage insurers and other
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third-party payors. Coverage and reimbursement by a third-party payor may depend upon several factors, including the
third-party payor’s determination that use of a product is:
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient and the indication;
convenient and easy-to-administer compared to alternative treatments;
cost-effective compared to alternative treatments; and
neither experimental nor investigational.
No uniform policy requirement for coverage and reimbursement for biopharmaceutical products exists among
third-party payors. Therefore, coverage and reimbursement for such products can differ significantly from payor to
payor. As a result, obtaining coverage and reimbursement for a product from third-party payors is a time-consuming and
costly process that could require us to provide to each different payor supporting scientific, clinical and
cost-effectiveness data. We may not be able to provide data sufficient to gain acceptance with respect to coverage and
reimbursement. If coverage and reimbursement are not available, or are available only at limited levels, we may not be
able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement
amount may not be adequate to realize a sufficient return on our investment including our research, development,
manufacture, sales, and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be
sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the
drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs
and may be incorporated into existing payments for other services. Assuming we obtain coverage for a given product by
a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that
patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their
prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their
prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate
to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement are
critical to new product acceptance. Additionally, there may be significant delays in obtaining coverage and
reimbursement for newly approved drugs and biologics, and coverage may be more limited than the purposes for which
the drug is approved by the FDA or comparable foreign regulatory authorities.
There is significant uncertainty related to third-party coverage and reimbursement of newly approved products.
In the United States, third-party payors, including government payors such as the Medicare and Medicaid programs, play
an important role in determining the extent to which new drugs and biologics will be covered and reimbursed. The
Medicare and Medicaid programs increasingly are used as models for how private payors and government payors
develop their coverage and reimbursement policies. A primary trend in the U.S. healthcare industry and elsewhere is cost
containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the
amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies
provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.
The CMS is responsible for determining whether a product should be approved for coverage and reimbursement
under the Medicare program. It is difficult to predict what CMS will decide with respect to coverage and reimbursement
for novel products such as ours, as there is no body of established practices and precedents for these types of products.
Currently, no gene therapy product has been approved for coverage and reimbursement by the CMS. Moreover,
reimbursement agencies in the European Union may be more conservative than CMS. For example, several cancer drugs
have been approved for reimbursement in the United States and have not been approved for reimbursement in certain
European Union Member States. It is difficult to predict what third-party payors will decide with respect to the coverage
and reimbursement for our product candidates, especially given that the cost of our product candidates is likely to be
very high and pricing of such products is highly uncertain.
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Outside the United States, international operations generally are subject to extensive government price controls
and other market regulations, and increasing emphasis on cost-containment initiatives in the European Union, Canada
and other countries may put pricing pressure on us. In many countries, the prices of medical products are subject to
varying price control mechanisms as part of national health systems. In general, the prices of medicines under such
systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for
medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing
regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets
outside the United States, the reimbursement for our products may be reduced compared with the United States and may
be insufficient to generate commercially reasonable product revenues.
Moreover, increasing efforts by government and third-party payors in the United States and abroad to cap or
reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new
products approved and, as a result, they may not cover or provide adequate payment for our product candidates. Payors
increasingly are considering new metrics as the basis for reimbursement rates, such as average sales price, or ASP,
average manufacturer price, or AMP, and Actual Acquisition Cost. The existing data for reimbursement based on some
of these metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of
setting Medicaid reimbursement rates, and CMS has begun making pharmacy National Average Drug Acquisition Cost
and National Average Retail Price data publicly available on at least a monthly basis. The regulations that govern
marketing approvals, pricing, coverage and reimbursement for new drug and device products vary widely from country
to country. Current and future 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 drug
before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing
approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product
in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly
for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that
country. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial
that compares the cost-effectiveness of our product candidate to other available therapies. Adverse pricing limitations
may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain
marketing approval.
Therefore, it is difficult to project the impact of these evolving reimbursement metrics on the willingness of
payors to cover candidate products that we or our partners are able to commercialize. We expect to experience pricing
pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the
increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on
healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become
intense. As a result, increasingly high barriers are being erected to the entry of new products such as ours.
The commercial success of any of our product candidates will depend upon its degree of market acceptance by
physicians, patients, third-party payors and others in the medical community.
Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or
prohibiting our products. Even with the requisite approvals from the FDA in the United States, EMA in the European
Union and other regulatory authorities internationally, the commercial success of our product candidates will depend, in
part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and our
product candidates in particular, as medically necessary, cost-effective and safe. Any product that we commercialize may
not gain acceptance by physicians, patients, health care payors and others in the medical community. If these products do
not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become
profitable. The degree of market acceptance of gene therapy products and, in particular, our product candidates, if
approved for commercial sale, will depend on several factors, including:
the efficacy and safety of such product candidates as demonstrated in clinical trials;
the potential and perceived advantages of product candidates over alternative treatments;
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the cost of treatment relative to alternative treatments;
the clinical indications for which the product candidate is approved by the FDA or the European
Commission, or other regulatory authorities;
patient awareness of, and willingness to seek, genotyping;
the willingness of physicians to prescribe new therapies;
the willingness of physicians to undergo specialized training with respect to administration of our product
candidates;
the willingness of the target patient population to try new therapies;
the prevalence and severity of any side effects;
product labeling or product insert requirements of the FDA, EMA or other regulatory authorities, including
any limitations or warnings contained in a product’s approved labeling or restrictions on the use of our
products together with other medications;
relative convenience and ease of administration;
the strength of marketing and distribution support;
the timing of market introduction of competitive products;
publicity concerning our products or competing products and treatments; and
sufficient third-party payor coverage and reimbursement.
Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical
trials, market acceptance of the product will not be fully known until after it is launched.
Our gene therapy approach utilizes vectors derived from viruses, which may be perceived as unsafe or may result in
unforeseen adverse events. Negative public opinion and increased regulatory scrutiny of gene therapy may damage
public perception of the safety of our product candidates and adversely affect our ability to conduct our business or
obtain regulatory approvals for our product candidates.
Gene therapy remains a novel technology, with few gene therapy products approved to date in the United States
and the European Union. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy
may not gain the acceptance of the public or the medical community. In particular, our success will depend upon
physicians who specialize in the treatment of genetic diseases targeted by our product candidates, prescribing treatments
that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are
familiar and for which greater clinical data may be available. More restrictive government regulations or negative public
opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may
delay or impair the development and commercialization of our product candidates or demand for any products we may
develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of
leukemia and death seen in other trials using non-AAV gene therapy vectors. Serious adverse events in our clinical trials,
or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to
the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable
public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling
requirements for those product candidates that are approved and a decrease in demand for any such product candidates.
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If we obtain approval to commercialize our product candidates outside of the United States, in particular in the
European Union, a variety of risks associated with international operations could harm our business.
We expect that we will be subject to additional risks in commercializing our product candidates outside the
United States, including:
different regulatory requirements for approval of drugs and biologics in foreign countries;
reduced or loss of protection under our intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues,
and other obligations incident to doing business in another country;
workforce uncertainty in countries where labor unrest is more common than in the United States;
shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
business interruptions resulting from geopolitical actions, including war and terrorism or natural disasters
including earthquakes, typhoons, floods and fires, or from economic or political instability; and
greater difficulty with enforcing our contracts in jurisdictions outside of the United States.
We must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in
which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from
paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official,
political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the
individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed
in the United States to comply with certain accounting provisions requiring the company to maintain books and records
that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and
maintain an adequate system of internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a
recognized problem. In many foreign countries, it is common for others to engage in business practices that are
prohibited by U.S. laws and regulations applicable to us, including the FCPA. In addition, the FCPA presents particular
challenges in the pharmaceutical industry because, in many countries, hospitals are operated by the government, and
doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with
clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA
enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the
United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as
well as certain products and technical data relating to those products. If we expand our presence outside of the United
States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from
developing, manufacturing, or selling certain products and product candidates outside of the United States, which could
limit our growth potential and increase our development costs.
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The failure to comply with laws governing international business practices may result in substantial civil and
criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission
also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting
provisions. Although we expect to implement policies and procedures designed to comply with these laws and policies,
there can be no assurance that our employees, contractors and agents will comply with these laws and policies. If we are
unable to successfully manage the challenges of international expansion and operations, our business and operating
results could be harmed.
Risks Related to Our Intellectual Property
Our rights to develop and commercialize our product candidates are subject to, in part, the terms and conditions of
licenses granted to us by others.
We are reliant upon licenses to certain patent rights and proprietary technology from third parties that are
important or necessary to the development of our technology and products, including technology related to our
manufacturing process and our product candidates. These and other licenses may not provide exclusive rights to use such
intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or
commercialize our technology and products in the future. As a result, we may not be able to prevent competitors from
developing and commercializing competitive products in territories included in all of our licenses. These licenses may
also require us to grant back certain rights to licensors and to pay certain amounts relating to sublicensing patent and
other rights under the agreement.
In some circumstances, particularly in-licenses with academic institutions, we may not have the right to control
the preparation, filing and prosecution of patent applications, or to maintain, enforce or defend the patents, covering
technology that we license from third parties. Therefore, we cannot be certain that these patents and applications will be
prosecuted, maintained and enforced in a manner consistent with the best interests of our business. If our licensors fail to
maintain such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced
or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights
could be adversely affected. In certain circumstances, we have or may license technology from third parties on a non-
exclusive basis. In such instances, other licensees may have the right to enforce our licensed patents in their respective
fields, without our oversight or control. Those other licensees may choose to enforce our licensed patents in a way that
harms our interest, for example, by advocating for claim interpretations or agreeing on invalidity positions that conflict
with our positions or our interest. In addition to the foregoing, the risks associated with patent rights that we license from
third parties will also apply to patent rights we own or may own in the future.
Further, in many of our license agreements we are responsible for bringing any actions against any third party
for infringing on the patents we have licensed. Certain of our license agreements also require us to meet development
thresholds to maintain the license, including establishing a set timeline for developing and commercializing products and
minimum yearly diligence obligations in developing and commercializing the product. Certain of our license agreements
contain “no challenge” clauses which preclude and prevent us from taking any action to limit or narrow the intellectual
property of a licensor. In some cases these limitations extend to any intellectual property of our licensor and not just that
which is licensed to us. Such constraints may limit our ability to develop or commercialize products or to expand such
efforts beyond the scope of any license. Disputes may arise regarding intellectual property subject to a licensing
agreement, including:
the scope of rights granted under the license agreement and other interpretation-related issues;
the extent to which our technology and processes infringe on intellectual property of the licensor that is not
subject to the licensing agreement;
the sublicensing of patent and other rights under our collaborative development relationships;
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our diligence obligations under the license agreement and what activities satisfy those diligence
obligations;
the inventorship or ownership of inventions and know-how resulting from the creation or use of intellectual
property by our licensors and us and our partners; and
the priority of invention of patented technology.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current
licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected
product candidates.
If we fail to comply with our obligations under these license agreements, or we are subject to a bankruptcy, the
licensor may have the right to terminate the license, in which event we would not be able to develop, manufacture, or
market products covered by the license or may face other penalties under the agreements. Termination of these
agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or
reinstated agreements with less favorable terms or cause us to lose our rights under these agreements, including our
rights to important intellectual property or technology.
Furthermore, the research resulting in certain of our licensed patent rights and technology was funded by the
U.S. government. As a result, the government may have certain rights, or march-in rights, to such patent rights and
technology. When new technologies are developed with U.S. government funding, the U.S. government generally
obtains certain rights in any resulting patents, including a non-exclusive, royalty-free license authorizing the U.S.
government, or a third party on its behalf, to use the invention for non-commercial purposes. These rights may permit the
government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third
parties to use our licensed technology. The U.S. government can exercise its march-in rights if it determines that action is
necessary because we fail to achieve practical application of the government-funded technology, because action is
necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S.
industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products
embodying such inventions in the United States. Any exercise by the government, or a third party on its behalf, of such
rights could harm our competitive position, business, financial condition, results of operations and prospects.
If we are unable to obtain and maintain patent protection for our products and technology, or if the scope of the
patent protection obtained is not of sufficient breadth, our competitors could develop and commercialize products and
technology similar or identical to ours, and our ability to successfully commercialize our products and technology
may be adversely affected.
Our success depends, in large part, on our and our licensors’ ability to obtain and maintain patent protection in
the United States and other countries with respect to our product candidates and manufacturing technology. We and our
licensors have sought, and we intend to seek in the future, to protect our proprietary position by filing patent applications
in the United States and abroad related to many of our technologies and product candidates that are important to our
business.
The patent prosecution process is expensive, time-consuming and complex, and we may not have and may not
in the future be able to file, prosecute, maintain, enforce, defend or license all necessary or desirable patent applications
at a reasonable cost or in a timely manner. For example, in some cases, the work of certain academic researchers in the
gene therapy field has entered the public domain, which may compromise our ability to obtain patent protection for
certain inventions related to or building upon such prior work. Consequently, we may not be able to obtain any such
patents to prevent others from using our technology for, and developing and marketing competing products to treat, these
indications. It is also possible that we will fail to identify patentable aspects of our research and development output
before it is too late to obtain patent protection. In some cases, we may be able to obtain patent protection, but such
protections may expire before we commercialize the product protected by those rights, leaving us no meaningful
protection for our products. In other cases, where our intellectual property is being managed by a third-party
collaborator, licensee or partner, that third party may fail to act diligently in prosecuting, maintaining, defending or
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enforcing our patents. Such conduct may result in the failure to maintain or obtain protections, loss of rights, loss of
patent term or, in cases where a third party has acted negligently or inequitably, patents being found unenforceable.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves
complex legal and factual questions and has, in recent years, been the subject of much litigation. As a result, the
issuance, scope, validity, enforceability and commercial value of our and our licensors’ patent rights are highly
uncertain. Our pending and future patent applications may not result in patents being issued which protect our
technology or product candidates or which effectively prevent others from commercializing competitive technologies
and product candidates. In particular, during prosecution of any patent application, the issuance of any patents based on
the application may depend upon our ability to generate additional preclinical or clinical data that support the
patentability of our proposed claims. We may not be able to generate sufficient additional data on a timely basis, or at all.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may
diminish the value, narrow the scope, or eliminate the enforceability of our and our licensors’ patent protection.
We may not be aware of all third-party intellectual property rights potentially relating to our product candidates.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in
the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, only
upon issuance or not at all. Therefore, we cannot be certain that we, or a licensor, were the first to make the inventions
claimed in any owned or any licensed patents or pending patent applications, respectively, or which entity was the first to
file for patent protection until such patent application publishes or issues as a patent. Databases for patents and
publications, and methods for searching them, are inherently limited, so it is not practical to review and know the full
scope of all issued and pending patent applications. As a result, the issuance, scope, validity, enforceability, and
commercial value of our and our licensed patent rights are uncertain.
Even if the patent applications we license or may own in the future do issue as patents, they may not issue in a
form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with
us or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to
circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
In spite of a legal presumption of validity, the issuance of a patent is not conclusive as to its inventorship, scope,
validity, or enforceability which may be challenged in the courts and patent offices in the United States and abroad. Such
challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which
could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit
the duration of the patent protection of our technology and product candidates. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with
sufficient rights to exclude others from commercializing products similar or identical to ours.
Our intellectual property licenses with third parties may be subject to disagreements over contract interpretation,
which could narrow the scope of our rights to the relevant intellectual property or technology, resulting in
termination of our access to such intellectual property, or increase our financial or other obligations to our licensors.
The agreements under which we currently license intellectual property or technology from third parties are
complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any
contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the
relevant intellectual property or technology, result in loss of access, or increase what we believe to be our financial or
other obligations under the relevant agreement, any of which could harm our business, financial condition, results of
operations and prospects.
We may not be successful in obtaining necessary rights to our product candidates through acquisitions and
in-licenses.
We currently have rights to certain intellectual property, through licenses from third parties, to develop our
product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of
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our business likely will depend, in part, on our ability to acquire, in-license or use these proprietary rights. We may be
unable to acquire or in-license any compositions, methods of use, processes or other intellectual property rights from
third parties that we identify as necessary for our product candidates. The licensing or acquisition of third-party
intellectual property rights is a competitive area, and several more established companies may pursue strategies to
license or acquire third-party intellectual property rights that we may consider attractive. These established companies
may have a competitive advantage over us due to their size, capital resources and greater clinical or technical
development and commercialization capabilities. In addition, companies that perceive us to be a competitor 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 terms that would allow us to make an appropriate return on our investment.
We sometimes collaborate with non-profit and academic institutions to accelerate our preclinical research or
development under written agreements with these institutions. Typically, these institutions provide us with an option to
negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such
option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If
we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our
ability to develop our program.
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 be required to expend significant time and resources to redesign
our product candidates or the methods for manufacturing them or to develop or license replacement technology, all of
which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or
commercialize the affected product candidates, which could harm our business significantly.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or
applications will be due to be paid to the United States Patent and Trademark Office, or USPTO, and various
government patent agencies outside of the United States over the lifetime of our licensed patents and/or applications and
any patent rights we may own in the future. We rely on our outside counsel or our licensing partners to pay these fees
due to patent agencies. The USPTO and various non-U.S. government patent agencies require compliance with several
procedural, documentary, fee payment and other similar provisions during the patent application process. We employ
reputable law firms and other professionals to help us comply and we are also dependent on our licensors to take the
necessary action to comply with these requirements with respect to our licensed intellectual property. In many cases, an
inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There
are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction, and may compromise the strength of
other intellectual property in our portfolio. In such an event, potential competitors might be able to enter the market and
this circumstance could harm our business.
On February 1, 2019 the government of Venezuela, in response to certain US sanctions, began to require that
foreign entities pay all official fees, including patent fees (either for pending matters or new petitions), in PETRO, a
“cryptocurrency” created by the Nicolás Maduro administration in February 2018 as a way to collect U.S. dollars while
avoiding American financial sanctions issued under an Executive Order of President Trump on March 19, 2018. The
Executive Order banned transactions involving “any digital currency, digital coin, or digital token, that was issued by,
for, or on behalf of the Government of Venezuela on or after January 9, 2018.” The prohibition is applicable to any U.S.
entity unless exempted by license. We do not hold such a license and therefore may not be able to secure patents in
Venezuela.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be
prohibitively expensive. Our intellectual property rights may vary from country to country and foreign protections could
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be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect
intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be
able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or
importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use
our technologies in jurisdictions where we have not obtained patent protection to develop their own products and,
further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not
as strong as that in the United States. These products may compete with our products and our patents or other intellectual
property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights
in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to
biotechnology products or methods of treatment, which could make it difficult for us to stop the infringement of our
patents or marketing of competing products in violation of our proprietary rights generally. For example, an April 2014
report from the Office of the United States Trade Representative identified a number of countries, including India and
China, where challenges to the procurement and enforcement of patent rights have been reported. Several countries,
including India and China, have been listed in the report every year since 1989. With Brexit, there is uncertainty
associated with obtaining, defending, and enforcing intellectual property rights in the United Kingdom. International
treaties and regulations promulgated as a result of this transition could impede or eliminate our ability to obtain or
maintain meaningful intellectual property rights in the United Kingdom. Proceedings to enforce our patent rights in
foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our
business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of
not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we
initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our
efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or license.
Issued patents covering our technology or product candidates could be found invalid or unenforceable if challenged
in court. We may not be able to protect our trade secrets in court.
If one of our licensing partners or we initiate legal proceedings against a third party to enforce a patent covering
our technology or one of our product candidates, the defendant could counterclaim that the patent covering such
technology or product candidate is invalid or unenforceable. In patent litigation in the United States, defendant
counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an
alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of written
description or non-enablement. Grounds for an unenforceability assertion could be an allegation that an individual
connected with prosecution of the patent, including an inventor, an employee of the company, a collaborator or advisor,
withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution.
Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the
context of litigation. Such mechanisms include pre-issuance submissions, ex parte re-examination, post-grant review,
inter partes review and equivalent proceedings in foreign jurisdictions. Some of these mechanisms may even be
exploited anonymously by third parties. Such proceedings could result in the revocation or cancellation of or amendment
to our patents in such a way that they no longer cover our technology or product candidates. The outcome following
legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we
cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensing partners
were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we
could lose part or, all of the patent protection on one or more of our product candidates or our supporting technology.
Such a loss of patent protection could harm our business.
In addition to the protection afforded by patents, we rely on trade secret protection, nondisclosure, and
confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes
for which patents are difficult to enforce and any other elements of our product candidate discovery and development
processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade
secrets can be difficult to protect. Some courts inside and outside the United States are less willing or unwilling to
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protect trade secrets. We seek to protect our proprietary technology and processes, in part, by entering into
confidentiality agreements with our employees, consultants, scientific advisors, collaborators, contractors, and other third
parties. We cannot guarantee that we have entered into such agreements with each party that may have or have had
access to our trade secrets or proprietary technology and processes. We also seek to preserve the integrity and
confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic
security of our information technology systems. While we have confidence in these individuals, organizations and
systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In
addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the
outcome of which would be uncertain and could harm our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture,
market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights and
intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and
complex litigation regarding patents and other intellectual property rights. We may become party to, or threatened with,
infringement litigation claims regarding our products and technology, including claims from competitors or from non-
practicing entities that have no relevant product revenue and against whom our own patent portfolio may have no
deterrent effect. Moreover, we may become party to, or be threatened with, adversarial proceedings or litigation
regarding intellectual property rights with respect to our product candidates and technology, including ex parte re-
examination, post grant review and inter partes review before the USPTO or foreign patent offices. Third parties may
assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of
the merit of the claim. There is a risk that third parties may choose to engage in litigation with us to enforce or to
otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent
jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could adversely affect
our ability to commercialize our product candidates or any other of our product candidates or technologies covered by
the asserted third-party patents. In order to successfully challenge the validity of any such asserted third-party U.S. patent
in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to
present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court
of competent jurisdiction would invalidate the claims of any such U.S. patent. Similar challenges exist in other
jurisdictions. If we are found to infringe a third-party’s valid and enforceable intellectual property rights, we could be
required to obtain a license from such third-party to continue developing, manufacturing and marketing our product
candidates and technology. However, we may not be able to obtain any required license on commercially reasonable
terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and
other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing
and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and
commercializing the infringing technology or product candidates. In addition, we could be found liable for monetary
damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other
intellectual property right. A finding of infringement could prevent us from manufacturing and commercializing our
product candidates or force us to cease some of our business operations, which could harm our business. In addition, we
may be forced to redesign our product candidates, seek new regulatory approvals, and indemnify third parties pursuant to
contractual agreements. Claims that we have misappropriated the confidential information or trade secrets of third parties
could have a similar negative impact on our business, reputation, financial condition, results of operations and prospects.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their
normal responsibilities.
Competitors may infringe our intellectual property rights or the intellectual property rights of our licensing
partners, or we may be required to defend against claims of infringement. To counter infringement or unauthorized use
claims or to defend against claims of infringement can be expensive and time consuming. Even if resolved in our favor,
litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses
and could distract our technical and management personnel from their normal responsibilities. In addition, there could be
public announcements of the results of hearings, motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
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common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources
available for development activities or any future sales, marketing or distribution activities. We may not have sufficient
financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial
resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and
continuation of patent litigation or other proceedings could adversely affect our ability to compete in the marketplace.
We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed
alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own
intellectual property.
Many of our directors, employees, consultants, and advisors are currently, or were previously, employed at
universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.
Although we try to ensure that these individuals do not use the proprietary information or know-how of others in their
work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation
may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees, consultants, advisors and contractors who may be
involved in the conception or development of intellectual property to execute agreements assigning such intellectual
property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or
develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be
self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third
parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual
property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such
claims, litigation could result in substantial costs and be a distraction to management.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our
products.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent
applications and the enforcement or defense of 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 several significant changes to
U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also may affect
patent litigation. These also include provisions that switched the United States from a “first-to-invent” system to a
“first-inventor-to-file” system, allow third-party submission of prior art to the USPTO during patent prosecution and set
forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under a
first-inventor-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent
application generally will be entitled to the patent on an invention regardless of whether another inventor had made the
invention earlier. The USPTO has promulgated regulations and procedures to govern administration of the Leahy-Smith
Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the
first-inventor-to-file provisions, became effective on March 16, 2013. The Leahy-Smith Act has resulted in an increased
investment in filing applications earlier, and consequently has increased the uncertainties and costs surrounding the
prosecution of our patent applications, and may increase the enforcement or defense of our issued patents, all of which
could harm our business, financial condition, results of operations and prospects.
The administrative tribunal created by the Leahy-Smith Act, known as the Patent Trial and Appeals Board, or
PTAB, may have an impact on the operation of our business in the future. For example, the initial results of patent
challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S. patent
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claims. The availability of the PTAB as a lower-cost, faster and potentially more potent tribunal for challenging patents
could therefore increase the likelihood that our own licensed patents will be challenged, thereby increasing the
uncertainties and costs of maintaining and enforcing them. Moreover, if such challenges occur, we may not have the
right to control the defense. In certain situations, we may be required to rely on our licensor to consider our suggestions
and to defend such challenges, with the possibility that it may not do so in a way that best protects our interests.
We also may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved
in other contested proceedings such as opposition, derivation, reexamination, inter partes review, or post-grant review
proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such
submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to
commercialize our technology or products and compete directly with us, without payment to us, or result in our inability
to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or
strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from
collaborating with us to license, develop or commercialize current or future products.
The patent positions of companies engaged in the development and commercialization of biologics and
pharmaceuticals are particularly uncertain as the courts address issues such as patenting genes or gene products. The
most recent guidance provided under Berkheimer v HP, Inc. (April 19, 2018) and Vanda Pharmaceuticals, Inc. v West-
Ward Pharmaceuticals (June 7, 2018) instruct USPTO examiners on the ramifications of the court rulings as applied to
natural products and principles including all naturally occurring nucleic acids. Patents for certain of our product
candidates contain claims related to specific DNA sequences that are naturally occurring and, therefore, could be the
subject of future challenges made by third parties. In addition, the recent USPTO guidance could make it impossible for
us to pursue similar patent claims in patent applications we may prosecute in the future.
We cannot assure you that our efforts to seek patent protection for our technology and products will not be
negatively impacted by the court decisions referenced above, rulings in other cases or changes in guidance or procedures
issued by the USPTO. We cannot fully predict what impact decisions from the Supreme Court’s decisions in Mayo
Collaborative Services v. Prometheus Laboratories and Molecular Pathology v. Myriad Genetics, Inc. or other
applicable court decisions may have on the ability of life science companies to obtain or enforce patents relating to their
products and technologies in the future. These decisions, the guidance issued by the USPTO and rulings in other cases or
changes in USPTO guidance or procedures could have an adverse effect on our existing patent portfolio and our ability
to protect and enforce our intellectual property in the future.
Moreover, although the Supreme Court has held that isolated segments of naturally occurring DNA are not
patent-eligible subject matter, certain third parties could allege that activities that we may undertake infringe other
gene-related patent claims, and we may deem it necessary to defend ourselves against these claims by asserting
non-infringement and/or invalidity positions, or paying to obtain a license to these claims. In any of the foregoing or in
other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of
patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from
utilizing the patented subject matter. Such outcomes could harm our business, financial condition, results of operations
or prospects.
Outside the United States, other courts have also begun to address the patenting of genetic material. In August
2015, the Australian High Court ruled that isolated genes cannot be patented in Australia. The decision did not address
methods of using genetic material. Any ruling of a similar scope in other countries could affect the scope of our
intellectual property rights. The ambiguities and changing law in all countries as to patenting genetic material may
directly affect our ability to secure and/or maintain patent protection for our products.
If we do not obtain patent term extension and data exclusivity for our product candidates, our business may be
harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates,
one or more of our U.S. patents, which may cover non-gene therapy compounds, may be eligible for limited patent term
extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act. The
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Hatch-Waxman Act permits a patent extension term of up to five years as compensation for patent term lost during the
FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of
14 years from the date of product approval, only one patent may be extended per FDA-approved product, and only those
claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. Further,
certain of our licenses currently or in the future may not provide us with the right to control decisions the licensor or its
other licensees on Orange Book listings or patent term extension decisions under the Hatch-Waxman Act. Thus, if one of
our important licensed patents is eligible for a patent term extension under the Hatch-Waxman Act, and it covers a
product of another licensee in addition to our own product candidate, we may not be able to obtain that extension if the
other licensee seeks and obtains that extension first. However, we may not be granted an extension because of, for
example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within
applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable
requirements.
The Biologics Price Competition and Innovation Act of 2009 provides 12 years of market exclusivity for a
reference biological product. We may not be able to obtain such exclusivity for our products. Moreover, the applicable
time-period or the scope of patent protection afforded during any such extension could be less than we request. If we are
unable to obtain patent term extension or the scope of term of any such extension is less than we request, the period
during which we will have the right to exclusively market our product may be shortened and our competitors may obtain
approval of competing products following our patent expiration, and our revenue could be materially reduced.
If our trademarks and trade name are not adequately protected, then we may not be able to build name recognition in
our markets of interest and our business may be adversely affected.
We own service mark registrations in the USPTO for the marks “VOYAGER THERAPEUTICS” and
“VOYAGER THERAPEUTICS Logo” and European Community trademark registrations for the marks “V-TAG” and
“VOYAGER TRAJECTORY ARRAY GUIDE.” We also own pending trademark applications in the USPTO for the
marks “V-TAG” and the V-TAG Logo. Our trademarks or our trade name may be challenged, infringed, circumvented or
declared generic or found to infringe prior third-party marks. We may not be able to protect our rights in our trademarks
or in our trade name, which we need in order to build name recognition among potential partners or customers in our
markets of interest. It is possible that competitors may adopt trade names or trademarks similar to ours, thereby impeding
our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade
name or trademark infringement claims brought by owners of prior registered trademarks or trademarks that incorporate
variations of our registered or unregistered trademarks or trade name. Over the long term, if we are unable to establish
name recognition based on our trademarks and trade name, then we may not be able to compete effectively, and our
business may be adversely affected. Our efforts to enforce and protect our proprietary rights related to trademarks, trade
secrets, domain names, copyrights and other intellectual property may be ineffective and could result in substantial costs
and diversion of resources and could adversely impact our financial condition or results of operations.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual
property rights have limitations, and such rights may not adequately protect our business or permit us to maintain our
competitive advantage. For example:
others may be able to make gene therapy products that are similar to our product candidates but that are not
covered by the claims of the patents that we own, license or may access in the future;
we, or our license partners or current or future collaborators, might not have been the first to make the
inventions covered by the issued patent or pending patent application that we license or may own in the
future;
we, or our license partners or current or future collaborators, might not have been the first to file patent
applications covering certain of our or their inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies
without infringing our owned or licensed intellectual property rights;
it is possible that our pending patent applications or those that we may own in the future will not lead to
issued patents;
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal
challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have
patent rights and then use the information learned from such activities to develop competitive products for
sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable;
the patents of others may have an adverse effect on our business; and
we may choose not to file a patent for certain inventions, trade secrets or know-how, and a third party may
subsequently file a patent covering such intellectual property.
Should any of these events occur, they could significantly harm our business, financial condition, results of
operations and prospects.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor
will discover them or that our trade secrets will be misappropriated or disclosed.
Because we currently rely on certain third parties to manufacture all or part of our product candidates and to
perform quality testing, and because we collaborate with various organizations and academic institutions for the
advancement of our gene therapy platform and pipeline, we must, at times, share our proprietary technology and
confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by
entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research
agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and
consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights
of the third parties to use or disclose our confidential information. Despite the contractual provisions employed when
working with third parties, the need to share trade secrets and other confidential information increases the risk that such
trade secrets become known by our competitors, are inadvertently incorporated into the technology of others or are
disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how
and trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other
unauthorized use or disclosure would impair our competitive position and may harm our business, financial condition,
results of operations and prospects.
Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through
breach of these agreements, independent development or publication of information including our trade secrets by third
parties. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact
on our business, financial condition, results of operations and prospects.
Risks Related to Ownership of Our Common Stock
Our executive officers, directors, principal stockholders and their affiliates exercise significant influence over our
company.
The holdings of our executive officers, directors, principal stockholders and their affiliates, including
investment funds affiliated with Third Rock Ventures, Bellevue Asset Management, Armistice Capital, UBS
Switzerland, and BlackRock Institutional Trust Company, N.A., represent beneficial ownership, in the aggregate, of
approximately 56% of our outstanding common stock as of December 31, 2018. As a result, these stockholders, if they
116
act together, will be able to influence our management and affairs and the outcome of matters submitted to our
stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or
substantially all of our assets. In addition, this concentration of ownership might adversely affect the market price of our
common stock by:
delaying, deferring or preventing a change of control of us;
impeding a merger, consolidation, takeover or other business combination involving us; or
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of
us.
An active trading market for our common stock may not be sustained.
Our shares of common stock began trading on the Nasdaq Global Select Market on November 11, 2015. Given
the limited trading history of our common stock, there is a risk that an active trading market for our shares will not be
sustained, which could put downward pressure on the market price of our common stock and thereby affect the ability of
our stockholders to sell their shares.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of
our stock, the price of our stock could decline.
The trading market for our common stock will rely in part on the research and reports that industry or financial
analysts publish about us or our business. If no or few analysts maintain coverage of us, the trading price of our stock
would likely decrease. If one or more of the analysts covering our business downgrade their evaluations of our stock, the
price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the
market for our stock, which in turn could cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Persons who were our stockholders prior to our initial public offering continue to hold a substantial number of
shares of our common stock. If such persons sell, or indicate an intention to sell, substantial amounts of our common
stock in the public market, the trading price of our common stock could decline.
In addition, shares of common stock that are either subject to outstanding options or restricted stock units, or
RSUs, or reserved for future issuance under our stock incentive plans will become eligible for sale in the public market
to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities
Act of 1933, as amended, and, in any event, we have filed a registration statement permitting shares of common stock
issued on exercise of options or the settlement of RSUs to be freely sold in the public market. If these additional shares
of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our
common stock could decline. In addition, we have registered on a registration statement on Form S-3 that has been
declared effective, the sale of up to $250.0 million in aggregate of an indeterminate number of shares of common stock
and preferred stock, an indeterminate principal amount of debt securities, and an indeterminate number of warrants. In
November 2017, under such shelf registration statement, we issued and sold 5,175,000 shares of common stock to the
public at an offering price of $12.00 per share, including 675,000 shares of common stock issued upon the full exercise
by the underwriter of their option to purchase additional shares, resulting in net proceeds of $58.0 million after deducting
underwriting discounts, commissions, and offering expenses payable by us. The registration statement also registers the
offering, issuance, and sale of common stock having up to a maximum aggregate offering price of $75.0 million that we
may issue and sell in at-the-market offerings or negotiated transactions under a sales agreement we entered into with
Cowen and Company, LLC on December 1, 2016 pursuant to a sales agreement prospectus that forms a part of the
registration statement. As of February 26, 2019, $75.0 million in shares of common stock remained eligible for sale
under the sales agreement. In January 2019, we executed a stock purchase agreement to sell common stock to Neurocrine
for an aggregate purchase price of approximately $50.0 million. The sale of shares to Neurocrine is subject to customary
closing conditions, including certain antitrust approvals, that have not been satisfied as of the date of this Annual Report
on Form 10-K. As a result, we have not yet issued such shares to Neurocrine, but, if the applicable closing conditions are
met, we expect to do so promptly.
117
Certain holders of our common stock have rights, subject to specified conditions, to require us to file
registration statements covering their shares or to include their shares in registration statements that we may file for
ourselves or other stockholders. Any sales of securities by these stockholders could have a material adverse effect on the
trading price of our common stock.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for
purchasers of our common stock.
The price of our common stock is likely to be volatile and may fluctuate substantially. From January 1, 2018
through December 31, 2018, the sales price of our common stock ranged from a high of $31.91 to a low of $8.30 on the
Nasdaq Global Select Market. As a result of this volatility, our stockholders may not be able to sell their common stock
at or above the price at which they purchased it. The market price for our common stock may be influenced by many
factors, including:
our success in commercializing any product candidates for which we obtain marketing approval;
regulatory action and results of clinical trials of our product candidates or those of our competitors;
the success of competitive products or technologies;
the results of clinical trials of our product candidates;
the results of clinical trials of product candidates of our competitors;
the commencement, termination, and success of our collaborations;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our product candidates or clinical development programs;
the results of our efforts to discover, develop, acquire or in-license additional product candidates or
technologies, the cost of commercializing such product candidates, and the cost of development of any such
product candidates or technologies;
actual or anticipated 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;
the ability to secure third-party reimbursement for our product candidates;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-
K.
If our operating results fall below the expectations of investors or securities analysts for a given period, the
price of our common stock could decline substantially. Furthermore, any fluctuations in our operating results from period
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to period may, in turn, cause the price of our stock to fluctuate substantially. We believe that such comparisons of our
financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action
litigation often has been instituted against that company. We also may face securities class-action litigation if we cannot
obtain regulatory approvals for or if we otherwise fail to commercialize our product candidates. Such litigation, if
instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention
and resources, which could seriously harm our business, financial condition, results of operations and prospects.
We have broad discretion in how we apply our available funds, and we may not use these funds effectively, which
could affect our results of operations and cause our stock price to decline.
Our management will have broad discretion in the application of our existing cash, cash equivalents and
marketable securities and could spend these funds in ways that do not improve our results of operations or enhance the
value of our common stock. The failure by our management to apply our available funds effectively could result in
financial losses that could cause the price of our common stock to decline and delay the development of our product
candidates and preclinical programs. Pending their use, we may invest our available funds in a manner that does not
produce income or that loses value.
We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements
applicable to such companies may make our common stock less attractive to investors.
For so long as we remain an “emerging growth company,” or EGC, as defined in the JOBS Act, we are
permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public
companies that are not EGCs. These exemptions include:
not being required to comply with the auditor attestation requirements in the assessment of our internal
control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002;
not being required to comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm 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
stockholder approval of any golden parachute payments not previously approved.
We may take advantage of these exemptions until we are no longer an EGC. We would cease to be an EGC
upon the earlier of: (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or
more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO, which is
December 31, 2020; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the
previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the
Securities and Exchange Commission, or SEC, which means the first day of the year following the first year in which the
market value of our common stock that is held by non-affiliates exceeds $700.0 million as of June 30th.
We expect to continue to take advantage of some, but not all, of the available exemptions. Even after we no
longer qualify as an emerging growth company, we might still qualify as a smaller reporting company, or SRC, which
would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced
disclosure obligations regarding executive compensation. We cannot predict whether investors will find our common
stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less
attractive as a result, there may be a less active trading market for our common stock and our stock price may be more
volatile and may decline.
119
In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for
complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail
ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new
or revised accounting standards as other public companies that are not emerging growth companies.
We incur increased costs as a result of operating as a public company, and our management is required to devote
substantial time to new compliance initiatives.
As a public company, and particularly after we are no longer an EGC or SRC, we incur significant legal,
accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002,
the Dodd-Frank Wall Street Reform and Consumer Protection Act, and rules subsequently implemented by the SEC and
The Nasdaq Stock Market have imposed various requirements on public companies, including establishment and
maintenance of effective disclosure and financial controls and corporate governance practices. Our management and
other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
regulations have increased our legal and financial compliance costs and have made some activities more time-consuming
and costly. For example, these rules and regulations have made it more difficult and more expensive for us to obtain
director and officer liability insurance, and we have been required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and
retain qualified people to serve on our board of directors, our board committees or as executive officers.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a
report by our management on our internal control over financial reporting. However, while we remain an EGC, we will
not be required to include an attestation report on internal control over financial reporting issued by our independent
registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be
engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and
challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants
and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue
steps to improve control processes as appropriate, validate through testing that controls are functioning as documented
and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our
efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude
within the prescribed timeframe, or at all, that our internal control over financial reporting is effective as required by
Section 404. If we identify one or more material weaknesses in our internal control over financial reporting, it could
result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial
statements.
Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law could make an
acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or
prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including
transactions in which our stockholders might otherwise receive a premium for their shares. These provisions also could
limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the
market price of our common stock. In addition, because our board of directors is responsible for appointing the members
of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or
remove our current management by making it more difficult for stockholders to replace members of our board of
directors. Among other things, these provisions:
establish a classified board of directors such that only one of three classes of members of the board is
elected each year;
allow the authorized number of our directors to be changed only by resolution of our board of directors;
120
limit the manner in which stockholders can remove directors from the board;
establish advance notice requirements for stockholder proposals that can be acted on at stockholder
meetings and nominations to our board of directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions
by our stockholders by written consent;
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could be used
to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock
ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved
by our board of directors; and
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to
cast to amend or repeal certain provisions of our amended and restated certificate of incorporation or
bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the
Delaware General Corporation Law, 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 years after 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 approved in a prescribed
manner.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as
the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders,
which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or employees.
Our amended and restated certificate of incorporation, provides that, unless we consent in writing to an
alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any
derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed
by any of our directors, officers and employees to us or our stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws or
(iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of
Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person
purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to
have consented to this provision of our amended and restated certificate of incorporation. This choice of forum provision
may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it finds favorable for disputes with us
or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and
employees even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the
Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in
or near the State of Delaware. The Court of Chancery may also reach different judgments or results than would other
courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring
the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court
were to find this provision of our amended and restated certificate of incorporation inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings, we may incur additional costs which could have
a material adverse effect on our business, financial condition or results of operations.
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Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital
appreciation, if any, will be our stockholders’ sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future
earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt
agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will
be the sole source of gain for our stockholders for the foreseeable future.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Our corporate headquarters are located in Cambridge, Massachusetts. Our current leased facilities encompass
approximately 74,000 square feet of office and laboratory space, located at 75 Sidney Street and 64 Sidney Street,
Cambridge, Massachusetts.
ITEM 3.
LEGAL PROCEEDINGS
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations,
proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. While
the outcome of these proceedings and claims cannot be predicted with certainty, as of December 31, 2018, we were not
party to any legal matters, claims, or arbitration proceedings that may have, or have had in the recent past, significant
effects on our financial position or profitability. No governmental proceedings are pending or, to our knowledge,
contemplated against us. We are not a party to any material proceedings in which any director, member of senior
management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us
or our subsidiaries.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock has been traded on the Nasdaq Global Select Market under the symbol “VYGR” since
November 11, 2015. Prior to this time, there was no public market for our common stock. On February 22, 2019, the last
reported sale price for our common stock on the Nasdaq Global Select Market was $13.12 per share.
Stockholders
As of February 22, 2019, there were approximately 15 holders of record of our common stock. The actual
number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial
owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also
does not include stockholders whose shares may be held in trust by other entities.
Dividends
We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash
dividends in the foreseeable future.
122
Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of
this Annual Report on Form 10-K.
Unregistered Sales of Equity Securities
On July 16, 2018, we issued to our new President and Chief Executive Officer, G. Andre Turenne, a non-
statutory stock option to purchase an aggregate of 650,000 shares of our common stock at an exercise price of $18.03 per
share. This option was granted as an inducement material to Mr. Turenne’s entry into employment with us and was
issued outside our existing equity compensation plans in accordance with Nasdaq Stock Market Listing Rule 5635(c)(4).
We also intend to issue non-statutory stock options to purchase an aggregate of 338,750 shares of our common stock and
an aggregate of 58,125 restricted stock units, or RSUs, to certain of our future executive officers who have executed
employment agreements but not yet commenced employment with us. These equity awards were granted as inducements
material to the respective officers’ entry into their employment agreements with us and will be issued outside of our
existing equity compensation plans in accordance with Nasdaq Stock Market Listing Rule 5635(c)(4) on such officers’
first day of employment.
We intend to file a registration statement on a Form S-8 to register the shares of common stock underlying the
stock options granted to Mr. Turenne and the stock options and RSUs granted to our future executive officers prior to the
time at which the shares underlying such options become exercisable or such RSUs become settleable.
Additionally, on January 28, 2019, in connection with the Neurocrine Collaboration, we agreed to sell
4,179,728 shares of Common Stock to Neurocrine at a price of $11.9625 per share, for an aggregate purchase price of
approximately $50.0 million. The sale of shares to Neurocrine is subject to customary closing conditions, including
certain antitrust approvals, that have not been satisfied as of the date of this Annual Report on Form 10-K. As a result,
we have not yet issued such shares to Neurocrine, but, if the applicable closing conditions are met, we expect to do so
promptly thereafter. We expect the shares to be issued in reliance on the exemption from registration under Section
4(a)(2) of the Securities Act of 1933, as amended, for a transaction by an issuer not involving any public offering within
the meaning of Section 4(a)(2) thereunder.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
There were no repurchases of shares of common stock made during the year ended December 31, 2018.
ITEM 6.
SELECTED FINANCIAL DATA
The following financial data should be read in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”, the financial statements and related notes, and other financial
information included in this Annual Report on Form 10-K.
123
We have derived the statements of operations data for the years ended December 31, 2018, 2017, and 2016, and
the balance sheet data as of December 31, 2018 and 2017, from our audited financial statements included elsewhere in
this Annual Report on Form 10-K. We have derived the statements of operations data for the years ended December 31,
2015 and 2014, and the balance sheet data as of December 31, 2016, 2015, and 2014, from our audited consolidated
financial statements not included in this Annual Report on Form 10-K. Historical results are not necessarily indicative
of the results to be expected in future periods.
Consolidated statements of operations
data:
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Loss before income taxes
Income tax (benefit) provision
Net loss
Other comprehensive loss
Net unrealized gain (loss) on available-
for-sale-securities, net
Comprehensive loss
Reconciliation of net loss to net loss
attributable to common stockholders:
Net loss
Accretion of preferred stock to
redemption value
Accrued dividends on series A preferred
stock
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders—basic and diluted(1)
Weighted average number of common
shares used in net loss per share attributable
to common stockholders—basic and
diluted(1)
Year ended December 31,
2018
2017
2016
2015
2014
(amounts in thousands, except share and per share data)
$
7,619 $
10,135 $
14,220 $
17,334 $
—
64,905
33,809
98,714
(91,095)
3,310
(683)
(88,468)
(180)
(88,288) $
62,260
19,738
81,998
(71,863)
1,227
(62)
(70,698)
—
(70,698) $
42,249
13,270
55,519
(41,299)
976
182
(40,141)
52
(40,193) $
27,679
9,909
37,588
(20,254)
332
(9,750)
(29,672)
—
8,898
5,469
14,367
(14,367)
(1)
(1,949)
(16,317)
—
(29,672) $ (16,317)
34
(88,254) $
(235)
(70,933) $
199
(39,994) $
(251)
—
(29,923) $ (16,317)
$
$
$
(88,288) $
(70,698) $
(40,193) $
(29,672) $ (16,317)
—
—
—
—
—
—
(7,373)
(1,366)
(1,245)
—
$
$
(88,288) $
(70,698) $
(40,193) $
(38,290) $ (17,683)
(2.75) $
(2.64) $
(1.59) $
(9.14) $
(27.83)
32,065,781
26,803,711
25,302,414
4,191,210
635,448
124
2018
2017
As of December 31,
2016
(in thousands)
2015
2014
Consolidated balance sheet data:
Cash, cash equivalents, and marketable debt
securities
Working capital(2)
Total assets
Redeemable convertible preferred stock
Common stock and additional paid-in capital
Total stockholders’ equity (deficit)
$
155,806 $
130,808
177,029
—
315,630
46,446
169,052 $
155,893
184,477
—
295,051
134,051
174,418 $
164,984
189,566
—
225,989
135,922
224,345 $
171,963
229,457
—
219,147
169,074
7,035
5,884
11,497
21,979
1
(20,830)
(1) See Statements of Operations Data and Note 2 to our financial statements for further details on the calculation of net loss per share, basic and
diluted, attributable to common stockholders and the weighted-average number of shares used in the computation of the per share amounts.
(2) We define working capital as current assets less current liabilities. See our financial statements for further details regarding our current assets and
current liabilities.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations
together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on
Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to
these differences below and elsewhere in this report, including those set forth under Item 1A. “Risk Factors” and under
“Forward-Looking Statements” in this Annual Report on Form 10-K.
We are a clinical-stage gene therapy company focused on developing life-changing treatments for patients
suffering from severe neurological diseases. We focus on neurological diseases where we believe an adeno-associated
virus, or AAV, gene therapy approach that either increases or decreases the production of a specific protein can slow or
reduce the symptoms experienced by patients, and therefore have a clinically meaningful impact. We have built a gene
therapy platform that we believe positions us to be a leading company at the intersection of AAV gene therapy and
severe neurological disease. Our gene therapy platform enables us to engineer, optimize, manufacture and deliver our
AAV-based gene therapies that have the potential to provide durable efficacy following a single administration.
Additionally, we are working to identify novel AAV capsids, which are the outer viral protein shells that
enclose the genetic material of the virus payload. Our team of experts in the fields of AAV gene therapy and
neuroscience first identifies and selects severe neurological diseases that are well-suited for treatment using AAV gene
therapy. We then engineer and optimize AAV vectors for delivery of the virus payload to the targeted tissue or cells. Our
manufacturing process employs an established system that we believe will enable production of high quality AAV
vectors at commercial-scale. In addition to our capsid optimization efforts, we leverage novel delivery paradigms,
established routes of administration, and advances in dosing techniques to optimize delivery of our AAV gene therapies
to target tissues, regions and cell types that are critical to the disease of interest. We believe we can achieve this directly,
with targeted infusions to discrete regions of the brain or spinal cord, or systemically, in conjunction with our novel
capsids.
Our business strategy focuses on discovering, developing, manufacturing and commercializing our gene therapy
programs. As part of this strategy, we have developed core competencies specific to AAV gene therapy development and
manufacturing and are beginning to build our commercial infrastructure. This business strategy also includes business
development activities that may include in-licensing activities or partnering certain programs in specific geographies
with collaborators, as we have demonstrated through our collaborations, including those with Sanofi Genzyme
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Corporation, which we refer to as Sanofi Genzyme, AbbVie Biotechnology Ltd and its affiliates, which we collectively
refer to as AbbVie, and Neurocrine Biosciences, Inc., which we refer to as Neurocrine. Since our inception, our
operations have focused on organizing and staffing our company, business planning, raising capital, establishing our
intellectual property portfolio, determining which neurological diseases to pursue, advancing our product candidates
including delivery and manufacturing, and conducting preclinical studies and clinical trials. We do not have any product
candidates approved for sale and have not generated any revenue from product sales. We have funded our operations
primarily through private placements of redeemable convertible preferred stock, public offerings of our common stock,
our collaboration with Sanofi Genzyme, or the Sanofi Genzyme Collaboration, which commenced in February 2015 and
our collaboration with AbbVie focusing on tau-related disease, or the AbbVie Tau Collaboration, which commenced in
February 2018. Additionally, we recently entered into collaborations with Neurocrine, or the Neurocrine Collaboration,
which we expect to commence in the first half of 2019, and with AbbVie focusing on pathological species of alpha-
synuclein, or the AbbVie Alpha-Synuclein Collaboration.
On November 7, 2017, we completed the sale of 5,175,000 shares of common stock to the public at an offering
price of $12.00 per share, including 675,000 shares of common stock issued upon the full exercise by the underwriters of
their option to purchase additional shares, resulting in net proceeds of $58.0 million after deducting underwriting
discounts, commissions, and offering expenses payable by us.
Since inception, we have incurred significant operating losses. Our net losses were $88.3 million, $70.7 million,
and $40.2 million for the years ended December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018, we
had an accumulated deficit of $269.1 million. We expect to continue to incur significant expenses and operating losses
for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing
activities, as we:
continue investing in our gene therapy platform to optimize vector engineering, manufacturing and dosing
and delivery techniques;
continue to advance our clinical candidate, VY-AADC, as a treatment for Parkinson’s disease through the
ongoing Phase 1b clinical trial and our RESTORE-1 Phase 2 clinical trial;
initiate additional preclinical studies and clinical trials for, and continue research and development of, our
other programs;
conduct joint research and development under our strategic collaborations for the research, development,
and commercialization of certain of our pipeline programs;
continue our process research and development activities, as well as establish our research-grade and
commercial manufacturing capabilities;
identify additional neurological diseases for treatment with our AAV gene therapies and develop additional
programs or product candidates;
work to identify and optimize novel AAV capsids;
develop, obtain and maintain regulatory clearances for devices to deliver our AAV gene therapies;
seek marketing and regulatory approvals for VY-AADC or other product candidates or devices that arise
from our programs that successfully complete clinical development;
maintain, expand, protect and enforce our intellectual property portfolio;
identify, acquire or in-license other product candidates and technologies;
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develop a sales, marketing and distribution infrastructure to commercialize any product candidates for
which we may obtain marketing approval;
expand our operational, financial and management systems and personnel, including personnel to support
our clinical development, manufacturing and commercialization efforts and our operations as a public
company;
increase our product liability and clinical trial insurance coverage as we expand our clinical trials and
commercialization efforts; and
continue to operate as a public company.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from
product sales for the foreseeable future. For the year ended December 31, 2018, we recognized $0.7 million of
collaboration revenue from the Sanofi Genzyme Collaboration and $6.9 million of collaboration revenue from the
AbbVie Tau Collaboration. For additional information about our revenue recognition policy related to the collaborations,
see the section titled “—Critical Accounting Policies and Estimates—Revenue.”
For the foreseeable future, we expect substantially all of our revenue will be generated from our collaboration
agreements with Sanofi Genzyme, AbbVie, Neurocrine, and any other strategic relationships we may enter into. If our
development efforts are successful, we may also generate revenue from product sales.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our
program discovery efforts, and the development of our programs and gene therapy platform, which include:
employee-related expenses including salaries, benefits, and stock-based compensation expense;
costs of funding research performed by third parties that conduct research and development, preclinical
activities, manufacturing and production design on our behalf;
the cost of purchasing lab supplies and non-capital equipment used in designing, developing and
manufacturing preclinical study materials;
consultant fees;
facility costs including rent, depreciation and maintenance expenses; and
fees for maintaining licenses under our third-party licensing agreements.
Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing,
preclinical studies, and clinical trials, are generally recognized based on an evaluation of the progress to completion of
specific tasks using information and data provided to us by our vendors and collaborators.
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At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that
will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever,
material net cash inflows will commence from sales of our product candidates. This is due to the numerous risks and
uncertainties associated with developing such product candidates, including the uncertainty of:
successful enrollment in and completion of clinical trials;
establishing an appropriate safety profile;
establishing commercial manufacturing capabilities or making arrangements with third-party
manufacturers;
receipt of marketing approvals from applicable regulatory authorities;
commercializing the product candidates, if and when approved, whether alone or in collaboration with
others;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product
candidates;
continued acceptable safety profiles of the products following approval; and
retention of key research and development personnel.
A change in the outcome of any of these variables with respect to the development of any of our product
candidates would significantly change the costs, timing and viability associated with the development of that product
candidate.
Research and development activities are central to our business model. We expect research and development
costs to increase significantly for the foreseeable future as our development programs progress, including as we continue
to support the ongoing Phase 1b clinical trial and the separate Phase 1 trial exploring a posterior delivery approach and
continue to enroll the RESTORE-1 Phase 2 clinical trial of VY-AADC as a treatment for Parkinson’s disease, and move
our other product candidates into clinical trials. Additionally, we expect research and development costs associated with
activities under our Strategic Collaborations to increase. There are numerous factors associated with the successful
commercialization of any of our product candidates, including future trial design and various regulatory requirements,
many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future
commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based
compensation, for personnel in executive, finance, accounting, business development, legal and human resource
functions. Other significant costs include corporate facility costs not otherwise included in research and development
expenses, legal fees related to patent and corporate matters and fees for accounting and consulting services.
We anticipate that our general and administrative expenses will increase in the future to support continued
research and development activities, including the RESTORE-1 Phase 2 clinical trial of VY-AADC, the expanded efforts
in connection with our Strategic Collaborations, and the ongoing research and development activities and initiation of
clinical trials for our other product candidates. These increases will likely include increased costs related to the hiring of
additional personnel and fees to outside consultants. We also anticipate increased expenses associated with being a
public company, including costs for audit, legal, regulatory, and tax-related services, director and officer insurance
premiums, business development activities, and investor relations costs.
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Other Income (Expense)
Other income (expense) consists primarily of the gain (loss) on the equity securities investment in MRI
Interventions.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our consolidated financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these consolidated financial statements requires us to make judgments and
estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known
trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our
judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in
estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.
While our significant accounting policies are described in more detail in the notes to our consolidated financial
statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used
in the preparation of our financial statements require the most significant judgments and estimates.
Revenue Recognition – ASC 606
As of December 31, 2018, our revenue was generated from the Sanofi Genzyme Collaboration and the AbbVie
Tau Collaboration. We recognize revenue in accordance with Financial Accounting Standards Board, or FASB,
Accounting Standards Codification, or ASC, Topic 606 Revenue from Contracts with Customers, or ASC 606. Effective
January 1, 2018, we adopted the provisions of ASC 606 using the modified retrospective transition method. Under this
method, we recorded the cumulative effect of initially applying the new standard to all contracts as of the date of
adoption.
We enter into collaboration agreements which are within the scope of ASC 606, under which we license rights
to certain of our product candidates and perform research and development services. The terms of these arrangements
typically include payment of one or more of the following: non-refundable, upfront fees; reimbursement of research and
development costs; development, regulatory and commercial milestone payments; and royalties on net sales of licensed
products.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services,
in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of
ASC 606, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii)
determination of whether the promised goods or services are performance obligations including whether they are distinct
in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable
consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when
(or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that
we will collect consideration we are entitled to in exchange for the goods or services we transfer to the customer.
The promised goods or services in our arrangement typically consist of license rights to our intellectual property
or research and development services. We provide options to additional items in the contracts, which are accounted for
as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the
customer. We evaluate the customer options for material rights, or options to acquire additional goods or services for free
or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a
separate performance obligation at the outset of the arrangement. Performance obligations are promised goods or
services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the
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customer can benefit from the good or service on its own or together with other readily available resources and (ii) the
promised good or service is separately identifiable from other promises in the contract. In assessing whether promised
goods or services are distinct, we consider factors such as the stage of development of the underlying intellectual
property, the capabilities of the customer to develop the intellectual property on their own or whether the required
expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the
contract.
We estimate the transaction price based on the amount expected to be received for transferring the promised
goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the
inception of each arrangement that includes variable consideration, we evaluate the amount of potential payment and the
likelihood that the payments will be received. We utilize either the most likely amount method or expected amount
method to estimate the amount expected to be received based on which method best predicts the amount expected to be
received. The amount of variable consideration which is included in the transaction price may be constrained, and is
included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the
cumulative revenue recognized will not occur in a future period.
Our contracts often include development and regulatory milestone payments which are assessed under the most
likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone
payments that are not within our control or the licensee’s control, such as regulatory approvals, are not considered
probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the
probability of achievement of such development milestones and any related constraint, and if necessary, adjust our
estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which
would affect collaboration revenues in the period of adjustment. To date, we have not recognized any consideration
related to the achievement of development, regulatory, or commercial milestone revenue resulting from any of our
collaboration arrangements.
For arrangements that include sales-based royalties, including milestone payments based on the level of sales,
and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i)
when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been
allocated has been satisfied (or partially satisfied). To date, we have not recognized any consideration related to sales-
based royalty revenue resulting from any of our collaboration arrangements.
We allocate the transaction price based on the estimated stand-alone selling price of each of the performance
obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each
performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price
for service obligations, which may include other comparable transactions, pricing considered in negotiating the
transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we
utilize comparable transactions, industry standards for product development and clinical trial success probabilities and
estimates of option exercise likelihood. Variable consideration is allocated specifically to one or more performance
obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance
obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the
satisfaction of each performance obligation.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred
for the related goods or services. For performance obligations which consist of licenses and other promises, we utilize
judgment to assess the nature of the combined performance obligation to determine whether the combined performance
obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We
evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related
revenue recognition.
Upfront payments and fees are recorded as deferred revenue upon receipt or when due until we perform our
obligations under these arrangements. Amounts are recorded as accounts receivable when our rights to consideration are
unconditional.
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Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses as
of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our
personnel to identify services that have been performed on our behalf and estimating the level of service performed and
the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.
The majority of our service providers invoice us monthly in arrears for services performed or when contractual
milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and
circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers
and make adjustments if necessary. The significant estimates in our accrued research and development expenses include
the costs incurred for services performed by our vendors in connection with research and development activities for
which we have not yet been invoiced.
We record our expenses related to research and development activities on our estimates of the services received
and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our
behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result
in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of
services provided and result in a prepayment of the research and development expense. In accruing service fees, we
estimate the time period over which services will be performed and the level of effort to be expended in each period. If
the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or
prepaid accordingly. Non-refundable advance payments for goods and services that will be used in future research and
development activities are expensed when the activity has been performed or when the goods have been received rather
than when the payment is made.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our
estimates of the status and timing of services performed differ from the actual status and timing of services performed, it
could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no
material differences between our estimates of such expenses and the amounts actually incurred.
Stock-based Compensation
We account for our stock-based compensation awards in accordance with ASC Topic 718, Compensation—
Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and directors, including
grants of restricted stock and stock options, to be recognized as expense in the statements of operations based on their
grant date fair values. Grants of restricted stock and stock options to other service providers, referred to as non-
employees, are required to be recognized as expense in the statements of operations based on their vesting date fair
values. We estimate the fair value of options granted using the Black-Scholes option pricing model. We use the fair
value of our common stock to determine the fair value of restricted stock awards.
The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including
(a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and
(d) expected dividends. Due to a lack of company-specific historical and implied volatility data, we have based the
estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded,
blended with the most recent period of historic volatility of our common stock. The historical volatility is calculated
based on a period of time commensurate with the expected term assumption. The computation of expected volatility is
based on the historical volatility of a representative group of companies with similar characteristics to us, including stage
of product development and life science industry focus. We use the simplified method as prescribed by the SEC Staff
Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees and
directors as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the
expected term. For options granted to non-employees, we utilize the contractual term of the arrangement as the basis for
the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with
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the expected term of the stock options. The expected dividend yield is assumed to be zero as we have never paid
dividends and do not have current plans to pay any dividends on common stock.
The fair value of each option issued to employees and directors was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
Year ended December 31,
2018
2017
2016
2.8 %
— %
6.0
74.4 %
2.0 %
— %
6.0
73.7 %
1.5 %
— %
6.0
73.1 %
The fair value of each option issued to non-employees was estimated at each vesting and reporting date using
the Black-Scholes option pricing model. The reporting date fair value was determined using the following
weighted-average assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
2018
As of December 31,
2017
2.6 %
— %
7.6
73.2 %
2.4 %
— %
8.5
76.2 %
2016
2.1 %
— %
9.1
83.3 %
We expense the fair value of our stock-based compensation awards to employees and directors on a straight-line
basis over the associated service period, which is generally the period in which the related services are received. Stock-
based compensation awards to non-employees are adjusted through stock-based compensation expense at each reporting
period end to reflect the current fair value of such awards and are expensed on a straight-line basis.
We record the expense for stock-based compensation awards subject to performance-based milestone vesting
over the remaining service period when management determines that achievement of the milestone is probable.
Management evaluates when the achievement of a performance-based milestone is probable based on the expected
satisfaction of the performance conditions as of the reporting date. Management concluded that the achievement of the
performance milestone for one of the three performance-based awards had been met during 2016. Accordingly, stock-
based compensation expense in the amount of $0.3 million, $1.4 million, and $1.1 million was recorded in the years
ended December 31, 2018, 2017, and 2016, respectively.
Stock-based compensation totaled approximately $15.7 million, $9.1 million, and $6.3 million the years ended
December 31, 2018, 2017, and 2016 respectively. As of December 31, 2018, we had $0.1 million and $26.1 million of
unrecognized compensation expense related to restricted stock awards and stock option awards, respectively, which are
expected to be recognized over weighted-average remaining vesting periods at the time the milestones have been met
and approximately 2.78 years, respectively. We expect the impact of our stock-based compensation expense for
restricted stock and stock options granted to employees, directors and other service providers to grow in future periods
due to the potential increases in the value of our common stock and headcount.
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Results of Operations
Comparison of the years ended December 31, 2018 and 2017:
The following table summarizes our results of operations for the years ended December 31, 2018 and 2017,
respectively, together with the changes in those items in dollars:
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Other income:
Interest income
Other expense
Total other income
Loss before income taxes
Income tax provision
Net loss
Collaboration Revenue
Year ended
December 31,
2018
2017
(in thousands)
Change
$
7,619 $
10,135 $
(2,516)
64,905
33,809
98,714
62,260
19,738
81,998
3,310
(683)
2,627
(88,468)
(180)
(88,288) $
1,227
(62)
1,165
(70,698)
—
(70,698) $
$
2,645
14,071
16,716
2,083
(621)
1,462
(180)
(180)
Collaboration revenue was $7.6 million for the year ended December 31, 2018, and $10.1 million for the year
ended December 31, 2017. Collaboration revenue included amounts related to the Sanofi Genzyme Collaboration in
addition to research services related to the AbbVie Tau Collaboration, which commenced in February 2018. The
decrease in revenue is primarily related the recognition of amounts related to our Parkinson’s program under the Sanofi
Genzyme Collaboration, or the PD Option, in the year ended December 31, 2017, the adoption of ASC 606 as of January
1, 2018, which resulted in the use of a proportional performance method in 2018 as compared to the use of straight-line
method in 2017, as well as changes in estimates of costs to reach proof of principle on our Huntington’s disease and
Friedreich’s ataxia programs. These reductions were offset by revenue recognized on research services performed under
the AbbVie Tau Collaboration.
We recognized $5.5 million of revenue in the year ended December 31, 2017 related to the portion of the
upfront consideration under the Sanofi Genzyme Collaboration which had been allocated to Sanofi Genzyme’s rights
related to the PD Option. In the year ended December 31, 2017, Sanofi Genzyme decided not to exercise the PD Option,
and we recognized all amounts allocated to their option at that time. Additionally, effective January 1, 2018, we adopted
the provisions of ASC 606 for revenue recognition.
Research and Development Expense
Research and development expense increased by $2.6 million from $62.3 million for the year ended
December 31, 2017 to $64.9 million for the year ended December 31, 2018. The following table summarizes our
research and development expenses, for the years ended December 31, 2018 and 2017:
External research and development expenses
Employee and contractor related expenses
$
28,890 $
26,075
33,816 $
20,919
(4,926)
5,156
Year ended
December 31,
2018
2017
(in thousands)
Change
133
Facility, technology, and other expenses
License fees
Total research and development expenses
$
9,305
635
64,905 $
6,705
820
62,260 $
2,600
(185)
2,645
The change in research and development expense for the year ended December 31, 2018 was primarily
attributable to the following:
approximately $5.2 million for increased research and development employee compensation costs as we
continue to increase research and development headcount to support our ongoing development of our
clinical and pre-clinical programs and platform;
approximately $2.6 million for increased facility and other costs including rent, depreciation, maintenance
and other expenses due to the additional space leased;
offset by approximately $4.8 million for decreased costs of funding research performed by third parties that
conduct research and development. This reduction includes a decrease in preclinical activities, offset by an
increase in clinical and manufacturing activities; further decreased by a reduction of approximately
$0.1 million attributable to in-kind research and development services incurred by Sanofi Genzyme and
provided to us under the Sanofi Genzyme Collaboration; and approximately $0.2 million related to
decreased licensing costs.
General and Administrative Expense
General and administrative expense increased by $14.1 million from $19.7 million for the year ended
December 31, 2017 to $33.8 million for the year ended December 31, 2018. The change in general and administrative
expense was primarily attributable to the following:
approximately $9.6 million for increased employee compensation costs as we increase our administrative
headcount to support our growing business. The increase included the recognition of $5.4 million of stock-
based compensation related to the retirement agreement with our former Chief Executive Officer, Dr.
Steven Paul;
approximately $2.7 million for increased legal costs for general, business development, and intellectual
property support; and
approximately $1.7 million for increased facility and other costs including rent, depreciation, maintenance
and other expenses.
Other Income, Net
Other income of approximately $2.6 million and $1.2 million was recognized in the years ended
December 31, 2018 and 2017 related to interest income on marketable securities balances offset by losses on our
warrants to purchase shares of common stock and our common stock investment in MRI Interventions, Inc., or MRIC.
The increase in other income is largely a result of higher cash balances year over year.
Income Tax
We recorded an income tax provision of $0.2 million related to our alternative minimum tax, or AMT, liability
resulting in an income tax payable of $0.1 million for the year ended December 31, 2017. The payable was due to the
recognition of deferred revenue related to the Sanofi Genzyme Collaboration for income tax purposes. There was no
income tax payable for the year ended December 31, 2018.
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Comparison of year ended December 31, 2017 and 2016:
The following table summarizes our results of operations for the year ended December 31, 2017 and 2016,
respectively, together with the changes in those items in dollars:
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Other income:
Interest income
Other (expense) income, net
Total other income
Loss before income taxes
Income tax provision
Net loss
Collaboration Revenue
Year ended
December 31,
2017
2016
(in thousands)
Change
$
10,135 $
14,220 $
(4,085)
62,260
19,738
81,998
42,249
13,270
55,519
1,227
(62)
1,165
(70,698)
—
(70,698) $
976
182
1,158
(40,141)
52
(40,193) $
$
20,011
6,468
26,479
251
(244)
7
(30,557)
(52)
(52)
Collaboration revenue was $10.1 million for the year ended December 31, 2017, and $14.2 million for the year
ended December 31, 2016, all of which related to the Sanofi Genzyme Collaboration. In October 2017, Sanofi Genzyme
decided not to exercise its option for the ex-U.S. rights to the PD Option. Therefore, in the year ended December 31,
2017, we recognized $5.5 million of revenue related to the portion of the upfront consideration which had been allocated
to the PD Option. In addition, revenue recognized during the year ended December 31, 2017 and 2016 includes amounts
recognized related to consideration allocated to research and development services for various programs under the Sanofi
Genzyme Collaboration. During 2017 we reassessed the estimated period of performance for each of the units of
accounting and determined that the estimated period would be extended for two units of accounting. During 2016 we
deprioritized the development of VY-SMN101. These adjustments were made on a prospective basis and resulted in
decreases in revenue recognized by $2.1 million and $9.5 million, respectively, for the year ended December 31, 2017.
Research and Development Expense
Research and development expense increased by $20.0 million from $42.2 million for the year ended
December 31, 2016 to $62.2 million for the year ended December 31, 2017. The following table summarizes our
research and development expenses, for the year ended December 31, 2017 and 2016, respectively:
External research and development expenses
Employee and contractor related expenses
Facility, technology, and other expenses
License fees
$
Total research and development expenses
$
Year ended
December 31,
2017
2016
(in thousands)
Change
33,816 $
20,919
6,705
820
62,260 $
20,413 $
15,530
4,553
1,753
42,249 $
13,403
5,389
2,152
(933)
20,011
135
The change in research and development expense was primarily attributable to research and development, and
included the following:
approximately $14.5 million for increased costs of funding research performed by third parties that conduct
research and development, preclinical and clinical activities and manufacturing and production design on
our behalf and increased purchases of lab supplies and non-capital equipment used in designing, developing
and manufacturing preclinical study materials, and an additional expense of approximately $1.1 million
attributable to in-kind research and development services incurred by Sanofi Genzyme and provided to us
under the Sanofi Genzyme Collaboration;
approximately $5.4 million for increased research and development employee-related and consultant
compensation costs;
approximately $2.2 million for increased facility and other costs including rent, depreciation, maintenance
and other expenses due to the additional leased space dedicated to research and development efforts at 64
Sidney Street and 75 Sidney Street; and
offset by approximately $0.9 million for decreased intellectual property and license fees.
General and Administrative Expense
General and administrative expense increased by $6.4 million from $13.3 million for the year ended
December 31, 2016 to $19.7 million for the year ended December 31, 2017. The change in general and administrative
expense was primarily attributable to the following:
approximately $3.5 million for increased employee compensation cost due to increases in headcount and
stock-based compensation;
approximately $0.8 million for increased facility and other costs including rent, depreciation, maintenance
and other expenses; and
approximately $2.1 million for increased legal and intellectual property expenses.
Other Income, Net
Other income of approximately $1.2 million was recognized in the years ended December 31, 2017 and 2016
related to interest income on marketable securities balances offset by losses on our warrants to purchase shares of
common stock of MRIC.
Income Tax
We recorded an income tax provision of $0.2 million related to our alternative minimum tax, or AMT, liability
resulting in an income tax payable of $0.1 million for the year ended December 31, 2016. The payable was due to the
recognition of deferred revenue related to the Sanofi Genzyme Collaboration for income tax purposes. There was no
income tax payable for the year ended December 31, 2017. Our overall income tax provision was offset by an income tax
benefit recorded to continuing operations of $0.1 million associated with the recognition of the corresponding income tax
associated with unrealized gains included in other comprehensive income. The net tax effect resulted in an overall
income tax provision recorded to continuing operations of $0.1 million. We recorded no income tax provision (benefit)
for the year ended December 31, 2017.
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Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations primarily through private placements of redeemable convertible preferred stock,
public offerings of our common stock, the Sanofi Genzyme Collaboration which commenced in February 2015, and the
AbbVie Tau Collaboration which commenced in February 2018. Additionally, in January 2019, we entered into a
Collaboration and License Agreement with Neurocrine Biosciences, Inc., or the Neurocrine Collaboration, which we
expect to commence in the first half of 2019, and in February 2019, we entered into a Collaboration Agreement with
AbbVie Ireland Unlimited Company, or the AbbVie Alpha-Synuclein Collaboration. Under the Neurocrine
Collaboration, we will receive an upfront payment of $165.0 million, including a $50.0 million investment through the
purchase of 4,179,728 shares of our common stock in a private placement, and under the AbbVie Alpha-Synuclein
Collaboration, we will receive an upfront payment of $65.0 million.
On November 16, 2015, we closed our IPO whereby we sold 5,750,000 shares of common stock, at a public
offering price of $14.00 per share, including 750,000 shares of common stock issued upon the full exercise by the
underwriters of their option to purchase additional shares, resulting in net proceeds to us of $72.9 million after deducting
underwriting discounts and commissions and offering expenses payable by us. On November 7, 2017, we sold 5,175,000
shares of common stock to the public at an offering price of $12.00 per share, including 675,000 shares of common stock
issued upon the full exercise by the underwriters of their option to purchase additional shares, resulting in net proceeds to
us of $58.0 million after deducting underwriting discounts, commissions, and offering expenses payable by us.
As of December 31, 2018, we had cash, cash equivalents, and marketable debt securities of $155.8 million.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2018,
2017, and 2016:
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
$
Net increase (decrease) in cash and cash equivalents $
Cash Flows from Operating Activities
2018
Year ended
December 31,
2017
(in thousands)
2016
(15,887) $
26,467
4,749
15,329 $
(61,350) $
(3,681)
59,920
(5,111) $
(42,482)
47,721
514
5,753
Net cash used in operating activities was $15.9 million during the year ended December 31, 2018 compared to
$61.4 million during the year ended December 31, 2017. The decrease in cash used for operating activities was primarily
due to the receipt of $69.0 million related to the AbbVie Tau Collaboration in 2018, offset by increases in operating
expenses due to increased research and development activities, as well as higher general and administrative expenses as a
result of a higher headcount, legal fees, and other costs year over year. The decrease in cash used in operating activities
was also offset by an increase in prepaid expenses and other current assets as well as a decrease in accrued expenses.
Net cash used in operating activities was $61.4 million during the year ended December 31, 2017 compared to
$42.5 million of cash used in operating activities during the year ended December 31, 2016. The increase in cash used
for operating activities was primarily due to an increase in operating expenses. The increase in operating expenses is
primarily due to increased research and development activities as we advance our clinical and preclinical programs, as
well as higher general and administrative expenses to support the increased research and development operations.
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Cash Flows from Investing Activities
Net cash provided by investing activities was $26.5 million during the year ended December 31, 2018. The cash
provided by investing activities for the year ended December 31, 2018 was primarily due to proceeds from maturities of
marketable securities of $364.0 million offset by purchase of marketable securities of $333.2 million and purchases of
property and equipment of $4.9 million.
Net cash used in investing activities was $3.7 million during the year ended December 31, 2017. The cash used
in investing activities for the year ended December 31, 2017 was due to purchases of property and equipment of $4.0
million, offset by net proceeds from maturities and purchases of marketable securities of $0.3 million.
Net cash provided by investing activities was $47.7 million during the year ended December 31, 2016. The cash
provided by investing activities for the year ended December 31, 2016 was due to proceeds from maturities of
marketable securities of $165.1 million, partially offset by purchases of marketable securities of $112.4 million and
purchases of property and equipment of $5.0 million.
Cash Flows from Financing Activities
Net cash provided by financing activities was $4.7 million during the year ended December 31, 2018 related to
proceeds from exercises of stock options, and purchases by our employees of our common stock under our Employee
Stock Purchase Plan.
Net cash provided by financing activities was $59.9 million during the year ended December 31, 2017 and was
largely driven by the $58.0 million of net proceeds from our sale of common stock in November 2017 and proceeds from
exercises of stock options.
Net cash provided by financing activities was $0.5 million during the year ended December 31, 2016 and
consisted of proceeds from exercises of stock options.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the
research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product
candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant
expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and
distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur additional costs
associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in
connection with our continuing operations. If we are unable to raise capital or enter into business development
transactions when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and
development programs or any future commercialization efforts.
Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable debt
securities, as well as amounts expected from the upfront payment and expected reimbursement of development costs
from the Neurocrine Collaboration Agreement and the upfront payment from the AbbVie Alpha-Synuclein Collaboration
Agreement entered into in 2019, will enable us to fund our operating expenses and capital expenditure requirements into
mid-2022. Our future capital requirements will depend on many factors, including:
the scope, progress, results, and costs of product discovery, preclinical studies and clinical trials for our
product candidates and any required companion devices;
the scope, progress, results, costs, prioritization, and number of our research and development programs;
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the progress and status of our strategic collaborations, including any research and development costs for
which we are responsible, the potential exercise by our collaboration partners of options to develop or
license certain products and product candidates, and our potential receipt of future milestone payments and
royalties from our collaboration partners;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, preclinical development
and clinical trial costs, or the achievement of milestones or occurrence of other developments that trigger
payments, under any other collaboration agreement to which we might become a party;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to establish and maintain collaboration, distribution, or other marketing arrangements for our
product candidates on favorable terms, if at all;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies or acquire or invest
in other businesses, such as our investment in MRIC;
the costs related to evaluating possible alternative devices that may be useful in the delivery of our product
candidates, including our ongoing development of V-TAG;
the costs of securing manufacturing arrangements for pre-commercial and commercial production;
the level of product sales from any product candidates for which we obtain marketing approval in the
future; and
the costs of establishing or contracting for sales, manufacturing, marketing, distribution, and other
commercialization capabilities if we obtain regulatory approvals to market our product candidates.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a
time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary
data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if
approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty
payments under our collaboration agreements, will be derived from sales of products that may not be commercially
available for many years, if at all. Accordingly, we will need to continue to rely on additional financing and business
development transactions to achieve our business objectives. Adequate additional financing may not be available to us
on acceptable terms, or at all.
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to
finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and
licensing arrangements. To the extent that we raise additional capital through the sale of equity or equity-linked
securities, including convertible debt, our stockholders’ ownership interests will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders
of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, obtaining
additional capital, acquiring or divesting businesses, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or
product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds
139
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
Contractual Obligations
The following table summarizes our significant contractual obligations as of payment due date by period at
December 31, 2018:
Total
Less Than
1 Year
More than
1 to 3 Years 3 to 5 Years 5 Years
(in thousands)
Operating lease commitments(1)
$ 40,844 $ 4,325 $
9,594 $ 10,142 $ 16,783
(1) We lease office space at 75 Sidney Street and 64 Sidney Street in Cambridge, Massachusetts under non-cancelable
operating leases that expire in November 2026.
In February 2018, we executed a second amendment for additional space located at 75 Sidney Street in
Cambridge, Massachusetts, concurrent to the existing leases with terms going through December 2024. In June 2018, we
executed a third amendment for additional space located at 75 Sidney Street, including an extension to the term through
November 2026. Additionally, we executed an amendment to the lease at 64 Sidney Street to extend the term through
November 2026.
We enter into agreements in the normal course of business with clinical research organizations, contract
manufacturing organizations, and institutions to license intellectual property. We have not included these future
payments in the table of contractual obligations above since the contracts are cancelable at any time by us, generally
upon 30 to 90 days prior written notice.
Our agreements to license intellectual property include potential milestone payments that are dependent upon
the development of products using the intellectual property licensed under the agreements and contingent upon the
achievement of clinical trial or regulatory approval milestones. We may also be required to pay annual maintenance fees
or minimum amounts payable ranging from low-four digits to low five-digits depending upon the terms of the applicable
agreement.
In February 2015, we entered into an agreement in connection with the Sanofi Genzyme Collaboration, or the
Sanofi Genzyme Collaboration Agreement, pursuant to which we granted Sanofi Genzyme an exclusive option to
license, develop, and commercialize (i) ex-U.S. rights to several programs including our programs for Parkinson’s
disease and Friedreich’s ataxia, (ii) ex-U.S. rights and U.S. co-commercialization rights to our program for Huntington’s
disease, and (iii) worldwide rights to our program for Spinal Muscular Atrophy. Sanofi Genzyme’s option for each
program is triggered following the completion of the first proof of principle human clinical study on a program-by-
program basis.
Subject to specified exceptions, we are solely responsible for all costs incurred in connection with the
development of each of the covered programs prior to Sanofi Genzyme’s exercise of its option for such program. Upon
Sanofi Genzyme’s exercise of its option to license most of the programs pursuant to our collaboration, we will have sole
responsibility for the development and commercialization of such product in the United States, and Sanofi Genzyme
shall have sole responsibility for development and commercialization of such product in the rest of the world. In the case
of our Huntington’s disease program, if Sanofi Genzyme exercises its co-commercialization rights, it will also be
responsible for commercialization activities related to the Huntington’s disease product in the United States. In the case
of our Spinal Muscular Atrophy product, if Sanofi Genzyme exercises its option, it will be responsible for all
development costs occurring following the option exercise date and all worldwide commercialization activities.
In February 2018, we entered into an agreement in connection with the AbbVie Tau Collaboration, or the
AbbVie Tau Collaboration Agreement, pursuant to which we granted AbbVie an exclusive option to license, develop,
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and commercialize AAV and other virus-based gene therapy products for the treatment of neurodegenerative diseases
related to defective or excess aggregation of tau protein in the human brain, including Alzheimer’s disease. The
collaboration is comprised of a research period, a development period, and an exclusive license option. During the
research period, we are obligated to use diligent efforts to conduct antibody engineering and other research activities to
create research compounds and to develop product candidates. We will be solely responsible for the costs and expenses
during the research period. During a specified portion of the research period, AbbVie may exercise one or more of its
exclusive development options to select up to a total of three research compounds and their corresponding product
candidates to proceed to the development period.
During the development period, we are obligated to use diligent efforts to conduct development activities,
including IND-enabling and Phase 1 clinical trial activities, for such selected research compounds and their
corresponding product candidates. We will be solely responsible for the costs and expenses during the development
period. During a specified portion of the development period, AbbVie may exercise its exclusive license option to further
develop and commercialize all of the research compounds and corresponding product candidates. Upon the exercise of
its license option, AbbVie would be solely responsible for all development and commercialization activities relating to
the licensed compounds and corresponding licensed products, subject to certain exceptions. We also may elect to share
in AbbVie’s development costs relating to a licensed product on an indication-by-indication basis in exchange for a
specified increase in royalties.
In January 2019, we entered into an agreement in connection with the Neurocrine Collaboration, or the
Neurocrine Collaboration Agreement, for the development and commercialization of our VY-AADC program, our gene
therapy program for the treatment of Friedreich’s ataxia including VY-FXN01, and two programs to be determined by us
and Neurocrine at a later date, which we refer to herein as the Discovery Programs. Under the terms of the Neurocrine
Collaboration Agreement, Neurocrine has agreed to pay us an upfront payment of $165.0 million, along with funding for
ongoing development of each program in accordance with an agreed budget, and up to $1.7 billion in potential
development, regulatory, and commercial milestone payments. Under the terms of the Neurocrine Collaboration
Agreement, Neurocrine will fund the clinical development of the Phase 2 clinical program for VY-AADC for
Parkinson’s disease. After our receipt of topline data of the RESTORE-1 Phase 2 trial, we have the option to either (1)
co-commercialize VY-AADC in the United States under a 50/50 cost- and profit-sharing arrangement and receive
milestones and royalties based on ex-U.S. sales, or (2) grant Neurocrine full global commercial rights in exchange for
milestone payments and royalties based on global sales. Under the terms of the Neurocrine Collaboration Agreement,
Neurocrine will fund the development for VY-FXN01 for Friedreich’s ataxia through the Phase 1 clinical trial. After the
data readout of the Phase 1 trial, we have the option to either (1) co-commercialize VY-FXN01 with Neurocrine in the
U.S. under a 60/40 cost- and profit-sharing arrangement, or (2) grant Neurocrine full worldwide commercial rights in
exchange for milestone payments and royalties based on global sales, subject to Sanofi Genzyme’s option to
commercialize the FA Program in countries outside the United States. Under the terms of the agreement for the two
Discovery Programs, Neurocrine will fund the development of those programs and we have the right to earn milestone
payments and royalties based on global sales. Sanofi Genzyme retains an option for ex-U.S. rights to VY-FXN01
following the data readout of the Phase 1 trial; however, if Sanofi Genzyme declines its option, the ex-U.S. rights to VY-
FXN01 would revert to us and be included under the territories licensed to Neurocrine. Under the terms of the
Neurocrine Collaboration Agreement, Neurocrine will fund the development of the two Development Programs, and we
will have the right to earn milestone payments and royalties on global sales.
In February 2019, we entered into an exclusive collaboration and option agreement with AbbVie to develop and
commercialize vectorized antibodies directed against pathological species of alpha-synuclein for the potential treatment
of Parkinson’s disease and other diseases characterized by the abnormal accumulation of misfolded alpha-synuclein
protein, or synucleinopathies. Under the terms of this agreement, we will receive an upfront payment of $65.0 million
and may receive future option fees, development, regulatory, and commercial milestone payments, and royalties. Under
the terms of the agreement, we and AbbVie have agreed to collaborate on the research and development of specified
vectorized antibody compounds, or Research Compound, comprised of an AAV or other viral capsid and a virus vector
genome that encodes one or more antibodies that target and bind to the alpha-synuclein protein. The collaboration is
comprised of a research period and a development period. We are obligated to conduct research activities directed to
constructing one or more virus vectors that encode antibodies designated by AbbVie. We are obligated to use diligent
efforts to conduct antibody engineering and other research activities to create Research Compounds and to develop
product candidates containing or comprised of such Research Compounds, Product Candidates. We are solely
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responsible for the costs and expenses during the Research Period. During a specified portion of the Research Period,
AbbVie may exercise one or more of its exclusive development options to select up to a total of four Research
Compounds and their corresponding Product Candidates to proceed to the Development Period, after which AbbVie may
exercise its option to license such Product Candidates following Phase 1 results, for which we may earn up to $245.0
million in option exercise payments in aggregate. In addition to the upfront payment and the potential option exercise
payments, we are eligible to receive up to $727.5 million in development and regulatory milestones for each Licensed
Compound. We are also eligible to receive tiered, escalating royalties, in the mid-single-digit percentage range on
aggregate net sales of Licensed Products on a Licensed Compound by Licensed Compound basis, as well as up to $500.0
million in commercial milestones based on aggregate annual net sales thresholds of Licensed Products. The royalties are
subject to potential reductions for biosimilar market penetration, patent claim expiration, and other provisions, subject to
specified limits. Subject to certain exceptions, each of AbbVie and the Company has agreed to be financially responsible
for all payments owed to a third party with which it has contracted for any use of in-licensed intellectual property under
the Collaboration Agreement.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any off-balance sheet
arrangements, as defined under applicable Securities and Exchange Commission rules.
JOBS Act
In April 2012, the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an emerging growth company,
or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as
amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies.
Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, including without
limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant
to Section 404(b) of the Sarbanes‑Oxley Act and (ii) complying with any requirement that may be adopted by the Public
Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the
auditor’s report providing additional information about the audit and the financial statements, known as the auditor
discussion and analysis. We will remain an EGC until the earlier of (i) the last day of the fiscal year in which we have
total annual gross revenues of $1.07 billion or more; (ii) December 31, 2020; (iii) the date on which we have issued more
than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a
large accelerated filer under the rules of the SEC.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates. We have policies requiring us to invest in
high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to
market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly
because our investments, including cash equivalents, are in the form of money market fund and marketable securities and
are invested in U.S. Treasury and U.S. government agency obligations. Due to the short-term duration of our investment
portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not
have had a material effect on the fair market value of our portfolio.
We are not currently exposed to market risk related to changes in foreign currency exchange rates; however, we
may contract with vendors that are located in Asia and Europe in the future and may be subject to fluctuations in foreign
currency rates at that time.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that
inflation had a material effect on our business, financial condition, or results of operations during the year ended
December 31, 2018.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of
those financial statements is found in Item 15.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) or 15d-15(e) under the
Exchange Act to mean controls and other procedures of a company that are designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and
procedures include, without limitation, controls and other procedures designed to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Our management, with the participation of our principal executive officer and principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. Our management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Our principal executive officer and principal financial officer have
concluded based upon the evaluation described above that, as of December 31, 2018, our disclosure controls and
procedures were effective at the reasonable assurance level.
We continue to review and document our disclosure controls and procedures and may from time to time make
changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as
a process designed by, or under the supervision of, a company’s principal executive officer and principal financial
officer, or persons performing similar functions, and effected by a company’s board of directors, management, and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies
and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of a company’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that a company’s receipts and
expenditures are being made only in accordance with authorizations of the company’s management and
directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
143
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Under the supervision of and with the participation of our principal executive officer and principal financial and
accounting officer, our management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2018 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework (2013 framework). Based on this assessment,
management concluded that our internal control over financial reporting was effective as of December 31, 2018.
ITEM 9B.
OTHER INFORMATION
As previously discussed, we are a party to a license agreement with REGENX for the development and
commercialization of gene therapies to treat ALS, Friedreich’s ataxia and Huntington’s disease. Pursuant to our license
agreement, REGENX granted us a non-exclusive worldwide license to certain technology and an option to obtain a non-
exclusive worldwide license for intellectual property pertaining to a specified AAV vector. We exercised an option to
certain technology of REGENX in November 2016. We do not currently utilize any rights licensed under the REGENX
license agreement.
On February 21, 2019, we provided REGENX notice that we were exercising our right to terminate our license
agreement with REGENX in its entirety, effective on May 22, 2019, at the expiration of the required notice period. Upon
the effective date of termination, we are required to grant to REGENX a non-exclusive, perpetual, irrevocable,
worldwide, royalty-free, transferable, sublicensable license to certain improvements made by us during the term of the
license (including any intellectual property rights with respect thereto). This grant back will allow for REGENX’s use of
the improvements in the research, development or commercialization of products in any therapeutic indication.
Additionally, all licenses granted to us under the license agreement will terminate upon the effective date of termination.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from the information in our Proxy Statement for our 2019 Annual Meeting of
Stockholders, which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual
Report on Form 10-K relates.
ITEM 11.
EXECUTIVE COMPENSATION
Incorporated by reference from the information in our Proxy Statement for our 2019 Annual Meeting of
Stockholders, which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual
Report on Form 10-K relates.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Incorporated by reference from the information in our Proxy Statement for our 2019 Annual Meeting of
Stockholders, which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual
Report on Form 10-K relates.
144
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference from the information in our Proxy Statement for our 2019 Annual Meeting of
Stockholders, which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual
Report on Form 10-K relates.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference from the information in our Proxy Statement for our 2019 Annual Meeting of
Stockholders, which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual
Report on Form 10-K relates.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) Financial Statements.
Report of independent registered public accounting firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to consolidated financial statements
(a)(2) Financial Statement Schedules.
Pages
F-1
F-2
F-3
F-4
F-5
F-6
All schedules have been omitted because they are not required or because the required information is given in the
Consolidated Financial Statements or Notes thereto set forth under Item 8 above.
(a)(3) Exhibits.
See the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. The
exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report on Form
10-K.
ITEM 16.
FORM 10-K SUMMARY
This Annual Report on Form 10-K does not include a summary.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Voyager Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Voyager Therapeutics, Inc. (the “Company”) as of
December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, redeemable
convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period
ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2018 and 2017, and the results 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 accepted accounting principles.
Adoption of ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606)
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
revenue in 2018 due to the adoption of Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with
Customers (Topic 606), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
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 of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
February 26, 2019
F-1
Voyager Therapeutics, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities, current
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Deposits and other non-current assets
Marketable securities, non-current
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue, current portion
Total current liabilities
Deferred rent
Deferred revenue, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingencies (see note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares issued and outstanding at
December 31, 2018 and 2017
Common stock, $0.001 par value: 120,000,000 shares authorized; 32,364,895 and 31,572,044
shares issued and outstanding at December 31, 2018 and 2017, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2018
2017
$
$
$
46,859
108,947
6,675
162,481
12,771
1,149
628
177,029
1,038
9,788
20,847
31,673
5,710
92,199
1,001
130,583
31,530
137,522
2,738
171,790
10,283
1,304
1,100
184,477
1,020
11,497
3,380
15,897
5,337
28,180
1,012
50,426
—
—
32
315,598
(133)
(269,051)
46,446
177,029
$
32
295,019
(287)
(160,713)
134,051
184,477
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Voyager Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(amounts in thousands, except share and per share data)
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense), net:
Interest income, net
Other (expense) income, net
Total other income (expense), net
Loss before income taxes
Income tax provision
Net loss
Other comprehensive loss
Net unrealized gain (loss) on available-for-sale-securities, net
of tax expense of $128 for the year ended December 31, 2016
Total other comprehensive income (loss)
Comprehensive loss
Net loss per share, basic and diluted
Weighted-average common shares outstanding, basic and diluted
$
$
$
Year ended
December 31,
2018
$
7,619 $
2017
10,135 $
2016
14,220
64,905
33,809
98,714
(91,095)
62,260
19,738
81,998
(71,863)
3,310
(683)
2,627
(88,468)
(180)
(88,288) $
1,227
(62)
1,165
(70,698)
—
(70,698) $
42,249
13,270
55,519
(41,299)
976
182
1,158
(40,141)
52
(40,193)
34
34
(88,254) $
(2.75) $
(235)
(235)
(70,933) $
(2.64) $
199
199
(39,994)
(1.59)
25,302,414
32,065,781
26,803,711
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Voyager Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands, except share data)
Accumulated
Additional
Other
Common Stock
Paid-In
Amount Capital
Shares
Comprehensive Accumulated
Loss
Deficit
Stockholders’
Equity
Balance at December 31, 2015
Vesting of restricted stock
Exercises of vested stock options
Stock-based compensation expense
Unrealized gain on available-for-sale securities, net of tax
Net loss
Balance at December 31, 2016
Vesting of restricted stock
Exercises of vested stock options
Issuance of common stock under ESPP
Issuance of common stock from public offering (net of underwriters discounts and
issuance costs of $4,100)
Stock-based compensation expense
Unrealized loss on available-for-sale securities, net of tax
Net loss
Balance at December 31, 2017
Vesting of restricted stock
Exercises of vested stock options
Issuance of common stock under ESPP
Stock-based compensation expense
Unrealized gain on available-for-sale securities, net of tax
Cumulative-effect adjustment to beginning accumulated deficit and statement of
operations resulting from ASU No. 2016-01
Modified retrospective adjustment to beginning accumulated deficit and deferred revenue
resulting from ASU No. 2014-09
Net loss
Balance at December 31, 2018
24,930,979 $
601,501
65,432
—
—
—
25,597,912 $
573,803
158,677
66,652
5,175,000
—
—
—
31,572,044 $
319,891
384,186
88,774
—
—
—
—
—
32,364,895 $
17
514
6,310
—
—
25 $ 219,122 $
1
—
—
—
—
26 $ 225,963 $
1
—
—
12
1,363
563
57,989
9,129
—
—
5
—
—
—
32 $ 295,019 $
—
—
—
—
—
9
3,891
969
15,710
—
(251) $
—
—
—
199
—
(52) $
—
—
—
—
—
(235)
—
(287) $
—
—
—
—
34
(49,822) $
—
—
—
—
(40,193)
(90,015) $
—
—
—
—
—
—
(70,698)
(160,713) $
—
—
—
—
—
169,074
18
514
6,310
199
(40,193)
135,922
13
1,363
563
57,994
9,129
(235)
(70,698)
134,051
9
3,891
969
15,710
34
—
—
120
(120)
—
—
—
32 $ 315,598 $
—
—
—
—
(133) $
(19,930)
(88,288)
(269,051) $
(19,930)
(88,288)
46,446
The accompanying notes are an integral part of these consolidated financial statements
F-4
Voyager Therapeutics, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
Cash flow from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Depreciation
Amortization of premiums and discounts on marketable securities
In-kind research and development expenses
Other non-cash items
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Other non-current assets
Deferred revenue
Accounts payable
Accrued expenses
Other non-current liabilities
Lease incentive benefit
Net cash used in operating activities
Cash flow from investing activities
Purchases of property and equipment
Purchases of marketable securities
Proceeds from maturities or sales of marketable securities
Net cash provided by (used in) investing activities
Cash flow from financing activities
Proceeds from the issuance of stock net of discount and issuance costs
Proceeds from the exercise of stock options
Proceeds from the purchase of common stock under ESPP
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents, and restricted cash beginning of period
Cash, cash equivalents, and restricted cash end of period
Supplemental disclosure of cash and non-cash activities
Impact of adopting new accounting standards
Capital expenditures incurred but not yet paid
Year ended
December 31,
2017
2018
2016
$
(88,288)
$
(70,698)
$
(40,193)
15,710
2,117
(2,163)
176
859
(3,937)
(180)
61,380
(282)
(1,600)
—
321
(15,887)
9,238
1,595
(24)
113
46
1,630
—
(10,135)
470
4,900
1,000
515
(61,350)
6,310
612
696
1,182
709
(847)
7
(14,582)
(62)
2,636
—
1,050
(42,482)
(4,305)
(333,228)
364,000
26,467
(3,985)
(147,296)
147,600
(3,681)
(5,029)
(112,350)
165,100
47,721
—
3,889
860
4,749
15,329
32,265
47,594
20,050
300
$
$
$
57,994
1,363
563
59,920
(5,111)
37,376
32,265
—
—
$
$
$
—
514
—
514
5,753
31,623
37,376
—
242
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
VOYAGER THERAPEUTICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of business
Voyager Therapeutics, Inc. (the “Company”) is a clinical-stage gene therapy company focused on developing
life-changing treatments for patients suffering from severe neurological diseases. The Company is focused on
neurological diseases where it believes an adeno-associated virus (“AAV”) gene therapy approach that either increases
or decreases the production of a specific protein can slow or reduce the symptoms experienced by patients, and therefore
have a clinically meaningful impact. The Company has built a gene therapy platform that it believes positions itself to be
a leading company at the intersection of AAV gene therapy and severe neurological disease. The Company’s gene
therapy platform enables it to engineer, optimize, manufacture and deliver its AAV-based gene therapies that have the
potential to provide durable efficacy following a single administration.
Additionally, the Company is working to identify novel AAV capsids, which are the outer viral protein shells
that enclose the genetic material of the virus payload. The Company’s team of experts in the fields of AAV gene therapy
and neuroscience first identifies and selects severe neurological diseases that are well-suited for treatment using AAV
gene therapy. The Company then engineers and optimizes AAV vectors for delivery of the virus payload to the targeted
tissue or cells. The Company’s manufacturing process employs an established system that it believes will enable
production of high quality AAV vectors at commercial-scale. In addition to the Company’s capsid optimization efforts, it
leverages novel delivery paradigms, established routes of administration, and advances in dosing techniques to optimize
delivery of its AAV gene therapies to target tissues, regions and cell types that are critical to the disease of interest. The
Company believes it can achieve this directly, with targeted infusions to discrete regions of the brain or spinal cord, or
systemically, in conjunction with its novel capsids.
The Company’s business strategy focuses on discovering, developing, manufacturing and commercializing its
gene therapy programs. As part of this strategy, the Company has developed core competencies specific to AAV gene
therapy development and manufacturing and is beginning to build its commercial infrastructure. This business strategy
also includes business development activities that may include in-licensing activities or partnering certain programs in
certain geographies with collaborators, as the Company has demonstrated through its collaboration with Sanofi Genzyme
(the “Sanofi Genzyme Collaboration”), its collaboration with AbbVie Biotechnology Ltd (the “AbbVie Tau
Collaboration”), its collaboration with Neurocrine Biosciences, Inc. (the “Neurocrine Collaboration”), and its
collaboration with AbbVie Ireland Unlimited Company (the “AbbVie Alpha-Synuclein Collaboration”). The Company is
devoting substantially all of its efforts to product research and development, market development, and raising capital.
The Company is subject to risks common to companies in the biotechnology and gene therapy industry, including but not
limited to, the need to obtain sufficient capital to continue to fund its operations, risks of failure of preclinical studies and
clinical trials, the need to obtain marketing approval for its product candidates, the need to successfully commercialize
and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary
technology, compliance with government regulations, development by competitors of technological innovations, and
ability to transition from pilot-scale manufacturing to large-scale production of products.
The Company has incurred annual net operating losses in every year since inception. As of December 31, 2018,
the Company had an accumulated deficit of $269.1 million. The Company has not generated any product revenue and
has financed its operations primarily through public offerings and private placements of its equity securities and funding
from its collaborations with Sanofi Genzyme and AbbVie. Additionally, in January 2019, the Company entered into the
Neurocrine Collaboration which is expected to commence in the first half of 2019. Under the Neurocrine Collaboration,
the Company will receive an upfront payment of $165.0 million, including a $50.0 million investment in 4,179,728
shares of common stock. The effectiveness of this agreement is subject to certain conditions, including the expirations or
termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and other customary closing conditions. In February 2019, the Company announced the AbbVie Alpha-
Synuclein Collaboration to develop and commercialize vectorized antibodies directed at pathological species of alpha-
synuclein for the potential treatment of Parkinson’s disease and other diseases (synucleinopathies) characterized by the
abnormal accumulation of misfolded alpha-synuclein protein. Under the terms of the AbbVie Alpha-Synuclein
Collaboration, the Company will receive an upfront payment of $65.0 million. Based upon the current operating plan, the
Company expects that its existing cash, cash equivalents, and marketable debt securities, as well as amounts expected
F-6
from the upfront payment and expected reimbursement of development costs from the Neurocrine Collaboration
Agreement and the upfront payment from the AbbVie Alpha-Synuclein Collaboration Agreement entered into in 2019,
will enable the Company to fund its operating expenses and capital expenditure requirements into mid-2022. There can
be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue
or revenue from collaborative partners on terms acceptable to the Company, on a timely basis or at all. The failure of the
Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the
Company’s business, results of operations, and financial condition.
2. Summary of significant accounting policies
The following is a summary of significant accounting policies followed in the preparation of these financial
statements.
Basis of presentation
The accompanying consolidated financial statements include those of the Company and its subsidiary, Voyager
Securities Corporation, after elimination of all intercompany accounts and transactions. The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America (“GAAP”).
Public offerings
On October 29, 2015, in preparation for the Company’s IPO, the Company’s Board of Directors and
stockholders approved a 1-for-4.25 reverse split of the Company’s common stock, which became effective on October
29, 2015. All share and per share amounts in the consolidated financial statements and notes thereto have been
retroactively adjusted for all periods presented to give effect to this reverse split, including reclassifying an amount equal
to the reduction in par value of common stock to additional paid-in capital.
On November 16, 2015, the Company completed the sale of 5,750,000 shares of its common stock in its initial
public offering (the “IPO”), at a price to the public of $14.00 per share, resulting in net proceeds to the Company of
$72.9 million after deducting underwriting discounts, commissions and offering expenses payable by the Company.
On November 7, 2017, the Company completed the sale of 5,175,000 shares of its common stock in a public
offering at a price to the public of $12.00 per share, resulting in net proceeds to the Company of $58.0 million after
deducting underwriting discounts, commissions, and offering expenses payable by the Company.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to,
estimates related to revenue recognition, accrued expenses, stock-based compensation expense, and income taxes. The
Company bases its estimates on historical experience and other market specific or other relevant assumptions that it
believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments
measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the
Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in
pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable
inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing
the asset or liability, and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for
F-7
considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value
hierarchy that distinguishes between the following:
Level 1—Quoted market prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted
market prices, interest rates, and yield curves.
Level 3—Unobservable inputs developed using estimates of assumptions developed by the Company,
which reflect those that a market participant would use.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the
Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level
within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amounts reflected in the balance sheets for cash and cash equivalents, prepaid expenses and other
current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of 90 days or less at
acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money
market funds.
Marketable Securities
The Company classifies marketable debt securities with a remaining maturity of greater than three months when
purchased as available-for-sale. Marketable debt securities with a remaining maturity date greater than one year and
marketable equity securities are classified as non-current where the Company has the intent and ability to hold these
securities for at least the next 12 months. During 2016, the Company invested in a supplier and received common stock
and warrants to purchase common stock in that entity. The common stock is considered an available-for-sale marketable
equity security and is included in non-current marketable securities, and the warrants are included in non-current assets.
All available for sale debt securities are carried at fair value with the unrealized gains and losses included in
other comprehensive income (loss) as a component of stockholders’ equity until realized. Any premium or discount
arising at purchase is amortized and/or accreted to interest income and/or expense. Realized gains and losses are
determined using the specific identification method and are included in other income (expense). If any adjustment to fair
value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to
which the decline is “other than temporary” and, if so, recognizes the loss through a charge to the Company’s statement
of operations and comprehensive loss. No other than temporary losses have been recognized.
F-8
Cash, cash equivalents, and marketable securities as of December 31, 2018 and 2017 consist of the following:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
(in thousands)
46,173 $
— $
— $
46,173
As of December 31, 2018
Money market funds included in cash and cash equivalents $
Marketable securities:
U.S. Treasury notes
Equity securities
108,951
1,220
Total marketable securities
Total money market funds and marketable securities
$ 110,171 $
$ 156,344 $
As of December 31, 2017
Money market funds included in cash and cash equivalents $
Marketable securities:
U.S. Treasury notes
Equity securities
137,560
1,220
Total marketable securities
Total money market funds and marketable securities
$ 138,780 $
$ 169,249 $
30,469 $
— $
— $
30,469
1
—
1 $
1 $
108,947
5
592
628
597 $ 109,575
597 $ 155,748
—
—
— $
— $
137,522
38
120
1,100
158 $ 138,622
158 $ 169,091
All of the Company’s marketable debt securities at December 31, 2018 and 2017 have a contractual maturity of
one year or less.
Restricted Cash
At December 31, 2018 and 2017, the Company maintained restricted cash totaling approximately $0.7 million
held in the form of money market accounts as collateral for the Company’s facility lease obligation. The balance is
included within deposits in other non-current assets in the accompanying consolidated balance sheets. The following
table provides a reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance
sheet that sum to the total of the same such amounts shown in the statement of cash flows:
Cash and cash equivalents
$
Restricted cash included in deposits and other noncurrent assets
$
Total cash, cash equivalents, and restricted cash
46,859 $
735
47,594 $
31,530 $
735
32,265 $
36,641
735
37,376
2018
As of December 31,
2017
(in thousands)
2016
Property and Equipment
Property and equipment consists of laboratory equipment, furniture and office equipment, and leasehold
improvements and is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or
extend the lives of the respective assets are expensed to operations as incurred; while costs of major additions and
betterments are capitalized. Depreciation is calculated over the estimated useful lives of the assets using the straight-line
method.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for potential impairment when events or changes in circumstances
indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book
values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book
values of the assets exceed their fair value. The Company has not recognized any impairment losses from inception
through December 31, 2018.
F-9
Revenue Recognition
As of December 31, 2018, all of the Company’s revenue is generated from its collaboration agreements with
Sanofi Genzyme Corporation, a Sanofi company (“Sanofi Genzyme”), and AbbVie Biotechnology Ltd. and its affiliates
collectively, (“AbbVie”).
The Company enters into collaboration agreements which are within the scope of ASC 606, Revenue from
Contracts with Customers (“ASC 606”), under which the Company licenses rights to certain of the Company’s product
candidates and performs research and development services. The terms of these arrangements typically include payment
of one or more of the following: non-refundable, upfront fees; reimbursement of research and development costs;
development, regulatory, and commercial milestone payments; and royalties on net sales of licensed products.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services,
in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of
ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the
contract; (ii) determination of whether the promised goods or services are performance obligations including whether
they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on
variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of
revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model
to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or
services it transfers to the customer.
The promised goods or services in the Company’s arrangements typically consist of license rights to the
Company’s intellectual property and research and development services. The Company provides options to additional
items in the contracts, which are accounted for as separate contracts when the customer elects to exercise such options,
unless the option provides a material right to the customer. The Company evaluates the customer options for material
rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined
to represent a material right, the material right is recognized as a separate performance obligation at the outset of the
arrangement. Performance obligations are promised goods or services in a contract to transfer a distinct good or service
to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or
together with other readily available resources and (ii) the promised good or service is separately identifiable from other
promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors
such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the
intellectual property on its own or whether the required expertise is readily available and whether the goods or services
are integral or dependent to other goods or services in the contract.
The Company estimates the transaction price based on the amount expected to be received for transferring the
promised goods or services in the contract. The consideration may include fixed consideration or variable consideration.
At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of
potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely
amount method or expected amount method to estimate the amount expected to be received based on which method best
predicts the amount expected to be received. The amount of variable consideration which is included in the transaction
price may be constrained, and is included in the transaction price only to the extent that it is probable that a significant
reversal in the amount of the cumulative revenue recognized will not occur in a future period.
The Company’s contracts often include development and regulatory milestone payments which are assessed
under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur.
Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are
not considered probable of being achieved until those approvals are received. At the end of each reporting period, the
Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if
necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-
up basis, which would affect collaboration revenues in the period of adjustment. To date, the Company has not
recognized any consideration related to the achievement of development, regulatory, or commercial milestone revenue
resulting from any of the Company’s collaboration arrangements.
F-10
For arrangements that include sales-based royalties, including milestone payments based on the level of sales,
and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at
the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty
has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any consideration
related to sales-based royalty revenue resulting from any of the Company’s collaboration arrangements.
The Company allocates the transaction price based on the estimated stand-alone selling price of each of the
performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone
selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to
determine the stand-alone selling price for service obligations, which may include other comparable transactions, pricing
considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling
price for material rights, the Company utilizes comparable transactions, clinical trial success probabilities, and estimates
of option exercise likelihood. Variable consideration is allocated specifically to one or more performance obligations in a
contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the
resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of
each performance obligation.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred
for the related goods or services. For performance obligations which consist of licenses and other promises, the
Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the
combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of
measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the
measure of performance and related revenue recognition.
Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company
performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s
right to consideration is unconditional
Research and Development
Research and development costs are charged to expense as incurred in performing research and development
activities. The costs include employee compensation costs, external research, consultant costs, sponsored research,
in-kind services provided under the Sanofi Genzyme agreement, license fees, process development and facilities costs.
Facilities costs primarily include the allocation of rent, utilities and depreciation.
Research Contract Costs and Accruals
The Company has entered into various research and development contracts with research institutions and other
companies. These agreements are generally cancelable. The Company records accruals for estimated ongoing research
costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including
the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be
made in determining the accrued balances at the end of any reporting period. Actual results could differ from the
Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual
costs.
Patent Costs
The Company expenses patent application and related legal costs as incurred and classifies such costs as general
and administrative expenses in the accompanying statements of operations.
Stock-Based Compensation Expense
The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718
Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and
directors, including grants of restricted stock and stock options, to be recognized as expense in the statements of
operations based on their grant date fair values. Grants of restricted stock and stock options to other service providers,
F-11
referred to as non-employees, are required to be recognized as expense in the statements of operations based on their
vesting date fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing
model. The Company uses the fair value of its common stock to determine the fair value of restricted stock awards.
The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including
(a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and
(d) expected dividends. Due to a lack of company-specific historical and implied volatility data, the Company bases the
estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded,
blended with the most recent period of historic volatility of its common stock. The historical volatility is calculated based
on a period of time commensurate with the expected term assumption. The computation of expected volatility is based
on the historical volatility of a representative group of companies with similar characteristics to the Company, including
stage of product development and life science industry focus. The Company uses the simplified method as prescribed by
the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for stock options
granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to
estimate the expected term. For stock options granted to non-employees, the Company utilizes the contractual term of the
arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument
whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero
as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.
The Company expenses the fair value of its stock-based compensation awards to employees on a straight-line
basis over the associated service period, which is generally the period in which the related services are received.
Stock-based compensation awards to non-employees are adjusted through stock-based compensation expense at each
reporting period end to reflect the current fair value of such awards and are expensed on a straight-line basis.
The Company records the expense for stock-based compensation awards subject to performance conditions over
the remaining service period when management determines that achievement of the performance condition is probable.
Management evaluates when the achievement of a performance condition is probable based on the expected satisfaction
of the performance conditions as of the reporting date.
Income Taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for
deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are
measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to
reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the weight of
available evidence, it is more likely than not that the deferred tax assets will be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When
uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will
more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is
based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As
of December 31, 2018, the Company does not have any significant uncertain tax positions.
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive income or loss. Other comprehensive
income or loss consists of unrealized gains or losses on marketable securities.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of
common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss
per share is computed by dividing the net loss by the weighted-average number of shares of common stock and
potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods.
F-12
For purposes of the diluted net loss per share, unvested restricted common stock and outstanding stock options
are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share
because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all
periods presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the
calculation of diluted net loss per share because to do so would be anti-dilutive:
Unvested restricted common stock
Outstanding stock options
Total
Concentrations of Credit Risk and Off-Balance Sheet Risk
As of December 31,
2018
2017
235,294
4,225,152
4,460,446
557,979
3,143,566
3,701,545
2016
1,167,984
1,871,237
3,039,221
The Company has no financial instruments with off-balance sheet risk such as foreign exchange contracts,
option contracts or other foreign currency hedging arrangements. Financial instruments that potentially subject the
Company to a concentration of credit risk are cash and cash equivalents. The Company’s cash is held in accounts at a
financial institution that may exceed federally insured limits. The Company has not experienced any credit losses in such
accounts and does not believe it is exposed to any significant credit risk on these funds.
Concentration of Suppliers
The Company is dependent on a third-party manufacturer to supply certain products for research and
development activities in its programs. In particular, the Company relies on a sole manufacturer to supply it with specific
vectors related to the Company’s research and development programs.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is
available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess
performance. The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer,
views the Company’s operations and manages its business as a single operating segment, which is the business of
developing and commercializing gene therapies.
Recently Adopted Accounting Pronouncements
In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASC Update No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities (“Update No. 2016-01”). The purpose of Update No. 2016-01 is to improve financial reporting for financial
instruments by reducing the number of items recorded to other comprehensive income. The Company adopted Update
No. 2016-01 in the first quarter of 2018, using the modified retrospective method. Unrealized gains and losses previously
recorded to other comprehensive income (loss) were reclassified to accumulated deficit and all future fair value changes
will be recorded to other income (loss). The adoption of the standard on January 1, 2018 did not have a material impact
on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (“ASU 2016-15”), which
simplifies certain elements of cash flow classification and is intended to reduce diversity in practice in how certain
transactions are classified in the statement of cash flows. The update is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2017. The Company adopted ASU 2016-15 on January 1, 2018, and
such adoption did not have a material impact on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”). The amendments in
ASU 2016-18 require an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and
restricted cash within its statements of cash flows and was adopted utilizing a full retrospective approach. The Company
F-13
adopted the new standard on January 1, 2018. The Company has included the necessary reconciliation within Note 2
“Restricted Cash”.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”),
which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”), and most
industry-specific guidance. The new standard requires that an entity recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The update also requires additional disclosure about the nature, amount, timing,
and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Thereafter, a series of clarifying
ASUs, narrow scope improvements and practical expedients were issued. This collective guidance resulted in the new
revenue standard, ASC 606.
The Company adopted the new standard effective January 1, 2018 using the modified retrospective approach.
The Company had one open contract, relating to the Sanofi Genzyme Collaboration, on the adoption date and has
assessed it under the new revenue standard. The adoption of ASC 606 resulted in the changes to (i) the allocation of
arrangement consideration, including the determination of estimated selling price and the allocation of variable
consideration to specific performance obligations and (ii) the application of proportional performance as a measure of
progress on service-related deliverables.
The Company has accounted for the impact of adopting ASC 606 as a cumulative catch-up under the modified
retrospective approach, which is represented as an increase of $20.0 million to deferred revenue with an offset to
accumulated deficit, effective January 1, 2018. The following financial statement line items have been shown to reflect
comparative balances under ASC 606 and ASC 605 for the year ended December 31, 2018, for both of the Sanofi
Genzyme Collaboration and AbbVie Tau Collaboration, collectively.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Year ended December 31, 2018
Collaboration revenue
Loss before income taxes
Net loss
Net loss per share, basic and diluted
Condensed Consolidated Balance Sheets
Deferred revenue, current
Deferred revenue, non-current
Accumulated deficit
$
$
Under ASC 606
Effect of change
Under ASC 605
(in thousands, except per share data)
7,619 $
(88,468)
(88,288)
(2.75)
11,095 $
(84,992)
(84,812)
(2.64)
(3,476)
(3,476)
(3,476)
(0.11)
Under ASC 606
As of December 31, 2018
Under ASC 605
(in thousands)
Effect of change
20,847 $
92,199
(269,051)
19,111 $
70,529
(245,645)
1,736
21,670
(23,406)
Condensed Consolidated Statements of Cash Flows
$
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred revenue
(88,288) $
(84,812) $
(3,476)
61,380
57,904
3,476
Year ended December 31, 2018
Under ASC 606
Under ASC 605 Effect of change
(in thousands)
F-14
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, a comprehensive new lease accounting standard, which
provides revised guidance on accounting for lease arrangements by both lessors and lessees and requires lessees to
recognize a lease liability and a right-of-use asset for most leases. In July 2018, the FASB issued ASU No. 2018-11,
Leases (Topic 842), Targeted Improvements, which provides an additional transition method that allows entities to
initially apply the new lease requirements at the adoption date, not the earliest period presented, and recognize a
cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company
expects to elect this transition method at the adoption date of January 1, 2019. The Company also expects to elect a
package of practical expedients, under which an entity need not reassess whether any expired or existing contracts are or
contain leases, the lease classification for any expired or existing leases, or initial direct costs for any existing leases. The
Company is currently in the process of evaluating the impact that the adoption of this guidance will have on its
consolidated financial statements and related disclosures.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118, to address the application of
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts
and Jobs Act (the “Tax Reform Act”). The Company has recognized the provisional tax impacts related to the
revaluation of the deferred tax assets and liabilities and included these amounts in its consolidated financial statements
for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among
other things, additional analysis, changes in interpretations and assumptions the Company has made, additional
regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The
accounting was completed when the Company’s 2017 U.S. corporate income tax return was filed in 2018, and no
material differences arose as compared to provisional amounts initially reflected in the consolidated financial statements
for the year ended December 31, 2017.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to
Nonemployee Share-Based Payment Accounting (“ASC 718”). The new standard largely aligns the accounting for share-
based payment awards issued to employees and nonemployees by expanding the scope of ASC 718 to apply to
nonemployee share-based transactions, as long as the transaction is not effectively a form of financing. The new
guidance will be effective for the Company on January 1, 2019. The Company is currently evaluating the potential
impact that this guidance may have on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Requirements for Fair Value Measurement (“ASU 2018-13”). The new standard added, modified or removed disclosure
requirements under Topic 820 for clarity and consistency. ASU 2018-13 is effective for all entities for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the
potential impact that this guidance may have on its consolidated financial statements.
F-15
3. Fair value measurements
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017 are as
follows:
Assets
Total
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(in thousands)
Significant
Unobservable
Inputs
(Level 3)
December 31, 2018
Money market funds included in cash and cash
equivalents
Marketable securities:
U.S. Treasury notes
Equity securities
Total marketable securities
Warrants to purchase equity securities
Total
December 31, 2017
Money market funds included in cash and cash
equivalents
Marketable securities:
U.S. Treasury notes
Equity securities
Total marketable securities
Warrants to purchase equity securities
Total
$
46,173
$
46,173
$
—
$
108,947
628
$ 109,575
234
$ 155,982
108,947
628
109,575
—
155,748
$
$
$
$
—
—
—
234
234
$
$
$
30,469
$
30,469
$
—
$
137,522
1,100
$ 138,622
569
$ 169,660
137,522
1,100
138,622
—
169,091
$
$
$
$
—
—
—
569
569
$
$
—
—
—
—
—
—
—
—
—
—
—
—
The Company measures the fair value of money market funds, U.S. Treasuries and equity securities based on
quoted prices in active markets for identical securities. The Level 2 equity securities include warrants used to purchase
equity securities that are valued using the Black-Scholes model. The Black-Scholes option pricing model requires inputs
based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected
term of the awards, (c) the risk-free interest rate, and (d) expected dividends. The assumptions utilized to value the
warrants to purchase equity securities as of December 31, 2018, 2017, and 2016 are as follows:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
As of December 31,
2018
2017
2016
2.5 %
— %
2.7
112.7 %
2.0 %
— %
3.7
103.5 %
1.8 %
— %
4.7
97.5 %
The expected volatility is based on the historic volatility for the equity securities underlying the warrants and is
calculated based on a period of time commensurate with the expected term assumption. The expected term is based on
the remaining contractual life of the warrants on each measurement date. The risk-free interest rate is based on a treasury
instrument whose term is consistent with the expected term of the warrants. The expected dividend yield is assumed to
be zero as the entity that issued the warrants has never paid and has not indicated any intention to pay dividends.
F-16
4. Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
Prepaid research and development contracts
Other current assets
Prepaid insurance
Accrued interest receivable
Total
5. Property and equipment, net
Property and equipment, net consists of the following:
Leasehold improvements
Laboratory equipment
Furniture and office equipment
Other
Construction in progress
Total property and equipment
Less: accumulated depreciation
Property and equipment, net
As of December 31,
2018
2017
(in thousands)
$
$
4,497 $
1,360
617
201
6,675 $
1,330
766
520
122
2,738
As of December 31,
2018
2017
(in thousands)
7,035 $
8,843
1,675
306
19
17,878
(5,107)
12,771 $
6,421
5,262
1,565
25
—
13,273
(2,990)
10,283
$
$
The Company recorded $2.1 million, $1.6 million, and $0.6 million in depreciation expense during the years
ended December 31, 2018, 2017, and 2016, respectively.
6. Accrued expenses
Accrued expenses consist of the following:
Employee compensation costs
Research and development costs
Professional services
Accrued goods and services
Patent costs
Other
Total
7. Commitments and contingencies
Operating Leases
As of December 31,
2018
2017
(in thousands)
3,780 $
3,555
1,448
784
120
101
9,788 $
3,383
5,780
1,762
388
120
64
11,497
$
$
During April 2014, the Company entered into an agreement to lease the 75 Sidney Street facility under a
non-cancelable operating lease that would have expired December 15, 2019. The lease includes two renewal options,
each for five-year terms and at fair market value upon exercise. The lease contains escalating rent clauses which require
higher rent payments in future years. The Company expenses rent on a straight-line basis over the term of the lease,
including any rent-free periods.
F-17
In December 2015, the Company executed an amendment to the 75 Sidney Street lease to extend its term, and
executed an agreement to lease a facility at 64 Sidney Street until December 31, 2024. The facility at 64 Sidney Street
includes laboratory and office space, and was ready for occupancy in early 2017.
In February 2018, the Company executed a second amendment to the 75 Sidney Street lease to lease additional
space to support its continued growth. The additional facility includes laboratory and office space, and was ready for
occupancy in mid-2018.
In June 2018, the Company executed a third amendment to the 75 Sidney Street lease to lease additional space
to further support its continued growth. The additional facility includes laboratory and office space, and was ready for
occupancy in late 2018. The third amendment extended the term of the 75 Sidney Street lease until November 30, 2026.
Additionally, the Company executed a second amendment to the 64 Sidney Street lease to extend that lease until
November 30, 2026.
The Company received leasehold improvement incentives from the landlord totaling $1.3 million and $3.5
million for 75 Sidney Street and 64 Sidney Street, respectively. The Company recorded these incentives as a component
of deferred rent and is amortizing these incentives as a reduction of rent expense over the life of the lease. The leasehold
improvements have been recorded as fixed assets. The Company is entitled to receive approximately $0.3 million of
leasehold improvements for the additional space at 75 Sidney Street.
Rent expense of approximately $4.0 million, $2.9 million, and $2.0 million was incurred during the years ended
December 31, 2018, 2017, and 2016, respectively.
Future annual minimum lease payments at December 31, 2018 are as follows:
2019
2020
2021
2022
2023
2024+
.
Significant Agreements
Sanofi Genzyme Collaboration Agreement
Summary of Agreement
Total Minimum
Lease Payments
(in thousands)
4,325
4,731
4,863
5,001
5,141
16,783
40,844
$
In February 2015, the Company entered into an agreement with Sanofi Genzyme (the “Sanofi Genzyme
Collaboration Agreement”) which included a non-refundable upfront payment of $65.0 million. In addition,
contemporaneous with entering into the Sanofi Genzyme Collaboration Agreement, Sanofi Genzyme entered into a
Series B Stock Purchase Agreement, under which Sanofi Genzyme purchased 10,000,000 shares of Series B Preferred
Stock for $30.0 million. The fair value of the Series B Preferred Stock at the time of issuance was approximately
$25.0 million. The $5.0 million premium over the fair value is accounted for as additional consideration under the Sanofi
Genzyme Collaboration Agreement.
Under the Sanofi Genzyme Collaboration Agreement, the Company granted Sanofi Genzyme an exclusive
option to license, develop and commercialize (i) ex-U.S. rights to the following programs, which are referred to as Split
Territory Programs; VY-AADC (“Parkinson’s Program”), VY-FXN01 (“Friedreich’s ataxia Program”), a future program
to be designated by Sanofi Genzyme (“Future Program), and VY-HTT01 (“Huntington’s Program”), with an incremental
option to co-commercialize VY-HTT01 in the United States and (ii) worldwide rights to VY-SMN101 (“Spinal
Muscular Atrophy Program”). Sanofi Genzyme’s option for the Split Territory Programs and the Spinal Muscular
F-18
Atrophy Program is triggered following the completion of the first proof-of-principle human clinical study (“POP
Study”), on a program by program basis.
Prior to any option exercise by Sanofi Genzyme, the Company will collaborate with Sanofi Genzyme in the
development of products under each Split Territory Program and the Spinal Muscular Atrophy Program pursuant to a
written development plan and under the guidance of an Alliance Joint Steering Committee (“AJSC”), comprised of an
equal number of employees from the Company and Sanofi Genzyme.
The Company is required to use commercially reasonable efforts to develop products under each Split Territory
Program and the Spinal Muscular Atrophy Program through the completion of the applicable POP Study. During the
development of these joint programs, the activities are guided by a Development Advisory Committee (“DAC”). The
DAC may elect to utilize certain Sanofi Genzyme technology relating to the Parkinson’s Program, the Huntington’s
Program or generally with the manufacture of Split Territory Program products.
The Company is solely responsible for all costs incurred in connection with the development of the Split
Territory Programs and the Spinal Muscular Atrophy Program products prior to the exercise of an option by Sanofi
Genzyme with the exception of the following: (i) at the Company’s request and upon mutual agreement, Sanofi
Genzyme will provide “in-kind” services valued at up to $5.0 million and (ii) Sanofi Genzyme shall be responsible for
the costs and expenses of activities under the Huntington’s Program development plan to the extent such activities are
covered by financial support Sanofi Genzyme is entitled to receive from a patient advocacy group, collectively Sanofi
Genzyme “in-kind” and other funding.
Other than the Parkinson’s Program (for which a POP Study has already been completed), if the Company does
not initiate a POP Study for a given Split Territory Program by December 31, 2026 (or for the Future Program by the
tenth anniversary of the date the Future Program is nominated by Sanofi Genzyme), and Sanofi Genzyme has not
terminated the Sanofi Genzyme Collaboration Agreement with respect to the collaboration program, then Sanofi
Genzyme shall be entitled, as its sole and exclusive remedy, to a credit of $10.0 million for each such program against
other milestone or royalty payments payable by Sanofi Genzyme under the Sanofi Genzyme Collaboration Agreement.
However, if the POP Study is not initiated due to a regulatory delay or a force majeure event, such time period shall be
extended for so long as such delay continues.
With the exception of the Parkinson’s Program, Sanofi Genzyme is required to pay an option exercise payment
of $20.0 million or $30.0 million for each Split Territory Program, as well as the Spinal Muscular Atrophy Program.
Upon Sanofi Genzyme’s exercise of its option to license a given product in a Split Territory Program (“Split
Territory Licensed Product”), the Company will have sole responsibility for the development of such Split Territory
Licensed Product in the United States and Sanofi Genzyme shall have sole responsibility for development of such Split
Territory Licensed Product in the rest of the world. The Company and Sanofi Genzyme will have shared responsibility
for execution of ongoing development of such Split Territory Licensed Product that is not specific to either territory,
including costs associated therewith. The Company is responsible for all commercialization activities relating to Split
Territory Licensed Products in the United States, including all of the associated costs. Sanofi Genzyme is responsible for
all commercialization activities relating to the Split Territory Licensed Products in the rest of the world, including all of
the associated costs. If Sanofi Genzyme exercised its co-commercialization rights, Sanofi Genzyme will be the lead party
responsible for all commercialization activities related to the Huntington’s Licensed Product in the United States.
Upon exercise of the option, Sanofi Genzyme shall have the sole right to develop the Spinal Muscular Atrophy
Product worldwide. Sanofi Genzyme shall be responsible for all of the development costs that occur after the option
exercise date for the Spinal Muscular Atrophy Program. Sanofi Genzyme is also responsible for commercialization
activities relating to the Spinal Muscular Atrophy Product worldwide.
Sanofi Genzyme is required to pay the Company for specified regulatory and commercial milestones, if
achieved, up to $540.0 million across all programs. The Company is no longer entitled to receive a total of $105.0
million related to regulatory and commercial milestone payments for VY-AADC as a result of Sanofi Genzyme’s
decision to not exercise its option for the Parkinson’s Program (the “PD Opt-Out”). The regulatory approval milestones
are payable upon either regulatory approval in the United States or regulatory and reimbursement approval in the
European Union and range from $40.0 million to $50.0 million per milestone, with an aggregate total of $220.0 million,
after accounting for the PD Opt-Out. The commercial milestones are payable upon achievement of specified annual net
F-19
sales in each program and range from $50.0 million to $100.0 million per milestone, with an aggregate total of
$320.0 million, after accounting for the PD Opt-Out.
In addition, to the extent any Split Territory Licensed Products or the Spinal Muscular Atrophy Licensed
Product are commercialized, the Company is entitled to tiered royalty payments ranging from the mid-single digits to
mid-teens based on a percentage of net sales by Sanofi Genzyme. Sanofi Genzyme is entitled to receive tiered royalty
payments related to sales of the Split Territory Licensed Product ranging from the low-single digits to mid-single digits
based on a percentage of net sales by the Company depending on whether the Company uses Sanofi Genzyme
technology in the Split Territory Licensed Product. If Sanofi Genzyme elects to co-commercialize VY-HTT01 in the
United States, the Company and Sanofi Genzyme will share in any profits or losses from VY-HTT01 product sales.
The Sanofi Genzyme Collaboration Agreement will continue in effect until the later of (i) the expiration of the
last to expire of the option rights and (ii) the expiration of all payment obligations unless sooner terminated by the
Company or Sanofi Genzyme. The Company and Sanofi Genzyme have customary termination rights including the right
to terminate for an uncured material breach of the agreement committed by the other party and Sanofi Genzyme has the
right to terminate for convenience.
Accounting Analysis
At inception, the Sanofi Genzyme Collaboration Agreement included the following performance obligations: (i)
research and development services for each of the Split Territory Programs and the Spinal Muscular Atrophy Program,
(ii) participation in the AJSC, (iii) participation in the DAC and (iv) a material right associated with an option to obtain a
development and commercial license in the Parkinson’s Program (“PD Material Right”). The Company determined that
the option to obtain a development and commercial license in the Parkinson’s Program was a material right under ASC
606 primarily because there were no additional option exercise payments payable by Sanofi Genzyme at the time of
option exercise. Therefore, the PD Material Right was considered a performance obligation at the inception of the
arrangement. The options in the other Split Territory Programs and the Spinal Muscular Atrophy Program do not provide
a material right to the customer that it would receive without entering into the contract principally because the option
fees are at least equal to the standalone selling price for the underlying goods. Therefore, the other Split Territory
Programs and the Spinal Muscular Atrophy Program options are not performance obligations at inception.
The Company has identified $74.6 million of total transaction price consisting of the $65.0 million upfront fee,
the $5.0 million premium paid in excess of fair value of the Series B Preferred Stock and $4.6 million of Sanofi
Genzyme “in-kind” funding, which represents the transaction price at adoption. Additional consideration to be paid to
the Company upon the exercise of the license options by Sanofi Genzyme or upon reaching certain milestones are
excluded from the transaction price as they relate to option fees and milestones that can only be achieved subsequent to
the option exercise or are outside of the initial contract term.
The Company has allocated the transaction price to the separate performance obligations based on their relative
standalone selling price. For all performance obligations, the Company determined the standalone selling price at
contract inception based on each obligation’s estimated standalone selling price (“ESP”). The Company determined the
ESP for the service related deliverable for the research and development activities based on internal estimates of the
costs to perform the services, including expected internal expenses and expenses with third parties for services and
supplies, marked up to include a reasonable profit margin and adjusted for the scope of the potential license. Significant
inputs used to determine the total expense of the research and development activities include, the length of time required
and the number and costs of various studies that will be performed to complete the applicable POP Study. The ESP for
the AJSC and DAC have been estimated based on the costs incurred to participate in the committees, marked up to
include a reasonable profit margin. The ESP for the PD Material Right was determined based on the estimated value of
the license adjusted for the estimated probability that the option would be exercised by Sanofi Genzyme.
F-20
Based on the relative standalone selling price allocation, the allocation of the transaction price to the separate
performance obligations was as follows:
Unit of Accounting
Research and Development Services for:
Huntington’s Program
Parkinson’s Program
Friedreich’s ataxia Program
Spinal Muscular Atrophy Program
Future Program
Committee Obligations:
AJSC
DAC
PD Material Right
Total
Amount
(in thousands)
$
$
14,228
6,040
14,821
29,116
2,239
133
207
7,855
74,639
The Company recognizes the amounts associated with research and development services and committee
obligations on a proportional performance basis over the period of service using input-based measurements such as costs
incurred to date, to estimate proportion performed, and remeasures its progress towards completion at the end of each
reporting period. The amount allocated to the PD Material Right was initially deferred and recognized in full prior to the
adoption of ASC 606.
In October 2017, Sanofi Genzyme decided not to exercise the PD Material Right. Therefore, in the year ended
December 31, 2017, the Company recognized revenue of $7.8 million of consideration which had been allocated to the
PD Material Right. In addition, revenue recognized during the years ended December 31, 2017 and 2016 include
amounts recognized related to consideration allocated to research and development services for various programs under
the Sanofi Genzyme Collaboration Agreement. During 2017 the Company reassessed the estimated period of
performance for each of the units of accounting and determined that the estimated period would be extended for two
units of accounting. During 2016 the Company deprioritized the development of VY-SMN101 for the treatment of
Spinal Muscular Atrophy. As a result, the Company ceased recognizing the revenue allocated to this program. These
adjustments were made on a prospective basis and resulted in decreases in revenue recognized by $2.1 million and $9.5
million, respectively, for the year ended December 31, 2017.
During the years ended December 31, 2018, 2017, and 2016, the Company recognized $0.7 million, $10.1
million, and $14.2 million, respectively, of revenue associated with its collaboration with Sanofi Genzyme related to
research and development services performed during the period and for consideration allocated to the PD Material Right,
which was recognized during 2017. As of December 31, 2018, there is $50.9 million of deferred revenue related to the
Sanofi Genzyme Collaboration Agreement, which is classified as either current or noncurrent in the accompanying
balance sheet based on the period the services are expected to be delivered.
Costs incurred relating to the programs that Sanofi Genzyme has the option to license under the Sanofi
Genzyme Collaboration Agreement consist of internal and external research and development costs, which primarily
include: salaries and benefits, lab supplies and preclinical research studies. All costs are included in research and
development expenses in the Company’s statement of operations during the years ended December 31, 2018, 2017, and
2016.
AbbVie Tau Collaboration Agreement
Summary of Agreement
In February 2018, the Company entered into an exclusive collaboration and option agreement (the “AbbVie Tau
Collaboration Agreement”) with AbbVie for the research, development and commercialization of AAV and other virus-
based gene therapy products for the treatment of diseases of the central nervous system and other neurodegenerative
diseases related to defective or excess aggregation of tau protein in the human brain, including Alzheimer’s disease.
F-21
Under the AbbVie Tau Collaboration Agreement, the Company and AbbVie have agreed to collaborate on the research
and development of specified vectorized antibody compounds comprised of an AAV or other viral capsid and a virus
vector genome that encodes one or more antibodies that target and bind to a tau protein. The collaboration is comprised
of a research period (the “Research Period”), a development period (the “Development Period”), and an exclusive license
option (the “License Option”). The AbbVie Tau Collaboration Agreement included a non-refundable upfront payment of
$69.0 million for services during the Research Period.
During the Research Period, each party has agreed to identify up to five antibodies for inclusion in the
collaboration. Subject to certain conditions and exceptions, the parties will select up to three antibodies (each, a
“Research Antibody”) as candidates for creation of research compounds (each, a “Research Compound”), with AbbVie
having the right to select two of the three Research Antibodies. The Company is required to use diligent efforts to
conduct antibody engineering and other research activities to create Research Compounds and to develop product
candidates containing or comprised of such Research Compounds (“Product Candidates”). The Company is solely
responsible for its costs and expenses during the Research Period. During a specified portion of the Research Period,
AbbVie may exercise one or more of its exclusive development options (each, a “Development Option”) to select up to a
total of three Research Compounds (the “Selected Research Compounds”) and their corresponding Product Candidates
(the “Selected Product Candidates”) to proceed to the Development Period.
Upon AbbVie’s exercise of a Development Option, AbbVie will pay the Company $80.0 million for the first
Selected Research Compound and $30.0 million each for up to two additional Selected Research Compounds. During the
Development Period, the Company is obligated to use diligent efforts to conduct development activities, including
Investigational New Drug application-enabling and Phase 1 clinical trial activities, for the Selected Research Compounds
and corresponding Selected Product Candidates. The Company will be solely responsible for the costs and expenses
during the Development Period. During a specified portion of the Development Period (the “License Option Period”),
AbbVie may exercise its License Option to further develop and commercialize all of the Research Compounds (the
“Licensed Compounds”), and corresponding product candidates (the “Licensed Products”). Upon AbbVie’s exercise of
its License Option, AbbVie will provide a one-time payment of $75.0 million to the Company, and the Company will
grant to AbbVie an exclusive, worldwide license, with the right to sublicense, under certain of the Company’s
intellectual property rights to develop and commercialize the Licensed Compounds and the Licensed Products for all
human diagnostic, prophylactic and therapeutic uses. In addition, after AbbVie’s exercise of the License Option, the
Company has certain obligations to complete any remaining research and development activities that have not been
completed for any Research Compounds and Product Candidates.
The Company’s research and development activities will be conducted pursuant to the plans agreed to by the
parties and overseen by a joint governance committee (“JGC”) as detailed in the AbbVie Tau Collaboration Agreement.
Any material amendment to the research or development plans must be mutually agreed to by the Company and AbbVie,
which may be through the JGC.
Under the AbbVie Tau Collaboration Agreement, AbbVie is required to use commercially reasonable efforts to
develop and commercialize at least one Licensed Product in each of the United States, Japan, the United Kingdom,
Germany, France, Italy, and Spain. After exercise of the License Option, AbbVie is solely responsible for all
development and commercialization activities relating to Licensed Compounds and Licensed Products at its sole cost and
expense, subject to the agreed-upon research and development plans. The Company may elect to share in AbbVie’s
development costs relating to a Licensed Product on an indication-by-indication basis in exchange for a specified
increase in royalties (a “Cost-Sharing Option”). If the Company exercises a Cost-Sharing Option, the Company may
either reimburse AbbVie for AbbVie’s applicable development costs or, in the case of certain budget overruns, AbbVie
may instead deduct applicable development costs, up to a specified cap, from milestone and royalty payments owed by
AbbVie to the Company.
Under the AbbVie Tau Collaboration, the Company is eligible to receive specified development and first-sale
milestone payments for each Licensed Compound of up to an aggregate of $550.0 million in the case of an Alzheimer’s
disease indication, up to $230.0 million in the case of the first indication other than Alzheimer’s disease and up to $115.0
million for a subsequent non-Alzheimer’s disease indication. Additionally, the Company is eligible to receive tiered,
escalating royalties, in a range from a high-single digit to a mid-to-high teen (or, if the Company has exercised its Cost-
Sharing Option, low-twenties) percentage of aggregate net sales of Licensed Products on a Licensed Compound by
Licensed Compound basis, subject to potential reductions in certain circumstances. For each Licensed Product, AbbVie
F-22
also has the right to decrease or eliminate its royalty payments on such Licensed Product in exchange for a one-time
payment by AbbVie at a fair market value to be negotiated by the parties or determined pursuant to dispute resolution
procedures specified in the AbbVie Tau Collaboration Agreement.
Unless earlier terminated, the AbbVie Tau Collaboration Agreement will expire on the earliest to occur of the
expiration of (i) the Development Option Period, without AbbVie’s exercise of a Development Option; (ii) the License
Option Period, without AbbVie’s exercise of its License Option; and (iii) the last-to-expire royalty term with respect to
all Licensed Products in all countries. The Company and AbbVie have customary termination rights including the right
to terminate for an uncured material breach of the agreement committed by the other party, and AbbVie has the right to
terminate for convenience.
Accounting Analysis
The Company assessed the promised goods and services under the AbbVie Tau Collaboration Agreement, in
accordance with ASC 606, and determined that the AbbVie Tau Collaboration Agreement includes the following
performance obligations: (i) research services during the Research Period (through the delivery of the final research
report) including the identification of the Research Antibodies, conduct of research activities and provision of
information to AbbVie to allow AbbVie to determine whether to exercise up to three Development Options to be
rendered (collectively, the “Research Services”), and (ii) a material right associated with the Development Option on the
first Research Compound and associated Product Candidates (“First Development Option Material Right”). The first
Development Option provides AbbVie with (i) additional development services on a selected Research Compound and
(ii) the ability to exercise the License Option. The Company has concluded the option provides a material right as the
consideration paid by AbbVie upon exercise of the first Development Option is less than the amount that the Company
would otherwise expect to receive outside the context of the contract.
The Company has concluded that the First Development Option Material Right is a separate performance
obligation under ASC 606 as AbbVie is provided additional services and a License Option for additional consideration
that represents a significant discount from amounts that would otherwise be offered outside the context of the contract.
The First Development Option Material Right is distinct from the other performance obligations in the arrangement as it
is an option in the contract that is not required for AbbVie to obtain the benefit of the other promised goods or services in
the arrangement. The First Development Option Material Right does not include the underlying goods or services that
are delivered upon exercise of the option, but rather represents the value to the customer of having the right to obtain
development services and the right to the License Option at an advantageous price.
The Company received a nonrefundable, upfront payment of $69.0 million as consideration under the AbbVie
Tau Collaboration Agreement, which represents the transaction price at inception. Additional consideration to be paid to
the Company upon the exercise of the Development and License Options by AbbVie or upon reaching certain milestones
are excluded from the transaction price as they relate to option fees and milestones that can only be achieved subsequent
to the option exercise or are outside of the initial contact term.
The Company has allocated the transaction price to the separate performance obligations based on their relative
standalone selling price. The Company determined the standalone selling price at contract inception based on each
obligation’s ESP. The Company determined the ESP for the research services obligation based on internal estimates of
the costs to perform the services, including expected internal expenses and expenses with third parties for services and
supplies, inclusive of a reasonable profit margin. Significant inputs used to determine the total expense of the research
services include the length of time required, the internal hours expected to be incurred on the services and the number
and costs of various studies that will be performed to complete the Research Plan. The ESP for the First Development
Option Material Right was determined based on the fees AbbVie would pay to exercise the Development and License
Options, the estimated costs to perform the development services, inclusive of a reasonable profit margin, the estimated
value of the License Option using comparable transactions, and the probability that the Development and License
Options would be exercised by AbbVie.
Based on the relative standalone selling price, the allocation of the transaction price to the separate performance
obligations was as follows:
Performance Obligation
Amount
F-23
Research Services
First Development Option Material Right
Total
$
$
(in thousands)
34,482
34,518
69,000
The Company recognizes the amounts associated with Research Services on a proportional performance basis
over the period of service using input-based measurements of total cost of research incurred to estimate proportion
performed and remeasures its progress towards completion at the end of each reporting period. The amount allocated to
the First Development Option Material Right is recorded as deferred revenue and will be recognized either over the
period in which goods and services underlying the option are transferred or upon expiry of the option.
During the year ended December 31, 2018, the Company recognized $6.9 million of revenue associated with
the AbbVie Tau Collaboration related to the Research Services performed during the period. As of December 31, 2018,
there is $62.1 million of deferred revenue related to the AbbVie Tau Collaboration Agreement, which is classified as
either current or noncurrent in the accompanying balance sheet based on the period the goods or services are expected to
be delivered.
Costs incurred relating to the AbbVie Tau Collaboration Agreement consist of internal and external research
and development costs, which primarily include salaries and benefits, lab supplies, and preclinical research studies. All
of these costs are included in research and development expenses in the Company’s statement of operations during the
year ended December 31, 2018.
MRI Interventions License and Securities Purchase Agreements
Summary of Agreement
In September 2016, the Company entered into a securities purchase agreement (the “Securities Purchase
Agreement”) and a license agreement (the “MRIC License Agreement”) with MRI Interventions, Inc. (“MRIC”). MRIC
is the primary supplier of the ClearPoint® System, which is being used by the Company in ongoing development and
clinical trials. Under the Securities Purchase Agreement, the Company paid $2.0 million for shares of MRIC common
stock and a warrant to purchase additional shares of MRIC common stock. The Company also entered into the MRIC
License Agreement, which provided for certain rights to MRIC technology and for MRIC to transfer the rights and
know-how to manufacture the ClearPoint System to enable the Company to utilize an alternative supplier for the
ClearPoint System for use in the Company’s development and clinical trials. During 2017, the Company terminated the
MRIC License Agreement and all prior and future commitments and obligations under such agreement became null and
void. The Company continues to hold the common stock and warrants to purchase additional shares of common stock as
an available-for-sale security and non-current asset, respectively.
In May 2018, the Company entered into a master services and supply agreement with MRIC (the “MRIC
Supply Agreement”) which provides for MRIC to perform certain manufacturing, supply, development and services as
requested by the Company, including the supply of the ClearPoint System and cannula devices.
As of December 31, 2018, the Company continued to hold the common stock and warrants to purchase
additional shares of common stock as an available-for-sale security and non-current asset, respectively.
Other Agreements
During 2018, 2017, and 2016, the Company entered into various agreements with contract research
organizations and institutions to license intellectual property. In consideration for the licensed rights the Company
generally made upfront payments, which were recorded as research and development expense as the acquired
technologies were considered in-process research and development. The license agreements obligate the Company to
make additional payments that are contingent upon specific clinical trial and regulatory approval milestones being
achieved as well as royalties on future product sales. The agreements to license intellectual property include potential
milestone payments that are dependent upon the development of products licensed under the agreements and contingent
upon the achievement of clinical trial or regulatory approval milestones. As of December 31, 2018 and 2017, there have
F-24
been no milestones achieved. The Company can generally terminate the license agreements upon 30-90 days prior
written notice.
Additionally, certain license agreements require the Company to reimburse the licensor for certain past and
ongoing patent related expenses. During the year ended December 31, 2018, 2017, and 2016, the Company incurred $0.6
million, $0.8 million, and $1.8 million of expense, respectively, related to these reimbursable patent costs which are
recorded as general and administrative expense
During the year ended December 31, 2016, the Company entered into a research and development funding
arrangement with a non-profit organization that provides up to $4.0 million in funding to the Company upon the
achievement of clinical and development milestones. The agreement provides that the Company repay amounts received
under certain circumstances including termination of the agreement, and to pay an amount up to 2.6 times the funding
received upon successful development and commercialization of any products developed. During the year ended
December 31, 2017, the Company earned a milestone payment of $1.0 million. The Company has evaluated the
arrangement and has concluded that it represents a research and development financing arrangement as it is probable that
the Company will repay amounts received under the arrangement. As a result, the $1.0 million earned through the year
ended December 31, 2017 is recorded as a non-current liability in the consolidated balance sheet.
Litigation
The Company is not a party to any material legal matters or claims and does not have contingency reserves established
for any litigation liabilities as of December 31, 2018 or 2017.
8. Preferred stock
The Company has authorized preferred stock amounting to 5,000,000 shares as of December 31, 2018 and
2017. The authorized preferred stock was classified under stockholders’ equity at December 31, 2018.
9. Common stock
As of December 31, 2018 and 2017, the Company had authorized 120,000,000 shares of common stock, at
$0.001 par value per share.
General
The voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by
the rights, powers and preferences of the holders of preferred stock. The common stock has the following characteristics:
Voting
The holders of shares of common stock are entitled to one vote for each share of common stock held at all
meetings of stockholders and written actions in lieu of meetings.
Dividends
The holders of shares of common stock are entitled to receive dividends, if and when declared by the Board of
Directors. No dividends have been declared or paid by the Company since its inception.
Liquidation
The holders of shares of common stock are entitled to share ratably in the Company’s remaining assets
available for distribution to its stockholders in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company or upon occurrence of a deemed liquidation event.
F-25
Shares Reserved For Future Issuance
Shares reserved for vesting of restricted stock awards under the Founder
Agreements
Shares reserved for vesting of restricted stock awards under the 2014 Option and
Stock Plan
Shares reserved for exercise of outstanding stock options
Shares reserved for issuances under the 2015 Stock Option Plan
Shares reserved for issuances under the 2015 Employee Stock Purchase Plan
As of December 31,
2018
2017
235,294
366,914
—
4,225,152
1,973,227
963,386
7,397,059
191,065
3,143,566
1,501,005
730,860
5,933,410
10. Stock-based compensation
2014 Stock Option and Grant Plan
In January 2014, the Company adopted the 2014 Stock Option and Grant Plan (the “2014 Plan”), under which it
could grant incentive stock options, non-qualified stock options, restricted stock awards, unrestricted stock awards, or
restricted stock units to purchase up to 823,529 shares of Common Stock to employees, officers, directors and
consultants of the Company.
In April 2014, the Company amended the Plan to allow for the issuance of up to 1,411,764 shares of Common
Stock. In August 2014, April 2015, August 2015 and October 2015 the Company further amended the Plan to allow for
the issuance of up to 2,000,000, 2,047,058, 2,669,411 and 2,998,823 shares of Common Stock, respectively. During
2014 the Company issued only restricted stock awards under the Plan and during 2015 the Company only granted stock
options.
The terms of stock option agreements, including vesting requirements, were determined by the Board of
Directors and were subject to the provisions of the 2014 Plan. Restricted stock awards granted by the Company generally
vest based on each grantee’s continued service with the Company during a specified period following grant. Stock
options granted to employees generally vest over four years, with 25% vesting on the one year anniversary and 75%
vesting ratably, on a monthly basis, over the remaining three years. Stock options granted to non-employee consultants
generally vest monthly over a period of one to four years.
Founder Awards
In January 2014, the Company issued 1,188,233 shares of restricted stock to its Founders at an original issuance
price of $0.0425 per share. Of the total restricted shares awarded to the Founders, 835,292 shares generally vest over one
to four years, based on each Founder’s continued service to the Company in varying capacity as a Scientific Advisory
Board member, consultant, director, officer or employee, as set forth in each grantee’s individual restricted stock
purchase agreement.
The remaining 352,941 of the shares issued will begin vesting upon the achievement of certain performance
objectives as well as continued service to the Company, as set forth in the agreements. These performance conditions are
tied to certain milestone events specific to the Company’s corporate goals, including but not limited to preclinical and
clinical development milestones related to the Company’s product candidates. Stock-based compensation expense
associated with these performance-based awards will be recognized when the achievement of the performance condition
is considered probable, using management’s best estimates. Management concluded that the achievement of the
performance milestone for one of the three performance-based awards had been met during 2016. Accordingly,
stock-based compensation expense in the amount of $0.3 million, $1.4 million, and $1.1 million was recorded in the
years ended December 31, 2018, 2017, and 2016, respectively.
2015 Stock Option Plan
In October 2015, the Company’s board of directors and stockholders approved the 2015 Stock Option and
Incentive Plan “(2015 Stock Option Plan”), which became effective upon the completion of the IPO. The 2015 Stock
Option Plan provides the Company with the flexibility to use various equity-based incentive and other awards as
compensation tools to motivate its workforce. These tools include stock options, stock appreciation rights, restricted
stock, restricted stock units, unrestricted stock, performance share awards and cash-based awards. The 2015 Stock
F-26
Option Plan replaced the 2014 Plan. Any options or awards outstanding under the 2014 Plan remained outstanding and
effective. The number of shares initially reserved for issuance under the 2015 Stock Option Plan is the sum of
(i) 1,311,812 shares of common stock and (ii) the number of shares under the 2014 Plan that are not needed to fulfill the
Company’s obligations for awards issued under the 2014 Plan as a result of forfeiture, expiration, cancellation,
termination or net issuances of awards thereunder. The number of shares of common stock that may be issued under the
2015 Stock Option Plan is also subject to increase on the first day of each fiscal year by up to 4% of the Company’s
issued and outstanding shares of common stock on the immediately preceding December 31.
Effective January 1, 2016, 2017, 2018 and 2019, an additional 1,069,971, 1,070,635, 1,285,200, and 1,302,830
shares of common stock, respectively, were added to the Company’s 2015 Stock Option Plan pursuant to its “evergreen”
provision, for future issuance. During the year ended December 31, 2018, the Company granted options to purchase
2,215,891 shares of common stock to employees and directors. As of December 31, 2018, there were 1,973,227 shares
available for future issuance under the 2015 Stock Option Plan.
2015 Employee Stock Purchase Plan
In October 2015, the Company’s board of directors and stockholders approved the 2015 Employee Stock
Purchase Plan (the “2015 ESPP”). Under the 2015 ESPP, all full-time employees of the Company are eligible to
purchase common stock of the Company twice per year, at the end of each six-month payment period. During each
payment period, eligible employees who so elect, may authorize payroll deductions in an amount of 1% to 10% (whole
percentages only) of the employee’s base pay for each payroll period. At the end of each payment period, the
accumulated deductions are used to purchase shares of common stock from the Company at a discount. A total of
262,362 shares of common stock were initially authorized for issuance under this plan. The 2015 ESPP became effective
upon the completion of the IPO. Effective January 1, 2016, 2017, 2018, and 2019, a total of 267,492, 267,658, 321,300,
and 325,707 shares of common stock, respectively, were added to the 2015 ESPP, pursuant to its evergreen provision,
for future issuance. The Company issued 88,774 shares of common stock under the 2015 ESPP in the year ended
December 31, 2018.
Stock-based Compensation Expense
Total compensation cost recognized for all stock-based compensation awards in the statements of operations
and comprehensive loss is as follows:
2018
Year ended December 31,
2017
(in thousands)
2016
Research and development
General and administrative
Total stock-compensation expense
$
$
4,717 $
10,993
15,710 $
5,367 $
3,871
9,238 $
4,296
2,014
6,310
Restricted Stock
A summary of the status of and changes in unvested restricted stock was as follows:
Unvested restricted common stock as of December 31, 2017
Issued
Vested
Repurchased
Unvested restricted common stock as of December 31, 2018
Weighted
Average
Grant Date
Fair Value
Per Share
Shares
557,979 $
—
(319,891) $
(2,794) $
235,294 $
0.70
0.84
1.11
0.51
The expense related to awards granted to employees and non-employees was $0.1 million and $0.4 million,
respectively, for the year ended December 31, 2018. The expense related to awards granted to employees and non-
F-27
employees was $0.5 million and $2.7 million, respectively, for the year ended December 31, 2017. The expense related
to awards granted to employees and non-employees was $0.5 million and $2.6 million, respectively, for the year ended
December 31, 2016.
Stock Options
A summary of the status of, and changes in, stock options was as follows:
Outstanding at December 31, 2017
Granted
Exercised
Cancelled or forfeited
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Vested and expected to vest at December 31, 2018
Weighted Remaining Aggregate
Intrinsic
Contractual
Value
(in thousands)
Life
(in years)
Shares
3,143,566 $
2,215,891 $
(384,186) $
(750,119) $
4,225,152 $
1,531,832 $
4,225,152 $
Average
Exercise
Price
11.82
20.78
10.13
16.13
15.91
12.55
15.91
8.4 $
7.3 $
8.4 $
578
507
578
Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees
and directors during the year ended December 31, 2018 was $13.87. The stock-based compensation expense related to
stock option awards granted to employees and directors was $14.9 million, $5.5 million, and $3.0 million for the years
ended December 31, 2018, 2017, and 2016, respectively.
The fair value of each option issued to employees and directors was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
Year ended December 31,
2018
2017
2016
2.8 %
— %
6.0
74.4 %
2.0 %
— %
6.0
73.7 %
1.5 %
— %
6.0
73.1 %
There were no new options granted to non-employees during the year ended December 31, 2018. Unvested
options granted to non-employees are revalued at each measurement period until they vest. The expense related to stock
option awards granted to non-employees was $0.3 million, $0.4 million, and $0.2 million for the years ended
December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018, the Company had unrecognized
stock-based compensation expense related to its unvested stock options of $26.1 million which is expected to be
recognized over the remaining weighted average vesting period of 2.78 years.
The fair value of each option issued to non-employees was estimated at each vesting and reporting date using
the Black-Scholes option pricing model. The reporting date fair value was determined using the following
weighted-average assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
As of December 31,
2018
2017
2016
2.6 %
— %
7.6
73.2 %
2.4 %
— %
8.5
76.2 %
2.1 %
— %
9.1
83.3 %
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11. 401(k) Savings plan
The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the
“401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and
allows participants to defer a portion of their annual compensation on a pretax basis. The Company expensed
approximately $0.8 million, $0.5 million, and $0.3 million related to employer contributions made during the years
ended December 31, 2018, 2017, and 2016, respectively.
12. Income taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and for tax carryforwards, such as net operating losses. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
provision for income taxes in the period that includes the enactment date. The Company records a valuation allowance to
reduce the carrying amount of deferred tax assets if it is more likely than not that such asset will not be realized. The
evaluation of uncertain tax positions is based on factors including, but not limited to, changes in the law, the
measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to
audit, new audit activity, and changes in facts or circumstances related to a tax position. The Company evaluates its tax
positions on an annual basis.
On December 22, 2017, the U.S. federal government enacted comprehensive tax legislation with the U.S. Tax
Cuts and Jobs Act (“Tax Act”) that made changes to the U.S. tax code impacting the year ended December 31, 2017 and
future years. Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%.
For the year ended December 31, 2017, the Tax Act required a one-time transition tax on certain unrepatriated
earnings of foreign subsidiaries that is payable over eight years. At December 31, 2018, the Company does not have any
foreign subsidiaries and the international aspects of the Tax Act are not applicable.
In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provided
guidance on accounting for the tax effects of the Tax Act. SAB 118 provided a measurement period that should not
extend beyond one year from the date of the Tax Act enactment for companies to complete the accounting under
Accounting Standards Codification 740—Income Taxes. In accordance with SAB 118, to the extent that a company’s
accounting for certain income tax effects of the Tax Act is incomplete, but the company is able to determine a reasonable
estimate, it must record a provisional estimate in its financial statements. The Company’s accounting for the Tax Act was
completed in the fourth quarter of 2018 and resulted in no adjustments to the Company’s prior provisional estimates
recorded in the period ended December 31, 2017.
The benefit for incomes taxes is as follows:
Current
Federal
State
Total current
Deferred
Federal
State
Total deferred
Total tax expense
Year ended December 31,
2018
2017
(in thousands)
180
—
180
—
—
—
180
$
$
—
—
—
—
—
—
—
$
$
F-29
A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate at the
Company’s effective tax rate is as follows:
Income tax computed at federal statutory tax rate
State taxes, net of federal benefit
General business credit carryovers
Non-deductible expenses
Deferred rate change
Change in valuation allowance
Total
Year ended December 31,
2018
2017
2016
21.0 %
6.3 %
3.1 %
(2.1) %
— %
(28.1) %
0.2 %
34.0 %
6.1 %
5.0 %
(4.1)%
(21.8)%
(19.2)%
— %
34.0 %
5.6 %
4.2 %
(4.0)%
— %
(40.2)%
(0.4)%
The Company has incurred net operating losses (“NOLs”) since June 2013. At December 31, 2018, the
Company had federal and state net operating loss carryforwards of $162.9 million and $163.8 million, respectively.
During 2018, the company generated federal and state NOLs carryforwards of $73.1 million and $72.1 million,
respectively. The federal net operating loss carryforward generated in 2018 is limited to 80% of taxable income and has
an indefinite carryforward period. The Company’s federal net operating loss carryforward generated in the period ended
December 31, 2017 and prior, as well as the Company’s state NOL carryforwards begin to expire in 2033. As of
December 31, 2018, the Company also had federal and state research and development tax credit carryforwards of $9.4
million and $3.0 million, respectively, which expire beginning in 2028. As of December 31, 2018, the Company had
state investment credits of $0.4 million, which expire beginning in 2019.
Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership
may result in a limitation on the amount of NOL carryforwards and research and development credit carryforwards that
may be utilized annually to offset future taxable income and taxes payable. In general, an ownership change, as defined
by Section 382, results from transactions that increase the ownership of 5% stockholders or public groups in the stock of
a corporation by more than 50 percent in the aggregate over a three-year period. During 2016, the Company completed a
study through June 30, 2016, to determine whether any ownership change has occurred since the Company’s formation
and has determined that transactions have resulted in three ownership changes, as defined by Section 382. There could be
additional ownership changes in the future that could further limit the amount of NOLs and tax credit carryforwards that
the Company can utilize.
The significant components of the Company’s deferred tax assets and (liabilities) as of December 31, 2018 and
2017 are as follows:
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Deferred rent
Deferred revenue
Non-deductible accruals and reserves
Intangibles
Stock compensation
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities
Depreciation and amortization
Net deferred taxes
F-30
Year ended December 31,
2018
2017
(in thousands)
$ 44,556 $ 24,642
8,832
1,458
8,622
817
832
1,361
46,564
(44,953)
1,611
12,021
1,560
13,926
1,105
930
2,802
76,900
(75,213)
1,687
(1,687)
$
— $
(1,611)
—
As required by ASC 740, management has evaluated the positive and negative evidence bearing upon the
realizability of its deferred tax assets, which principally comprise NOL carryforwards, research and development credit
carryforwards, deferred revenue. Management has determined that it is more likely than not that the Company will not
recognize the benefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $75.2 million
and $45.0 million has been established at December 31, 2018 and 2017, respectively. The change in valuation allowance
was $30.2 million for the year ended December 31, 2018, primarily due to additional operating losses incurred by the
Company for the year ended December 31, 2018. The primary reason for the difference between the income tax expense
recorded by the Company and the amount of income tax expense at statutory income tax rates was the change in the
valuation allowance.
At December 31, 2018 and 2017, the Company had no unrecognized tax benefits. The Company has not as yet
conducted a study of its research and development credit carryforwards. This study may result in an adjustment to the
Company’s research and development credit carryforwards; however, until a study is completed, and any adjustment is
known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided
against the Company’s research and development credits, and if an adjustment is required, this adjustment would be
offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of
operations if an adjustment were required.
Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax
expense in the accompanying statements of operations. As of December 31, 2018 and 2017, the Company has no accrued
interest related to uncertain tax positions. Since the Company is in a loss carryforward position, it is generally subject to
examination by the U.S. federal, state, and local income tax authorities for all tax years in which a loss carryforward is
available.
13. Related-party transactions
Since inception, the Company received consulting and management services from one of its investors. The total
amount of consulting and management services provided by this investor was de minimis during the years ended
December 31, 2018 and 2017.
14. Selected quarterly financial data (unaudited)
The following table contains quarterly financial information for 2018 and 2017. The Company believes that the
following information reflects all normal recurring adjustments necessary for a fair statement of the information for the
periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2018
Collaboration revenue
Total operating expenses
Loss from operations
Net loss
Net loss per share
Collaboration revenue
Total operating expenses
Loss from operations
Net loss
Net loss per share
(amounts in thousands, except per share data)
2,008 $
25,169
(23,161)
(22,532)
2,575 $
28,269
(25,694)
(25,541)
2,094 $
23,241
(21,147)
(20,289)
$
942 $
22,035
(21,093)
(19,926)
$
(0.63) $
(0.70) $
7,619
98,714
(91,095)
(88,288)
(2.75)
(0.80) $
(0.63) $
2017
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(amounts in thousands, except per share data)
$
1,464 $
18,986
(17,522)
(16,648)
$
(0.65) $
1,177 $
19,816
(18,639)
(18,876)
1,148 $
24,503
(23,355)
(23,346)
(0.73) $
(0.89) $
6,346 $ 10,135
81,998
18,693
(71,863)
(12,347)
(70,698)
(11,828)
(2.64)
(0.40) $
F-31
15. Subsequent events
Neurocrine Collaboration
In January 2019, the Company entered into a collaboration and license agreement with Neurocrine for the
research, development and commercialization of four programs including the Company’s Parkinson’s disease program,
the Company’s Friedreich’s ataxia program, and two programs to be determined by the Company and Neurocrine at a
later date. Under the terms of the agreement, the Company will receive an upfront payment of $165.0 million, inclusive
of $50.0 million for the sale of 4,179,728 shares of its common stock, funding of development costs under the
Parkinson’s and Friedreich’s ataxi programs, and may receive future development and regulatory milestones and
royalties.
AbbVie Alpha-Synuclein Collaboration
In February 2019, the Company entered into a separate collaboration agreement with AbbVie, the AbbVie
Alpha-Synuclein Collaboration Agreement, for the research, development, and commercialization of AAV and other
virus based gene therapy products directed against pathological species of alpha-synuclein for the potential treatment of
Parkinson’s disease and other synucleinopathies. Under the terms of the AbbVie Alpha-Synuclein Collaboration
Agreement, the Company will receive an upfront payment of $65.0 million and may receive option exercise payments,
future regulatory and commercial milestone payments and royalties.
F-32
EXHIBIT INDEX
Description
Form or
Schedule
Incorporated by Reference to:
Filing
Date with
SEC
SEC File
Number
Exhibit
No.
Filed
Herewith
Exhibit
No.
1.1
Sales Agreement by and between the
Registrant and Cowen and Company,
LLC, dated as of December 1, 2016.
S-3
1.2
12/01/2016
3.1
Amended and Restated Certificate of
8-K
3.1
11/16/2015
Incorporation of the Registrant.
3.2
Amended and Restated By-Laws of the
8-K
3.2
11/16/2015
Registrant.
4.1
Specimen Common Stock Certificate of
10-K
4.1
3/14/18
the Registrant.
4.2
4.3
Form of Indenture to be entered into
between the Registrant and Trustee.
S-3/A
4.2
12/19/2016
Second Amended and Restated Investors’
Rights Agreement, by and among the
Registrant and certain of its stockholders,
dated as of April 10, 2015.
S-1/A
4.2
10/28/2015
10.1#
2014 Stock Option and Grant Plan and
forms of award agreements thereunder.
S-1/A
10.1
10/28/2015
10.2#
2015 Stock Option and Incentive Plan and
forms of award agreements thereunder.
S-1/A
10.2
10/28/2015
10.3†
Collaboration Agreement by and between
S-1/A
10.3
11/06/2015
the Registrant and Sanofi Genzyme
Corporation, dated February 11, 2015.
10.4†
Exclusive License Agreement by and
S-1
10.4
10/09/2015
between the Registrant and the University
of Massachusetts, dated January 30, 2014.
10.5
Lease Agreement by and between the
S-1/A
10.5
10/28/2015
Registrant and UP 45/75 Sidney Street,
LLC, dated as of April 1, 2014.
10.6
First Amendment to Lease Agreement by
and between the Registrant and 45/75
Sidney Street, LLC, dated as of December
23, 2015.
10-Q
10.5
05/12/2016
10.7#
Offer Letter by and between the
S-1/A
10.6
10/28/2015
Registrant and Bernard Ravina, M.D.,
dated January 15, 2014.
F-33
333-
207367
001-
37625
001-
37625
001-
37625
333-
207367
333-
207367
333-
207367
333-
207367
333-
207367
333-
207367
333-
207367
001-
37625
333-
207367
10.9#
Offer Letter by and between the
S-1/A
10.8
10/28/2015
Registrant and Steven Paul, M.D., dated
July 24, 2014.
10.10
Form of Indemnification Agreement to be
entered into between the Registrant and
its directors.
10.11
Form of Indemnification Agreement to be
entered into between the Registrant and
its executive officers.
S-1/A
10.9
10/28/2015
S-1/A
10.10
10/28/2015
10.12† License Agreement, by and between the
S-1/A
10.11
11/04/2015
Registrant and ReGenX Biosciences,
LLC, dated May 28, 2014.
10.13# 2015 Employee Stock Purchase Plan.
S-1/A
10.12
10/28/2015
10.14# Employment Agreement by and between
the Registrant and Steven M. Paul, Dated
May 11, 2016.
10.16# Employment Agreement by and between
the Registrant and Dinah Sah, dated May
11, 2016.
10-Q
10.1
05/12/2016
10-Q
10.3
05/12/2016
10.17
Lease Agreement by and between the
10-Q
10.6
05/12/2016
Registrant and UP 64 Sidney Street, LLC,
dated as of December 23, 2015.
10.18
First Amendment to Lease Agreement, by
and between Voyager Therapeutics, Inc.
and UP 64 Sidney Street, LLC, dated June
1, 2018.
10.19# Employment Agreement by and between
the Registrant and Jane Pritchett
Henderson, dated January 1, 2017.
10.20# Employment Agreement by and between
the Registrant and Matthew Ottmer, dated
September 11, 2017.
8-K
10.2
06/05/2018
8-K
10.1
01/03/2017
8-K
10.1
9/18/2017
10.21
Second Amendment to the Lease
8-K
10.1
02/07/2018
Agreement by and between the Registrant
and UP 45/75 Sidney Street, LLC, dated
as of February 5, 2018.
10.22# Amendment No. 1 to 2015 Employee
10-K
10.21
03/14/2018
Stock Purchase Plan.
10.23†† Collaboration Agreement by and between
the Registrant and AbbVie Biotechnology
Ltd, dated as of February 16, 2018.
10-K
10.22
03/14/2018
F-34
333-
207367
333-
207367
333-
207367
333-
207367
333-
207367
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
10.24# Retirement Agreement, by and between
8-K
10.1
06/29/2018
Voyager Therapeutics, Inc. and Steven M.
Paul, dated June 28, 2018.
10.25# Employee Agreement, by and between
8-K
10.2
06/29/2018
Voyager Therapeutics, Inc. and G. Andre
Turenne, dated June 28, 2018.
10.26# Consulting Agreement, by and between
10-Q
10.5
08/07/2018
Voyager Therapeutics, Inc. and Steven M.
Paul, M.D., dated August 2, 2018.
10.27# Form of Non-Qualified Stock Option
Agreement for Inducement Grant.
10.28†† Collaboration and License Agreement, by
and between the Registrant and
Neurocrine Biosciences, Inc., dated
January 28, 2019.
10.29
Stock Purchase Agreement, by and
between the Registrant and Neurocrine
Biosciences, Inc., dated January 28, 2019.
10.30
Investor Agreement, by and between the
Registrant and Neurocrine Biosciences,
Inc., dated January 28, 2019.
10.31†† Collaboration and Option Agreement, by
and between the Registrant and AbbVie
Ireland Unlimited Company, dated
February 21, 2019.
10.32# Employment Agreement, by and between
10-Q
10.3
11/07/2018
Voyager Therapeutics, Inc. and Allison
Dorval, dated November 7, 2018.
10.33# Form of Restricted Stock Unit Agreement
for Inducement Grant.
10.34
Third Amendment to Lease Agreement,
by and between Voyager Therapeutics,
Inc. and UP 45/75 Sidney Street, LLC,
dated June 1, 2018.
21.1
Subsidiaries of the Registrant.
23.1
Consent of Ernst & Young, Independent
Registered Public Accounting Firm.
24.1
Power of Attorney (see signature page of
this Annual Report on Form 10-K).
8-K
10.1
06/05/2018
F-35
001-
37625
001-
37625
001-
37625
001-
37625
001-
37625
X
X
X
X
X
X
X
X
X
X
X
X
31.1
31.2
Certification of Principal Executive
Officer pursuant to Exchange Act
Rules 13a-14 or 15d-14.
Certification of Principal Financial
Officer pursuant to Exchange Act
Rules 13a-14 or 15d-14.
32.1+
Certifications of Principal Executive
Officer and Principal Financial Officer
pursuant to Exchange Act Rules 13a-
14(b) or 15d-14(b) and 18 U.S.C.
Section 1350.
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema
Document.
101.CAL XBRL Taxonomy Extension Calculation
Document.
101.LAB XBRL Taxonomy Extension Definition
Linkbase Document.
101.PRE XBRL Taxonomy Extension Labels
Linkbase Document.
101.DEF XBRL Taxonomy Extension Presentation
Link Document.
# Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to
the Annual Report on Form 10-K.
† Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed
with the Securities and Exchange Commission.
†† Confidential treatment has been requested as to certain portions, which portions have been omitted and separately
filed with the Securities and Exchange Commission.
+ The certification furnished in Exhibit 32.1 hereto is deemed to be furnished with this Annual Report on Form 10-K
and will not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
except to the extent that the Registrant specifically incorporates it by reference.
F-36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
February 26, 2019
VOYAGER THERAPEUTICS, INC.
/s/ G. Andre Turenne
By:
G. Andre Turenne
Chief Executive Officer, President, and
Director
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned directors and officers of Voyager Therapeutics, Inc. (the “Company”), hereby severally
constitute and appoint G. Andre Turenne and Allison Dorval, and each of them singly, our true and lawful attorneys,
with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below,
any and all amendments to this Annual Report on Form 10-K, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as each of us might or could do in
person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes,
shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has
been signed by the following persons in the capacities and on the dates indicated.
Name
/s/ G. Andre Turenne
G. Andre Turenne
/s/Allison Dorval
Allison Dorval
/s/Mark Levin
Mark Levin
/s/Jim Geraghty
Jim Geraghty
/s/Michael Higgins
Michael Higgins
/s/Perry A. Karsen
Perry A. Karsen
/s/Steven Hyman, M.D.
Steven Hyman, M.D.
/s/Wendy Dixon, Ph.D.
Wendy Dixon, Ph. D.
/s/Steve Paul, M.D.
Steve Paul, M.D.
/s/Glenn Pierce, M.D., Ph.D.
Glenn Pierce, M.D., Ph.D.
Date
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
4
4
Title
Chief Executive Officer, President, and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
F-37
Management Team
Board of Directors
Mark Levin
Chairman; Partner, Third Rock Ventures
Wendy Dixon, Ph.D.
Formerly of Bristol-Myers Squibb Company
Jim Geraghty
Chairman of the Board, Idera Pharmaceuticals
and Orchard Therapeutics
Michael Higgins
Entrepreneur-in-Residence, Polaris Partners
Steven Hyman, M.D.
Director, Stanley Center for Psychiatric Research
at the Broad Institute
Perry A. Karsen
Former Chief Executive Officer,
Celgene Cellular Therapeutics
Steven Paul, M.D.
President, CEO and Chairman of the Board,
Karuna Therapeutics
Glenn Pierce, M.D., Ph.D.
Entrepreneur-in-Residence at Third Rock Ventures
Andre Turenne
President and Chief Executive Officer
Omar Khwaja, M.D., Ph.D.
Chief Medical Officer
Matthew P. Ottmer
Chief Operating Officer
Allison Dorval
Chief Financial Officer
Dinah Sah, Ph.D.
Chief Scientific Officer
Luis Maranga, Ph.D.
Chief Technical Operations Officer
Robert Hesslein
General Counsel
Kathleen Hayes
VP of Human Resources
Robert Pietrusko, Pharm.D.
SVP of Regulatory Affairs and Quality Assurance
Matthew Osborne
VP of Corporate Affairs,
Communications and Investor Relations
Allen Nunnally
VP of Corporate and Business Development
Legal Counsel
Wilmer Cutler Pickering Hale and Dorr LLP
New York, NY
Independent Auditors
Ernst & Young LLP
Boston, MA
Transfer Agent and Registrar
Computershare Trust Company, N.A.
Canton, MA
Annual Meeting
The Annual Meeting of Stockholders will be held
Thursday, June 13, 2019 at 8:00 a.m. EDT
Voyager Therapeutics, Inc.,
64 Sidney Street, Cambridge, MA 02139
®
Voyager Therapeutics
75 Sidney Street
Cambridge, MA 02139
info@voyagertherapeutics.com
857-259-5340