UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

__________________________________________________________________

FORM 10-Q

__________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

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: 001-35966

__________________________________________________________________

bluebird bio, Inc.

(Exact Name of Registrant as Specified in Its Charter)

__________________________________________________________________

Delaware	13-3680878
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

455 Grand Union Boulevard
Somerville	,	Massachusetts	02145
(Address of Principal Executive Offices)			(Zip Code)

(339) 499-9300

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

__________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	BLUE	The NASDAQ Stock Market LLC

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 electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

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	☐	Accelerated filer	☐
Non-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 Exchange Act).     Yes  ☐    No  ☒

As of November 3, 2023, there were 109,336,211 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development programs;

•our ability to advance product candidates into, and successfully complete, clinical studies;

•our ability to obtain adequate financing to fund our operations and to execute on our strategy;

•our expectations and projections regarding the sufficiency of our cash, cash equivalents, marketable securities and restricted cash to fund our operations;

•our ability to establish and scale commercial viral vector and drug product manufacturing capabilities, and to ensure adequate supply of our viral vectors and drug products, and our plans and expectations regarding our manufacturing activities;

•the timing or likelihood of regulatory filings and marketing approvals for our product candidates and our plans and expectations relating thereto;

•our plans and expectations regarding our commercialization activities for any approved products and the timing or success thereof, including expectations regarding our network of qualified treatment centers;

•our ability to obtain adequate pricing and reimbursement of any approved products;

•the implementation of our business model, strategic plans for our business, product candidates and technology;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

•the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;

•our ability to maintain and establish collaborations and licenses;

•developments relating to our competitors and our industry;

•the impact of the general economic conditions and uncertainties, including as a result of the COVID-19 pandemic; and

•other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other 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 these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

Summary of the Material and Other Risks Associated with Our Business

Below is a summary of the material risks to our business, operations and the investment in our common stock. This summary does not address all of the risks that we face. Risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q in its entirety before making investment decisions regarding our common stock.

•We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

•There is substantial doubt regarding our ability to continue as a going concern. 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 our commercial programs, product development efforts or other operations.

•Among other potential adverse events, insertional oncogenesis is a significant risk of gene therapies using viral vectors that can integrate into the genome. Any such adverse events may require us to halt or delay further clinical development of our product candidates or to suspend or cease commercialization following marketing approval, and the commercial potential of our products and product candidates may be materially and negatively impacted.

•We rely on complex, single-source supply chains for SKYSONA, ZYNTEGLO, and lovo-cel, respectively. The manufacture, testing and delivery of LVV and drug products present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, or timing needed to support our clinical programs and commercialization.

•Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.

•We cannot predict when or if we will obtain marketing approval to commercialize lovo-cel, and the marketing approval of our product candidates may ultimately be for more narrow indications than we expect. If lovo-cel or other candidates are not approved in a timely manner or at all for any reason, our business prospects, results of operations, and financial condition would be adversely affected.

•We have limited experience as a commercial company and the marketing and sale of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), may be unsuccessful or less successful than anticipated.

•The commercial success of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), will depend upon the degree of market acceptance by physicians, patients, payers and other stakeholders.

•If the market opportunities for our product candidates are smaller than we believe they are, and if we are not able to successfully identify patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.

•The insurance coverage and reimbursement status of newly-approved products in the United States is uncertain. Due to the novel nature of our technology and the potential for our product to offer lifetime therapeutic benefit in a single administration, we face unique and additional challenges in obtaining adequate pricing and reimbursement for our products. Failure to obtain or maintain adequate coverage and reimbursement for any new or current product could limit our ability to market those products and decrease our ability to generate revenue.

•We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced, safer or more effective than ours, which may adversely affect our financial condition and our ability to successfully develop and commercialize ZYNTEGLO, SKYSONA and lovo-cel.

bluebird bio, Inc.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		2
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	28
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	70
SIGNATURES		72

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

bluebird bio, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except par value amounts)

	As of September 30, 2023		As of December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	165,347	$	113,006
Marketable securities	8,946		67,321
Accounts receivable	23,000		—
Prepaid expenses	11,431		8,374
Inventory	20,969		—
Other current assets	17,383		10,787
Total current assets	247,076		199,488
Marketable securities	—		1,414
Property, plant and equipment, net	9,972		9,362
Goodwill	5,646		5,646
Intangible assets	5,368		4,868
Operating lease right-of-use assets	294,717		281,996
Restricted cash and other non-current assets	50,829		52,128
Total assets	$	613,608	$	554,902
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,852	$	25,092
Deferred revenue	9,653		1,502
Accrued expenses and other current liabilities	57,768		50,483
Operating lease liability, current portion	71,684		51,160
Total current liabilities	158,957		128,237
Operating lease liability, net of current portion	232,023		230,230
Other non-current liabilities	92		92
Total liabilities	391,072		358,559
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value, 250,000 shares authorized; 107,022 and 82,923 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	1,071		830
Additional paid-in capital	4,333,594		4,186,086
Accumulated other comprehensive loss	(2,227)		(4,070)
Accumulated deficit	(4,109,902)		(3,986,503)
Total stockholders’ equity	222,536		196,343
Total liabilities and stockholders’ equity	$	613,608	$	554,902

See accompanying notes to unaudited condensed consolidated financial statements.

2

bluebird bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except per share data)

	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
Revenue:
Product revenue, net	$	12,281	$	—	$	21,414	$	2,739
Other revenue	111		71		249		795
Total revenues	12,392		71		21,663		3,534
Cost of product revenue	10,955		—		23,895		10,056
Gross margin	1,437		71		(2,232)		(6,522)
Operating expenses:
Selling, general and administrative	40,703		33,402		118,406		106,201
Research and development	45,463		53,149		133,881		194,864
Restructuring expenses	—		(1,699)		—		4,940
Total operating expenses	86,166		84,852		252,287		306,005
Gain from sale of priority review voucher, net	—		—		92,930		—
Income (loss) from operations	(84,729)		(84,781)		(161,589)		(312,527)
Interest income, net	2,454		383		7,958		663
Other income (expense), net	10,544		7,885		30,152		13,061
Income (loss) before income taxes	(71,731)		(76,513)		(123,479)		(298,803)
Income tax (expense) benefit	—		(7)		80		(7)
Net income (loss)	$	(71,731)	$	(76,520)	$	(123,399)	$	(298,810)
Net income (loss) per share - basic	$	(0.66)	$	(0.94)	$	(1.15)	$	(3.91)
Net income (loss) per share - diluted	$	(0.66)	$	(0.94)	$	(1.15)	$	(3.91)
Weighted-average number of common shares used in computing net income (loss) per share - basic:	109,098		81,543		106,924		76,361
Weighted-average number of common shares used in computing net income (loss) per share - diluted:	109,098		81,543		106,924		76,361
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax benefit (expense) of $0.0 million for the three and nine months ended September 30, 2023 and 2022	137		(214)		1,843		(1,719)
Total other comprehensive income (loss)	137		(214)		1,843		(1,719)
Comprehensive income (loss)	$	(71,594)	$	(76,734)	$	(121,556)	$	(300,529)

See accompanying notes to unaudited condensed consolidated financial statements.

3

bluebird bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Balances at December 31, 2022	82,923	$	830	$	4,186,086	$	(4,070)	$	(3,986,503)	$	196,343
Vesting of restricted stock units	382	3		(198)		—		—		(195)
Exercise of stock options	3	—		7		—		—		7
Purchase of common stock under employee stock purchase plan (ESPP)	62	1		226		—		—		227
Issuance of common stock	23,000	230		130,061		—		—		130,291
Stock-based compensation	—	—		5,843		—		—		5,843
Other comprehensive income (loss)	—	—		—		984		—		984
Net income (loss)	—	—		—		—		21,240		21,240
Balances at March 31, 2023	106,370	$	1,064	$	4,322,025	$	(3,086)	$	(3,965,263)	$	354,740
Vesting of restricted stock units	65	$	1	$	(1)	$	—	$	—	$	—
Exercise of stock options	19	—		77		—		—		77
Stock-based compensation	—	—		6,388		—		—		6,388
Other comprehensive income (loss)	—	—		—		722		—		722
Net income (loss)	—	—		—		—		(72,908)		(72,908)
Balances at June 30, 2023	106,454	$	1,065	$	4,328,489	$	(2,364)	$	(4,038,171)	$	289,019
Vesting of restricted stock units	566	$	6	$	(6)	$	—	$	—	$	—
Exercise of stock options	2	—		8		—		—		8
Issuance of common stock	—	—		(50)		—		—		(50)
Stock-based compensation	—	—		5,153		—		—		5,153
Other comprehensive income (loss)	—	—		—		137		—		137
Net loss	—	—		—		—		(71,731)		(71,731)
Balances at September 30, 2023	107,022	$	1,071	$	4,333,594	$	(2,227)	$	(4,109,902)	$	222,536

4

	Common stock				Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders' equity
	Shares		Amount
Balances at December 31, 2021	$	71,115	$	711	$	4,096,402	$	(2,911)	$	(3,719,925)	$	374,277
Vesting of restricted stock units	310		3		(3)		—		—		—
Exercise of stock options	1		—		1		—		—		1
Stock-based compensation	—		—		12,681		—		—		12,681
Issuance of unrestricted common stock awards to settle accrued employee compensation	12		—		—		—		—		—
Other comprehensive income (loss)	—		—		—		(1,548)		—		(1,548)
Net income (loss)	—		—		—		—		(122,152)		(122,152)
Balances at March 31, 2022	71,438		$	714	$	4,109,081	$	(4,459)	$	(3,842,077)	$	263,259
Vesting of restricted stock units	60		1		(1)		—		—		—
Exercise of stock options	1		—		1		—		—		1
Issuance of common stock	2,052		20		8,023		—		—		8,043
Stock-based compensation	—		—		8,908		—		—		8,908
Other comprehensive income (loss)	—		—		—		43		—		43
Net income (loss)	—		—		—		—		(100,138)		(100,138)
Balances at June 30, 2022	73,551		$	735	$	4,126,012	$	(4,416)	$	(3,942,215)	$	180,116
Vesting of restricted stock units	572		6		(6)		—		—		—
Purchase of common stock under ESPP	67		1		238		—		—		239
Issuance of common stock	8,690		87		45,937		—		—		46,024
Stock-based compensation	—		—		9,212		—		—		9,212
Other comprehensive loss	—		—		—		(214)		—		(214)
Net loss	—		—		—		—		(76,520)		(76,520)
Balances at September 30, 2022	82,880		$	829	$	4,181,393	$	(4,630)	$	(4,018,735)	$	158,857

See accompanying notes to unaudited condensed consolidated financial statements.

5

bluebird bio, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	For the nine months ended September 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(123,399)	$	(298,810)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	3,124		3,745
Stock-based compensation expense	16,013		30,509
Gain from sale of priority review voucher	(92,930)		—
Loss (gain) on equity securities	—		3,135
Excess inventory reserve	5,333		7,519
Other non-cash items	19		2,890
Changes in operating assets and liabilities:
Accounts receivable	(23,000)		—
Prepaid expenses and other assets	(523)		(6,197)
Inventory	(24,931)		—
Operating lease right-of-use assets	40,101		29,650
Accounts payable	(5,787)		(7,552)
Accrued expenses and other liabilities	7,125		(39,046)
Operating lease liabilities	(30,506)		(22,523)
Deferred revenue	8,152		—
Net cash used in operating activities	(221,209)		(296,680)
Cash flows from investing activities:
Purchase of property, plant and equipment	(2,975)		(8,100)
Purchases of marketable securities	(43,297)		—
Proceeds from maturities of marketable securities	99,521		125,095
Proceeds from sales of marketable securities	5,853		30,216
Purchase of intangible assets	(868)		—
Proceeds from sale of priority review voucher	92,930		—
Net cash provided by investing activities	151,164		147,211
Cash flows from financing activities:
Proceeds from exercise of stock options and ESPP contributions	93		3
Proceeds from vesting of restricted stock	(196)		—
Proceeds from the secondary public offering, net of issuance costs	130,072		54,365
Net cash provided by financing activities	129,969		54,368
(Decrease) increase in cash, cash equivalents and restricted cash	59,924		(95,101)
Cash, cash equivalents and restricted cash at beginning of period	158,445		206,693
Cash, cash equivalents and restricted cash at end of period	$	218,369	$	111,592
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	165,347	$	66,478
Restricted cash included in other current assets	8,885		1,565
Restricted cash included in restricted cash and other non-current assets	44,137		43,549
Total cash, cash equivalents and restricted cash	$	218,369	$	111,592
Supplemental cash flow disclosures from investing and financing activities:
Purchases of property, plant and equipment included in accounts payable and accrued expenses	941		176
Offering expenses accrued or in accounts payable	248		298
Right-of-use assets obtained in exchange for operating lease liabilities	44,819		229,636
Increase (Reduction) of right of use asset and associated lease liability due to lease reassessment	8,003		(2,833)
Cash paid during the period for income taxes	5		—

See accompanying notes to unaudited condensed consolidated financial statements.

6

bluebird bio, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of the business

bluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Somerville, Massachusetts. The Company is a biotechnology company committed to researching, developing, and commercializing potentially curative transformative gene therapies for severe genetic diseases based on our lentiviral vector (“LVV”) gene addition platform. In 2022, following more than a decade of leadership in research and clinical development, the Company received approval from the U.S. Food and Drug Administration (the “FDA”) for two gene therapies, both of which were recently launched.

On August 17, 2022, ZYNTEGLO (betibeglogene autotemcel, also known as beti-cel), was approved by the FDA for the treatment of adult and pediatric patients with ß-thalassemia who require regular red blood cell transfusions. On September 16, 2022, the FDA granted Accelerated Approval of SKYSONA (elivaldogene autotemcel, also known as eli-cel), to slow the progression of neurologic dysfunction in boys 4-17 years of age with early active cerebral adrenoleukodystrophy (“CALD”). On June 21, 2023, the Company announced that the FDA had accepted for priority review the Company's biologics licensing application (“BLA”) for its third gene therapy candidate (lovotibeglogene autotemcel, also known as lovo-cel) which was submitted with a proposed indication for the treatment of patients 12 and older with sickle cell disease (“SCD”) with a history of vaso-occlusive-events. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date for lovo-cel of December 20, 2023 and if approved, the Company anticipates commercial launch in early 2024.

The Company is focusing its development and commercialization efforts in the U.S. market. The Company has obtained the withdrawal of the marketing authorization for beti-cel in the European Union, which became effective on March 24, 2022. On November 18, 2021, the Company obtained the withdrawal of the marketing authorization for eli-cel in the European Union. The Company withdrew its marketing applications for beti-cel and eli-cel from the MHRA in the United Kingdom. The Company is continuing the long-term follow-up of patients previously enrolled within the clinical trial programs in Europe as planned but do not intend to initiate any new clinical trials in Europe for β-thalassemia, CALD or SCD.

Since its inception in 1992, the Company has devoted substantially all of its resources to its development and commercialization efforts relating to its products and product candidates, including activities to manufacture product candidates in compliance with good manufacturing practices ("GMP") to conduct clinical studies of its product candidates, to provide selling, general and administrative support for these operations, to market, commercially manufacture and distribute its approved products and to protect its intellectual property. The Company has not generated material revenue from product sales. The Company has funded its operations primarily through the sale of common stock in its public offerings, private placements of preferred stock and warrants, the sale of two Rare Pediatric Disease Priority Review Vouchers ("PRVs") and through collaborations.

In August 2022 and September 2022 the Company received the two PRVs under an FDA program intended to encourage the development of treatments for rare pediatric diseases. In the first quarter of 2023, the Company sold its second PRV for aggregate net proceeds of $92.9 million. In October 2023, the Company entered into an advance agreement to sell a third PRV, if granted in connection with the potential approval of lovo-cel, for $103.0 million.

In the first quarter of 2023, the Company sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) through an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million.

In April 2022, the board of directors of the Company (the "Board of Directors") approved a comprehensive restructuring plan intended to reduce operating expenses and enhance the Company’s focus on achieving FDA approval for its programs in the U.S. As part of the restructuring, the Company reduced its workforce by approximately 30% across the second and third quarters of 2022. Refer to Note 14, Restructuring, for more information on this restructuring.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. As of September 30, 2023, the Company had an accumulated deficit of $4.11 billion. During the nine months ended September 30,

7

2023, the Company had a net loss of $123.4 million and used $221.2 million of cash in operations. As of September 30, 2023, the Company had cash, cash equivalents and marketable securities of $174.3 million.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future equity or debt issuances and the release of restricted cash related to the Company’s 50 Binney Street sublease cannot be considered probable at this time because these plans are not entirely within the Company’s control nor have been approved by the Board of Directors as of the date of these condensed consolidated financial statements.

The Company's expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support its planned operations raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that these consolidated financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include evaluating 2023 spending and the pursuit of additional cash resources through public or private equity or debt financings. Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more of these sources, or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.

The Company will assess on a quarterly basis whether the determination for estimates remain appropriate based on actual data observed. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. The Company expects to finance its future cash needs through the issuance of equity, or debt, or other alternative means. If the Company is unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or product sales are less than it has projected, the Company may be required to further revise its business plan and strategy, which may result in the Company significantly curtailing, delaying or discontinuing one or more of its research or development programs or the commercialization of any product candidates or may result in the Company being unable to expand its operations or otherwise capitalize on its business opportunities. As a result, the Company's business, financial condition and results of operations could be materially affected.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

2. Basis of presentation, principles of consolidation and significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as included in the ASC and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended September 30, 2023 and 2022.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the

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Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2023 (the "2022 Annual Report on Form 10-K").

Amounts reported are computed based on thousands, except percentages, per share amounts or as otherwise noted. As a result, certain totals may not sum due to rounding.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company views its operations and manages its business in one operating segment.

Significant accounting policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2023 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements.

Estimates and judgments are used in the following areas, among others: future undiscounted cash flows and subsequent fair value estimates used to assess potential and measure any impairment of long-lived assets, including goodwill and intangible assets, and the measurement of right-of-use assets and lease liabilities, stock-based compensation expense, accrued expenses, income taxes, gross to net revenue reserves, inventory reserved, and the assessment of the Company's ability to fund its operations for at least the next twelve months from the date of issuance of these financial statements.

Inventory

Inventories are stated at the lower of cost or net realizable value under the first-expired, first-out ("FEFO") methodology. Given human gene therapy products are a new and novel category of therapeutics and future economic benefit is not probable until regulatory approval for the product has been obtained, the Company has only considered inventory for capitalization upon and after regulatory approval. Manufacturing costs incurred prior to regulatory approval for pre-launch inventory that did not qualify for capitalization and clinical manufacturing costs were charged to research and development expense in the Company’s consolidated statements of operations and comprehensive loss as costs were incurred. Additionally, inventory that initially qualifies for capitalization but that may ultimately be used for the production of clinical drug product is expensed as research and development expense when it has been designated for the manufacture of clinical drug product.

Inventory consists of cell banks, plasmids, LVV, other materials and compounds sourced from third party suppliers and utilized in the manufacturing process, and drug product, which has been produced for the treatment of specific patients, that are owned by the Company.

Management periodically reviews inventories for excess or obsolescence, considering factors such as sales forecasts compared to quantities on hand and firm purchase commitments as well as remaining shelf life of on hand inventories. The Company writes-down its inventory that is obsolete or otherwise unmarketable to its estimated net realizable value in the period in which the impairment is first identified. Any such adjustments are included as a component of cost of goods sold within cost of product revenue on the Company’s consolidated statements of operations and comprehensive loss.

Revenue recognition

Under ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines

9

are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Once a contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. 

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract).  

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price 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 in the period of adjustment.

If a license arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. The Company has assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of its arrangements.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, at a point in time.

The Company recognizes revenue within the following financial statement captions:

Product revenue, net

The Company recognizes product revenue, net in accordance with Topic 606. Product revenue, net represents sales of ZYNTEGLO and SKYSONA.

In 2022, the Company received approval of ZYNTEGLO and SKYSONA from the FDA. The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. The Company has Specialty Distributors ("SD") and Specialty Pharmacies ("SP") that deliver product to the

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Qualified Treatment Centers ("QTC"). Revenue is only recognized when the performance obligation is satisfied. The Company recognizes revenue upon infusion to the patient. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue.

Other revenue

In 2021, the Company entered into a grant agreement with the Bill and Melinda Gates Foundation. The Company recognizes grant revenue in accordance with ASC 958-605, Revenue Recognition Not-for-Profit Entities, when qualifying costs are incurred and barriers to restriction have been overcome. When grant funds are received after costs have been incurred, the Company records revenue and a corresponding grant receivable. Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. In 2023, the Company ceased further research work and is in the process of winding down such collaboration.

Recent accounting pronouncements

During the periods presented, the Company was not required to adopt any recently issued accounting standards. The Company does not expect any recently issued accounting standards to have a material impact on its financial statements.

3. Marketable securities

The following table summarizes the marketable securities held at September 30, 2023 and December 31, 2022 (in thousands):

Description	Amortized cost / Cost		Unrealized gains		Unrealized losses		Fair value
September 30, 2023
U.S. government agency securities and treasuries	8,949		—		(3)		8,946
Total	$	8,949	$	—	$	(3)	$	8,946
December 31, 2022
U.S. government agency securities and treasuries	$	67,970	$	—	$	(1,733)	$	66,237
Corporate bonds	2,524		—		(26)		2,498
Total	$	70,494	$	—	$	(1,759)	$	68,735

No available-for-sale debt securities held as of September 30, 2023 or December 31, 2022 had remaining maturities greater than one year.

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4. Fair value measurements

The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):

Description	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
September 30, 2023
Assets:
Cash and cash equivalents	$	165,347	$	165,347	$	—	$	—
Marketable securities:
U.S. government agency securities and treasuries	8,946		—		8,946		—
Total	$	174,293	$	165,347	$	8,946	$	—
December 31, 2022
Assets:
Cash and cash equivalents	$	113,006	$	113,006	$	—	$	—
Marketable securities:
U.S. government agency securities and treasuries	66,237		—		66,237		—
Corporate bonds	2,498		—		2,498		—
Total	$	181,741	$	113,006	$	68,735	$	—

Cash and cash equivalents

The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of September 30, 2023 and December 31, 2022, cash and cash equivalents comprise funds in cash and money market accounts held at multiple banking and asset management institutions.

Marketable securities

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. government agency securities and treasuries, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts. At September 30, 2023 and December 31, 2022, the balance in the Company’s accumulated other comprehensive loss was composed primarily of activity related to the Company’s available-for-sale debt securities. There were no realized losses recognized on the sale or maturity of available-for-sale debt securities during the three months ended September 30, 2023 and 2022. There were $0.1 million and no realized losses recognized on the sale or maturity of available-for-sale debt securities during the nine months ended September 30, 2023 and 2022, respectively.

Accrued interest receivable on the Company's available-for-sale debt securities totaled $0.3 million and $0.1 million as of September 30, 2023 and December 31, 2022, respectively. No accrued interest receivable was written off during the three and nine months ended September 30, 2023 or 2022.

The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months, and for which an allowance for credit losses has not been recorded at September 30, 2023 and December 31, 2022 (in thousands):

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	Less than 12 months				12 months or greater				Total
Description	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
September 30, 2023
U.S. government agency securities    and treasuries	$	8,946	$	(3)	$	—	$	—	$	8,946	$	(3)
Total	$	8,946	$	(3)	$	—	$	—	$	8,946	$	(3)
December 31, 2022
U.S. government agency securities    and treasuries	$	—	$	—	$	66,237	$	(1,733)	$	66,237	$	(1,733)
Corporate bonds	—		—		2,498		(26)		2,498		(26)
Total	$	—	$	—	$	68,735	$	(1,759)	$	68,735	$	(1,759)

The Company determined that there was no material change in the credit risk of the above investments during the nine months ended September 30, 2023. As such, an allowance for credit losses was not recognized.

5. Inventory

Inventory, net, consists of the following (in thousands):

	As of September 30, 2023		As of December 31, 2022
Raw materials	$	7,392	$	—
Work in progress	9,725		—
Finished goods	3,852		—
Inventory	$	20,969	$	—

Raw materials inventory consists of completed materials meeting quality acceptance standards to be used in the manufacture of drug product. Materials may include small molecules, plasmids, or vector products. Work in progress inventory consists of materials that are either partially completed or fully manufactured but are pending quality acceptance. Finished goods are completed drug product having full quality acceptance that may be shipped to a qualified treatment center, but has not yet been infused in the patient.

As of December 31, 2022, the Company did not have any manufactured inventory that was in progress or had received final quality acceptance after the FDA approval of ZYNTEGLO or SKYSONA. Prior to FDA approval, the existing inventory was expensed to research and development expense.

6. Property, plant and equipment, net

Property, plant and equipment, net, consists of the following (in thousands):

	As of September 30, 2023		As of December 31, 2022
Laboratory equipment	$	18,591	$	25,092
Computer equipment and software	2,267		1,854
Office equipment	4,646		4,348
Leasehold improvements	1,140		—
Construction-in-progress	410		—
Total property, plant and equipment	27,054		31,294
Less accumulated depreciation and amortization	(17,082)		(21,932)
Property, plant and equipment, net	$	9,972	$	9,362

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7. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	As of September 30, 2023		As of December 31, 2022
Accrued manufacturing costs	$	6,183	$	7,199
Accrued goods and services	7,709		8,134
Accrued clinical and contract research organization costs	13,689		12,368
Accrued employee compensation	19,442		20,095
Accrued professional fees	2,748		1,939
Other	7,997		748
Total accrued expenses and other current liabilities	$	57,768	$	50,483

8. Leases

The Company leases certain office and laboratory space, primarily located in Somerville, Massachusetts. Additionally, the Company has embedded leases through its agreements with contract manufacturing organizations in both the United States and internationally. Except as described below, there have been no material changes in lease obligations from those disclosed in Note 8 to the consolidated financial statements included in the Company's 2022 Annual Report on Form 10-K.

60 Binney Street lease & sublease

In August 2023, the Company completed the construction of its new office and laboratory space and terminated the 60 Binney Street sublease. On the termination date the remaining right-of-use asset and lease liability were removed.

Embedded operating leases

In September 2023, the Company entered into a second amendment to the June 2016 commercial manufacturing agreement with Lonza Houston, Inc. to manufacture gene therapies ZYNTEGLO and SKYSONA. Pursuant to the amendment, both parties agreed to increased manufacturing capacity, a revised fee schedule and modified payment terms on invoices. The revised fee schedule replaced the fixed suite fee with manufacturing slot fees.

The amended contract terms continue to provide exclusive use during the term of the agreement and the classification of the lease remained accounted for as an operating lease. The Company determined that the amendment should be accounted for as a lease modification applicable under ASC 842, not as a separate contract. For contract manufacturing arrangements, the Company has elected to account for lease and non-lease components separately. At the effective date of modification, the Company recorded an increase to the right-of-use asset and lease liability in the amount of $6.5 million.

In connection with the modified payment terms, the Company is required to post a letter of credit in the amount of $6.9 million for the benefit of the manufacturer, subject to gradual decreases upon payment of invoices. The letter of credit has been secured by cash and is presented as restricted cash and other current assets.

In December 2022, the Company entered into an agreement reserving manufacturing capacity with a contract manufacturing organization. The Company concluded that this agreement contains an embedded operating lease as the Company is using the entire capacity of a manufacturing suite at the facility. Under the terms of the agreement, the Company will be required to pay suite fees of $13.5 million in 2023 and $18.0 million per year in 2024 and 2025, in addition to the cost of any services provided. The term of the agreement is three years. The Company recorded a right-of-use asset and lease liability for this operating lease upon lease commencement in April 2023 and is recognizing rent expense on a straight-line basis throughout the remaining term of the embedded lease.

9. Commitments and contingencies

Other funding commitments

The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones that may be met in subsequent periods or royalties on future sales of specified products.

The Company may be obligated to make future development, regulatory, and commercial milestone payments, and royalty payments on future sales of specified products associated with its collaboration and license agreements. Payments under these

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agreements generally become due and payable upon achievement of such milestones or sales. When the achievement of these milestones or sales have occurred, the corresponding amounts are recognized in the Company’s financial statements.

Additionally, the Company is party to various contracts with contract research organizations and contract manufacturers that generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement. As compared to the contractual obligations and commitments as disclosed in the Company's 2022 Annual Report on Form 10-K, the Company's future minimum purchase commitments as of the nine months ended September 30, 2023 decreased by $0.6 million.

The Company is, and may become, party to various claims and complaints arising in the ordinary course of business, including securities class action and intellectual property litigation. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited. Management does not believe that any ultimate liability resulting from any of these claims will have a material adverse effect on its results of operations, financial position, or liquidity. However, management cannot give any assurance regarding the ultimate outcome of any claims, and their resolution could be material to operating results for any particular period.

The Company also indemnifies each of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and by-laws. The term of the indemnification period lasts as long as such officer or director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company's exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities relating to these obligations.

10. Equity

On January 18, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC in connection with the public offering, issuance and sale by the Company of 20.0 million shares of the Company’s common stock, $0.01 par value per share, at a public offering price of $6.00 per share, less underwriting discounts and commissions. Under the terms of the Underwriting Agreement, the Company also granted the underwriters an option exercisable for 30 days to purchase up to an additional 3.0 million shares of Common Stock at the public offering price, less underwriting discounts and commissions, which the underwriters exercised in full. The offering closed on January 23, 2023.

For the nine months ended September 30, 2023, the Company sold 23.0 million shares of common stock for gross proceeds of $138.0 million ($130.5 million net of offering costs), pursuant to the Underwriting Agreement.

11. Stock-based compensation

In January 2023 and 2022, the number of shares of common stock available for issuance under the 2013 Stock Option and Incentive Plan (“2013 Plan”) was increased by approximately 3.3 million and 2.8 million shares, respectively, as a result of the automatic increase provision of the 2013 Plan. On June 16, 2023, the Company’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”), which replaced the 2013 Plan. Following approval of the 2023 Plan, no further awards will be granted under the 2013 Plan. As of September 30, 2023, the total number of shares of common stock available for issuance under the 2023 Plan was approximately 4.8 million.

Stock-based compensation expense

The Company recognized stock-based compensation expense totaling $4.9 million and $9.2 million during the three months ended September 30, 2023 and 2022, respectively. The Company recognized stock-based compensation expense totaling $16.0 million and $30.5 million for the nine months ended September 30, 2023 and 2022, respectively. Stock-based compensation expense recognized by award type is included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):

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	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
Stock options	$	1,758	$	2,886	$	5,192	$	11,829
Restricted stock units	2,916		6,142		10,552		18,027
Employee stock purchase plan and other	194		184		269		653
	$	4,868	$	9,212	$	16,013	$	30,509

Stock-based compensation expense by classification included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands): 

	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
Cost of product revenue	342		—		435		—
Selling, general and administrative	2,461		3,975		7,503		13,462
Research and development	2,065		5,237		8,075		17,047
	$	4,868	$	9,212	$	16,013	$	30,509

During the nine months ended September 30, 2023, the Company had $1.4 million of stock compensation expense that was capitalized into inventory.

Stock options

The following table summarizes the stock option activity under the Company’s equity award plans and have been adjusted to reflect the effects of the November 2021 separation of our severe genetic disease and oncology programs into two separate, publicly traded companies:

	Shares (in thousands)	Weighted- average exercise price per share
Outstanding at December 31, 2022	2,668	$	24.38
Granted	2,015	$	4.95
Exercised	(3)	$	2.74
Canceled, forfeited, or expired	(453)	$	31.39
Outstanding at September 30, 2023	4,227	$	14.35
Exercisable at September 30, 2023	1,347	$	30.52
Vested and expected to vest at September 30, 2023	4,227	$	14.35

During the nine months ended September 30, 2023, less than 0.1 million stock options were exercised, resulting in total proceeds to the Company of less than $0.1 million.

Restricted stock units

The following table summarizes the restricted stock unit activity under the Company’s equity award plans and have been adjusted to reflect the effects of the November 2021 separation of our severe genetic disease and oncology programs into two separate, publicly traded companies:

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	Shares (in thousands)	Weighted- average grant date fair value
Unvested at December 31, 2022	2,415	$	11.44
Granted	3,117	$	4.90
Vested	(987)	$	14.71
Forfeited	(395)	$	8.50
Unvested at September 30, 2023	4,150	$	6.33

Employee stock purchase plan

In June 2013, the Company adopted its 2013 Employee Stock Purchase Plan (“2013 ESPP”), which authorized the initial issuance of up to a total of 0.2 million shares of the Company’s common stock to participating employees. In June 2021, the Company amended the 2013 ESPP to authorize an additional 1.4 million shares of the Company’s common stock available to participating employees. During each of the nine months ended September 30, 2023 and 2022, less than 0.1 million shares and less than 0.1 million shares, respectively, of common stock were issued under the 2013 ESPP.

12. Income taxes

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The tax benefit recognized during the three and nine months ended September 30, 2023 was $0.0 million and $0.1 million, respectively, due to the wind down of our operations in Europe and the full valuation allowance.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted and introduced a 15% corporate alternative minimum tax ("CAMT"), effective for tax years beginning after December 31, 2022, for corporations with average annual adjusted financial statement income for any consecutive three-year tax period ending after December 31, 2021 and preceding the tax year that exceeds $1 billion, as well as a 1% excise tax on stock repurchases made by public companies. The Company has concluded that the provisions in the IRA have an immaterial impact on the Company’s income tax expense due to its cumulative losses and full valuation allowance position.

13. Net loss per share

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect (in thousands):

	For the three months ended September 30,
	2023	2022
Outstanding stock options	5,875	4,548
Restricted stock units	4,194	2,473
ESPP shares and other	—	67
	10,069	7,088

14. Restructuring

In April 2022, the Board of Directors approved a comprehensive restructuring plan intended to reduce operating expenses. As part of the restructuring, the Company reduced its workforce by nearly 30% across the second and third quarters of 2022. The Company incurred approximately $4.9 million in costs to implement the restructuring, comprised primarily of severance payments and continuing health care coverage over the severance period. The restructuring actions associated with these charges commenced in April 2022, and were completed by September 30, 2022.

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15. Subsequent events

Pre-funded warrants

On October 18, 2023, the Company received exercise notifications for all pre-funded warrants issued in September 2021. The exercises were done as a cashless exercise and resulted in the issuance of 2,264,916 common shares.

Sale of priority review voucher

On October 30, 2023, the Company announced that it had entered into an advance agreement to sell a third PRV, if granted, in connection with the potential approval of lovo-cel, for $103.0 million. Closing of the transaction remains subject to the approval of lovo-cel and receipt of a PRV, as well as customary closing conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission, or the SEC, on March 29, 2023 (the "2022 Annual Report on Form 10-K").

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as “may,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a biotechnology company committed to researching, developing, and commercializing potentially curative transformative gene therapies for severe genetic diseases based on our lentiviral vector (“LVV”) gene addition platform. In 2022, following more than a decade of leadership in research and clinical development, we received approval from the U.S. Food and Drug Administration (the “FDA”) for two gene therapies, both of which were recently launched.

On August 17, 2022, ZYNTEGLO (betibeglogene autotemcel, also known as beti-cel), was approved by the FDA for the treatment of adult and pediatric patients with ß-thalassemia who require regular red blood cell transfusions. On September 16, 2022, the FDA granted Accelerated Approval of SKYSONA (elivaldogene autotemcel, also known as eli-cel), to slow the progression of neurologic dysfunction in boys 4-17 years of age with early active cerebral adrenoleukodystrophy (“CALD”). On June 21, 2023, we announced that the FDA had accepted for priority review our biologics licensing application (“BLA”) for our third gene therapy candidate (lovotibeglogene autotemcel, also known as lovo-cel) which was submitted with a proposed indication for the treatment of patients 12 and older with sickle cell disease (“SCD”) with a history of vaso-occlusive-events. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date for lovo-cel of December 20, 2023 and if approved, we anticipate commercial launch in early 2024.

We are focusing our development and commercialization efforts in the U.S. market. We have obtained the withdrawal of the marketing authorization for beti-cel in the European Union, which became effective on March 24, 2022. On November 18, 2021, we obtained the withdrawal of the marketing authorization for eli-cel in the European Union. We withdrew our marketing applications for beti-cel and eli-cel from the MHRA in the United Kingdom. We are continuing the long-term follow-up of patients previously enrolled within the clinical trial programs in Europe as planned but do not intend to initiate any new clinical trials in Europe for β-thalassemia, CALD or SCD.

Since our inception in 1992, we have devoted substantially all of our resources to our development and commercialization efforts relating to our products and product candidates, including activities to manufacture product candidates in compliance with good manufacturing practices ("GMP") to conduct clinical studies of our product candidates, to provide selling, general and administrative support for these operations, to market, commercially manufacture and distribute our approved products and

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to protect our intellectual property. We have not generated material revenue from product sales. We have funded our operations primarily through the sale of common stock in our public offerings, private placements of preferred stock and warrants, the sale of two Rare Pediatric Disease Priority Review Vouchers ("PRVs") and through collaborations.

In August 2022 and September 2022 we received the two PRVs under an FDA program intended to encourage the development of treatments for rare pediatric diseases. In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million, inclusive of additional legal costs incurred. In October 2023, we entered into an advance agreement to sell a third PRV, if granted, in connection with the potential approval of lovo-cel, for $103.0 million.

In the first quarter of 2023, we sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) through an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million, inclusive of additional offering costs incurred.

In April 2022, we initiated a comprehensive restructuring plan intended to reduce operating expenses. As part of the restructuring, we reduced our workforce by approximately 30% in the second and third quarters of 2022. See Note 14, Restructuring, to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for more information on this restructuring plan.

As of September 30, 2023, we had cash, cash equivalents and marketable securities of approximately $174.3 million. Absent the sale of our PRVs, we have never been profitable and have incurred net losses in each year since inception. Our net loss was $71.7 million and $123.4 million for the three and nine months ended September 30, 2023, respectively, and our accumulated deficit was $4.11 billion as of September 30, 2023. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for at least the next several years, as we:

•fund activities related to the commercial launches of ZYNTEGLO and SKYSONA in the United States;

•seek regulatory approval for lovo-cel and any other product candidates;

•scale our manufacturing capabilities in support of commercialization of ZYNTEGLO and SKYSONA and lovo-cel, if approved;

•conduct clinical studies; and

•increase research and development-related activities for severe genetic diseases.

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. We may not be able to generate substantial revenue from the sale of our products, and we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Until we generate significant revenues from product sales, if ever, we expect to continue to seek to fund our operations through public or private equity or debt financings, strategic collaborations, or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.

Business update

We had cash, cash equivalents and marketable securities of approximately $174.3 million as of September 30, 2023. Our expectation is that we will continue to generate operating losses and negative operating cash flows in the foreseeable future as we commercialize ZYNTEGLO and SKYSONA and lovo-cel, if approved, and seek regulatory approval of lovo-cel for SCD and will require the need for additional funding to support our planned operations before becoming profitable.

Based on our current business plan, management has concluded that there is substantial doubt regarding our ability to continue as a going concern, and we anticipate our cash, cash equivalents, and marketable securities as of September 30, 2023, including anticipated cash flows from operations, will be sufficient to fund our operations into the second quarter of 2024. We have based this estimate on assumptions of revenues and operating costs that may prove to be wrong. Our cash runway estimate does not include use of our restricted cash of $53.0 million, which is currently unavailable for use, and we believe at least

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$45.4 million of this restricted cash is unlikely to be released in the near term. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. In addition, our future net product revenues will depend upon the size of the markets, our ability to obtain regulatory approval of lovo-cel for SCD, our ability to timely scale our manufacturing capabilities to meet market demand, our ability to achieve sufficient market acceptance, reimbursement from third-party payers, adequate market share in those markets and the performance of drug product subject to outcome-based programs. As a result, we could deplete our capital resources sooner than we currently expect. If, for any reason, our revenues or our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis, we may be required to revise our business plan and strategy, which may result in bluebird significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any products or may result in bluebird being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially affected.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Financial operations overview

Product revenue, net

Our revenues have primarily been derived from product revenues associated with the sale of SKYSONA and ZYNTEGLO in the United States.

Other revenue

We have recognized an immaterial amount of revenue associated with grants.

Cost of product revenue

Cost of product revenue includes costs associated with the sale of SKYSONA and ZYNTEGLO in the United States.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance, legal, business development, commercial, information technology, and human resource functions. Other selling, general and administrative expenses include facility-related costs, professional fees for accounting, tax, legal and consulting services, directors’ fees and expenses associated with obtaining and maintaining patents. These expenses include lease expense related to 50 Binney Street; however, sublease income is presented in other income (expense), net.

We anticipate that our selling, general and administrative expenses, including payroll and sales and marketing expenses, will continue to increase in the future relative to current levels as we continue commercialization activities for ZYNTEGLO and SKYSONA in the United States and perform commercial readiness activities in the United States for lovo-cel, in anticipation of potential approval.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

•employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;

•expenses incurred under agreements with contract research organizations (“CROs”) and clinical sites that conduct our clinical studies;

•facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, information technology, insurance, and other supplies in support of research and development activities;

•costs associated with our research platform and preclinical activities;

•milestones and upfront license payments; and

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•costs associated with our regulatory, quality assurance and quality control operations.

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We cannot determine with certainty the duration and completion costs of the current or future clinical studies of our product candidates or to what extent we will generate revenues from the commercialization and sale of our approved products and any of our product candidates that obtain regulatory approval. We may not succeed in achieving regulatory approval for all of our product candidates. The duration, costs, and timing of clinical studies and development of our product candidates will depend on a variety of factors, any of which could mean a significant change in the costs and timing associated with the development of our product candidates, including:

•the scope, rate of progress, and expense of our ongoing as well as any additional clinical studies and other research and development activities we undertake;

•future clinical study results;

•uncertainties in clinical study enrollment rates;

•new manufacturing processes or protocols that we may choose to or be required to implement in the manufacture of our LVV or drug product;

•regulatory feedback on requirements for regulatory approval, as well as changing standards for regulatory approval; and

•the timing and receipt of any regulatory approvals.

We plan to continue to incur research and development expenses for the foreseeable future as we continue to advance the development of lovo-cel, and conduct research activities for our platform technology. Absent new initiatives, we expect our research and development expenses to decrease in conjunction with an increase in commercial activities and selling, general and administrative expense due to the approvals of ZYNTEGLO and SKYSONA and the performance of commercial readiness activities for lovo-cel in anticipation of potential approval. Our research and development expenses include expenses associated with the following activities:

•the long-term follow-up protocol associated with the clinical studies of ZYNTEGLO, and a postmarketing study for the same;

•the long-term follow-up protocol associated with the clinical studies of SKYSONA, and a postmarketing study for the same;

•the clinical studies of lovo-cel, consisting of HGB-206, HGB-210 study, and the associated long-term follow-up protocol;

•research and development activities for our platform technology; and

•the manufacture of clinical study materials in support of our clinical studies.

Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, laboratory and related expenses, certain license and other collaboration costs, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other research and development expenses in the table below:

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	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
ZYNTEGLO (beti-cel)	$	2,627	$	8,307	$	8,678	$	35,366
lovo-cel (formerly LentiGlobin for SCD)	19,282		17,396		58,189		59,950
SKYSONA (eli-cel)	3,123		4,909		10,863		24,872
Preclinical programs	373		778		889		6,732
Total direct research and development expense	25,405		31,390		78,619		126,920
Employee-and contractor-related expenses	8,003		5,404		22,201		22,512
Stock-based compensation expense	2,284		5,237		8,294		17,047
License and other related expenses	1,877		5,000		1,988		5,000
Laboratory and other expenses	1,174		(241)		2,808		806
Facility expenses	6,720		6,359		19,971		22,579
Total other research and development expenses	20,058		21,759		55,262		67,944
Total research and development expense	$	45,463	$	53,149	$	133,881	$	194,864

Restructuring expenses

Restructuring expenses consist of costs associated with postemployment nonretirement benefits in accordance with ASC 712, Postemployment Nonretirement Benefits. Such costs are based on the estimate of fair value in the period the expenses were incurred.

Gain from sale of priority review voucher, net

Gain from sale of priority review voucher, net consists of gain from sale of priority review voucher. In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million. We received the PRV in August 2022 under an FDA program intended to encourage the development of treatments for rare pediatric diseases.

Interest income, net

Interest income, net consists primarily of interest income earned on investments.

Other income (expense), net

Other income (expense), net consists primarily of rental income on sublease, gains and losses on investments, gains and losses on disposal of fixed assets, and gains and losses on foreign currency transactions.

Critical accounting policies and estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the nine months ended September 30, 2023, there were no material changes to our critical accounting policies as reported in our 2022 Annual Report on Form 10-K, except as otherwise described in Note 2, Basis of presentation, principles of consolidation and significant accounting policies, in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

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Results of Operations

Comparison of the three months ended September 30, 2023 and 2022:

	For the three months ended September 30,
	2023		2022		Change
	(in thousands)
Revenue:
Product revenue, net	$	12,281	$	—	$	12,281
Other revenue	111		71		40
Total revenues	12,392		71		12,321
Cost of product revenue	10,955		—		10,955
Gross margin	1,437		71		1,366
Operating expenses:
Selling, general and administrative	40,703		33,402		7,301
Research and development	45,463		53,149		(7,686)
Restructuring expenses	—		(1,699)		1,699
Total operating expenses	86,166		84,852		1,314
Income (loss) from operations	(84,729)		(84,781)		52
Interest income, net	2,454		383		2,071
Other income (expense), net	10,544		7,885		2,659
Income (loss) before income taxes	(71,731)		(76,513)		4,782
Income tax (expense) benefit	—		(7)		7
Net income (loss)	$	(71,731)	$	(76,520)	$	4,789

Revenues. Total revenue was $12.4 million for the three months ended September 30, 2023, compared to $0.1 million for the three months ended September 30, 2022. The increase of $12.3 million was primarily attributable to revenue recognized for the sales of SKYSONA and ZYNTEGLO in the United States in 2023, after receiving FDA approval in September and August 2022, respectively.

Cost of product revenue. Cost of product revenue was $11.0 million for the three months ended September 30, 2023, compared to $0.0 million for the three months ended September 30, 2022. The increase is primarily attributable to costs recognized for the sales of SKYSONA and ZYNTEGLO in 2023.

Selling, general and administrative expenses. Selling, general and administrative expenses were $40.7 million for the three months ended September 30, 2023, compared to $33.4 million for the three months ended September 30, 2022. The net increase of $7.3 million was primarily attributable to the following:

•$3.1 million of increased commercial costs driven by marketing activities for ZYNTEGLO and SKYSONA in the United States and the performance of commercial readiness activities in the United States for lovo-cel, in anticipation of potential FDA approval;

•$2.2 million of increased net employee compensation, benefit, and other headcount-related expenses, driven by increased headcount in selling, general and administrative costs in 2023 offset by a decrease in stock-based compensation expense due to an overall decrease in the value of awards.

•$2.0 million of increased professional fees driven by increased legal, audit, and public relations costs; and

•$0.6 million of increased information technology and facility-related costs.

These increased costs were partially offset by $0.8 million of decreased costs related to consultants.

Research and development expenses. Research and development expenses were $45.5 million for the three months ended September 30, 2023, compared to $53.1 million for the three months ended September 30, 2022. The net decrease of $7.6 million was primarily attributable to the following:

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•$3.5 million of decreased manufacturing costs primarily driven by material production now being included in inventory and cost of product revenue;

•$3.2 million of decreased license and milestone fees;

•$3.0 million of decreased net employee compensation, benefit, and other headcount-related expenses, including a decrease of $3.0 million in stock-based compensation expense, driven by related expenses now being included in inventory and cost of product revenue; and

•$2.0 million of decreased information technology and facility related costs driven by decreased information technology spending related to expenses now being included in inventory and cost of product revenue, and the impact of lease changes.

These decreased costs were partially offset by the following:

•$2.7 million of increased clinical costs driven by an increase in clinical treatment fees and CRO costs;

•$1.3 million of increased costs related to lab expenses, primarily driven by an increase in consumables; and

•$1.0 million of increased costs related to consultants.

Restructuring expenses. There were no restructuring expenses recorded during the third quarter of 2023 compared to a credit of $1.7 million during the third quarter of 2022, which was related to an adjustment of restructuring expenses incurred in the second quarter of 2022.

Interest income, net. The increase in interest income, net was primarily related to higher interest income earned on investments and dividends related to our operating account.

Other income (expense), net. The increase in other income (expense), net was primarily related to the common area maintenance ("CAM") rental income on our sublease.

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Comparison of the nine months ended September 30, 2023 and 2022:

	For the nine months ended September 30,
	2023		2022		Change
	(in thousands)
Revenue:
Product revenue, net	$	21,414	$	2,739	$	18,675
Other revenue	249		795		(546)
Total revenues	21,663		3,534		18,129
Cost of product revenue	23,895		10,056		13,839
Gross margin	(2,232)		(6,522)		4,290
Operating expenses:
Selling, general and administrative	118,406		106,201		12,205
Research and development	133,881		194,864		(60,983)
Restructuring expenses	—		4,940		(4,940)
Total operating expenses	252,287		306,005		(53,718)
Gain from sale of priority review voucher, net	92,930		—		92,930
Income (loss) from operations	(161,589)		(312,527)		150,938
Interest income, net	7,958		663		7,295
Other income (expense), net	30,152		13,061		17,091
Income (loss) before income taxes	(123,479)		(298,803)		175,324
Income tax (expense) benefit	80		(7)		87
Net income (loss)	$	(123,399)	$	(298,810)	$	175,411

Revenues. Total revenue was $21.7 million for the nine months ended September 30, 2023, compared to $3.5 million for the nine months ended September 30, 2022. The increase of $18.1 million was primarily attributable to revenue recognized for the sales of SKYSONA and ZYNTEGLO in the United States in 2023, after receiving FDA approval in September and August 2022, respectively.

Cost of product revenue. Cost of product revenue was $23.9 million for the nine months ended September 30, 2023, compared to $10.1 million for the nine months ended September 30, 2022. The increase is primarily attributable to costs recognized for the sales of SKYSONA and ZYNTEGLO in 2023, partially offset by inventory reserved during the first quarter of 2022 upon the Company's exit from Europe.

Selling, general and administrative expenses. Selling, general and administrative expenses were $118.4 million for the nine months ended September 30, 2023, compared to $106.2 million for the nine months ended September 30, 2022. The net increase of $12.2 million was primarily attributable to the following:

•$12.7 million of increased information technology and facility-related costs driven by the commencements of the 50 Binney sublease in April 2022, and the Assembly Row Lease in March 2022;

•$5.7 million of increased commercial readiness related costs; and

•$2.2 million of increased professional service fees.

These increased costs were partially offset by the following:

•$7.0 million of decreased costs related to consultants; and

•$2.5 million of decreased employee compensation, benefit, and other headcount-related expenses.

Research and development expenses. Research and development expenses were $133.9 million for the nine months ended September 30, 2023, compared to $194.9 million for the nine months ended September 30, 2022. The net decrease of $61.0 million was primarily attributable to the following:

•$34.2 million of decreased manufacturing costs primarily driven by 2022 manufacturing commitments; a decrease in research and development production costs in 2023 as well as material production now being included in inventory and cost of product revenue;

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•$23.3 million of decreased net employee compensation, benefit, and other headcount-related expenses, including a decrease of $8.8 million in stock-based compensation expense, driven by related expenses now being included in inventory and cost of product revenue;

•$6.5 million of decreased information technology and facility related costs driven by decreased information technology spending, related expenses now being included in inventory and cost of product revenue as well as the impact of lease changes; and

•$3.3 million of decreased license and milestone payment costs.

These decreased costs were partially offset by the following:

•$4.5 million of increased costs related to clinical trials; and

•$0.9 million of increased costs related to consultants.

Restructuring expenses. The decrease in restructuring expenses is primarily related to the costs associated with our decision to reduce our workforce by 30% during the second and third quarters of 2022.

Gain from sale of priority review voucher, net. The increase in gain from sale of priority review voucher, net was related to the sale of a priority review voucher in the first quarter of 2023.

Interest income, net. The increase in interest income, net was primarily related to higher interest income earned on investments and dividends related to our operating account.

Other income (expense), net. The increase in other income (expense), net was primarily related to the rental income from the 50 Binney sublease starting in April 2022 and CAM rental income from the sublease in 2023.

Liquidity and Capital Resources

As of September 30, 2023, we had cash, cash equivalents and marketable securities of approximately $174.3 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. As of September 30, 2023, our funds are primarily held in U.S. government agency securities and treasuries, corporate bonds, and money market accounts.

We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of September 30, 2023, we had an accumulated deficit of $4.11 billion. We expect our research and development expenses to decrease in conjunction with an increase in commercial activities and selling, general and administrative expense due to the approvals of ZYNTEGLO and SKYSONA and the performance of commercial readiness activities for lovo-cel in anticipation of potential approval.

Based on our current business plan, management has concluded that there is substantial doubt regarding our ability to continue as a going concern, and we anticipate our cash, cash equivalents, and marketable securities as of September 30, 2023, including anticipated cash flows from operations, will be sufficient to fund our operations into second quarter of 2024. We have based this estimate on assumptions of revenues and operating costs that may prove to be wrong. Our cash runway estimate does not include use of our restricted cash of $53.0 million, which is currently unavailable for use, and we believe at least $45.4 million of this restricted cash is unlikely to be released in the near term. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. However, we have based this estimate on assumptions of revenues and operating costs that may prove to be wrong. Our future net product revenues will depend upon the size of the markets, our ability to obtain regulatory approval of lovo-cel for SCD, our ability to timely scale our manufacturing capabilities to meet market demand, our ability to achieve sufficient market acceptance, reimbursement from third-party payers, adequate market share in those markets and the performance of drug product subject to outcome-based programs. As a result, we could deplete our capital resources sooner than we currently expect. If, for any reason, our revenues or our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis we may be required to revise our business plan and strategy, which may result in bluebird significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any products or may result in bluebird being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially affected.

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We have funded our operations principally from the sale of common stock in public offerings and the sale of the two PRVs. The following is a summary of recent financing transactions:

•In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million.

•In the first quarter of 2023, we sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) in an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million.

•In August 2023, we entered into an Open Market Sales Agreement (the "Sales Agreement") with Jefferies LLC ("Jefferies") to sell shares of our common stock up to $125.0 million, from time to time, through an “at the market” equity offering program under which Jefferies will act as sales agent. As of September 30, 2023, we have made no sales pursuant to the Sales Agreement.

•In October 2023, we entered into an advance agreement to sell a third PRV, if granted in connection with the potential approval of lovo-cel, for $103.0 million. Closing of the transaction remains subject to the approval of lovo-cel and receipt of a PRV, as well as customary closing conditions.

Sources of Liquidity

Cash Flows

The following table summarizes our cash flow activity:

	For the nine months ended September 30,
	2023		2022
	(in thousands)
Net cash used in operating activities	$	(221,209)	$	(296,680)
Net cash provided by investing activities	151,164		147,211
Net cash provided by financing activities	129,969		54,368
Net (decrease) increase in cash, cash equivalents and restricted cash	$	59,924	$	(95,101)

Operating Activities. The $75.5 million decrease in cash used in operating activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to the decrease in net loss during this period of $175.4 million, offset by adjustments for non-cash items, including a gain from the sale of priority review voucher of $92.9 million in the first quarter of 2023.

Investing Activities. The $4.0 million increase in cash provided by investing activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to a decrease in proceeds from sales of marketable securities of $24.4 million, a decrease in proceeds from maturities of marketable securities of $25.6 million and an increase in cash used to purchase marketable securities of $43.3 million, partially offset by an increase in proceeds from sale of priority review voucher of $92.9 million during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Financing Activities. The $75.6 million increase in cash provided by financing activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to the increase in proceeds from the secondary public offering, net of paid offering costs of $75.7 million during the nine months ended September 30, 2023.

Contractual Obligations and Commitments

Except as discussed in Note 8, Leases, and Note 9, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments as included in our 2022 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

We are exposed to market risk related to changes in interest rates. As of September 30, 2023 and December 31, 2022, we had cash, cash equivalents and marketable securities of $174.3 million and $181.7 million, respectively, primarily invested in U.S. government agency securities and treasuries, corporate bonds, commercial paper, equity securities, and money market

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accounts. 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 are in short-term securities. Our available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 basis points, or one percentage point, from levels at September 30, 2023, the net fair value of our interest-sensitive marketable securities would have resulted in a hypothetical decline of approximately $0.0 million.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of our Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. 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, employment and other matters. The outcome of these proceedings and claims cannot be predicted with certainty. We believe 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.

On October 21, 2021, San Rocco Therapeutics, LLC, formerly known as Errant Gene Therapeutics, LLC, filed a complaint against us in the United States District Court for the District of Delaware for alleged infringement of U.S. Patent Nos. 7,541,179 and 8,058,061. The term of U.S. Patent No. 8,058,061 already expired on November 25, 2022, and U.S. Patent No. 7,541,179 will expire on May 13, 2024. The allegations relate to our use of the BB305 lentiviral vector, including in connection with the beti-cel program and seeks injunctive relief and money damages. On February 21, 2022, the parties stipulated to amend the case caption, in light of the plaintiff’s name change, from Errant Gene Therapeutics, LLC to San Rocco Therapeutics, LLC ("SRT"). The Court granted this stipulation and, accordingly, the case is now captioned, San Rocco Therapeutics, LLC v. bluebird bio, Inc. and Third Rock Ventures, LLC, C.A. No. 21-1478-RGA. On April 6, 2022, we—along with Third Rock Ventures, LLC—filed a motion seeking various relief including to stay the proceedings and compel arbitration on two threshold issues, which we argued warranted complete dismissal of the action as a matter of law, regardless of the merits of SRT’s underlying infringement claims. On July 26, 2022, the Court granted our request to stay the proceedings and issued an Order compelling the parties to arbitrate the threshold issues we raised. On February 7, 2023, the Arbitrator issued a final award finding in favor of SRT on both threshold issues, thereby enabling SRT to pursue its claims for alleged infringement. On March 1, 2023, the parties jointly stipulated, subject to the approval of the United States District Court for the District of Delaware, to lift the stay.  The Court lifted the stay on March 2, 2023, and on March 31, 2023 we filed our answer to SRT's complaint with counterclaims asserting that we do not infringe the patents-in-suit and that the patents-in-suit are invalid. Also, on April 24, 2023, the Patent Trial & Appeal Board of the U.S. PTO granted institution of our two petitions for inter partes review, which are seeking to invalidate various claims of the patents-in-suit. On May 25, 2023, the Court entered a scheduling order that the parties agreed on, which scheduled a five-day jury trial to begin on April 21, 2025. We plan to vigorously defend against SRT's claims including by seeking a declaration from the Court that SRT's action is an exceptional case within the meaning of 35 U.S.C. § 285, and by seeking costs, attorney fees, and other relief to which we may be justly entitled.

On April 27, 2023, SRT filed another complaint against us (as well as against Mr. Nick Leschly, Mr. Mitchell Finer, Mr. Philip Reilly, Third Rock Ventures LLC, and 2Seventy Bio, Inc.) in the United States District Court for the District of Massachusetts. This complaint alleges civil violations of the Federal Racketeer Influenced and Corrupt Organizations Act, violations of Mass. Gen. Laws ch. 93A, § 11, and fraudulent inducement of SRT into a release provision in a November 2020 confidential settlement agreement we executed with, inter alia, SRT. The allegations relate to our use of the BB305 lentiviral vector, including in connection with the beti-cel program, and SRT seeks declaratory relief and money damages. On July 3, 2023, we (in conjunction with the other defendants) moved to dismiss all claims with prejudice brought by SRT in its Complaint for failure to state a claim upon which relief may be granted. On August 7, 2023, SRT filed an amended complaint, adding Craig Thompson as a defendant, and adding additional claims of alleged antitrust violations under federal and state law. The case is now captioned San Rocco Therapeutics, LLC v. Nick Leschly, Mitchell Finer, Philip Reilly, Craig Thompson, Third Rock Ventures LLC, bluebird bio, Inc. and 2Seventy Bio, Inc., C.A. No. 1:23-cv-10919-ADB. On September 18, 2023, we (in conjunction with the non-Thompson defendants), moved to dismiss with prejudice once again. SRT filed an opposition to that motion on October 12, 2023. On October 24, 2023, we filed a motion for leave to file a reply brief, which was granted on October 30, 2023. We plan to vigorously defend against SRT’s claims in this action, which we believe have no merit whatsoever.

Item 1A. Risk Factors

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Those risk factors below denoted with a “*” are newly added or have been materially updated from our 2022 Annual Report on Form 10-K.

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*We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

We have incurred significant losses since our inception in 1992. As of September 30, 2023, we had an accumulated deficit of $4.11 billion. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to generate revenues. We have devoted significant financial resources to research and development, including our clinical and preclinical development activities, which, absent new initiatives, we expect to directionally decrease as we focus on bringing our therapies to patients in the commercial setting. To date, we have financed our operations primarily through the sale of equity securities and priority review vouchers, and, to a lesser extent, through collaboration agreements and grants from governmental agencies and charitable foundations. We did not generate material revenues from the sale of ZYNTEGLO in the European Union and only recently launched ZYNTEGLO and SKYSONA in the U.S. Our future revenues will depend upon the size of any markets in which our products and product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payers and adequate market share for our potential products in those markets.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

•continue to invest in lovo-cel as we prepare for the potential regulatory approval for our accepted BLA;

•grow our capabilities to support our commercialization efforts for ZYNTEGLO, SKYSONA and lovo-cel, if approved, including continuing to establish a sales, marketing and distribution infrastructure in the United States;

•obtain, build and expand manufacturing capacity, including capacity at third-party manufacturers;

•attract and retain skilled personnel;

•initiate additional research, preclinical, clinical or other programs as we seek to identify and validate additional product candidates;

•acquire or in-license other product candidates and technologies;

•maintain, protect and expand our intellectual property portfolio; and

•experience any delays or encounter issues with any of the above.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

There is substantial doubt regarding our ability to continue as a going concern. 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 our commercial programs, product development efforts or other operations.

Developing and commercializing gene therapy products is expensive, and we do not expect to generate meaningful product revenues in the foreseeable future. Based on our current business plan as of the date hereof, there is substantial doubt regarding our ability to continue as a going concern. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” of this Quarterly Report on Form 10-Q for a discussion of our expected cash runway. Our cash runway estimate does not include use of our restricted cash of $53.0 million, which is currently unavailable for use, and we believe at least $45.4 million of this restricted cash is unlikely to be released in the near term. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. Accordingly, we will need to raise additional funding in order to execute on our current business plans and strategy, including prior to becoming profitable.

Our efforts to raise additional funding may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity, traditional debt or other debt-like arrangements, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on

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our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

Moreover, as a result of recent volatile market conditions, the cost and availability of capital has been and may continue to be adversely affected. Concern about the stability of the banking sector has generally led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. Continued turbulence in the U.S. market and economy may adversely affect our liquidity and financial condition, including our ability to access the capital markets to meet liquidity needs. In addition, we maintain the majority of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

If we are unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or product sales are less than we have projected, we may be required to further revise our business plan and strategy, which may result in us significantly curtailing, delaying or discontinuing the commercialization of any current or future products or may result in our being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition and results of operations could be materially affected.

* Among other potential adverse events, insertional oncogenesis is a significant risk of gene therapies using viral vectors that can integrate into the genome. Any such adverse events may require us to halt or delay further clinical development of our product candidates or to suspend or cease commercialization following marketing approval, and the commercial potential of our products and product candidates may be materially and negatively impacted.

Adverse events or other undesirable side effects caused by our products or product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay, denial or withdrawal of regulatory approval by the FDA or other comparable foreign regulatory authorities. A potentially significant risk in any gene therapy product using viral vectors that can integrate into the genome is that the vector will insert in or near cancer-causing genes, leading to the proliferation of certain cellular clones that could cause cancer in the patient, known as insertional oncogenesis. For instance, five patients with CALD treated with eli-cel (now SKYSONA) in our clinical studies have been diagnosed with myelodysplastic syndrome (“MDS”), likely mediated by Lenti-D LVV insertion. SKYSONA's label includes a boxed warning for the known risk of hematologic malignancy and, accordingly, we expect additional cases to arise over time. We continue to closely monitor potential cases of hematologic malignancy in patients treated with SKYSONA and we are communicating regularly with treating physicians and regulatory authorities. We cannot make assurances that additional patients treated with SKYSONA, ZYNTEGLO or lovo-cel in the clinical or commercial setting will not be diagnosed with MDS, leukemia or lymphoma.

Moreover, in December 2021, the FDA placed the lovo-cel clinical development program under a partial clinical hold for patients under the age of 18. The hold related to a case of persistent anemia in an adolescent patient with two α-globin gene deletions (−α3.7/−α3.7), also known as alpha-thalassemia trait, who was treated with lovo-cel. In December 2022, the FDA lifted its partial clinical hold for patients under the age of 18 in studies evaluating lovo-cel for SCD. Notwithstanding the lifting of this partial clinical hold, additional adverse events or new data or analyses regarding previously reported events may indicate significant safety issues, and the FDA could potentially impose or reimpose a clinical hold in the future on studies evaluating lovo-cel. Moreover, laboratory results following gene therapy can be difficult to interpret, resulting in different or changing diagnoses by treating physicians. For instance, on January 31, 2023, we received a physician diagnosis of MDS in a patient treated with lovo-cel, in response to lab results obtained through routine monitoring of the same adolescent patient with two α-globin gene deletions subject to the partial clinical hold noted above. Consistent with established safety protocols, the information was reviewed by an independent Data Monitoring Committee which concluded that available evidence did not support a diagnosis of MDS and additional data would be needed to confirm such diagnosis, and that lovo-cel clinical studies should continue. Test results received since the investigator's initial report (including integration site analysis) demonstrated no evidence of insertional oncogenesis and the patient continues to be clinically stable and is not undergoing treatment for an MDS diagnosis. Study investigators and the FDA have been informed and we will continue to monitor additional analyses as further test results are received. We maintain dialogue with the FDA and, from time to time, as required by regulations or requested by the FDA, update the FDA on additional adverse events or new data or analyses regarding previously reported events.

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Furthermore, treatment with our products and product candidates involves chemotherapy or myeloablative treatments, which can cause side effects or adverse events that may impact the perception of the potential benefits of our products and product candidates. For instance, MDS leading to acute myeloid leukemia is a known risk of certain myeloablative regimens. Accordingly, it is possible that the events of MDS and acute myeloid leukemia previously reported in our HGB-206 clinical study of lovo-cel in SCD were caused by underlying SCD, transplant procedure, and stress on the bone marrow following drug product infusion in connection with the lovo-cel treatment. Additionally, the procedures associated with the administration or collection of cells for ZYNTEGLO, SKYSONA, or lovo-cel, could potentially cause other adverse events that have not yet been predicted. The inclusion of patients with significant underlying medical problems in our clinical studies may result in deaths, or other adverse medical events, due to other therapies or medications that such patients may be using, or the progression of their disease.

Moreover, patients treated with our therapies, including lovo-cel, have exhibited persistent oligoclonality, which we define as two consecutive instances of (i) any LVV insertion site observed at >=10% relative frequency, or (ii) two or more insertion sites observed at >= to 5% relative frequency, as measured by integration site analysis. Based on our clinical protocols, we increase monitoring of patients who exhibit persistent oligoclonality. It is not clear at this time whether persistent oligoclonality represents an increased risk of developing MDS, leukemia, or lymphoma in the future, but it is a criterion used by the FDA to evaluate the safety of gene therapies over time.

Additionally, there is the potential risk of other delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. The FDA has stated that LVVs possess characteristics that may pose high risks of delayed adverse events.

If any such adverse events occur, including insertional oncogenesis, further advancement of our clinical studies could be halted or delayed, we may not receive marketing approval for our product candidates, and we may be unable to commercialize our approved products in the manner we expect, or at all. It is possible that upon occurrence or recurrence of any of these events, the FDA may place one or more of our programs on hold, impose requirements that result in delays for regulatory approval for one or more of our programs, require risk evaluation or mitigation strategies as a condition for regulatory approval, or may cause us to cease commercialization of our approved products. If any of these were to occur, the commercial potential of our programs may be materially and negatively impacted.

Although ZYNTEGLO and SKYSONA have been approved by the FDA, serious safety events may result in an approved product being removed from the market or its market opportunity being significantly reduced. For instance, it is possible that as we commercialize our products or test our product candidates in larger, longer and more extensive clinical trials, or as use of these products and product candidates (if approved) becomes more widespread, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects (that may or may not be related to our products or product candidates) are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a commercial scale following approval. Other patients receiving our products and product candidates may develop cancers, including leukemia, lymphoma, or MDS in the future, which may negatively impact the commercial prospects of our products and product candidates. We or others may later identify undesirable side effects or adverse events caused by such products, or side effects or adverse events could accumulate over time, and a number of potentially significant negative consequences could result, including but not limited to:

•regulatory authorities may suspend, limit or withdraw approvals of such product, or seek an injunction against its manufacture or distribution;

•regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts, "Dear Healthcare Provider" or "Dear Doctor" letters, press releases or other communications containing warnings or other safety information about the product;

•we may be required to change the way the product is administered or conduct additional clinical trials or post-marketing studies;

•we may be required to create a risk evaluation and mitigation strategy, or REMS which could include elements to assure safe use, or a medication guide outlining the risks of such side effects for distribution to patients;

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•we may be subject to fines, injunctions or the imposition of criminal penalties;

•patients and/or treating physicians could perceive the risk of undesirable side effects or adverse events caused by the product to exceed its potential benefit and choose not to use the product;

•we could choose to remove such product from the market;

•we could be sued and held liable for harm caused to patients; and

•our reputation may suffer.

Any of these events could impair our ability to develop or commercialize our products and product candidates, and their commercial potential may be materially and negatively impacted.

*We rely on complex, single-source supply chains for SKYSONA, ZYNTEGLO, and lovo-cel, respectively. The manufacture, testing and delivery of LVV and drug products present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, or timing needed to support our clinical programs and commercialization.

We rely on third parties to manufacture the LVV and the drug product for ZYNTEGLO and SKYSONA, our two commercial products, and for our clinical trials, including the ongoing phase 3 clinical study evaluating the efficacy and safety of lovo-cel in the treatment of patients with SCD. We continue to advance plans to make additional investment in manufacturing to expand capacity and, to date, we have secured additional commercial-scale manufacturing capacity in order to meet our near-term sales forecasts for ZYNTEGLO and SKYSONA; however, any plans to expand our manufacturing capacity beyond our current levels are subject to FDA approval, which we have not yet obtained. If we fail to secure adequate capacity to manufacture our drug products or LVV used in the manufacture of our drug products in accordance with our forecasts, or if we fail to receive regulatory approval for the expansion of our manufacturing capacity in a timely manner, we may be unable to execute on our commercialization plans on the timing that we expect, or at all.

The manufacture of LVV and drug products is complex and requires significant expertise. Even with the relevant experience and expertise, manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating initial production, managing the transition from clinical manufacturing to manufacturing in the commercial setting, and ensuring that the product meets required specifications. These problems include difficulties with production costs and yields, quality control, quality assurance testing, operator error, scarcity of qualified manufacturing and quality control testing personnel, shortages of any production raw materials as well as compliance with strictly enforced federal, state and foreign regulations. Further, the transition from clinical to commercial manufacturing is complex and has resulted in, and may continue to result in, lower operational success rates due to, among other things, tighter specifications and higher regulatory standards associated with commercial products. We cannot make any assurances that these problems will not occur in the future, or that we will be able to resolve or address in a timely manner or with available funds problems that occur. Because of this complexity, transitioning production of either LVV or drug products to backup or second source manufacturing requires a lengthy technology transfer process and regulatory review and approval, which often takes significant time and may require additional significant financial expenditures. Furthermore, our cost of goods development is at an early stage.

The actual cost to manufacture our LVV and drug products could be greater than we expect and could materially and adversely affect the commercial viability of SKYSONA, ZYNTEGLO, or lovo-cel. If we or such third-party manufacturers are unable to produce the necessary quantities of LVV and our drug products, or in compliance with GMP or other pertinent regulatory requirements, and within our planned time frame and cost parameters, including due to reduced operational success rates as a result of the transition to commercial manufacturing, the development and commercialization of our products and product candidates may be materially harmed, result in delays in our plans or increased capital expenditures.

In addition, we currently have only one drug product supplier for ZYNTEGLO and SKYSONA and one drug product supplier anticipated for commercial distribution for lovo-cel and, accordingly, any significant disruption in our supplier relationships could harm our business. We source key materials from third parties, either directly through agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers for certain key materials that are used to manufacture SKYSONA, ZYNTEGLO, and lovo-cel. Such suppliers may not sell these key materials to us or to our manufacturers at the times we need them or on commercially reasonable terms. We do not control the process for acquisition of all key materials and shortages may occur for reasons beyond our control.

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Additionally, since the hematopoietic stem cells ("HSCs") used as starting material for our drug products have a limited window of stability following procurement from a patient, we have initially established transduction facilities in areas that we believe can adequately service patients from regions where we are commercializing SKYSONA, ZYNTEGLO, and where we anticipate commercializing lovo-cel, if and when approved. However, we cannot ensure that such facilities will enable us to produce and deliver drug product in a timely manner; any issues with production and delivery of drug product could have a material adverse effect on our successful commercialization of our product and product candidates. Moreover, establishing additional facilities in appropriate regions may be financially impractical or impeded by technical, quality, or regulatory issues related to these new sites and we may also run into technical or scientific issues related to transfer of our transduction process or other developmental issues that we may be unable to resolve in a timely manner or with available funds.

Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.

The manufacturing processes for our LVV and our drug products are complex. We explore improvements to our manufacturing processes on a continual basis, as we evaluate clinical and manufacturing data and based on discussions with regulatory authorities. In some circumstances, changes in the manufacturing process may require us to perform additional comparability studies, collect additional data from patients, submit additional regulatory filings, or comply with additional requirements, which may lead to delays in our clinical development and commercialization plans.

For instance, in our lovo-cel program, we are seeking regulatory approval for drug product utilizing LVV manufactured using a scalable suspension manufacturing process using bioreactors, rather than an adherent cell tray manufacturing process, and drug product manufactured in a commercial, rather than a clinical, manufacturing facility. Such transitions require regulatory review and approval including reaching agreement with the FDA on an acceptable comparability data package. The FDA may require us to conduct additional clinical studies, collect additional data, develop additional assays, or modify product specifications relating to such comparability analysis prior to approving our BLA for lovo-cel, which may delay or prevent our plans for commercialization. Any such requests or delays may have a material adverse effect on our forecasted timelines for approval of lovo-cel and may require substantial additional funds.

We are evaluating plans to transition our drug product manufacturing process for lovo-cel, if approval is obtained, to utilize cryopreserved apheresis patient starting material in order to expand the potential reach of our therapy and to provide manufacturing flexibility. Such changes to our drug manufacturing process will similarly require comparability and process validation data to support such transition and, therefore, may not be approved in a timely manner, if at all.

We cannot predict when or if we will obtain marketing approval to commercialize lovo-cel, and the marketing approval of our product candidates may ultimately be for more narrow indications than we expect. If lovo-cel or other product candidates are not approved in a timely manner or at all for any reason, our business prospects, results of operations, and financial condition would be adversely affected.

The results from previous or ongoing studies are not necessarily predictive of our future clinical study results, and initial or interim results may not continue or be confirmed upon completion of the study. There are limited data concerning long-term safety and efficacy following treatment with our products and product candidates. These data, or other positive data, may not continue to occur for these patients or for any future patients in our ongoing or future clinical studies, and may not be repeated or observed in ongoing or future studies involving our product candidates. Furthermore, our marketed products or product candidates may also fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical studies. There can be no assurance that any of these studies will ultimately be successful or support further clinical advancement or marketing approval of our product candidates. For instance, while patients with SCD who have been treated with lovo-cel may experience a reduction of vaso-occlusive events following successful engraftment, there can be no assurance that they will not experience vaso-occlusive events in the future. We have experienced unexpected results in the past, and we may experience unexpected results in the future.

Even if our product candidates demonstrate safety and efficacy in clinical studies, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development. We may experience delays or rejections based upon additional government regulation from future legislation or administrative action, changes in regulatory agency policy, or additional regulatory feedback or guidance during the period of product development, clinical studies and the review process. The field of cell and gene therapy is evolving, and as more products are reviewed by regulatory authorities, they may impose additional requirements that were not previously anticipated. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates or may require the inclusion of limitations or warnings that may be different from those of our competitors. For example, the development of our product

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candidates for pediatric use is an important part of our current business strategy, and if we are unable to obtain marketing approval for the desired age ranges, such as using lovo-cel for treatment for children with sickle cell disease ages 12 and older, our business may suffer, including as a result of our inability to close the announced sale of a priority review voucher we may be eligible to receive should lovo-cel be approved for patients with sickle cell disease ages 12 and older.

Our ability to obtain approval of a BLA is ultimately an FDA review decision, which will be dependent upon the data and information submitted in the original BLA and during review, and the data submitted may not be sufficiently robust from a safety and/or efficacy perspective, or from a manufacturing, comparability and/or quality perspective, to support the approval of the BLA. The BLA submission for lovo-cel is based on clinical data from Group C of our ongoing HGB-206 clinical study, which is our registrational Phase 1/2 clinical trial of lovo-cel in three treatment cohorts, and supporting data from our ongoing HGB-210 clinical study, which is our Phase 3 clinical trial of lovo-cel in pediatric and adult participants, and has been accepted for filing by the FDA and granted priority review, with a PDUFA goal date of December 20, 2023. However, the FDA may determine that lovo-cel cannot be approved or it may require that we conduct additional follow-up or larger clinical trials before we can obtain approval of the BLA for lovo-cel for the treatment of patients with SCD, if ever.

If lovo-cel or other product candidates are ultimately not approved for any reason, our business, prospects, results of operations and financial condition would be adversely affected.

Risks related to commercialization

We have limited experience as a commercial company and the marketing and sale of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), may be unsuccessful or less successful than anticipated.

We have limited experience as a commercial company as we have only recently launched ZYNTEGLO and SKYSONA in the U.S., our first two commercial products marketed in the U.S. Consequently, there is limited information about our ability to overcome many of the risks and uncertainties encountered by companies commercializing products in the biopharmaceutical industry in the U.S. To execute our business plan, we will need to successfully:

•gain regulatory approval to commercialize lovo-cel in the United States;

•sustain adequate pricing and reimbursement for ZYNTEGLO and SKYSONA, across all U.S. payer segments, and obtain pricing and reimbursement for lovo-cel across payers in the U.S., when and if approved;

•establish and maintain, in the regions where we hope to treat patients, relationships with qualified treatment centers who will be treating the patients who receive ZYNTEGLO, SKYSONA, and lovo-cel, when and if approved;

•manage our manufacturing capabilities and supply chain operations in the coordination and delivery of drug product to patients at qualified treatment centers;

•manage our spending as we seek marketing approvals, and engage in commercialization efforts; and

•initiate, develop and maintain successful strategic alliances.

If we are not successful in accomplishing these objectives, we may not be able to effectively commercialize ZYNTEGLO or SKYSONA, develop or commercialize lovo-cel, raise capital, expand our business, or continue our operations.

The commercial success of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), will depend upon the degree of market acceptance by physicians, patients, payers and other stakeholders.

The commercial success of ZYNTEGLO, SKYSONA, and of lovo-cel following marketing approval, if and when obtained, will depend in part on the medical community, patients, and third-party or governmental payers accepting gene therapy products in general, and ZYNTEGLO, SKYSONA, and lovo-cel, in particular, as medically useful, cost-effective, and safe. ZYNTEGLO, SKYSONA, and lovo-cel, which we may bring to the market if approved, may not gain market acceptance by physicians, patients, payers and other stakeholders. 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 ZYNTEGLO, SKYSONA, and of lovo-cel, if and when approved, will depend on a number of factors, including:

•the potential and perceived efficacy and potential advantages over alternative treatments, including over direct competitors in the gene therapy space;

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•the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling; for instance, the SKYSONA product label includes a boxed warning for the risk of hematologic malignancy;

•the prevalence and severity of any side effects resulting from the chemotherapy and myeloablative treatments associated with the procedure by which our products are administered, including the possible prejudicial effects that chemotherapy can have on fertility;

•relative convenience and ease of administration;

•given the complexity of manufacturing product and the reduced operational success rates in connection with the transition to commercial manufacturing, the perception or possibility that issues may continue to arise in the supply of product which could delay treatment;

•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the strength of marketing and distribution support and timing of market introduction of competitive products;

•the pricing of our products;

•publicity concerning our products, or competing products and treatments;

•sufficient insurance coverage or reimbursement;

•the possible occurrence of adverse clinical findings or decreased effectiveness of a product or product candidate over time identified during continued monitoring and evaluation of patients; and

•the mix of private and governmental payers coverage, particularly if the percentage of patients receiving reimbursement from state Medicaid is high since such process can be slower to reimburse.

Even if a product displays a favorable efficacy and safety profile in clinical studies, market acceptance of the product will not be known until some period after it is launched. Our efforts to educate the medical community and payers on the benefits of our products may require significant resources and may never be successful. For instance, following marketing approval of ZYNTEGLO in the European Union, we did not reach agreement with payers on an acceptable price for reimbursement in our priority markets in Europe, and as a result we are no longer seeking to commercialize our products and product candidates in Europe for the foreseeable future. Our efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. Any of these factors may cause ZYNTEGLO, SKYSONA, or lovo-cel, to be unsuccessful or less successful than anticipated.

Our ability to successfully commercialize our products or product candidates, if approved, including our ability to achieve their widespread market acceptance, is critical to the success of our business.

We dedicate a substantial amount of our resources to the commercialization of ZYNTEGLO and SKYSONA. Our ability to generate revenue in the near-term will depend almost entirely on our ability to execute on our commercialization plans and the level of market adoption for, and the continued use of, ZYNTEGLO and SKYSONA and, if approved, lovo-cel, by physicians, hospitals, patients, and/or healthcare payers, including government payers, consumers, managed care organizations, and specialty pharmacies. If we are not successful in commercializing our products, including achieving and maintaining an adequate level of market adoption, our profitability and our future business prospects will be adversely impacted.

Future expansion of commercial opportunity is dependent upon lifecycle management and access to complementary therapies. Our efforts to reduce cost of goods through efficiencies of scale or new technologies, such as improved mobilization, may not be successful and/or we may not have access to the complementary technologies we need to succeed, which could impact the level of future profitability. For instance, improvements in conditioning regimens (which could increase the patient population who has access to our products), may not be successfully developed and approved, and if they are, we may not have access to those improvements which, in most instances, are technology owned by third parties. Additionally, the future opportunity to market our therapies in geographies outside the U.S. through partnership or our internal efforts may not materialize.

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If the market opportunities for our product candidates are smaller than we believe they are, and if we are not able to successfully identify patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.

We focus our research and product development on treatments for severe genetic diseases. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower or more difficult to identify than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. For instance, in our lovo-cel and SKYSONA programs, we have received notice of safety events of acute myeloid leukemia or myelodysplastic syndrome, and additional such events may be reported in the future. The market opportunity for our gene therapies may be negatively impacted even if our gene therapies ultimately receive marketing approval.

Even if we obtain significant market share for a product within an approved indication, because the potential target populations for our products and product candidates are small, we may never achieve profitability without obtaining marketing approval for additional indications.

Any of these factors may negatively affect our ability to generate revenues from sales of our product candidates and our ability to achieve and maintain profitability and, as a consequence, our business may suffer.

We have limited sales and distribution experience and limited capabilities for marketing and market access. Although we have invested and expect to continue to invest significant financial and management resources, if we are unable to establish and maintain these commercial capabilities and infrastructure, or to enter into agreements with third parties to market and sell our products, we may be unable to generate sufficient revenue to sustain our business.

We have limited prior sales or distribution experience and limited capabilities for marketing and market access, and we did not generate meaningful product sales following the commercial launch of beti-cel following marketing approv