10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2017

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: 001-37923

CRISPR THERAPEUTICS AG

(Exact name of Registrant as specified in its charter)

Switzerland	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Baarerstrasse 14 6300 Zug, Switzerland	Not Applicable
(Address of principal executive offices)	(zip code)

+41 (0)41 561 32 77

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒  (Do not check if smaller reporting company)	Smaller Reporting Company	☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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.  ☒

As of August 7, 2017, there were 40,591,669 shares of registrant’s common shares outstanding.

Index

	Page Number
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June  30, 2017 and December 31, 2016		2
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2017 and 2016		3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016		4
Notes to Condensed Consolidated Financial Statements		5
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures about Market Risk		28
Item 4. Controls and Procedures		29
PART II: OTHER INFORMATION
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 6. Exhibits		31
SIGNATURES		32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CRISPR Therapeutics AG

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except share and per share data)

	As of
	June 30,			December 31,
	2017			2016
Assets
Current assets:
Cash	$	272,264		$	315,520
Accounts receivable, including related party amounts of $1,340 and $752 as of June 30, 2017 and December 31, 2016, respectively		6,814			3,157
Prepaid expenses and other current assets including related party amounts of $1,141 and $0 as of June 30, 2017 and December 31, 2016, respectively		2,207			1,511
Total current assets		281,285			320,188
Property and equipment, net		19,927			21,027
Intangible assets, net		372			399
Restricted cash		3,154			3,150
Other non-current assets		237			198
Total assets	$	304,975		$	344,962
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	2,559		$	4,569
Accrued expenses, including related party amounts of $305 and $537 as of June 30, 2017 and December 31, 2016, respectively		11,888			16,320
Accrued tax liabilities		272			23
Deferred rent		1,027			1,027
Other current liabilities		68			59
Total current liabilities		15,814			21,998
Deferred revenue, including related party amounts of $284 and $527 as of June 30, 2017 and December 31, 2016, respectively		79,232			77,646
Deferred rent non-current		11,928			12,283
Other non-current liabilities		198			189
Total liabilities		107,172			112,116
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common shares, CHF 0.03 par value, 40,556,891 and 40,253,674 shares authorized at June 30, 2017 and December 31, 2016, respectively, 40,484,288 and 40,164,307 shares issued at June 30, 2017 and December 31, 2016, respectively, 40,039,415 and 39,719,434 shares outstanding at June 30, 2017 and December 31, 2016, respectively, 17,079,353 and 15,325,607 shares in conditional capital at June 30, 2017 and December 31, 2016, respectively		1,226			1,216
Treasury shares, at cost, 444,873 shares at June 30, 2017 and December 31, 2016, respectively		—			—
Additional paid-in capital		297,446			288,739
Accumulated deficit		(100,873	)		(57,083	)
Accumulated other comprehensive income (loss)		4			(26	)
Total shareholders’ equity		197,803			232,846
Total liabilities and shareholders’ equity	$	304,975		$	344,962

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

CRISPR Therapeutics AG

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited, in thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Collaboration revenue (1)	$	3,582		$	795		$	6,285		$	1,271
Operating expenses:
Research and development (2)		17,120			8,602			31,925			14,614
General and administrative		7,768			8,751			16,410			14,867
Total operating expenses		24,888			17,353			48,335			29,481
Loss from operations		(21,306	)		(16,558	)		(42,050	)		(28,210	)
Other (expense) income:
Interest expense		—			—			—			(8,050	)
Loss from equity method investment		(505	)		(686	)		(951	)		(686	)
Gain on extinguishment of convertible loan		—			—			—			11,482
Other (expense) income, net		(161	)		80			(167	)		(66	)
Total other (expense) income, net		(666	)		(606	)		(1,118	)		2,680
Net loss before income taxes		(21,972	)		(17,164	)		(43,168	)		(25,530	)
Provision for income taxes		(343	)		—			(622	)		(76	)
Net loss		(22,315	)		(17,164	)		(43,790	)		(25,606	)
Foreign currency translation adjustment		6			(13	)		30			(17	)
Comprehensive loss	$	(22,309	)	$	(17,177	)	$	(43,760	)	$	(25,623	)
Reconciliation of net loss to net loss attributable to common shareholders:
Net loss	$	(22,315	)	$	(17,164	)	$	(43,790	)	$	(25,606	)
Loss attributable to noncontrolling interest		—			7			—			10
Net loss attributable to common shareholders	$	(22,315	)	$	(17,157	)	$	(43,790	)	$	(25,596	)
Net loss per share attributable to common shareholders—basic and diluted	$	(0.56	)	$	(3.15	)	$	(1.10	)	$	(4.66	)
Weighted-average common shares outstanding used in net loss per share attributable to common shareholders—basic and diluted		39,895,938			5,448,855			39,811,412			5,488,467
(1) Including the following revenue from a related party, see Note 11:	$	1,475		$	—		$	2,639		$	—
(2) Including the following research and development expense with a related party, See Note 11:	$	1,355		$	—		$	2,491		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

CRISPR Therapeutics AG

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Six Months Ended June 30,
	2017			2016
Operating activities:
Net loss	$	(43,790	)	$	(25,606	)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization		1,426			277
Equity-based compensation		7,026			4,523
Non-cash interest		—			8,050
Loss from disposal of property and equipment		—			28
Unrealized foreign currency remeasurement loss		(9	)		14
Gain on extinguishment of convertible loan		—			(11,482	)
Loss from equity method investment		951			686
Changes in:
Restricted cash		(4	)		(2,453	)
Accounts receivable		(3,657	)		(1,015	)
Prepaid expenses and other assets		(736	)		(2,573	)
Accounts payable and accrued expenses		(2,103	)		4,988
Deferred revenue		1,586			710
Deferred rent		(355	)		184
Other liabilities, net		278			51
Net cash used in operating activities		(39,387	)		(23,618	)
Investing activities:
Purchase of property and equipment		(4,615	)		(1,279	)
Proceeds from contribution of intellectual property to equity method investee		—			20,000
Cash investment in equity method investee		—			(100	)
Net cash (used in) provided by investing activities		(4,615	)		18,621
Financing activities:
Proceeds from issuance of Series A-3 preferred shares		—			22,850
Proceeds from issuance of Series B preferred shares		—			38,075
Proceeds from issuance of convertible loans		—			35,000
Proceeds from exercise of options		715			—
Net cash provided by financing activities		715			95,925
Effect of exchange rate changes on cash		31			(40	)
(Decrease) increase in cash		(43,256	)		90,888
Cash, beginning of period		315,520			155,961
Cash, end of period	$	272,264		$	246,849
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses	$	2,697		$	47
Conversion of Vertex convertible loan and accrued interest	$	—		$	61,929
Noncash contribution of intellectual property to Casebia LLP	$	—		$	36,372
Issuance costs for public offering in accounts payable and accrued expenses	$	—		$	1,810

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

CRISPR Therapeutics AG

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Operations

The Company

CRISPR Therapeutics AG (“CRISPR” or the “Company”) was formed on October 28, 2013 in Basel, Switzerland. The Company was established to translate CRISPR/Cas9, a genome editing technology, into transformative gene-based medicines for the treatment of serious human diseases. The foundational intellectual property underlying the Company’s operations was licensed to the Company and its subsidiaries in April 2014. The Company devotes substantially all of its efforts to product research and development activities, initial market development and raising capital. The Company’s principal offices are located in Zug, Switzerland and its principal research operations are in Cambridge, Massachusetts.

On January 23, 2014, the founders of the Company formed TRACR Hematology Limited (“TRACR”), wholly-owned subsidiary of the Company, in the United Kingdom, to further the development of the CRISPR/Cas9 technology into medicines for the treatment of blood-borne illnesses. As the Company was funding and managing TRACR’s operations in 2014, it has been consolidated by the Company from the date that the Company established a variable interest in TRACR in April 2014. In March 2015, the Company acquired 82.1% of the outstanding equity of TRACR in a share exchange transaction. Concurrent with its initial public offering (“IPO”) in October 2016, the Company acquired the outstanding non-controlling interest in TRACR.

On February 7, 2014, the Company formed a wholly-owned subsidiary in the United Kingdom, CRISPR Therapeutics Limited (“CRISPR Ltd.”), and on February 16, 2015, the Company formed a wholly-owned subsidiary in the United States, CRISPR Therapeutics, Inc. (“CRISPR Inc.”), as its principal research and development operation.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.

The Company had an accumulated deficit of $100.9 million as of June 30, 2017 and has financed its operations to date from proceeds obtained from its IPO, a series of preferred shares and convertible loan issuances, and upfront fees received under its collaboration and joint venture arrangements. The Company will require substantial additional capital to fund its research and development and ongoing operating expenses.

5

Liquidity

The Company expects its cash of $272.3 million at June 30, 2017 to be sufficient to fund its current operating plan for at least the next 24 months. Thereafter, the Company may be required to obtain additional funding. There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”). There have been no material changes to the significant accounting policies during the six months ended June 30, 2017.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report.

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, and include the accounts of (i) the Company, and (ii) its wholly-owned subsidiaries, CRISPR Ltd., CRISPR Inc., and TRACR. All intercompany accounts and transactions have been eliminated. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). The Company accounts for its 50% investment in Casebia Therapeutics LLC (“Casebia”) under the equity method of accounting. See Note 7 for further details.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, equity-based compensation expense, revenue recognition, equity method investments, fair

6

value of intangible assets, the provision for or benefit from income taxes and reported amounts of research and development expenses during the period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. The consolidated statements reflect all adjustments which are of a normal recurring nature necessary for presentation. Actual results may differ from those estimates or assumptions.

Net Loss Per Share Attributable to Common Shareholders

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common shareholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method.

The following common share equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in common stock equivalent shares):

	As of
	June 30, 2017		December 31, 2016
Outstanding options		5,636,786		4,535,371
Unvested unissued restricted common shares		72,603		89,367
Total		5,709,389		4,624,738

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Subsequently, the FASB also issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligation and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09 (collectively, the “Revenue ASUs”).

The Revenue ASUs noted above provide an accounting standard for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for interim and annual periods beginning after December 15, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior

7

reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the new standard effective January 1, 2018 under the full retrospective method. The Company is in the process of determining the impact of the Revenue ASUs on its financial statements as it relates to their revenue generating collaboration agreements. The Company continues to make progress on the assessment of its two collaboration agreements and is in the process of developing its revenue recognition policy under the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and will require lessees to record most leases on the balance sheet, but recognize expense in a manner similar to the current standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, which is the year ended December 31, 2019 for the Company. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company is evaluating the new guidance and the impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU 2016-09”). The guidance changes how companies account for certain aspects of equity-based payments to employees. Entities will be required to recognize income tax effects of awards in the income statement when the awards vest or are settled. The guidance also allows an employer to repurchase more of an employee’s shares than it can under current guidance for tax withholding purposes providing for withholding at the employee’s maximum rate as opposed to the minimum rate without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company adopted the new standard January 1, 2017. The Company made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. Adoption did not materially impact the consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes. The amendments in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. The amendments should be applied on a modified retrospective transition basis, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending balances shown on the statement of cash flows. The guidance is effective in the first quarter of fiscal 2018 and early adoption is permitted. ASU 2016-18 must be applied retrospectively to all periods presented. Upon adoption, the Company’s 2016 statement of cash flows will reflect an increase in operating cash flows resulting from the adoption of this new standard. The Company does not expect any additional impact on its financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”). ASU 2017-01 clarifies whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The purpose of the guidance is to narrow the definition of a business at it relates recording transactions as business acquisitions or asset acquisitions. The guidance is effective in annual periods beginning after December 15, 2017, including interim periods within those years, with early adoption permitted under certain circumstances. The Company does not expect any additional impact on its financial statements.

8

3. Property and Equipment, net

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

	As of
	June 30,			December 31,
	2017			2016
Computer equipment and software	$	285		$	110
Furniture, fixtures, and other		2,079			2,044
Laboratory equipment		5,985			2,970
Leasehold improvements		13,742			15,780
Construction work in process		176			1,065
		22,267			21,969
Accumulated Depreciation		(2,340	)		(942	)
Property and equipment, net	$	19,927		$	21,027

Depreciation expense for the three and six months ended June 30, 2017 was $0.7 million and $1.4 million respectively. Depreciation expense for the three and six months ended June 30, 2016 was $0.1 million and $0.2 million, respectively.

4. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	As of
	June 30, 2017		December 31, 2016
Payroll and employee-related costs	$	3,567	$	2,585
Research costs		1,561		996
Licensing fees		783		492
Professional fees		1,892		2,715
Intellectual property costs		1,255		3,372
Accrued property and equipment		2,663		5,081
Other		167		1,079
Total	$	11,888	$	16,320

9

5. Convertible Loans

2015 Convertible Loan Agreement with Vertex and certain existing shareholders

On October 26, 2015, the Company entered into a convertible loan agreement with Vertex Pharmaceuticals Incorporated (“Vertex”) and certain existing shareholders (the “Vertex Convertible Loan”) under which the Company borrowed $38.2 million. The Vertex Convertible Loan accrued interest at 2.5% per annum and had an initial maturity date of April 26, 2016 subject to acceleration upon the occurrence of certain conditions. The Vertex Convertible Loan included various embedded conversion, redemption and other features, none of which required separate accounting from the host instrument under ASC Topic 815: Derivatives and Hedging (“ASC 815”).

The conversion terms, redemption terms, and other features of the Vertex Convertible Loan are included in the Annual Report.

Convertible Loan with Bayer Global Investments B.V.

On January 29, 2016, concurrent with the execution of an agreement to establish a Joint Venture (“JV”) with Bayer HealthCare LLC (“Bayer HealthCare”), the Company entered into a Convertible Loan Agreement (the “Bayer Convertible Loan”) with Bayer Global Investments B.V. (“Bayer BV”) under which the Company borrowed $35.0 million. The Bayer Convertible Loan accrued interest at 2.0% per annum and matured on January 29, 2016. The Bayer Convertible Loan included various embedded conversion, redemption and other features, none of which required separate accounting from the host instrument under ASC 815.

The conversion terms, redemption terms, and other features of the Bayer Convertible Loan are included in the Annual Report.

Conversion of Convertible Loans to Series B Preferred Shares

On January 29, 2016, concurrent with the issuance of the Bayer Convertible Loan, all of the outstanding principal under the $35.0 million Bayer Convertible Loan automatically converted into 2,605,330 Series B Redeemable Convertible Preferred Shares (“Series B Preferred Shares”) at $13.43 per share. The Company determined the fair value of the Bayer Convertible Loan to be $24.5 million based on the fair value of the underlying Series B Preferred Shares that were exchanged as part of the immediate conversion. As the Bayer Convertible Loan was executed in contemplation of the joint venture agreement with Bayer, the Company evaluated the Bayer Convertible Loan as part of one multiple-element arrangement and, using a relative fair value allocation method, allocated $27.0 million of aggregate arrangement consideration to the Bayer Convertible Loan upon issuance. Upon conversion, the Company accreted the Bayer Convertible Loan to its face value of $35.0 million through a charge to interest expense of $8.0 million and converted the $35.0 million to Series B Preferred Shares under the conversion model.

The receipt of $35.0 million in proceeds under the Bayer Convertible Loan in exchange for equity securities, combined with the $38.2 million in proceeds from Vertex Convertible Loan, triggered an automatic conversion provision of the Vertex Convertible Loan Agreement. Accordingly, on January 29,

10

2016, the Vertex Convertible Loan, including loans from existing shareholders, plus accrued interest also converted into 2,859,278 of Series B Preferred Shares at $13.43 per share. The Company determined the fair value of the Vertex Convertible Loan to be $26.9 million based on the fair value of the underlying Series B Preferred Shares that were exchanged as part of the conversion. Upon extinguishment, the Company recorded a gain on extinguishment of $11.5 million for the difference between the carrying value of the debt and the fair value of the Series B Preferred Shares issued to settle the debt under the general extinguishment model.

6. Commitments and Contingencies

License Agreement with StrideBio LLC

On April 13, 2017, the Company and its affiliates entered into a development and option agreement with StrideBio LLC (“StrideBio”), to research and develop novel adeno-associated virus capsids. Pursuant to the license agreement, the Company made a one-time upfront payment of $0.5 million to StrideBio, an achieved milestone payment of $0.3 million and is required to pay StrideBio up to $3.0 million upon the achievement of research milestones. Under the agreement, the Company is also contingently obligated to purchase a convertible note in the amount of $0.5 million, which was deemed to be fair value as of the date the investment was executed in the third quarter. The terms of this investment are further disclosed in Note 12.

Operating Leases

In March 2017, the Company subleased a portion of one research and office facility to a third party effective April 1, 2017. The sublease term is less than the remaining term under the original lease, and as a result, the Company does not believe it has met a cease use date as it may re-enter the space following the sublease. Payments to be received from the sublessee are approximately $2.8 million and will offset scheduled rent payments due to the landlord under the original lease for the sublease term.

Litigation

The Company licenses a U.S. patent application that is currently subject to interference proceedings declared by the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. Following motions by the parties and other procedural matters, the PTAB concluded in February 2017 that the declared interference should be dismissed because the claim sets of the two parties were not directed to the same patentable invention in accordance with the PTAB’s two-way test for patent interferences. In April 2017, the regents of the University of California (“California”) appealed the PTAB decision to the U.S. Court of Appeals for the Federal Circuit. In the appeal, California is seeking review and reversal of the PTAB’s February 2017 decision, which terminated the interference without determining which inventors actually invented the use of the CRISPR/Cas9 genome editing technology in eukaryotic cells.

Under the Invention Management Agreement signed on December 15, 2016, the Company is obligated to share costs related to patent maintenance, defense and prosecution. During the three and six months ended June 30, 2017, the Company incurred $0.5 million and $1.0 million, respectively, in shared costs. During the three and six months ended June 30, 2016, the Company incurred $0.3 million, and $0.8 million, respectively, in shared costs. The Company had accrued legal costs from the cost sharing of $0.8 million and $2.8 million as of June 30, 2017 and December 31, 2016, respectively.

11

7. Significant Contracts

Intellectual Property Agreements

CRISPR Therapeutics AG—Charpentier License Agreement

In April 2014, the Company entered into a technology license agreement with Dr. Charpentier pursuant to which the Company licensed certain intellectual property rights under joint ownership from Dr. Charpentier to develop and commercialize products for the treatment or prevention of human diseases other than hemoglobinopathies (“CRISPR—Charpentier License Agreement”). In consideration for the granting of the license, the Company paid Dr. Charpentier an upfront fee of CHF 0.1 million ($0.1 million), and agreed to pay an immaterial annual license maintenance fee if Dr. Charpentier is not otherwise engaged in a service arrangement with the Company. During the years ended December 31, 2016 and 2015, and three months ended June 30, 2017 and 2016, Dr. Charpentier has been in a consulting arrangement with the Company, as such, no annual payments have been made under this provision. Dr. Charpentier is entitled to receive nominal clinical milestone payments. The Company is also obligated to pay Dr. Charpentier a low single digit percentage of sublicensing payments received under any sublicense agreement with a third party. In addition, the Company is also obligated to pay to Dr. Charpentier a low single-digit percentage royalty based on annual net sales of licensed products and licensed services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017, the Company did not record any sublicensing fees due to Dr. Charpentier. During the three and six months ended June 30, 2016, the Company recorded $0 and $0.3 million, respectively, of sublicensing fees due to Dr. Charpentier These expenses were under the terms of the CRISPR—Charpentier License Agreement that was triggered by the execution of the Bayer Agreement (“Bayer Agreement”).

TRACR Hematology Limited—Charpentier License Agreement

In April 2014, TRACR entered into a technology license agreement (“TRACR—Charpentier License Agreement”) with Dr. Charpentier pursuant to which TRACR licensed certain intellectual property rights under joint ownership from Dr. Charpentier to develop and commercialize products for the treatment or prevention of human diseases related to hemoglobinopathies. In consideration for the granting of the license, Dr. Charpentier is entitled to receive nominal clinical milestone payments. TRACR is also obligated to pay Dr. Charpentier a low single digit percentage of sublicensing payments received under any sublicense agreement with a third party. In addition, TRACR is obligated to pay to Dr. Charpentier low single digit percentage royalties based on annual net sales of licensed products and licensed services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017 and 2016, the Company did not record any sublicensing fees due to Dr. Charpentier under the terms of the TRACR—Charpentier License Agreement.

12

Patent Assignment Agreement

In November 2014, the Company entered into a patent assignment agreement (“Patent Assignment Agreement”) with Dr. Charpentier, Dr. Ines Fonfara, and the University of Vienna (collectively, the “Assignors”), pursuant to which the Company received from the assignors all rights, title and interest in and to certain patent rights claimed in the U.S. Patent Application No.61/905,835. In consideration for the assignment of such rights, the Assignors are entitled to receive clinical milestone payments totaling up to €0.3 million (approximately $0.4 million) in the aggregate for the first human therapeutic product. The Company is also obligated to pay to the Assignors low single digit royalties based on annual net sales of certain products and services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017 and 2016, the sublicensing fees due to the Assignors under the terms of the Patent Assignment Agreement that was triggered under the Vertex Collaboration Agreement (the “Vertex Collaboration Agreement”) and by the execution of the Bayer Agreement were immaterial.

Collaboration Agreement with Vertex Pharmaceuticals, Incorporated

On October 26, 2015, the Company entered into a strategic collaboration, option, and license agreement (“Collaboration Agreement”) with Vertex, focused on the use of CRISPR’s gene editing technology, CRISPR/Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease.

During the three and six months ended June 30, 2017, the Company recognized $2.1 million and $3.6 million of revenue related to the collaboration with Vertex. During the three and six months ended June 30, 2016, the Company recognized $0.8 million and $1.3 million of revenue related to the collaboration with Vertex. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and six months ended June 30, 2017 was $3.3 million and $5.9 million, respectively. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and six months ended June 30, 2016 was $1.6 million and $3.3 million, respectively. As of June 30, 2017, and December 31, 2016, there was $78.9 million and $77.1 million of non-current deferred revenue related to the Vertex Collaboration Agreement, respectively.

Joint Venture with Bayer Healthcare LLC

On December 19, 2015, the Company entered into an agreement with Bayer HealthCare LLC to establish a joint venture to discover, develop and commercialize new therapeutics to cure blood disorders, blindness, and congenital heart disease. On February 12, 2016, the Company and Bayer HealthCare completed the formation of the joint venture entity, Casebia Therapeutics LLC (“Casebia”). CRISPR contributed its proprietary CRISPR/Cas9 gene editing technology and intellectual property for selected disease indications to Casebia and Bayer HealthCare contributed its protein engineering expertise and relevant disease know-how to Casebia.

At June 30, 2017 and December 31, 2016, the value of the Company’s equity method investment in Casebia was zero.

13

During the three and six months ended June 30, 2017, the Company recognized $1.5 million and $2.6 million of revenue, respectively, related to the collaboration with Casebia. During the three and six months ended June 30, 2017, the Company recognized $1.4 million and $2.5 million of research and development expense, respectively, in relation to its performance under the agreement. During the three and six months ended June 30, 2017, the Company recognized $0.5 million and $1.0 million respectively, of stock-based compensation expense related to Casebia employees. During the three and six months ended June 30, 2016, the Company did not recognize any revenue, research and development expense or stock-based compensation expense related to the collaboration with Casebia. Non-current deferred revenue related to the Company’s collaboration with Casebia was $0.3 million and $0.5 million as of June 30, 2017 and December 31, 2016, respectively. Unrecognized equity method losses in excess of the Company’s equity investment in Casebia was $10.8 million and $4.0 million as of June 30, 2017 and December 31, 2016, respectively.

Total operating expenses, and net loss of Casebia for the three and six months ended June 30, 2017 was $9.0 million and $14.6 million, respectively. Total operating expenses, and net loss of Casebia for the three and six months ended June 30, 2016 was $1.0 million and $74.8 million, respectively, which included research and development expenses of $71.4 million for the fair value of the CRISPR license contributed to Casebia in the formation of the JV.

8. Share Capital

The Company had 40,556,891 registered common shares as of June 30, 2017, with a par value of CHF 0.03 per share, which includes 72,603 shares of unvested unissued restricted common stock and 444,873 treasury shares which are legally outstanding but not considered outstanding for accounting purposes.

Conditional Capital Reserved for Future Issuance

The Company had the following conditional capital reserved for future issuance:

	As of
Conditional Capital	June 30, 2017		December 31, 2016
Unvested unissued restricted stock		166,667		166,667
Outstanding stock options		5,636,786		4,535,371
Reserved for future issuance under stock option plans (1)		5,942,974		5,290,643
Shares available for bonds and similar debt instruments		4,919,700		4,919,700
Shares available for employee purchase plans		413,226		413,226
Total		17,079,353		15,325,607

(1) The Company’s Board of Directors approved an increase to the option pool of 2,012,684 options in May 2017.

14

9. Equity-based Compensation

The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and restricted stock awards. Stock options and restricted stock awards generally vest over four years with 25% vesting on the first anniversary of service commencement and the remaining 75% vesting monthly thereafter. Effective January 1, 2017, the Company adopted ASU 2016-09, and made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. The following table presents stock-based compensation expense included in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Research and development	$	1,946	$	853	$	3,676	$	1,491
General and administrative		1,780		2,648		3,350		3,032
Loss from equity method investment		505		—		951		—
Total	$	4,231	$	3,501	$	7,977	$	4,523

Grant-Date Fair Value

The Company estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following assumptions:

	Six Months Ended June 30,
	2017			2016
Employees:
Weighted average expected volatility		72.7	%		77.9	%
Expected term (in years)		6.0			6.0
Risk free interest rate		1.8 - 2.3	%		1.4 - 1.5	%
Expected dividend yield		0.0	%		0.0	%
Non-employees:
Weighted average expected volatility		83.6	%		n/a
Expected term (in years)		10.0			n/a
Risk free interest rate		2.3	%		n/a
Expected dividend yield		0.0	%		n/a

The fair value of the restricted stock awards was determined based on the fair value of the common shares on the grant date. Non-employee stock options and restricted stock awards, including those to employees of Casebia, are marked-to-market at each reporting period.

15

Share Based Payment Activity

Stock Option Awards

The following table summarizes stock option activity for employees and non-employees (intrinsic value in thousands):

	Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		4,535,371		$	8.38		9.1	$	53,966
Granted		1,750,048		$	16.13
Exercised		(304,173	)	$	2.40
Cancelled or forfeited		(344,460	)	$	5.11
Outstanding at June 30, 2017		5,636,786		$	11.29		9.0	$	30,510
Exercisable at June 30, 2017		1,319,922		$	5.94		8.4	$	13,309
Vested or expected to vest at June 30, 2017 (1)		5,609,286		$	11.26		9.0	$	30,467

(1) Represents the number of vested options at June 30, 2017 plus the number of unvested options expected to vest in the future.

As of June 30, 2017, total unrecognized compensation expense related to stock options was $35.7 million which the Company expects to recognize over a remaining weighted-average period of 3.2 years.

During the six months ended June 30, 2017 and 2016, the Company granted options to purchase 60,000 and 13,333 common shares, respectively, subject to performance-based vesting conditions. As of June 30, 2017, options to purchase 335,372 common shares subject to performance-based vesting conditions were vested, as performance conditions were achieved, and no options to purchase common shares subject to performance-based vesting conditions were deemed probable of vesting.

Restricted Stock Awards

The following table summarizes restricted stock activity for employees and non-employees during the six months ended June 30, 2017:

	Reflected as outstanding upon vesting			Reflected as outstanding upon grant date			Total			Weighted- Average Grant Date Fair Value
Unvested restricted common shares as of December 31, 2016		89,367			650,856			740,223		$	3.84
Vested		(16,764	)		(212,075	)		(228,839	)		4.02
Unvested restricted common shares as of June 30, 2017		72,603			438,781			511,384		$	3.76

During the six months ended June 30, 2017, the total fair value of vested restricted common shares was $4.2 million. As of June 30, 2017, total unrecognized compensation expense related to unvested restricted common shares was $4.0 million which the Company expects to recognize over a remaining weighted-average period of one year.

The Company did not grant any restricted common shares subject to performance-based vesting conditions during the six months ended June 30, 2017. As of June 30, 2017, 50,000 restricted common shares subject to performance-based vesting conditions were vested.

16

During the year ended December 31, 2016, the Company and Fay Corp. transferred 290,400 common shares to a founder, 268,093 of which were subject to vesting conditions with a weighted average grant date fair value of $12.65 per share. The unvested common shares are subject to repurchase by the Company upon termination of the holder’s service relationship with the Company as well as upon certain triggering events such as termination for cause, material breach of agreement and insolvency of the holder. During the three and six months ended June 30, 2017, the Company recognized expense related to these common shares in the amount of $0.2 million and $0.4 million respectively. During the three and six months ended June 30, 2016, the Company recognized expense related to these common shares in the amount of $2.2 million and $2.2 million respectively.

10. Income Taxes

During the three and six months ended June 30, 2017, the Company recorded an income tax provision of $0.3 million and $0.6 million, respectively, representing an effective tax rate of -1.6%, and -1.44%, respectively. During the three and six months ended June 30, 2016, the Company recorded an income tax provision of $0 and $76 thousand, respectively, representing an effective tax rate of 0% and -0.3%, respectively. The income tax provision is primarily attributable to the year-to-date pre-tax income earned by the Company’s U.S. and U.K. subsidiaries. The difference in the statutory tax rate and effective tax rate is primarily a result of the jurisdictional mix of earnings and losses that are not benefited. The Company maintains a valuation allowance against certain deferred tax assets that are not more-likely-than-not realizable. As a result, the Company has not recognized a tax benefit related to losses generated in Switzerland in the current periods.

11. Related Party Transactions

The Company is a party to intellectual property license agreements with Dr. Charpentier. As of June 30, 2017, and December 31, 2016, the Company owed Dr. Charpentier approximately $0 and $0.5 million, respectively, of sublicense fees primarily related to the Bayer Agreement. During the three and six months ended June 30, 2017, the Company did not record any sublicensing fees due to Dr. Charpentier in research and development expense related to the Bayer Agreement. During the three and six months ended June 30, 2016, the Company recorded sublicensing fees of $0 and $0.3 million, respectively, due to Dr. Charpentier in research and development expense related to the Bayer Agreement.

The Company is a party to the JV with Bayer HealthCare. During the three and six months ended June 30, 2017, the Company recognized revenue of $1.5 million, and $2.6 million, respectively, related to the collaboration with Casebia. During the three and six months ended June 30, 2017, the Company recognized research and development expense of $1.4 million and $2.5 million, respectively, related to the performance of services for Casebia. During the three and six months ended June 30, 2016 the Company did not recognize revenue or research and development expenses related to the collaboration with Casebia. As of June 30, 2017, and December 31, 2016, the Company had accounts receivable of $1.3 million and $0.8 million, respectively, other current assets related to receivables associated with shared license research arrangements of $1.1 million and $0, respectively, and deferred revenue of $0.3 million and $0.5 million, respectively, related to Casebia.

17

12. Subsequent Events

On April 13, 2017, the Company entered into a development and option agreement with StrideBio (Note 6) to research and develop novel adeno-associated virus capsids. Under the agreement, the Company was contingently obligated to purchase a convertible note in the amount of $0.5 million which was deemed to be fair value as of the date the investment was executed in the third quarter. The note was signed on August 1, 2017. The note will be convertible into StrideBio’s preferred stock upon the occurrence of a qualified financing that exceeds $3.0 million, the conversion price of which will be based on the price per share of the qualified financing. Upon conversion, the Company will receive a number of securities equal to the quotient of a fraction, the numerator of which is the total outstanding unpaid amount of principal and accrued interest due under the convertible note on the date of conversion, and the denominator of which is an amount equal to eighty percent (80%) of the lowest price per share at which the StrideBio sells and issues such shares to investors. On August 1, 2018, unless converted, StrideBio will pay the Company the principal amount outstanding, together with simple interest thereon accrued at a rate per annum equal to 8%, from and after the date StrideBio received the convertible note funds.

18

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in our annual report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 10, 2016. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics. CRISPR/Cas9 stands for Clustered, Regularly Interspaced Short Palindromic Repeats (CRISPR) Associated Protein 9 and is a revolutionary gene editing technology that allows for precise, directed changes to genomic DNA. The application of CRISPR/Cas9 for gene editing was co-invented by one of our scientific founders, Dr. Charpentier, who, along with her collaborators, published work elucidating how CRISPR/Cas9, a naturally occurring viral defense mechanism found in bacteria, can be adapted for use in gene editing. We are applying this technology to potentially treat a broad set of rare and common diseases by disrupting, correcting or regulating the genes related to the disease. We believe that our scientific expertise, together with our approach, may enable an entirely new class of highly active and potentially curative treatments for patients for whom current biopharmaceutical approaches have had limited success.

Since our inception in October 2013, we have devoted substantially all of our resources to initiating the conduct of our research and development efforts, identifying potential product candidates, undertaking drug discovery and preclinical development activities, building and protecting our intellectual property portfolio, organizing and staffing our company, business planning, raising capital, and providing general and administrative support for these operations. To date, we have primarily financed our operations through the initial public offering (“IPO”) of our common shares, private placements of our preferred and

19

common shares, convertible loans and collaboration agreements with strategic partners. From our inception through June 30, 2017, we raised an aggregate of $397.8 million of which $53.7 million consisted of proceeds from our IPO, $35.0 million from a private placement of our common shares, $125.2 million of gross proceeds from private placements of preferred shares, $73.2 million from the issuance of convertible loans, $75.0 million from an upfront payment under our collaboration with Vertex Pharmaceuticals, Incorporated, or Vertex, $35.0 million from a technology access fee related to our license of technology to Casebia Therapeutics, LLC, our joint venture, or JV, with Bayer HealthCare LLC, or Bayer HealthCare and $0.7 million from the exercise of stock options.

In October 2016, we issued 4,429,311 of our common shares, including 429,311 common shares sold pursuant to the underwriters’ partial exercise of their option to purchase additional common shares, in our IPO, at a public offering price of $14.00 per share, for aggregate gross proceeds of approximately $62.0 million. Concurrent with the IPO, we issued an aggregate of 2,500,000 common shares to Bayer Global Investments BV, or Bayer BV, in a private placement, at the IPO price of $14.00 a share, for aggregate net proceeds of $35.0 million.

All of our revenue to date has been collaboration revenue. We have incurred significant net operating losses in every year since our inception and expect to continue to incur net operating losses for the foreseeable future. As of June 30, 2017, we had $272.3 million in cash and an accumulated deficit of $100.9 million. We expect to continue to incur significant expenses and increasing operating losses for the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly as we continue our current research programs and development activities; seek to identify additional research programs and additional product candidates, conduct preclinical studies enabling clinical trial applications and initiate clinical trials for our most advanced product candidates which are from our hemoglobinopathy program targeting both beta thalassemia and sickle cell disease; initiate preclinical testing and clinical trials for any other product candidates we identify and develop, maintain, expand and protect our intellectual property portfolio, further develop our gene editing platform; hire additional research, clinical and scientific personnel; acquire or in license other technologies; and incur additional costs associated with operating as a public company.

Collaboration Agreement and Joint Venture Agreement

In October 2015, we entered into a strategic research collaboration agreement with Vertex focused on the development of CRISPR/Cas9-based therapies. Under the terms of our agreement, we received an upfront, nonrefundable payment of $75.0 million and proceeds from a convertible loan of $30.0 million.

In December 2015, we entered into a joint venture agreement, or the JV Agreement, with Bayer HealthCare to create a joint venture, Casebia, to discover, develop and commercialize new breakthrough therapeutics to cure blood disorders, blindness and heart disease. We and Bayer HealthCare each have a 50% interest in the JV. Under the JV Agreement, Bayer HealthCare is making available its protein engineering expertise and relevant disease know-how and we are contributing our proprietary CRISPR/Cas9 gene editing technology and intellectual property. Bayer HealthCare will also provide up to $300.0 million in research and development investments to the JV over the first five years, subject to specified conditions.

20

In connection with the JV Agreement, the JV was required to pay us a technology access fee of $35.0 million consisting of an upfront payment of $20.0 million, which was paid at the closing of the JV Agreement in March 2016, and another payment of $15.0 million for specified intellectual property rights relating to our CRISPR/Cas9 technology outside of the United States, which was paid in December 2016. In January 2016, we also issued a convertible loan to Bayer BV (the “Bayer Convertible Loan”) for gross proceeds of $35.0 million which was immediately converted to Series B Preferred Shares at a conversion price of $13.43 per share. Concurrent with the IPO in October 2016, we issued 2,500,000 common shares to Bayer BV, at the IPO price of $14.00 per share resulting in aggregate net proceeds of $35.0 million.

Financial Overview

Revenue

We have not generated any revenue to date from product sales and do not expect to do so in the future. During the three and six months ended June 30, 2017, we recognized revenue related to our collaboration agreements with Vertex and Casebia in the aggregate amount of $3.6 million and $6.3 million respectively. During the three and six months ended June 30, 2016, we recognized revenue related to our collaboration agreements with Vertex and Casebia in the aggregate amount $0.8 million and $1.3 million, respectively. As of June 30, 2017, we had not received any milestone or royalty payments under the Vertex Collaboration Agreement. For additional information about our revenue recognition policy, see the “Critical Accounting Policies and Estimates—Revenue” in our Annual Report.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include:

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

• costs of services performed by third parties that conduct research and development and preclinical activities on our behalf;

• costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical study materials;

• consultant fees;

• facility costs, including rent, depreciation and maintenance expenses; and

• fees and other payments related to acquiring and maintaining licenses under our third-party licensing agreements.

Research and development costs are expensed as incurred. Nonrefundable advance payments for research and development goods or services to be received in the future are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of any product candidates we may develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

21

• successful completion of preclinical studies and Investigational New Drug-enabling studies;

• successful enrollment in, and completion of, clinical trials;

• receipt of marketing approvals from applicable regulatory authorities;

• establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

• obtaining and maintaining patent and trade secret protection and non-patent exclusivity;

• launching commercial sales of the product, if and when approved, whether alone or in collaboration with others;

• acceptance of the product, if and when approved, by patients, the medical community and third-party payors;

• effectively competing with other therapies and treatment options;

• a continued acceptable safety profile following approval;

• enforcing and defending intellectual property and proprietary rights and claims; and

• achieving desirable medicinal properties for the intended indications.

A change in the outcome of any of these variables with respect to the development of any product candidates or the subsequent commercialization of any product candidates we may successfully develop could significantly change the costs, timing and viability associated with the development of that product candidate.

Except for activities we perform in connection with our collaborations with Vertex and Casebia, we do not track research and development costs on a program-by-program basis. We plan to track research and development costs for individual development programs when we identify a product candidate from the program that we believe we can advance into clinical trials.

Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our current development programs progress and new programs are added.

General and Administrative Expenses

General and administrative expenses consist primarily of employee related expenses, including salaries, benefits, and equity-based compensation for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.

We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and increased costs of operating as a public company. We anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with exchange listing and SEC requirements, insurance costs and investor relations costs, the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. We also anticipate increased expenses related to the reimbursements of third-party patent related expenses with respect to certain of our in-licensed intellectual property.

22

Results of Operations

Comparison of three Months Ended June 30, 2017 and 2016

The following table summarizes our results of operations for the three months ended June 30, 2017 and 2016, together with the dollar change in those items:

	Three Months Ended June 30,						Period to Period Change
	2017			2016
	(in thousands)
Collaboration revenue	$	3,582		$	795		$	2,787
Operating expenses:
Research and development		17,120			8,602			8,518
General and administrative		7,768			8,751			(983	)
Total operating expenses		24,888			17,353			7,535
Loss from operations		(21,306	)		(16,558	)		(4,748	)
Other expense, net		(666	)		(606	)		(60	)
Net loss before income taxes		(21,972	)		(17,164	)		(4,808	)
Provision for income taxes		(343	)		—			(343	)
Net loss	$	(22,315	)	$	(17,164	)	$	(5,151	)

Collaboration Revenue

Collaboration revenue for the three months ended June 30, 2017 was $3.6 million, compared to $0.8 million for the three months ended June 30, 2016. The increase of $2.8 million was due to an increase in research and development service revenue from our collaboration agreements with Vertex and Casebia of $1.3 million and $1.5 million, respectively.

Research and Development Expenses

Research and development expenses were $17.1 million for the three months ended June 30, 2017, compared to $8.6 million for the three months ended June 30, 2016. The increase of $8.5 million was primarily attributable to the following increases: $2.1 million of facilities costs including rent and utilities at our new research facility, $3.2 million of variable research and development costs including significant toxicology studies, $2.3 million of employee-related costs and $1.1 million of employee stock based compensation costs. These increases were partially offset by a decrease of $0.2 million in professional services costs.

General and Administrative Expenses

General and administrative expenses were $7.8 million for the three months ended June 30, 2017, compared to $8.8 million for the three months ended June 30, 2016. The decrease of $1.0 million was primarily due to decreases in costs associated with a 2016 passive foreign investment company (“PFIC”) tax liability of $2.0 million and employee stock based compensation expense of $0.9 million. The decreases were offset by the following increases: $1.0 million of employee-related costs to support our overall growth, $0.6 million of professional and consulting expenses including legal and intellectual property and $0.3 million in facilities costs including rent and utilities at our new facility.

23

Other Expense, Net

Other expense income, net, was $0.7 million of expense for the three months ended June 30, 2017, compared to $0.6 million of expense for the three months ended June 30, 2016.

Comparison of six Months Ended June 30, 2017 and 2016

The following table summarizes our results of operations for the six months ended June 30, 2017 and 2016, together with the dollar change in those items:

	Six Months Ended June 30,						Period to Period Change
	2017			2016
	(in thousands)
Collaboration revenue	$	6,285		$	1,271		$	5,014
Operating expenses:
Research and development		31,925			14,614			17,311
General and administrative		16,410			14,867			1,543
Total operating expenses		48,335			29,481			18,854
Loss from operations		(42,050	)		(28,210	)		(13,840	)
Other (expense) income, net		(1,118	)		2,680			(3,798	)
Net loss before income taxes		(43,168	)		(25,530	)		(17,638	)
Provision for income taxes		(622	)		(76	)		(546	)
Net loss	$	(43,790	)	$	(25,606	)	$	(18,184	)

Collaboration Revenue

Collaboration revenue for the six months ended June 30, 2017 was $6.3 million, compared to $1.3 million for the six months ended June 30, 2016. The increase of $5.0 million was due to an increase in research and development service revenue from our collaboration agreements with Vertex and Casebia of $2.4 million and $2.6 million, respectively.

Research and Development Expenses

Research and development expenses were $31.9 million for the six months ended June 30, 2017, compared to $14.6 million for the six months ended June 30, 2016. The increase of $17.3 million was primarily attributable to the following increases: $4.7 million of facilities costs including rent and utilities at our new research facility, $5.9 million of variable research and development program costs with toxicology studies, $4.7 million of employee-related costs and $2.2 million of employee stock based compensation costs. These increases were partially offset by a decrease in professional services costs of $0.2 million.

24

General and Administrative Expenses

General and administrative expenses were $16.4 million for the six months ended June 30, 2017, compared to $14.9 million for the six months ended June 30, 2016. The increase of $1.5 million was primarily due to the following increases: $2.0 million of employee-related costs to support our overall growth, $0.3 million of employee stock based compensation expense, $1.5 million in facilities costs including rent and utilities at our new research facility and $0.1 million in professional services costs. The increases were offset by a reduction of $2.4 million in our 2016 PFIC tax obligation and franchise taxes on the convertible preferred stock financings.

Other (Expense) Income, Net

Other (expense) income, net was $1.1 million of expense for the six months ended June 30, 2017, compared to $2.7 million of income for the six months ended June 30, 2016. The decrease of $3.8 million was primarily due to a loss from equity method investment of $1.0 million in the six months ended June 30, 2017 as compared to a gain of $11.5 million on the extinguishment of the convertible loan with Vertex partially offset by a loss from equity method investment of $0.7 million and interest expense of $8.0 million on the convertible loan with Bayer recognized in the six months ended June 30, 2016.

Liquidity and Capital Resources

From our inception through June 30, 2017, we raised an aggregate of $397.8 million, of which $53.7 million consisted of proceeds from our IPO, $35.0 million from a private placement of our common shares, $125.2 million of gross proceeds from private placements of preferred shares, $73.2 million from the issuance of convertible loans, an up-front payment under our collaboration agreement with Vertex of $75.0 million, technology access fee of $35.0 million from Casebia, pursuant to our JV Agreement with Bayer HealthCare and $0.7 million from the exercise of stock options.

As of June 30, 2017, we had $272.3 million in cash of which approximately $269.0 million was held outside of the United States.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, research and development activities, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing and maintenance costs for our licensed intellectual property and general overhead costs. We expect our expenses to increase compared to prior periods in connection with our ongoing activities, particularly as we continue research and development and preclinical activities, including preclinical studies to support clinical trial applications, and we initiate clinical trial. In addition, we expect to incur additional costs associated with operating as a public company.

Because our research programs are still in preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any future product candidates or whether, or when, we may achieve profitability. Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. We are entitled to research payments under our collaboration with Vertex. Additionally, we are eligible to earn payments, in each case, on a per-product basis under the JV Agreement and our collaboration with Vertex and

25

Casebia. Except for these sources of funding, we do not have any committed external source of liquidity. To the extent that we raise additional capital through the future sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Outlook

Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that the net proceeds from our IPO, including the proceeds from the concurrent private placement with Bayer BV, together with our existing cash, will enable us to fund our operating expenses and capital expenditures for at least the next 24 months, without giving effect to any additional proceeds we may receive under our collaboration agreement with Vertex and the JV. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including: developing our delivery technologies and our CRISPR/Cas9 technology platform; selecting appropriate product candidates to develop; completing research and preclinical and clinical development of selected product candidates; obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials; developing a sustainable and scalable manufacturing process for product candidates; launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor; obtaining market acceptance of our product candidates; addressing any competing technological and market developments; negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; maintaining good relationships with our collaborators and licensors; maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and attracting, hiring and retaining qualified personnel.

Cash Flows

The following table provides information regarding our cash flows for each of the period below:

26

	Six Months Ended June 30,						Period to Period Change
	2017			2016
	(in thousands)
Net cash used in operating activities	$	(39,387	)	$	(23,618	)	$	(15,769	)
Net cash (used in) provided by investing activities		(4,615	)		18,621			(23,236	)
Net cash provided by financing activities		715			95,925			(95,210	)
Effect of exchange rate changes on cash		31			(40	)		71
Net (decrease) increase in cash	$	(43,256	)	$	90,888		$	(134,144	)

Net Cash Used in Operating Activities

Net cash used in operating activities was $39.4 million for the six months ended June 30, 2017 as compared to $23.6 million for the six months ended June 30, 2016. The net cash used in operating activities for the six months ended June 30, 2017 primarily consisted of a net loss of $43.8 million adjusted for non-cash items (including equity-based compensation expense of $7.0 million, depreciation and amortization expense of $1.4 million and a loss from an equity method investment of $1.0 million), an increase in accounts receivable of $3.7 million, an increase in prepaid expenses and other assets of $0.7 million and a decrease in accounts payable and accrued expenses of $2.1 million, and a decrease of $0.4 million in deferred rent, partially offset by an increase in deferred revenue of $1.6 million and other liabilities of $0.3 million.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the six months ended June 30, 2017 was $4.6 million as compared with net cash provided by investing activities for the six months ended June 30, 2016 of $18.6 million. The net cash used in investing activities for the six months ended June 30, 2017 consisted primarily of purchases of property and equipment for use in research and development activities.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2017 was $0.7 million, compared with $96.0 million for the six months ended June 30, 2016. The net cash provided by financing activities for the six months ended June 30, 2017 consisted of proceeds from the exercise of stock options. The cash provided by financing activities for the six months ended June 30, 2016 consisted of the proceeds from our issuances of Series A-3 preferred shares, Series B preferred shares and convertible loans.

Contractual Obligations

The disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended December 31, 2016. There have been no material changes from the contractual commitments and obligations previously disclosed in our Annual Report on Form 10-K other than the changes described below and in Note 6 to the accompanying financial statements.

We have long-term liabilities associated with uncertain tax positions recorded under ASC 740, Income Taxes totaling $21 thousand. Due to the complexity associated with tax uncertainties, we cannot reasonably make a reliable estimate of the period in which we expect to settle these non-current liabilities. See Note 10 of the unaudited condensed consolidated financial statements contained in Item 1 of this interim report for more information on our unrecognized tax benefits.

27

Under the Invention Management Agreement (“IMA”) signed on December 15, 2016, the Company is obligated to share costs related to patent maintenance, defense and prosecution for the CRISPR/Cas9 gene editing intellectual property with California, Vienna and their licensees including Caribou Biosciences, Inc. and Caribou’s licensee Intellia Therapeutics, Inc.

Off-Balance Sheet Arrangements

As of June 30, 2017, we do not have any off-balance sheet arrangements as defined under applicable SEC rules.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that our most critical accounting policies are those relating to revenue recognition, variable interest entities and equity-based compensation, and there have been no significant changes to our accounting policies discussed in the Annual Report.

Recent Accounting Pronouncements

Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements. There were no new accounting pronouncements adopted during 2017 that had a material effect on our financial statements.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

Foreign Exchange Market Risk

As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Swiss Franc and British Pound, against the U.S. dollar. The current exposures arise primarily from cash, accounts payable, and intercompany receivables and payables. Changes in foreign exchange rates affect our consolidated statement of operations and distort comparisons between periods. We do not engage in any foreign exchange rate hedging activities and therefore we are subject to foreign currency impacts.

28

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company has established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2017, our Chief Executive Officer and Principal Financial Officer 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 June 30, 2017, the Company implemented an enterprise resource planning (ERP) accounting system. Consequently, the Company’s control environment has been modified to incorporate the controls contained within the new ERP system. Other than this item, no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the Company’s fiscal quarter ended June 30, 2017 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

29

From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. There are currently no claims or actions pending against us that, in the opinion of our management, are likely to have a material adverse effect on our business.

In January 2016, the U.S. Patent and Trademark Office, or USPTO, declared an interference between one of the pending U.S. patent applications we have in-licensed from Dr. Charpentier and twelve issued U.S. patents owned jointly by the Broad Institute and Massachusetts Institute of Technology and, in some instances, the President and Fellows of Harvard College, which we refer to individually and collectively as Broad. The interference was redeclared in March 2016 to add a U.S. patent application owned by Broad. An interference is a proceeding conducted at the USPTO by the Patent Trial and Appeal Board, or PTAB, to determine which party was the first to invent subject matter claimed by at least two parties. There were two parties to this interference being Dr. Charpentier, the regents of the University of California, and the University of Vienna (collectively, “UC”) and Broad.

Following motions by the parties and other procedural matters, in February 2017 the PTAB concluded that the declared interference should be dismissed. In its decision, the PTAB concluded that, although the claims overlap, the respective scope of UC and Broad’s claim sets as presented did not define the same patentable invention and, accordingly, terminated the interference.

In April 2017, UC appealed the PTAB decision to the U.S. Court of Appeals for the Federal Circuit, or the Federal Circuit. In the appeal, UC is seeking review and reversal of the PTAB’s February 2017 decision, which terminated the interference without determining which inventors actually invented the use of the CRISPR/Cas9 genome editing technology in eukaryotic cells.

In addition to the appeal of the PTAB decision to the Federal Circuit, in parallel, either party can also pursue existing or new patent applications in the U.S. and elsewhere. Going forward, either party and other parties could seek a new interference related to the uses of the technology in eukaryotic cells or other aspects of the technology, and any existing or new patents could be the subject of other challenges to their validity of enforceability. If there is a second interference, either party could again appeal an adverse decision to the U.S. Court of Appeals for the Federal Circuit.

In any case, it may be years before there is a final determination on priority. Pursuant to the terms of the license agreement with Dr. Charpentier, we are responsible for covering or reimbursing Dr. Charpentier’s patent prosecution, defense and related costs associated with our in-licensed technology.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

30

Use of Proceeds

As of June 30, 2017, we have used the net proceeds ($53.7 million) from the IPO as follows: approximately $33.6 million on research and development activities to advance our product candidates; and approximately $20.1 million for working capital and general corporate purposes. None of the offering expenses consisted of direct or indirect payments made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on October 19, 2016 pursuant to Rule 424.

Item 6. Exhibits

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Form 10-Q.

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CRISPR Therapeutics AG
Dated: August 10, 2017	By:	/s/ Rodger Novak
		Rodger Novak
		Chief Executive Officer
		(Principal Executive Officer)
Dated: August 10, 2017	By:	/s/ Samarth Kulkarni
		Samarth Kulkarni
		President and Chief Business Officer
		(Principal Financial Officer)

32

Exhibit Number	Description of Document
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financials in XBRL format.

* The certification attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of CRISPR Therapeutics AG under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

33

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Rodger Novak, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CRISPR Therapeutics AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2017

By:	/s/ Rodger Novak
	Rodger Novak
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Samarth Kulkarni, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CRISPR Therapeutics AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2017

By:	/s/ Samarth Kulkarni
	Samarth Kulkarni President and Chief Business Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CRISPR Therapeutics AG (the “Company”) for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned officers of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

/s/ Rodger Novak

Rodger Novak

Chief Executive Officer

(Principal Executive Officer)

August 10, 2017

/s/ Samarth Kulkarni

Samarth Kulkarni

President and Chief Business Officer

(Principal Financial Officer)

August 10, 2017

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 07, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	CRSP
Entity Registrant Name	CRISPR THERAPEUTICS AG
Entity Central Index Key	0001674416
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		40,591,669

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 272,264	$ 315,520
Accounts receivable, including related party amounts of $1,340 and $752 as of June 30, 2017 and December 31, 2016, respectively	6,814	3,157
Prepaid expenses and other current assets including related party amounts of $1,141 and $0 as of June 30, 2017 and December 31, 2016, respectively	2,207	1,511
Total current assets	281,285	320,188
Property and equipment, net	19,927	21,027
Intangible assets, net	372	399
Restricted cash	3,154	3,150
Other non-current assets	237	198
Total assets	304,975	344,962
Current liabilities:
Accounts payable	2,559	4,569
Accrued expenses, including related party amounts of $305 and $537 as of June 30, 2017 and December 31, 2016, respectively	11,888	16,320
Accrued tax liabilities	272	23
Deferred rent	1,027	1,027
Other current liabilities	68	59
Total current liabilities	15,814	21,998
Deferred revenue, including related party amounts of $284 and $527 as of June 30, 2017 and December 31, 2016, respectively	79,232	77,646
Deferred rent non-current	11,928	12,283
Other non-current liabilities	198	189
Total liabilities	107,172	112,116
Commitments and contingencies (Note 6)
Shareholders' equity:
Common shares, CHF 0.03 par value, X and 40,253,674 shares authorized at June 30, 2017 and December 31, 2016, respectively, X and 40,164,307 shares issued at June 30, 2017 and December 31, 2016, respectively, X and 39,719,434 shares outstanding at June 30, 2017 and December 31, 2016, respectively, X and 15,325,607 shares in conditional capital at June 30, 2017 and December 31, 2016, respectively	1,226	1,216
Treasury shares, at cost, 444,873 shares at June 30, 2017 and December 31, 2016, respectively	0	0
Additional paid-in capital	297,446	288,739
Accumulated deficit	(100,873)	(57,083)
Accumulated other comprehensive income (loss)	4	(26)
Total shareholders' equity	197,803	232,846
Total liabilities and shareholders' equity	$ 304,975	$ 344,962

XML

Condensed Consolidated Balance Sheets (Parenthetical) $ in Thousands	Jun. 30, 2017 USD ($) shares	Dec. 31, 2016 USD ($) shares
Statement of Financial Position [Abstract]
Accounts receivable, related party amount, current | $	$ 1,340	$ 752
Prepaid expenses and other current assets, related party amount | $	1,141	0
Accrued expenses related party amount, current | $	305	537
Deferred revenue related party amount | $	$ 284	$ 527
Common stock, shares authorized	40,556,891	40,253,674
Common stock, shares issued	40,484,288	40,164,307
Common stock, shares outstanding	40,039,415	39,719,434
Common stock, conditional capital	17,079,353	15,325,607
Treasury stock, shares	444,873	444,873

XML

Condensed Consolidated Statement of Operations and Comprehensive Loss - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Collaboration revenue	[1]	$ 3,582	$ 795	$ 6,285	$ 1,271
Operating expenses:
Research and development	[2]	17,120	8,602	31,925	14,614
General and administrative		7,768	8,751	16,410	14,867
Total operating expenses		24,888	17,353	48,335	29,481
Loss from operations		(21,306)	(16,558)	(42,050)	(28,210)
Other (expense) income:
Interest expense					(8,050)
Loss from equity method investment		(505)	(686)	(951)	(686)
Gain on extinguishment of convertible loan					11,482
Other (expense) income, net		(161)	80	(167)	(66)
Total other (expense) income, net		(666)	(606)	(1,118)	2,680
Net loss before income taxes		(21,972)	(17,164)	(43,168)	(25,530)
Provision for income taxes		(343)	0	(622)	(76)
Net loss		(22,315)	(17,164)	(43,790)	(25,606)
Foreign currency translation adjustment		6	(13)	30	(17)
Comprehensive loss		(22,309)	(17,177)	(43,760)	(25,623)
Reconciliation of net loss to net loss attributable to common shareholders:
Net loss		(22,315)	(17,164)	(43,790)	(25,606)
Loss attributable to noncontrolling interest			7		10
Net loss attributable to common shareholders		$ (22,315)	$ (17,157)	$ (43,790)	$ (25,596)
Net loss per share attributable to common shareholders-basic and diluted		$ (0.56)	$ (3.15)	$ (1.10)	$ (4.66)
Weighted-average common shares outstanding used in net loss per share attributable to common shareholders-basic and diluted		39,895,938	5,448,855	39,811,412	5,488,467

[1] Including the following revenue from a related party, see Note 11:

[2] Including the following research and development expense with a related party, See Note 11:

XML

Condensed Consolidated Statement of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017
Income Statement [Abstract]
Revenue from related party	$ 1,475	$ 2,639
Research and development expense with a related party	$ 1,355	$ 2,491

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Operating activities:
Net loss	$ (43,790)	$ (25,606)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization	1,426	277
Equity-based compensation	7,026	4,523
Non-cash interest		8,050
Loss from disposal of property and equipment		28
Unrealized foreign currency remeasurement loss	(9)	14
Gain on extinguishment of convertible loan		(11,482)
Loss from equity method investment	951	686
Changes in:
Restricted cash	(4)	(2,453)
Accounts receivable	(3,657)	(1,015)
Prepaid expenses and other assets	(736)	(2,573)
Accounts payable and accrued expenses	(2,103)	4,988
Deferred revenue	1,586	710
Deferred rent	(355)	184
Other liabilities, net	278	51
Net cash used in operating activities	(39,387)	(23,618)
Investing activities:
Purchase of property and equipment	(4,615)	(1,279)
Proceeds from contribution of intellectual property to equity method investee		20,000
Cash investment in equity method investee		(100)
Net cash (used in) provided by investing activities	(4,615)	18,621
Financing activities:
Proceeds from issuance of convertible loans		35,000
Proceeds from exercise of options	715
Net cash provided by financing activities	715	95,925
Effect of exchange rate changes on cash	31	(40)
(Decrease) increase in cash	(43,256)	90,888
Cash, beginning of period	315,520	155,961
Cash, end of period	272,264	246,849
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses	$ 2,697	47
Conversion of Vertex convertible loan and accrued interest		61,929
Noncash contribution of intellectual property to Casebia LLP		36,372
Issuance costs for public offering in accounts payable and accrued expenses		1,810
Series A-3 Redeemable Convertible Preferred Shares [Member]
Financing activities:
Proceeds from issuance of preferred shares		22,850
Series B Redeemable Convertible Preferred Shares [Member]
Financing activities:
Proceeds from issuance of preferred shares		$ 38,075

XML

Organization and Operations

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Operations

1. Organization and Operations

The Company

CRISPR Therapeutics AG (“CRISPR” or the “Company”) was formed on October 28, 2013 in Basel, Switzerland. The Company was established to translate CRISPR/Cas9, a genome editing technology, into transformative gene-based medicines for the treatment of serious human diseases. The foundational intellectual property underlying the Company’s operations was licensed to the Company and its subsidiaries in April 2014. The Company devotes substantially all of its efforts to product research and development activities, initial market development and raising capital. The Company’s principal offices are located in Zug, Switzerland and its principal research operations are in Cambridge, Massachusetts.

On January 23, 2014, the founders of the Company formed TRACR Hematology Limited (“TRACR”), wholly-owned subsidiary of the Company, in the United Kingdom, to further the development of the CRISPR/Cas9 technology into medicines for the treatment of blood-borne illnesses. As the Company was funding and managing TRACR’s operations in 2014, it has been consolidated by the Company from the date that the Company established a variable interest in TRACR in April 2014. In March 2015, the Company acquired 82.1% of the outstanding equity of TRACR in a share exchange transaction. Concurrent with its initial public offering (“IPO”) in October 2016, the Company acquired the outstanding non-controlling interest in TRACR.

On February 7, 2014, the Company formed a wholly-owned subsidiary in the United Kingdom, CRISPR Therapeutics Limited (“CRISPR Ltd.”), and on February 16, 2015, the Company formed a wholly-owned subsidiary in the United States, CRISPR Therapeutics, Inc. (“CRISPR Inc.”), as its principal research and development operation.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.

The Company had an accumulated deficit of $100.9 million as of June 30, 2017 and has financed its operations to date from proceeds obtained from its IPO, a series of preferred shares and convertible loan issuances, and upfront fees received under its collaboration and joint venture arrangements. The Company will require substantial additional capital to fund its research and development and ongoing operating expenses.

Liquidity

The Company expects its cash of $272.3 million at June 30, 2017 to be sufficient to fund its current operating plan for at least the next 24 months. Thereafter, the Company may be required to obtain additional funding. There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”). There have been no material changes to the significant accounting policies during the six months ended June 30, 2017.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report.

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, and include the accounts of (i) the Company, and (ii) its wholly-owned subsidiaries, CRISPR Ltd., CRISPR Inc., and TRACR. All intercompany accounts and transactions have been eliminated. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). The Company accounts for its 50% investment in Casebia Therapeutics LLC (“Casebia”) under the equity method of accounting. See Note 7 for further details.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, equity-based compensation expense, revenue recognition, equity method investments, fair value of intangible assets, the provision for or benefit from income taxes and reported amounts of research and development expenses during the period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. The consolidated statements reflect all adjustments which are of a normal recurring nature necessary for presentation. Actual results may differ from those estimates or assumptions.

Net Loss Per Share Attributable to Common Shareholders

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common shareholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method.

The following common share equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in common stock equivalent shares):

	As of
	June 30, 2017		December 31, 2016
Outstanding options		5,636,786		4,535,371
Unvested unissued restricted common shares		72,603		89,367
Total		5,709,389		4,624,738

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Subsequently, the FASB also issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligation and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09 (collectively, the “Revenue ASUs”).

The Revenue ASUs noted above provide an accounting standard for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for interim and annual periods beginning after December 15, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the new standard effective January 1, 2018 under the full retrospective method. The Company is in the process of determining the impact of the Revenue ASUs on its financial statements as it relates to their revenue generating collaboration agreements. The Company continues to make progress on the assessment of its two collaboration agreements and is in the process of developing its revenue recognition policy under the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and will require lessees to record most leases on the balance sheet, but recognize expense in a manner similar to the current standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, which is the year ended December 31, 2019 for the Company. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company is evaluating the new guidance and the impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU 2016-09”). The guidance changes how companies account for certain aspects of equity-based payments to employees. Entities will be required to recognize income tax effects of awards in the income statement when the awards vest or are settled. The guidance also allows an employer to repurchase more of an employee’s shares than it can under current guidance for tax withholding purposes providing for withholding at the employee’s maximum rate as opposed to the minimum rate without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company adopted the new standard January 1, 2017. The Company made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. Adoption did not materially impact the consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes. The amendments in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. The amendments should be applied on a modified retrospective transition basis, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending balances shown on the statement of cash flows. The guidance is effective in the first quarter of fiscal 2018 and early adoption is permitted. ASU 2016-18 must be applied retrospectively to all periods presented. Upon adoption, the Company’s 2016 statement of cash flows will reflect an increase in operating cash flows resulting from the adoption of this new standard. The Company does not expect any additional impact on its financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”). ASU 2017-01 clarifies whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The purpose of the guidance is to narrow the definition of a business at it relates recording transactions as business acquisitions or asset acquisitions. The guidance is effective in annual periods beginning after December 15, 2017, including interim periods within those years, with early adoption permitted under certain circumstances. The Company does not expect any additional impact on its financial statements.

XML

Property and Equipment, net

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment, net

3. Property and Equipment, net

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

	As of
	June 30,			December 31,
	2017			2016
Computer equipment and software	$	285		$	110
Furniture, fixtures, and other		2,079			2,044
Laboratory equipment		5,985			2,970
Leasehold improvements		13,742			15,780
Construction work in process		176			1,065
		22,267			21,969
Accumulated Depreciation		(2,340	)		(942	)
Property and equipment, net	$	19,927		$	21,027

Depreciation expense for the three and six months ended June 30, 2017 was $0.7 million and $1.4 million respectively. Depreciation expense for the three and six months ended June 30, 2016 was $0.1 million and $0.2 million, respectively.

XML

Accrued Expenses

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

Accrued Expenses

4. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	As of
	June 30, 2017		December 31, 2016
Payroll and employee-related costs	$	3,567	$	2,585
Research costs		1,561		996
Licensing fees		783		492
Professional fees		1,892		2,715
Intellectual property costs		1,255		3,372
Accrued property and equipment		2,663		5,081
Other		167		1,079
Total	$	11,888	$	16,320

XML

Convertible Loans

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Convertible Loans

5. Convertible Loans

2015 Convertible Loan Agreement with Vertex and certain existing shareholders

On October 26, 2015, the Company entered into a convertible loan agreement with Vertex Pharmaceuticals Incorporated (“Vertex”) and certain existing shareholders (the “Vertex Convertible Loan”) under which the Company borrowed $38.2 million. The Vertex Convertible Loan accrued interest at 2.5% per annum and had an initial maturity date of April 26, 2016 subject to acceleration upon the occurrence of certain conditions. The Vertex Convertible Loan included various embedded conversion, redemption and other features, none of which required separate accounting from the host instrument under ASC Topic 815: Derivatives and Hedging (“ASC 815”).

The conversion terms, redemption terms, and other features of the Vertex Convertible Loan are included in the Annual Report.

Convertible Loan with Bayer Global Investments B.V.

On January 29, 2016, concurrent with the execution of an agreement to establish a Joint Venture (“JV”) with Bayer HealthCare LLC (“Bayer HealthCare”), the Company entered into a Convertible Loan Agreement (the “Bayer Convertible Loan”) with Bayer Global Investments B.V. (“Bayer BV”) under which the Company borrowed $35.0 million. The Bayer Convertible Loan accrued interest at 2.0% per annum and matured on January 29, 2016. The Bayer Convertible Loan included various embedded conversion, redemption and other features, none of which required separate accounting from the host instrument under ASC 815.

The conversion terms, redemption terms, and other features of the Bayer Convertible Loan are included in the Annual Report.

Conversion of Convertible Loans to Series B Preferred Shares

On January 29, 2016, concurrent with the issuance of the Bayer Convertible Loan, all of the outstanding principal under the $35.0 million Bayer Convertible Loan automatically converted into 2,605,330 Series B Redeemable Convertible Preferred Shares (“Series B Preferred Shares”) at $13.43 per share. The Company determined the fair value of the Bayer Convertible Loan to be $24.5 million based on the fair value of the underlying Series B Preferred Shares that were exchanged as part of the immediate conversion. As the Bayer Convertible Loan was executed in contemplation of the joint venture agreement with Bayer, the Company evaluated the Bayer Convertible Loan as part of one multiple-element arrangement and, using a relative fair value allocation method, allocated $27.0 million of aggregate arrangement consideration to the Bayer Convertible Loan upon issuance. Upon conversion, the Company accreted the Bayer Convertible Loan to its face value of $35.0 million through a charge to interest expense of $8.0 million and converted the $35.0 million to Series B Preferred Shares under the conversion model.

The receipt of $35.0 million in proceeds under the Bayer Convertible Loan in exchange for equity securities, combined with the $38.2 million in proceeds from Vertex Convertible Loan, triggered an automatic conversion provision of the Vertex Convertible Loan Agreement. Accordingly, on January 29, 2016, the Vertex Convertible Loan, including loans from existing shareholders, plus accrued interest also converted into 2,859,278 of Series B Preferred Shares at $13.43 per share. The Company determined the fair value of the Vertex Convertible Loan to be $26.9 million based on the fair value of the underlying Series B Preferred Shares that were exchanged as part of the conversion. Upon extinguishment, the Company recorded a gain on extinguishment of $11.5 million for the difference between the carrying value of the debt and the fair value of the Series B Preferred Shares issued to settle the debt under the general extinguishment model.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

License Agreement with StrideBio LLC

On April 13, 2017, the Company and its affiliates entered into a development and option agreement with StrideBio LLC (“StrideBio”), to research and develop novel adeno-associated virus capsids. Pursuant to the license agreement, the Company made a one-time upfront payment of $0.5 million to StrideBio, an achieved milestone payment of $0.3 million and is required to pay StrideBio up to $3.0 million upon the achievement of research milestones. Under the agreement, the Company is also contingently obligated to purchase a convertible note in the amount of $0.5 million, which was deemed to be fair value as of the date the investment was executed in the third quarter. The terms of this investment are further disclosed in Note 12.

Operating Leases

In March 2017, the Company subleased a portion of one research and office facility to a third party effective April 1, 2017. The sublease term is less than the remaining term under the original lease, and as a result, the Company does not believe it has met a cease use date as it may re-enter the space following the sublease. Payments to be received from the sublessee are approximately $2.8 million and will offset scheduled rent payments due to the landlord under the original lease for the sublease term.

Litigation

The Company licenses a U.S. patent application that is currently subject to interference proceedings declared by the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. Following motions by the parties and other procedural matters, the PTAB concluded in February 2017 that the declared interference should be dismissed because the claim sets of the two parties were not directed to the same patentable invention in accordance with the PTAB’s two-way test for patent interferences. In April 2017, the regents of the University of California (“California”) appealed the PTAB decision to the U.S. Court of Appeals for the Federal Circuit. In the appeal, California is seeking review and reversal of the PTAB’s February 2017 decision, which terminated the interference without determining which inventors actually invented the use of the CRISPR/Cas9 genome editing technology in eukaryotic cells.

Under the Invention Management Agreement signed on December 15, 2016, the Company is obligated to share costs related to patent maintenance, defense and prosecution. During the three and six months ended June 30, 2017, the Company incurred $0.5 million and $1.0 million, respectively, in shared costs. During the three and six months ended June 30, 2016, the Company incurred $0.3 million, and $0.8 million, respectively, in shared costs. The Company had accrued legal costs from the cost sharing of $0.8 million and $2.8 million as of June 30, 2017 and December 31, 2016, respectively.

XML

Significant Contracts

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Significant Contracts

7. Significant Contracts

Intellectual Property Agreements

CRISPR Therapeutics AG—Charpentier License Agreement

In April 2014, the Company entered into a technology license agreement with Dr. Charpentier pursuant to which the Company licensed certain intellectual property rights under joint ownership from Dr. Charpentier to develop and commercialize products for the treatment or prevention of human diseases other than hemoglobinopathies (“CRISPR—Charpentier License Agreement”). In consideration for the granting of the license, the Company paid Dr. Charpentier an upfront fee of CHF 0.1 million ($0.1 million), and agreed to pay an immaterial annual license maintenance fee if Dr. Charpentier is not otherwise engaged in a service arrangement with the Company. During the years ended December 31, 2016 and 2015, and three months ended June 30, 2017 and 2016, Dr. Charpentier has been in a consulting arrangement with the Company, as such, no annual payments have been made under this provision. Dr. Charpentier is entitled to receive nominal clinical milestone payments. The Company is also obligated to pay Dr. Charpentier a low single digit percentage of sublicensing payments received under any sublicense agreement with a third party. In addition, the Company is also obligated to pay to Dr. Charpentier a low single-digit percentage royalty based on annual net sales of licensed products and licensed services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017, the Company did not record any sublicensing fees due to Dr. Charpentier. During the three and six months ended June 30, 2016, the Company recorded $0 and $0.3 million, respectively, of sublicensing fees due to Dr. Charpentier These expenses were under the terms of the CRISPR—Charpentier License Agreement that was triggered by the execution of the Bayer Agreement (“Bayer Agreement”).

TRACR Hematology Limited—Charpentier License Agreement

In April 2014, TRACR entered into a technology license agreement (“TRACR—Charpentier License Agreement”) with Dr. Charpentier pursuant to which TRACR licensed certain intellectual property rights under joint ownership from Dr. Charpentier to develop and commercialize products for the treatment or prevention of human diseases related to hemoglobinopathies. In consideration for the granting of the license, Dr. Charpentier is entitled to receive nominal clinical milestone payments. TRACR is also obligated to pay Dr. Charpentier a low single digit percentage of sublicensing payments received under any sublicense agreement with a third party. In addition, TRACR is obligated to pay to Dr. Charpentier low single digit percentage royalties based on annual net sales of licensed products and licensed services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017 and 2016, the Company did not record any sublicensing fees due to Dr. Charpentier under the terms of the TRACR—Charpentier License Agreement.

Patent Assignment Agreement

In November 2014, the Company entered into a patent assignment agreement (“Patent Assignment Agreement”) with Dr. Charpentier, Dr. Ines Fonfara, and the University of Vienna (collectively, the “Assignors”), pursuant to which the Company received from the assignors all rights, title and interest in and to certain patent rights claimed in the U.S. Patent Application No.61/905,835. In consideration for the assignment of such rights, the Assignors are entitled to receive clinical milestone payments totaling up to €0.3 million (approximately $0.4 million) in the aggregate for the first human therapeutic product. The Company is also obligated to pay to the Assignors low single digit royalties based on annual net sales of certain products and services by the Company and its affiliates and sublicensees.

During the three and six months ended June 30, 2017 and 2016, the sublicensing fees due to the Assignors under the terms of the Patent Assignment Agreement that was triggered under the Vertex Collaboration Agreement (the “Vertex Collaboration Agreement”) and by the execution of the Bayer Agreement were immaterial.

Collaboration Agreement with Vertex Pharmaceuticals, Incorporated

On October 26, 2015, the Company entered into a strategic collaboration, option, and license agreement (“Collaboration Agreement”) with Vertex, focused on the use of CRISPR’s gene editing technology, CRISPR/Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease.

During the three and six months ended June 30, 2017, the Company recognized $2.1 million and $3.6 million of revenue related to the collaboration with Vertex. During the three and six months ended June 30, 2016, the Company recognized $0.8 million and $1.3 million of revenue related to the collaboration with Vertex. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and six months ended June 30, 2017 was $3.3 million and $5.9 million, respectively. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and six months ended June 30, 2016 was $1.6 million and $3.3 million, respectively. As of June 30, 2017, and December 31, 2016, there was $78.9 million and $77.1 million of non-current deferred revenue related to the Vertex Collaboration Agreement, respectively.

Joint Venture with Bayer Healthcare LLC

On December 19, 2015, the Company entered into an agreement with Bayer HealthCare LLC to establish a joint venture to discover, develop and commercialize new therapeutics to cure blood disorders, blindness, and congenital heart disease. On February 12, 2016, the Company and Bayer HealthCare completed the formation of the joint venture entity, Casebia Therapeutics LLC (“Casebia”). CRISPR contributed its proprietary CRISPR/Cas9 gene editing technology and intellectual property for selected disease indications to Casebia and Bayer HealthCare contributed its protein engineering expertise and relevant disease know-how to Casebia.

At June 30, 2017 and December 31, 2016, the value of the Company’s equity method investment in Casebia was zero.

During the three and six months ended June 30, 2017, the Company recognized $1.5 million and $2.6 million of revenue, respectively, related to the collaboration with Casebia. During the three and six months ended June 30, 2017, the Company recognized $1.4 million and $2.5 million of research and development expense, respectively, in relation to its performance under the agreement. During the three and six months ended June 30, 2017, the Company recognized $0.5 million and $1.0 million respectively, of stock-based compensation expense related to Casebia employees. During the three and six months ended June 30, 2016, the Company did not recognize any revenue, research and development expense or stock-based compensation expense related to the collaboration with Casebia. Non-current deferred revenue related to the Company’s collaboration with Casebia was $0.3 million and $0.5 million as of June 30, 2017 and December 31, 2016, respectively. Unrecognized equity method losses in excess of the Company’s equity investment in Casebia was $10.8 million and $4.0 million as of June 30, 2017 and December 31, 2016, respectively.

Total operating expenses, and net loss of Casebia for the three and six months ended June 30, 2017 was $9.0 million and $14.6 million, respectively. Total operating expenses, and net loss of Casebia for the three and six months ended June 30, 2016 was $1.0 million and $74.8 million, respectively, which included research and development expenses of $71.4 million for the fair value of the CRISPR license contributed to Casebia in the formation of the JV.

XML

Share Capital

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Share Capital

8. Share Capital

The Company had 40,556,891 registered common shares as of June 30, 2017, with a par value of CHF 0.03 per share, which includes 72,603 shares of unvested unissued restricted common stock and 444,873 treasury shares which are legally outstanding but not considered outstanding for accounting purposes.

Conditional Capital Reserved for Future Issuance

The Company had the following conditional capital reserved for future issuance:

	As of
Conditional Capital	June 30, 2017		December 31, 2016
Unvested unissued restricted stock		166,667		166,667
Outstanding stock options		5,636,786		4,535,371
Reserved for future issuance under stock option plans (1)		5,942,974		5,290,643
Shares available for bonds and similar debt instruments		4,919,700		4,919,700
Shares available for employee purchase plans		413,226		413,226
Total		17,079,353		15,325,607

(1) The Company’s Board of Directors approved an increase to the option pool of 2,012,684 options in May 2017.

XML

Equity-based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-based Compensation

9. Equity-based Compensation

The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and restricted stock awards. Stock options and restricted stock awards generally vest over four years with 25% vesting on the first anniversary of service commencement and the remaining 75% vesting monthly thereafter. Effective January 1, 2017, the Company adopted ASU 2016-09, and made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. The following table presents stock-based compensation expense included in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Research and development	$	1,946	$	853	$	3,676	$	1,491
General and administrative		1,780		2,648		3,350		3,032
Loss from equity method investment		505		—		951		—
Total	$	4,231	$	3,501	$	7,977	$	4,523

Grant-Date Fair Value

The Company estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following assumptions:

	Six Months Ended June 30,
	2017			2016
Employees:
Weighted average expected volatility		72.7	%		77.9	%
Expected term (in years)		6.0			6.0
Risk free interest rate		1.8 - 2.3	%		1.4 - 1.5	%
Expected dividend yield		0.0	%		0.0	%
Non-employees:
Weighted average expected volatility		83.6	%		n/a
Expected term (in years)		10.0			n/a
Risk free interest rate		2.3	%		n/a
Expected dividend yield		0.0	%		n/a

The fair value of the restricted stock awards was determined based on the fair value of the common shares on the grant date. Non-employee stock options and restricted stock awards, including those to employees of Casebia, are marked-to-market at each reporting period.

Share Based Payment Activity

Stock Option Awards

The following table summarizes stock option activity for employees and non-employees (intrinsic value in thousands):

	Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		4,535,371		$	8.38		9.1	$	53,966
Granted		1,750,048		$	16.13
Exercised		(304,173	)	$	2.40
Cancelled or forfeited		(344,460	)	$	5.11
Outstanding at June 30, 2017		5,636,786		$	11.29		9.0	$	30,510
Exercisable at June 30, 2017		1,319,922		$	5.94		8.4	$	13,309
Vested or expected to vest at June 30, 2017 (1)		5,609,286		$	11.26		9.0	$	30,467

(1) Represents the number of vested options at June 30, 2017 plus the number of unvested options expected to vest in the future.

As of June 30, 2017, total unrecognized compensation expense related to stock options was $35.7 million which the Company expects to recognize over a remaining weighted-average period of 3.2 years.

During the six months ended June 30, 2017 and 2016, the Company granted options to purchase 60,000 and 13,333 common shares, respectively, subject to performance-based vesting conditions. As of June 30, 2017, options to purchase 335,372 common shares subject to performance-based vesting conditions were vested, as performance conditions were achieved, and no options to purchase common shares subject to performance-based vesting conditions were deemed probable of vesting.

Restricted Stock Awards

The following table summarizes restricted stock activity for employees and non-employees during the six months ended June 30, 2017:

	Reflected as outstanding upon vesting			Reflected as outstanding upon grant date			Total			Weighted- Average Grant Date Fair Value
Unvested restricted common shares as of December 31, 2016		89,367			650,856			740,223		$	3.84
Vested		(16,764	)		(212,075	)		(228,839	)		4.02
Unvested restricted common shares as of June 30, 2017		72,603			438,781			511,384		$	3.76

During the six months ended June 30, 2017, the total fair value of vested restricted common shares was $4.2 million. As of June 30, 2017, total unrecognized compensation expense related to unvested restricted common shares was $4.0 million which the Company expects to recognize over a remaining weighted-average period of one year.

The Company did not grant any restricted common shares subject to performance-based vesting conditions during the six months ended June 30, 2017. As of June 30, 2017, 50,000 restricted common shares subject to performance-based vesting conditions were vested.

During the year ended December 31, 2016, the Company and Fay Corp. transferred 290,400 common shares to a founder, 268,093 of which were subject to vesting conditions with a weighted average grant date fair value of $12.65 per share. The unvested common shares are subject to repurchase by the Company upon termination of the holder’s service relationship with the Company as well as upon certain triggering events such as termination for cause, material breach of agreement and insolvency of the holder. During the three and six months ended June 30, 2017, the Company recognized expense related to these common shares in the amount of $0.2 million and $0.4 million respectively. During the three and six months ended June 30, 2016, the Company recognized expense related to these common shares in the amount of $2.2 million and $2.2 million respectively.

XML

Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

During the three and six months ended June 30, 2017, the Company recorded an income tax provision of $0.3 million and $0.6 million, respectively, representing an effective tax rate of -1.6%, and -1.44%, respectively. During the three and six months ended June 30, 2016, the Company recorded an income tax provision of $0 and $76 thousand, respectively, representing an effective tax rate of 0% and -0.3%, respectively. The income tax provision is primarily attributable to the year-to-date pre-tax income earned by the Company’s U.S. and U.K. subsidiaries. The difference in the statutory tax rate and effective tax rate is primarily a result of the jurisdictional mix of earnings and losses that are not benefited. The Company maintains a valuation allowance against certain deferred tax assets that are not more-likely-than-not realizable. As a result, the Company has not recognized a tax benefit related to losses generated in Switzerland in the current periods.

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

11. Related Party Transactions

The Company is a party to intellectual property license agreements with Dr. Charpentier. As of June 30, 2017, and December 31, 2016, the Company owed Dr. Charpentier approximately $0 and $0.5 million, respectively, of sublicense fees primarily related to the Bayer Agreement. During the three and six months ended June 30, 2017, the Company did not record any sublicensing fees due to Dr. Charpentier in research and development expense related to the Bayer Agreement. During the three and six months ended June 30, 2016, the Company recorded sublicensing fees of $0 and $0.3 million, respectively, due to Dr. Charpentier in research and development expense related to the Bayer Agreement.

The Company is a party to the JV with Bayer HealthCare. During the three and six months ended June 30, 2017, the Company recognized revenue of $1.5 million, and $2.6 million, respectively, related to the collaboration with Casebia. During the three and six months ended June 30, 2017, the Company recognized research and development expense of $1.4 million and $2.5 million, respectively, related to the performance of services for Casebia. During the three and six months ended June 30, 2016 the Company did not recognize revenue or research and development expenses related to the collaboration with Casebia. As of June 30, 2017, and December 31, 2016, the Company had accounts receivable of $1.3 million and $0.8 million, respectively, other current assets related to receivables associated with shared license research arrangements of $1.1 million and $0, respectively, and deferred revenue of $0.3 million and $0.5 million, respectively, related to Casebia.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

12. Subsequent Events

On April 13, 2017, the Company entered into a development and option agreement with StrideBio (Note 6) to research and develop novel adeno-associated virus capsids. Under the agreement, the Company was contingently obligated to purchase a convertible note in the amount of $0.5 million which was deemed to be fair value as of the date the investment was executed in the third quarter. The note was signed on August 1, 2017. The note will be convertible into StrideBio’s preferred stock upon the occurrence of a qualified financing that exceeds $3.0 million, the conversion price of which will be based on the price per share of the qualified financing. Upon conversion, the Company will receive a number of securities equal to the quotient of a fraction, the numerator of which is the total outstanding unpaid amount of principal and accrued interest due under the convertible note on the date of conversion, and the denominator of which is an amount equal to eighty percent (80%) of the lowest price per share at which the StrideBio sells and issues such shares to investors. On August 1, 2018, unless converted, StrideBio will pay the Company the principal amount outstanding, together with simple interest thereon accrued at a rate per annum equal to 8%, from and after the date StrideBio received the convertible note funds.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report.

Basis of Presentation and Use of Estimates

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, and include the accounts of (i) the Company, and (ii) its wholly-owned subsidiaries, CRISPR Ltd., CRISPR Inc., and TRACR. All intercompany accounts and transactions have been eliminated. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). The Company accounts for its 50% investment in Casebia Therapeutics LLC (“Casebia”) under the equity method of accounting. See Note 7 for further details.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, equity-based compensation expense, revenue recognition, equity method investments, fair value of intangible assets, the provision for or benefit from income taxes and reported amounts of research and development expenses during the period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. The consolidated statements reflect all adjustments which are of a normal recurring nature necessary for presentation. Actual results may differ from those estimates or assumptions.

Net Loss Per Share Attributable to Common Shareholders

Net Loss Per Share Attributable to Common Shareholders

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common shareholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method.

The following common share equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in common stock equivalent shares):

	As of
	June 30, 2017		December 31, 2016
Outstanding options		5,636,786		4,535,371
Unvested unissued restricted common shares		72,603		89,367
Total		5,709,389		4,624,738

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Subsequently, the FASB also issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligation and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09 (collectively, the “Revenue ASUs”).

The Revenue ASUs noted above provide an accounting standard for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for interim and annual periods beginning after December 15, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the new standard effective January 1, 2018 under the full retrospective method. The Company is in the process of determining the impact of the Revenue ASUs on its financial statements as it relates to their revenue generating collaboration agreements. The Company continues to make progress on the assessment of its two collaboration agreements and is in the process of developing its revenue recognition policy under the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and will require lessees to record most leases on the balance sheet, but recognize expense in a manner similar to the current standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, which is the year ended December 31, 2019 for the Company. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company is evaluating the new guidance and the impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU 2016-09”). The guidance changes how companies account for certain aspects of equity-based payments to employees. Entities will be required to recognize income tax effects of awards in the income statement when the awards vest or are settled. The guidance also allows an employer to repurchase more of an employee’s shares than it can under current guidance for tax withholding purposes providing for withholding at the employee’s maximum rate as opposed to the minimum rate without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company adopted the new standard January 1, 2017. The Company made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. Adoption did not materially impact the consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes. The amendments in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. The amendments should be applied on a modified retrospective transition basis, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending balances shown on the statement of cash flows. The guidance is effective in the first quarter of fiscal 2018 and early adoption is permitted. ASU 2016-18 must be applied retrospectively to all periods presented. Upon adoption, the Company’s 2016 statement of cash flows will reflect an increase in operating cash flows resulting from the adoption of this new standard. The Company does not expect any additional impact on its financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”). ASU 2017-01 clarifies whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The purpose of the guidance is to narrow the definition of a business at it relates recording transactions as business acquisitions or asset acquisitions. The guidance is effective in annual periods beginning after December 15, 2017, including interim periods within those years, with early adoption permitted under certain circumstances. The Company does not expect any additional impact on its financial statements.

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Net Loss per Share

The following common share equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in common stock equivalent shares):

	As of
	June 30, 2017		December 31, 2016
Outstanding options		5,636,786		4,535,371
Unvested unissued restricted common shares		72,603		89,367
Total		5,709,389		4,624,738

XML

Property and Equipment, net (Tables)

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment, Net

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

	As of
	June 30,			December 31,
	2017			2016
Computer equipment and software	$	285		$	110
Furniture, fixtures, and other		2,079			2,044
Laboratory equipment		5,985			2,970
Leasehold improvements		13,742			15,780
Construction work in process		176			1,065
		22,267			21,969
Accumulated Depreciation		(2,340	)		(942	)
Property and equipment, net	$	19,927		$	21,027

XML

Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued expenses consist of the following (in thousands):

	As of
	June 30, 2017		December 31, 2016
Payroll and employee-related costs	$	3,567	$	2,585
Research costs		1,561		996
Licensing fees		783		492
Professional fees		1,892		2,715
Intellectual property costs		1,255		3,372
Accrued property and equipment		2,663		5,081
Other		167		1,079
Total	$	11,888	$	16,320

XML

Share Capital (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Schedule of Conditional Capital Reserved for Future Issuance

The Company had the following conditional capital reserved for future issuance:

	As of
Conditional Capital	June 30, 2017		December 31, 2016
Unvested unissued restricted stock		166,667		166,667
Outstanding stock options		5,636,786		4,535,371
Reserved for future issuance under stock option plans (1)		5,942,974		5,290,643
Shares available for bonds and similar debt instruments		4,919,700		4,919,700
Shares available for employee purchase plans		413,226		413,226
Total		17,079,353		15,325,607

(1) The Company’s Board of Directors approved an increase to the option pool of 2,012,684 options in May 2017.

XML

Equity-based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-Based Compensation Expense

The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and restricted stock awards. Stock options and restricted stock awards generally vest over four years with 25% vesting on the first anniversary of service commencement and the remaining 75% vesting monthly thereafter. Effective January 1, 2017, the Company adopted ASU 2016-09, and made an accounting policy election to account for the impact of pre-vesting forfeitures as they occur rather than applying an estimated forfeiture rate, as previously required. The following table presents stock-based compensation expense included in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Research and development	$	1,946	$	853	$	3,676	$	1,491
General and administrative		1,780		2,648		3,350		3,032
Loss from equity method investment		505		—		951		—
Total	$	4,231	$	3,501	$	7,977	$	4,523

Fair Value of Employee and Non-employee Stock Option Award on the Grant Date Using the Black-Scholes Option-Pricing Model

The Company estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following assumptions:

	Six Months Ended June 30,
	2017			2016
Employees:
Weighted average expected volatility		72.7	%		77.9	%
Expected term (in years)		6.0			6.0
Risk free interest rate		1.8 - 2.3	%		1.4 - 1.5	%
Expected dividend yield		0.0	%		0.0	%
Non-employees:
Weighted average expected volatility		83.6	%		n/a
Expected term (in years)		10.0			n/a
Risk free interest rate		2.3	%		n/a
Expected dividend yield		0.0	%		n/a

Summary of Stock Option Activity for Employees and Non-employees

The following table summarizes stock option activity for employees and non-employees (intrinsic value in thousands):

	Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		4,535,371		$	8.38		9.1	$	53,966
Granted		1,750,048		$	16.13
Exercised		(304,173	)	$	2.40
Cancelled or forfeited		(344,460	)	$	5.11
Outstanding at June 30, 2017		5,636,786		$	11.29		9.0	$	30,510
Exercisable at June 30, 2017		1,319,922		$	5.94		8.4	$	13,309
Vested or expected to vest at June 30, 2017 (1)		5,609,286		$	11.26		9.0	$	30,467

(1) Represents the number of vested options at June 30, 2017 plus the number of unvested options expected to vest in the future.

Summary of the Company's Restricted Stock Activity

The following table summarizes restricted stock activity for employees and non-employees during the six months ended June 30, 2017:

	Reflected as outstanding upon vesting			Reflected as outstanding upon grant date			Total			Weighted- Average Grant Date Fair Value
Unvested restricted common shares as of December 31, 2016		89,367			650,856			740,223		$	3.84
Vested		(16,764	)		(212,075	)		(228,839	)		4.02
Unvested restricted common shares as of June 30, 2017		72,603			438,781			511,384		$	3.76

XML

Organization and Operations - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016	Mar. 24, 2015
Organization and operations [Line Items]
Company formation date	Oct. 28, 2013
Company formation country name	Basel, Switzerland
Accumulated deficit	$ (100,873)	$ (57,083)
Cash	$ 272,264	$ 315,520
CRISPR Therapeutics Limited [Member] | United Kingdom [Member]
Organization and operations [Line Items]
Subsidiary formation date	Feb. 07, 2014
CRISPR Therapeutics, Inc. [Member] | United States [Member]
Organization and operations [Line Items]
Subsidiary formation date	Feb. 16, 2015
TRACR Hematology Limited [Member]
Organization and operations [Line Items]
Formation date, VIE	Jan. 23, 2014
Relationship nature and extent of involvement in VIE	On January 23, 2014, the founders of the Company formed TRACR Hematology Limited (“TRACR”), wholly-owned subsidiary of the Company, in the United Kingdom, to further the development of the CRISPR/Cas9 technology into medicines for the treatment of blood-borne illnesses. As the Company was funding and managing TRACR’s operations in 2014, it has been consolidated by the Company from the date that the Company established a variable interest in TRACR in April 2014. In March 2015, the Company acquired 82.1% of the outstanding equity of TRACR in a share exchange transaction. Concurrent with its initial public offering (“IPO”) in October 2016, the Company acquired the outstanding non-controlling interest in TRACR.
Purpose of VIE	To further the development of the CRISPR/Cas9 technology into medicines for the treatment of blood-borne illnesses.
Percentage of outstanding equity acquired			82.10%

XML

Summary of Significant Accounting Policies - Additional Information (Detail)	Jun. 30, 2017
Casebia Therapeutics LLP [Member]
Summary Of Significant Accounting Policies [Line Items]
Equity method investment, ownership percentage	50.00%

XML

Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Net Loss per Share (Detail) - shares shares in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of net loss per share	5,709,389	4,624,738
Stock Option Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of net loss per share	5,636,786	4,535,371
Unvested Unissued Restricted Common Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of net loss per share	72,603	89,367

XML

Property and Equipment, net - Summary of Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	$ 22,267	$ 21,969
Accumulated Depreciation	(2,340)	(942)
Property and equipment, net	19,927	21,027
Computer Equipment and Software [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	285	110
Furniture, Fixtures, and Other [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	2,079	2,044
Laboratory Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	5,985	2,970
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	13,742	15,780
Construction Work in Progress [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	$ 176	$ 1,065

XML

Property and Equipment, net - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 0.7	$ 0.1	$ 1.4	$ 0.2

XML

Accrued Expenses - Schedule of Accrued Expenses (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Accrued Liabilities, Current [Abstract]
Payroll and employee-related costs	$ 3,567	$ 2,585
Research costs	1,561	996
Licensing fees	783	492
Professional fees	1,892	2,715
Intellectual property costs	1,255	3,372
Accrued property and equipment	2,663	5,081
Other	167	1,079
Total	$ 11,888	$ 16,320

XML

Convertible Loans - Additional Information (Detail) - USD ($)			6 Months Ended
	Jan. 29, 2016	Oct. 26, 2015	Jun. 30, 2017	Jun. 30, 2016
Debt Conversion [Line Items]
Borrowings under loan agreement				$ 35,000,000
Conversion of convertible loans to Series B Preferred Shares				61,929,000
Gain on extinguishment of debt				$ 11,482,000
Bayer Convertible Loans [Member]
Debt Conversion [Line Items]
Loan agreement maturity date			Jan. 29, 2016
Borrowings under loan agreement	$ 35,000,000
Loan, accrued interest rate	2.00%
Borrowings under loan agreement	$ 35,000,000
Vertex Convertible Loans [Member]
Debt Conversion [Line Items]
Borrowings under loan agreement		$ 38,200,000
Loan, accrued interest rate		2.50%
Loan agreement maturity date			Apr. 26, 2016
Series B Redeemable Convertible Preferred Shares [Member] | Bayer Convertible Loans [Member]
Debt Conversion [Line Items]
Preferred shares, shares issued upon conversion	2,605,330
Preferred shares, conversion price per share	$ 13.43
Fair value of convertible loan	$ 24,500,000
Allocated to convertible loan	27,000,000
Interest expense	8,000,000
Conversion of convertible loans to Series B Preferred Shares	$ 35,000,000
Series B Redeemable Convertible Preferred Shares [Member] | Vertex Convertible Loans [Member]
Debt Conversion [Line Items]
Preferred shares, shares issued upon conversion	2,859,278
Preferred shares, conversion price per share	$ 13.43
Fair value of convertible loan	$ 26,900,000
Gain on extinguishment of debt	$ 11,500,000

XML

Commitments and Contingencies - Additional Information (Detail) $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 13, 2017 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2017 Sublease
Contingencies And Commitments [Line Items]
Cost sharing expensed relating to patent maintenance, defense and prosecution, incurred		$ 0.5	$ 0.3	$ 1.0	$ 0.8
Cost sharing expensed relating to patent maintenance, defense and prosecution, accrued				0.8		$ 2.8
Development and Option Agreement [Member] | StrideBio [Member]
Contingencies And Commitments [Line Items]
License agreement, one-time upfront payment	$ 0.5
License agreement, achieved milestone payment				0.3
License agreement, milestone payable				3.0
Convertible Notes Payable [Member] | Development and Option Agreement [Member] | StrideBio [Member]
Contingencies And Commitments [Line Items]
Purchase obligation		0.5		0.5
Research and Office Facility [Member]
Contingencies And Commitments [Line Items]
Operating lease number of sublet portions | Sublease							1
Operating leases, sublease payments receivable		$ 2.8		$ 2.8

XML

Significant Contracts - Additional Information (Detail) € in Millions, SFr in Millions		1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
		Apr. 30, 2014 USD ($)	Apr. 30, 2014 CHF (SFr)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Nov. 30, 2014 EUR (€)	Nov. 30, 2014 USD ($)
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense	[1]			$ 17,120,000	$ 8,602,000	$ 31,925,000	$ 14,614,000
Non-current deferred revenue				79,232,000		$ 79,232,000		$ 77,646,000
Date of joint venture agreement						Dec. 19, 2015
Equity method investment				0		$ 0		0
Stock-based compensation expense				4,231,000	3,501,000	7,977,000	4,523,000
Casebia Therapeutics LLP [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense				1,400,000	0	2,500,000	0
Revenue from collaboration agreement				1,500,000	0	2,600,000	0
Non-current deferred revenue				300,000		$ 300,000		500,000
Date of formation of joint venture entity						Feb. 12, 2016
Unrecognized equity method losses in excess of Company's interest						$ 10,800,000		4,000,000
Stock-based compensation expense				500,000	0	1,000,000	0
Net loss of joint venture				9,000,000	1,000,000	14,600,000	74,800,000
Casebia Therapeutics LLP [Member] | Fair Value of CRISPR License Acquired [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense						71,400,000
Vertex Pharmaceuticals Inc [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense				3,300,000	1,600,000	5,900,000	3,300,000
Revenue from collaboration agreement				2,100,000	800,000	3,600,000	1,300,000
Non-current deferred revenue				78,900,000		78,900,000		77,100,000
Patent Assignment Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Clinical milestone payment payable										€ 0.3	$ 400,000
CRISPR-Charpentier License Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Upfront fees paid for license		$ 100,000	SFr 0.1
Annual payments for consulting agreement				0	0			$ 0	$ 0
Research and development expense				0	0	0	300,000
TRACR-Charpentier License Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense				$ 0	$ 0	$ 0	$ 0

[1] Including the following research and development expense with a related party, See Note 11:

XML

Share Capital - Additional Information (Detail) - SFr / shares	Jun. 30, 2017	Dec. 31, 2016
Class of Stock [Line Items]
Common stock, shares authorized	40,556,891	40,253,674
Common shares, par value	SFr 0.03	SFr 0.03
Treasury stock, shares	444,873	444,873
Unvested Unissued Restricted Share Awards [Member]
Class of Stock [Line Items]
Unvested unissued restricted common stock	72,603

XML

Share Capital - Schedule of Conditional Capital Reserved for Future Issuance (Detail) - shares	Jun. 30, 2017	Dec. 31, 2016
Class of Stock [Line Items]
Conditional capital reserved for future issuance	17,079,353	15,325,607
Employee Purchase Plans [Member]
Class of Stock [Line Items]
Conditional capital reserved for future issuance	413,226	413,226
Bonds and Similar Debt Instruments [Member]
Class of Stock [Line Items]
Conditional capital reserved for future issuance	4,919,700	4,919,700
Unvested Unissued Restricted Stock [Member]
Class of Stock [Line Items]
Conditional capital reserved for future issuance	166,667	166,667
Outstanding Stock Options [Member]
Class of Stock [Line Items]
Conditional capital reserved for future issuance	5,636,786	4,535,371
Stock Option Plan [Member]
Class of Stock [Line Items]
Conditional capital reserved for future issuance	5,942,974	5,290,643

XML

Share Capital - Schedule of Conditional Capital Reserved for Future Issuance (Parenthetical) (Detail)	1 Months Ended
	May 31, 2017 shares
Equity [Abstract]
Number of options approved	2,012,684

XML

Equity-based Compensation - Equity-based Compensation Expense - Additional Information (Detail) - Stock Options and Restricted Stock Awards [Member]	6 Months Ended
	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation, options, vesting period	4 years
Share-based Compensation, options, vesting terms	Vest over four years with 25% vesting on the first anniversary of service commencement and the remaining 75% vesting monthly thereafter
Vesting Percentage on First Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation, options, vesting percentage	25.00%
Vesting Percentage after First Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation, options, vesting percentage	75.00%

XML

Equity-based Compensation - Schedule of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Equity-based compensation expense	$ 4,231	$ 3,501	$ 7,977	$ 4,523
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Equity-based compensation expense	1,946	853	3,676	1,491
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Equity-based compensation expense	1,780	$ 2,648	3,350	$ 3,032
Loss from Equity Method Investment [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Equity-based compensation expense	$ 505		$ 951

XML

Equity-based Compensation - Fair Value of Employee and Non-employee Stock Option Award on the Grant Date Using the Black-Scholes Option-Pricing Model (Detail)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Employee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average expected volatility	72.70%	77.90%
Expected term (in years)	6 years	6 years
Expected dividend yield	0.00%	0.00%
Employee [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	1.80%	1.40%
Employee [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	2.30%	1.50%
Non-Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average expected volatility	83.60%
Expected term (in years)	10 years	0 years
Risk free interest rate	2.30%
Expected dividend yield	0.00%

XML

Equity-based Compensation - Summary of Stock Option Activity for Employees and Non-employees (Detail) - Employees and Non-employees [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Options, Outstanding, Beginning Balance	4,535,371
Stock Options, Granted	1,750,048
Stock Options, Exercised	(304,173)
Stock Options, Cancelled or forfeited	(344,460)
Stock Options, Outstanding, Ending Balance	5,636,786	4,535,371
Stock Options, Exercisable	1,319,922
Stock Options, Vested or expected to vest	5,609,286
Weighted-Average Exercise Price, Outstanding, Beginning Balance	$ 8.38
Weighted-Average Exercise Price, Granted	16.13
Weighted-Average Exercise Price, Exercised	2.40
Weighted-Average Exercise Price, Cancelled or forfeited	5.11
Weighted-Average Exercise Price, Outstanding, Ending Balance	11.29	$ 8.38
Weighted-Average Exercise Price, Exercisable	5.94
Weighted-Average Exercise Price, Vested or expected to vest	$ 11.26
Weighted-Average Remaining Contractual Term	9 years	9 years 1 month 6 days
Weighted-Average Remaining Contractual Term, Exercisable	8 years 4 months 24 days
Weighted-Average Remaining Contractual Term, Vested or expected to vest	9 years
Outstanding at December 31, 2016	$ 30,510	$ 53,966
Exercisable at June 30, 2017	13,309
Vested or expected to vest at June 30, 2017 (1)	$ 30,467

XML

Equity-based Compensation - Share Based Payment Activity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense	$ 35,700		$ 35,700
Equity-based compensation expense not yet recognized, weighted-average service period for recognition			3 years 2 months 12 days
Stock-based compensation expense	4,231	$ 3,501	$ 7,977	$ 4,523
Founders' [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-Average Exercise Price, Vested or expected to vest					$ 12.65
Stock-based compensation expense	$ 200	$ 2,200	$ 400	$ 2,200
Fay Corp Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation, number of shares issued					290,400
Fay Corp Awards [Member] | Founders' [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Transfer of vested shares					268,093
Performance-Based [Member] | Vesting Percentage on First Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Options, Granted			60,000	13,333
Share-based compensation, options, vested			335,372
Share-based compensation, options, deemed probable of vesting	0		0
Performance-Based [Member] | Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock, granted			0
Restricted stock, vested			50,000
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense not yet recognized, weighted-average service period for recognition			1 year
Total fair value of vested restricted common shares			$ 4,200
Total unrecognized compensation expenses	$ 4,000		$ 4,000
Restricted stock, vested			228,839

XML

Equity-based Compensation - Summary of the Company's Restricted Stock Activity (Detail) - Restricted Stock Awards [Member]	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted common shares, Number of Shares, Beginning Balance	740,223
Unvested restricted common shares, Number of Shares, Vested	(228,839)
Unvested restricted common shares, Number of Shares, Ending Balance	511,384
Unvested restricted common shares, Weighted-Average Grant Date Fair Value, Beginning Balance | $ / shares	$ 3.84
Unvested restricted common shares, Weighted-Average Grant Date Fair Value, Vested | $ / shares	4.02
Unvested restricted common shares, Weighted-Average Grant Date Fair Value, Ending Balance | $ / shares	$ 3.76
Reflected as Outstanding Upon Vesting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted common shares, Number of Shares, Beginning Balance	89,367
Unvested restricted common shares, Number of Shares, Vested	(16,764)
Unvested restricted common shares, Number of Shares, Ending Balance	72,603
Reflected as Outstanding Upon Grant Date [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted common shares, Number of Shares, Beginning Balance	650,856
Unvested restricted common shares, Number of Shares, Vested	(212,075)
Unvested restricted common shares, Number of Shares, Ending Balance	438,781

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Income tax provision	$ 343	$ 0	$ 622	$ 76
Effective income tax rate	(1.60%)	0.00%	(1.44%)	(0.30%)

XML

Related Party Transactions - Additional Information (Detail) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Research and development expense	[1]	$ 17,120,000	$ 8,602,000	$ 31,925,000	$ 14,614,000
Accounts receivable, related party amount, current		1,340,000		1,340,000		$ 752,000
Other current assets, related party amount		1,141,000		1,141,000		0
Deferred revenue related party amount		284,000		284,000		527,000
Casebia Therapeutics LLP [Member]
Related Party Transaction [Line Items]
Revenue from collaboration agreement		1,500,000	0	2,600,000	0
Research and development expense		1,400,000	0	2,500,000	0
Bayer Healthcare LLC [Member]
Related Party Transaction [Line Items]
Sublicense fees payable		0		0		500,000
Bayer Healthcare LLC [Member] | Research and Development [Member]
Related Party Transaction [Line Items]
Sublicense fees recorded		0	0	0	300,000
Bayer Healthcare LLC [Member] | Casebia Therapeutics LLP [Member]
Related Party Transaction [Line Items]
Revenue from collaboration agreement		1,500,000	0	2,600,000	0
Research and development expense		1,400,000	$ 0	2,500,000	$ 0
Accounts receivable, related party amount, current		1,300,000		1,300,000		800,000
Other current assets, related party amount		1,100,000		1,100,000		0
Deferred revenue related party amount		$ 300,000		$ 300,000		$ 500,000

[1] Including the following research and development expense with a related party, See Note 11:

XML

Subsequent Events - Additional Information (Detail) - Convertible Notes Payable [Member] - Development and Option Agreement [Member] - StrideBio [Member] - USD ($) $ in Millions	Aug. 01, 2017	Jun. 30, 2017
Subsequent Event [Line Items]
Purchase obligation		$ 0.5
Subsequent Event [Member]
Subsequent Event [Line Items]
Financing threshold	$ 3.0
Percent of lowest price per share at which shares are issued and sold to investors for convesion of convertible note	80.00%
Accrued interest rate	8.00%