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As Filed with the Securities and Exchange Commission on February 18, 2020

Registration No. 333-236214


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



AMENDMENT NO. 1
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



PASSAGE BIO, INC.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  2836
(Primary Standard Industrial
Classification Code Number)
  82-2729751
(I.R.S. Employer
Identification Number)

Two Commerce Square
2001 Market Street, 28th Floor
Philadelphia, PA 19103
(267) 866-0311

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Bruce Goldsmith, Ph.D.
Chief Executive Officer
Passage Bio, Inc.
Two Commerce Square
2001 Market Street, 28th Floor
Philadelphia, PA 19103
(267) 866-0311

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Effie Toshav, Esq.
Robert A. Freedman, Esq.
Matthew Rossiter, Esq.
Ryan Mitteness, Esq.
Fenwick & West LLP
555 California Street
San Francisco, CA 94104
(415) 875-2300

 

Edgar B. Cale, Esq.
General Counsel and Corporate Secretary
Passage Bio, Inc.
Two Commerce Square
2001 Market Street, 28th Floor
Philadelphia, PA 19103
(267) 866-0311

 

Brent B. Siler
Jeffrey Libson
Divakar Gupta
Brian Leaf
Cooley LLP
55 Hudson Yards
New York, NY 10001
(212) 479-6000



Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

           If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.    o

           If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an "emerging growth company". See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Smaller reporting company ý

Emerging growth company ý

           If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.    o

Calculation of registration fee

               
 
Title of each class of securities
to be registered

  Amount to be
registered(1)

  Proposed maximum
offering price
per share

  Proposed maximum
aggregate offering
price(2)

  Amount of
registration
fee(3)

 

Common Stock, par value $0.0001 per share

  8,510,000   $18.00   $153,180,000   $19,883

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. Includes 1,110,000 additional shares that the underwriters have the option to purchase.

(2)
Estimated solely for the purpose of calculating the amount of the registration fee.

(3)
The Registrant previously paid $16,225 of this amount in connection with the initial filing of this Registration Statement.



           The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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Subject to completion, dated February 18, 2020

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Preliminary Prospectus

7,400,000 Shares

LOGO

Common Stock

        This is an initial public offering of shares of common stock by Passage Bio, Inc. We are offering 7,400,000 shares of our common stock. The initial public offering price is expected to be between $16.00 and $18.00 per share.

        Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Global Market under the symbol "PASG."

        We are an "emerging growth company" and a "smaller reporting company" as defined under the federal securities laws and are subject to reduced public company reporting requirements.

       
 
 
  Per share
  Total
 

Initial public offering price

  $               $            
 

Underwriting discounts and commissions(1)

  $               $            
 

Proceeds to Passage Bio, Inc., before expenses

  $               $            

 

(1)
See "Underwriting" for a description of compensation payable to the underwriters.

        We have granted the underwriters an option for a period of 30 days to purchase up to 1,110,000 additional shares of common stock from us at the public offering price, less underwriting discounts and commissions.

        Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 12 of this prospectus.

        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares of common stock to purchasers on or about            , 2020.

J.P. Morgan   Goldman Sachs & Co. LLC   Cowen

 

 

Chardan

 

 

   

                , 2020


TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

THE OFFERING

    8  

RISK FACTORS

    12  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    68  

MARKET, INDUSTRY AND OTHER DATA

    70  

USE OF PROCEEDS

    71  

DIVIDEND POLICY

    72  

CAPITALIZATION

    73  

DILUTION

    75  

SELECTED FINANCIAL DATA

    78  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    79  

BUSINESS

    92  

MANAGEMENT

    149  

EXECUTIVE COMPENSATION

    160  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    172  

PRINCIPAL STOCKHOLDERS

    178  

DESCRIPTION OF CAPITAL STOCK

    182  

SHARES ELIGIBLE FOR FUTURE SALE

    188  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

    190  

UNDERWRITING

    195  

LEGAL MATTERS

    206  

EXPERTS

    206  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

    206  

INDEX TO FINANCIAL STATEMENTS

    F-1  

        Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

        For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

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PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our shares of common stock. You should read the entire prospectus carefully, including "Risk Factors" on page 12 and our financial statements and the related notes thereto included at the end of this prospectus, before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to "Passage Bio," "company," "we," "us" and "our" refer to Passage Bio, Inc.

Overview

        We are a genetic medicines company focused on developing transformative therapies for rare, monogenic central nervous system, or CNS, disorders with limited or no approved treatment options. Our vision is to become the premier genetic medicines company by developing and ultimately commercializing therapies that dramatically and positively transform the lives of patients suffering from these life-threatening disorders. To achieve our vision, we have assembled a world-class team whose members have decades of collective experience in genetic medicines and rare disease drug development and commercialization. The field of genetic medicine is rapidly expanding and we believe we have a differentiated approach to developing treatments for rare, monogenic CNS disorders that enables us to select and advance product candidates with a higher probability of technical and regulatory success. We have entered into a strategic research collaboration with the Trustees of the University of Pennsylvania's, or Penn's, Gene Therapy Program, or GTP, headed by Dr. James Wilson, a leader in the genetic medicines field. Through this collaboration we have assembled a deep portfolio of genetic medicine product candidates, including our three lead product candidates: PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBFT02 for the treatment of frontotemporal dementia, or FTD, and PBKR03 for the treatment of Krabbe disease. We plan to submit investigational new drug applications, or INDs, for PBGM01 in the first half of 2020, for PBFT02 in the second half of 2020 and for PBKR03 in the second half of 2020, and expect to initiate Phase 1/2 trials for GM1 in the second half of 2020, for FTD in the first half of 2021 and for Krabbe disease in the first half of 2021. We will also continue to explore entering into new collaborations to expand our pipeline.

        Our research collaboration with GTP provides us with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates and exclusive rights to certain rare, monogenic CNS indications. As part of this collaboration, we have exclusive rights to all discovery work and IND-enabling research for up to 12 rare, monogenic CNS indications that we select. In addition to our three lead product candidates, we have three ongoing discovery programs and an option to license six additional programs from GTP. Further, we have limited exclusive rights to certain new capsid technology arising from GTP for our product candidates within our rare, monogenic CNS field of use. We have global commercial rights to all of our product candidates and believe that our approach to developing therapies for rare, life-threatening diseases that are currently underserved presents an opportunity to efficiently advance our product candidates through clinical development, regulatory approval and ultimately to commercialization.

        We founded Passage Bio with the intent to build a differentiated CNS genetic medicines company delivering transformative therapies to patients by combining our team's experience in rare and neurological disease development, manufacturing and commercialization with the pioneering research expertise of GTP in gene therapy. We are purposefully focusing on rare, monogenic CNS disorders for which we believe our genetic medicine approach provides distinct technical advantages based on decades of research by GTP. GTP conducts rigorous preclinical studies to identify promising product candidates. Our collaboration provides us with access to cutting edge capabilities and innovation in the field of genetic medicine research,


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including in capsid engineering and next-generation capsid libraries, vector engineering, transgene design and gene therapy modalities, animal disease models and related studies for lead-optimization of product candidates. Further, we believe our team's deep clinical development experience in rare and neurological diseases will enable well planned clinical trials with the potential for efficient advancement to regulatory approval. In addition, we are engaging with key opinion leaders, practitioners and patient advocacy groups in the field of rare, monogenic CNS disorders that provide strategic input and help inform our clinical development activities. We believe that our ability to execute on the above tenets provides us with product candidates that have an improved profile for clinical development and an enhanced probability of success.

        We are led by pioneers and experts with decades of collective experience in genetic medicines, rare disease drug development, manufacturing and commercialization. Our scientific founders, Dr. Stephen Squinto, Dr. James Wilson and Dr. Tadataka Yamada, are world leaders in research and development in the fields of rare disease and genetic medicine. Our founders' involvement in both academic research and clinical drug development allows us to gain early insight into emerging technologies that informs our business strategy. We have assembled a team whose members have extensive experience in successfully developing, manufacturing and commercializing rare disease and genetic medicine products at companies such as Alexion Pharmaceuticals, Allos Therapeutics, Biogen, GlaxoSmithKline, Janssen Pharmaceuticals, Lycera, Merck & Co., Momenta Pharmaceuticals, NPS Pharmaceuticals, Pharmasset, Ultragenyx Pharmaceutical and ViroPharma. Since our inception through December 31, 2019, we have raised $225.5 million. Our investors include OrbiMed Advisors, Versant Venture, Frazier Life Sciences, LAV Prescience Limited, New Leaf Ventures, Vivo Capital, Access Industries, Boxer Capital, Highline Capital, Logos Capital and Sphera Global Healthcare.

Our Approach

        The field of genetic medicine is rapidly expanding and we believe we have developed a differentiated approach to developing treatments for rare, monogenic CNS disorders that allows us to select and advance product candidates with a higher probability of technical and regulatory success. Our gene therapy product candidates use an adeno-associated virus, or AAV, a small, non-pathogenic virus that is genetically engineered to function as a delivery vehicle, or vector. The core tenets of our approach include:

    Rigorous Process for Selecting Product Candidates.  In selecting our product candidates, we focus initially on four key areas of assessment: selection of the route of administration to maximize transgene biodistribution; selection of capsid, transgene and promotor; biological mechanisms such as leveraging the cross-correction mechanism to help overcome the limits of vector biodistribution and CNS transduction inefficiency; and effective use of biomarkers.

    Mitigation of Early Development Risk of Programs Prior to IND Submission.  Our strategic research collaboration with GTP allows us to choose programs that have been validated through extensive testing in preclinical disease models.

    Mitigation of Clinical Development Risk through Our Relationship with the Orphan Disease Center at Penn.  We leverage our close working relationship with the Orphan Disease Center, or the ODC, at Penn to develop historical and prospective external data for each disease for use in building comparable patient profiles of participants in interventional trials.

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Our Pipeline

        We have assembled a deep portfolio of genetic medicine product candidates for rare, monogenic CNS disorders characterized by high unmet medical needs. We intend to further expand our portfolio with genetic medicine product candidates for other rare, monogenic CNS disorders as well as other treatment approaches as technology advances in the field. Our development programs consist of:

GRAPHIC


(*)
Program includes ongoing natural history study of infantile and juvenile GM1 gangliosidosis patients.

        We also have three programs in the discovery or candidate selection stage: PBML04 for metachromatic leukodystrophy, or MLD, PBAL05 for amyotrophic lateral sclerosis, or ALS, and PBCM06 for Charcot-Marie-Tooth Type 2A, or CMT2A.

PBGM01 for the Treatment of GM1

        We are currently developing PBGM01, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GLB1 gene encoding lysosomal acid beta-galactosidase, or b-gal, for infantile GM1. Currently, there are no disease-modifying therapies approved for the treatment of GM1. We believe PBGM01 could provide patients with significantly improved outcomes. In preclinical models, we have observed meaningful transduction of both the CNS and critical peripheral organs for GM1 patients using our ICM method of administration in combination with our next-generation AAVhu68 capsid. ICM, or intra cisterna magna injection, involves an injection at the craniocervical junction. We expect to submit an IND in the first half of 2020 and initiate a Phase 1/2 trial in the second half of 2020 and anticipate clinical data to be available in the first half of 2021. We are currently funding a GM1 natural history study being conducted by the ODC to collect prospective data on clinical disease progression in infantile and juvenile GM1. This data will be used to construct natural history patient profiles for use as matched case controls for comparison to the profiles of treated participants in our planned Phase 1/2 clinical trial.

PBFT02 for the Treatment of FTD-GRN

        We are currently developing PBFT02, which utilizes an AAV1 capsid to deliver to the brain a functional granulin, or GRN, gene encoding progranulin, for the treatment of FTD caused by a deficiency of progranulin, or FTD-GRN. Currently, there are no disease-modifying therapies approved for the treatment of FTD-GRN. We believe PBFT02 may provide patients with significantly improved outcomes. In a non-human primate, or NHP, model, we observed superior transduction results of the CNS using our ICM method of administration and an AAV1 capsid compared to other AAV capsids. We expect to submit an IND in the second half of 2020 and initiate a Phase 1/2 trial in the first half of 2021 and anticipate clinical data to be available in the second half of 2021.

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PBKR03 for the Treatment of Krabbe disease

        We are currently developing PBKR03, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GALC gene encoding the hydrolytic enzyme galactosylceramidase, for infantile Krabbe disease. Currently, there are no disease-modifying therapies approved for the treatment of Krabbe disease. We believe PBKR03 may provide patients with significantly improved outcomes. In preclinical models, we have observed meaningful transduction of both the CNS and critical peripheral organs for Krabbe patients using our ICM method of administration in combination with our next-generation AAVhu68 capsid. We expect to submit an IND in the second half of 2020 and initiate a Phase 1/2 trial in the first half of 2021 and anticipate clinical data to be available in the second half of 2021.

        We believe our lead product candidates have the potential to provide patients with significantly improved outcomes, given our chosen ICM route of administration, our target choice of secreted proteins that potentially leverage the cross-correction mechanism, thereby reducing transduction requirements, and our capsid and transgene selection process, which allows us to choose vectors that are fit-for-purpose for specific indications.

        We also have three programs in the discovery or candidate selection stage. PBML04 is targeting MLD patients who have mutations in the ARSA gene, PBAL05 is targeting ALS patients who have a gain-of-function mutation in the C9orf72 gene and PBCM06 is targeting CMT2A patients who have a mutation in the MFN2 gene. Beyond this portfolio, through our research collaboration with GTP, we also have the option to license programs for six additional rare, monogenic CNS indications through 2022.

Our Strategy

        Our vision is to become the premier genetic medicines company by developing and ultimately commercializing therapies that dramatically and positively transform the lives of patients suffering from life-threatening CNS disorders with limited or no approved treatment options. We leverage the decades of experience of our scientific founders as well as the transformative potential of genetic medicine technology to develop treatments that improve outcomes for patients with serious, life-threatening, rare diseases. Patients are considered every step of the way, in every decision we make.

        Key elements of our strategy include:

    Focus on rare, underserved indications for which we can have a transformative impact on patients' lives.

    Rapidly advance our lead product candidates into clinical development through commercialization.

    Advance and expand our pipeline by identifying and developing additional product candidates.

    Extend existing and establish new relationships with patients and patient advocacy groups.

    Continue to develop proprietary manufacturing capabilities.

    Selectively enter into new discovery relationships with premier research institutions and expand our existing collaboration.

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Risks Associated with Our Business

        Our business is subject to a number of risks and uncertainties, including those highlighted in the section entitled "Risk Factors" immediately following this prospectus summary. These risks include, among others, the following:

    We are a preclinical stage genetic medicines company with a history of operating losses, and we may not achieve or sustain profitability. We anticipate that we will continue to incur losses for the foreseeable future. Our limited operating history may make it difficult for you to evaluate our success to date and to assess our future viability.

    Even if this offering is successful, we expect that we will need to raise additional funding before we can expect to become profitable from any potential future sales of our products.

    We are very early in our development efforts. Our business is dependent on our ability to advance our current and future product candidates through preclinical studies and clinical trials, obtain marketing approval and ultimately commercialize them.

    Preclinical and clinical development involve a lengthy and expensive process with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidates or any future product candidates.

    Gene therapy is a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

    Our product candidates may cause undesirable and unforeseen side effects, which could delay or prevent their advancement into clinical trials or regulatory approval, limit the commercial potential or result in significant negative consequences.

    The disorders we seek to treat have low prevalence and it may be difficult to identify patients with these diseases, which may lead to delays in enrollment for our trials or slower commercial revenue if approved.

    We currently rely exclusively on our collaboration with Penn for our preclinical research and development, including for discovering, preclinically developing and conducting all IND-enabling studies for our lead product candidates and our near-term future pipeline.

    Gene therapies are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in delays in our development or commercialization programs or otherwise harm our business.

    We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies or technologies that are more advanced or effective than ours.

    We currently rely and expect to continue to rely on third-party manufacturers to produce clinical supply of our product candidates.

    If we are unable to obtain and maintain patent protection or other necessary rights for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad or our rights under licensed patents is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected.

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Corporate Information

        We were incorporated under the laws of the State of Delaware in July 2017 under the name Passage Bio, Inc. Our principal executive office is located at Two Commerce Square, 2001 Market Street, 28th Floor, Philadelphia, PA, 19103, and our telephone number is (267) 866-0311. Our website address is www.passagebio.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated by reference into, this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock.

Trademarks and Tradenames

        The mark "Passage Bio, Inc.", the Passage Bio logo and all product names are our common law trademarks. All other service marks, trademarks and tradenames appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

Implications of Being an Emerging Growth Company and Smaller Reporting Company

        As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

    being permitted to present only two years of audited financial statements and only two years of related "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus;

    not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, on the effectiveness of our internal controls over financial reporting;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    reduced disclosure obligations regarding executive compensation arrangements; and

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

        We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

        The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of

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the exemption provided by Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

        We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) when we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30 and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

        We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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THE OFFERING

Common stock offered by us

  7,400,000 shares

Option to purchase additional shares

 

We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to 1,110,000 additional shares from us at the initial public offering price per share less the underwriting discounts and commissions.

Common stock to be outstanding immediately after this offering          

 

39,398,295 shares (or 40,508,295 shares if the underwriters exercise in full their option to purchase additional shares).

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $113.8 million, or $131.3 million if the underwriters exercise in full their option to purchase additional shares, assuming an initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

 

We intend to use the net proceeds that we receive in this offering to advance our lead products in clinical trials, to advance our discovery and candidate selection stage programs and for general corporate purposes. See "Use of Proceeds."

Risk factors

 

See "Risk Factors" for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

Directed share program

 

At our request, the underwriters have reserved up to 2.5% of the shares of common stock being offered by this prospectus for sale, at the initial public offering price, to our officers, directors, certain employees and other persons associated with us. If these persons purchase reserved shares, it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. For further information regarding our directed share program, see "Underwriting".

Proposed Nasdaq Global Market
symbol

 

"PASG"

        The number of shares of our common stock to be outstanding after this offering is based on 31,998,295 shares of our common stock outstanding as of January 31, 2020, and after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock as of January 31,

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2020 into an aggregate of 26,803,777 shares of common stock immediately prior to the completion of this offering and excludes:

    4,974,519 shares of common stock issuable upon the exercise of options outstanding as of January 31, 2020 under our 2018 Amended and Restated Equity Incentive Plan, or the 2018 Plan, with a weighted-average exercise price of $8.36 per share;

    11,278 shares of common stock issuable upon the exercise of options granted after January 31, 2020 under the 2018 Plan with an exercise price of $11.00 per share;

    673,471 shares of common stock issuable upon the exercise of options we expect to grant to certain of our directors, executive officers and other employees pursuant to our 2020 Equity Incentive Plan immediately following effectiveness of the registration statement of which this prospectus forms a part at an exercise price equal to the initial public offering price per share;

    5,123,352 additional shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 1,422,823 shares of common stock reserved for future issuance under our 2018 Plan, (ii) 3,266,529 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan after the issuance of the awards described above, which will become effective on the date immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part and (iii) 434,000 shares of common stock reserved for future issuance under our 2020 Employee Stock Purchase Plan, which will become effective on the date of the effectiveness of the registration statement of which this prospectus forms a part. Upon completion of this offering, any remaining shares available for issuance under our 2018 Plan will be added to the shares reserved under our 2020 Equity Incentive Plan and we will cease granting awards under our 2018 Plan. Our 2020 Equity Incentive Plan and our 2020 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares reserved under the plans each year, as more fully described in "Executive Compensation—Equity Compensation Plans and Other Benefit Plans."

        Shares outstanding as of January 31, 2020 include 478,578 shares subject to forfeiture or repurchase.

        Except as otherwise indicated, all information in this prospectus assumes or gives effect to:

    the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 26,803,777 shares of common stock immediately prior to the completion of this offering;

    a one-for-4.43316 reverse stock split effected on February 14, 2020;

    the effectiveness of our restated certificate of incorporation and restated bylaws in connection with the completion of this offering;

    no exercise of outstanding options after January 31, 2020; and

    no exercise of the underwriters' option to purchase additional shares of our common stock.

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SUMMARY FINANCIAL DATA

        The following tables set forth a summary of our historical financial data as of, and for, the periods ended on the dates indicated. The summary statements of operations data presented below for the years ended December 31, 2018 and 2019 and our summary balance sheet data as of December 31, 2019 are derived from our financial statements included elsewhere in this prospectus. The following summary financial data should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future period. The summary financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.

 
  Year ended December 31,  
(in thousands, except share and per share data)
  2018   2019  

Statements of Operations Data:

             

Operating expenses:

             

Research and development

  $ 9,167   $ 29,738  

Acquired in-process research and development

    3,371     500  

General and administrative

    928     6,951  

Loss from operations

    (13,466 )   (37,189 )

Change in fair value of future tranche right liability

    696     (9,141 )

Interest income

        696  

Net loss

  $ (12,770 ) $ (45,634 )

Net loss per share of common stock, basic and diluted(1)

  $ (3.55 ) $ (10.77 )

Weighted-average common shares outstanding, basic and diluted(1)

    3,597,913     4,236,061  

Pro forma net loss per share of common stock, basic and diluted(1) (unaudited)

        $ (1.90 )

Pro forma weighted average shares outstanding, basic and diluted(1) (unaudited)

          23,962,816  

(1)
See Note 3 to our financial statements included elsewhere in this prospectus for a description of how we compute basic and diluted net loss per share, pro forma basic and diluted net loss per share and the weighted-average number of shares used in the computation of these per share amounts.

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  As of December 31, 2019  
(in thousands)
  Actual   Pro forma(1)   Pro forma
as adjusted(2)(3)
 

Balance Sheet Data:

                   

Cash and cash equivalents

  $ 158,874   $ 158,874   $ 273,431  

Working capital(4)

    162,094     162,094     277,605  

Total assets

    178,613     178,613     291,453  

Total liabilities

    4,261     4,261     3,307  

Total convertible preferred stock

    230,605          

Total stockholders' (deficit) equity

    (56,253 )   174,352     288,146  

(1)
The pro forma balance sheet data gives effect to the automatic conversion of all outstanding shares of our convertible preferred stock as of December 31, 2019 into an aggregate of 26,803,777 shares of common stock immediately prior to the completion of this offering as if such conversion had occurred on December 31, 2019.

(2)
The pro forma as adjusted balance sheet data gives further effect to the issuance and sale of 7,400,000 shares of common stock in this offering at an assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

(3)
The pro forma as adjusted information is illustrative only, and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders' equity by $6.9 million, assuming that the number of shares offered, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 in the number of shares of common stock offered would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders' equity by $15.8 million, assuming the assumed initial public offering price per share as set forth on the cover of this prospectus remains the same and after deducting the estimated underwriting discounts and commissions.

(4)
We define working capital as current assets less current liabilities.

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements, the notes thereto and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our stock could decline, and you could lose part or all of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

We are a preclinical stage biotechnology company with a history of operating losses, and we may not achieve or sustain profitability. We anticipate that we will continue to incur losses for the foreseeable future. Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

        We are a preclinical stage genetic medicines company with a limited operating history on which to base your investment decision. Biotechnology product development is a highly speculative undertaking and involves a substantial degree of risk. Our operations to date have been limited primarily to organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting preclinical research and development activities for our product candidates. All of our lead product candidates are still in the preclinical testing stage. We have no products in clinical development or approved for commercial sale and have not generated any revenue from commercial product sales, and we will continue to incur significant research and development and other expenses related to our clinical development and ongoing operations. We have funded our operations to date through proceeds from sales of our convertible preferred stock and do not expect to receive revenue for many years, if ever.

        We have incurred net losses since our inception in 2017. We incurred net losses of $12.8 million and $45.6 million for the years ended December 31, 2018 and 2019, respectively. As of December 31, 2019, we had an accumulated deficit of $58.7 million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses over the next several years and for the foreseeable future as we intend to continue to conduct research and development, clinical testing, regulatory compliance activities, manufacturing activities, and, if any of our product candidates is approved, sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in us incurring significant losses for the foreseeable future. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders' deficit and working capital.

        We expect that it will be several years, if ever, before we have a commercialized product. We anticipate that our expenses will increase substantially if, and as, we:

    continue to advance the preclinical and clinical development of our existing product candidates and discovery stage programs;

    seek regulatory approvals for any product candidates that successfully complete clinical trials;

    hire additional clinical, quality control, regulatory, manufacturing, scientific and administrative personnel;

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    expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;

    maintain, expand and protect our intellectual property portfolio; and

    incur additional legal, accounting or other expenses in operating our business, including the additional costs associated with operating as a public company.

        In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We expect to transition rapidly from a small start-up company with a focus on hiring employees, establishing key collaborations and financing to a more fully-integrated company that is capable of supporting clinical development, manufacturing and commercial activities. We may not be successful in such a transition.

We have never generated revenue from product sales and may never achieve or maintain profitability.

        We have no products in clinical development or approved for commercial sale and have not generated any revenue from commercial product sales. To become and remain profitable, we must develop and eventually commercialize product candidates with significant market potential, which will require us to be successful in a range of challenging activities. These activities can include completing preclinical studies and initiating and completing clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products that are approved and satisfying any post marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

        Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.

Even if this offering is successful, we expect that we will need to raise additional funding before we can expect to become profitable from any potential future sales of our products. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other operations.

        We will require substantial future capital in order to complete planned and future preclinical and clinical development for PBGM01, PBFT02, PBKR03 and any other product candidates, if any, and potentially commercialize these product candidates, if approved. We expect our spending levels to significantly increase in connection with our preclinical studies and planned clinical trials, if any, of our lead product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate certain of our licensing activities, our research and development programs or other operations.

        Our operations have consumed significant amounts of cash since inception. As of December 31, 2019, our cash and cash equivalents were $158.9 million. We estimate that the net proceeds from this

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offering will be approximately $113.8 million, based on an assumed initial public offering price of $17.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through the second quarter of 2022. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of factors currently unknown to us. As a result, we could deplete our capital resources sooner than we currently expect. See "Use of Proceeds" for more information.

        Our future capital requirements will depend on many factors, including:

    the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

    the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

    the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

    the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

    the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

    our ability to establish collaborations on favorable terms, if at all;

    the costs required to scale up our clinical, regulatory and manufacturing capabilities;

    the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval; and

    revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

        Accordingly, we will need to continue to rely on additional financing to achieve our business objectives, which may not be available to us on acceptable terms, or at all. We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If adequate funds are not available to us on a timely basis or on terms acceptable to us, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more product candidates or discovery stage programs or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize any product candidates, if approved.

Raising additional capital may cause dilution to our stockholders, including purchasers of our common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or securities convertible into equity, your ownership interest will be diluted, and the terms of these securities may

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include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making capital expenditures or declaring dividends.

        If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or 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 or on terms acceptable to us, 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.

Risks Related to Product Development and Regulatory Approval

We are very early in our development efforts. Our business is dependent on our ability to advance our current and future product candidates through preclinical studies and clinical trials, obtain marketing approval and ultimately commercialize them. If we are unable, or experience significant delays in doing so, our business will be materially harmed.

        We are very early in our development efforts and all of our product candidates are still in preclinical development. We expect the INDs with respect to our GM1 program to be submitted in the first half of 2020, our FTD program to be submitted in the second half of 2020 and our Krabbe disease program to be submitted in the second half of 2020. Additionally, we have a portfolio of programs, including those listed in the "Business—Our Pipeline" section of this prospectus, that are in earlier stages of preclinical development and may never advance to clinical-stage development. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates, which may never occur. We currently generate no revenue from sales of any product and we may never be able to develop or commercialize a marketable product.

        Each of our programs and product candidates will require additional preclinical and/or clinical development, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, capacity and expertise, building a commercial organization or successfully outsourcing commercialization, substantial investment and significant marketing efforts before we generate any revenue from product sales. Our product candidates must be authorized for marketing by the U.S. Food and Drug Administration, or the FDA, or certain other ex-U.S. regulatory agencies before we may commercialize our product candidates.

        The clinical and commercial success of our product candidates will depend on several factors, including the following:

    timely and successful completion of preclinical studies, including toxicology studies, biodistribution studies and minimally efficacious dose studies in animals, where applicable;

    effective INDs or comparable foreign applications that allow commencement of our planned clinical trials or future clinical trials for our product candidates;

    successful enrollment and completion of clinical trials, including under the FDA's current Good Clinical Practices, or cGCPs, and current Good Laboratory Practices, or cGLP;

    positive results from our future clinical programs that support a finding of safety and effectiveness and an acceptable risk-benefit profile of our product candidates in the intended populations;

    receipt of marketing approvals from applicable regulatory authorities;

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    establishment of arrangements with third-party manufacturers for clinical supply and, where applicable, commercial manufacturing capabilities;

    establishment and maintenance of patent and trade secret protection or regulatory exclusivity for our product candidates;

    commercial launch of our product candidates, if approved, whether alone or in collaboration with others;

    acceptance of the benefits and use of our product candidates, including method of administration, if and when approved, by patients, the medical community and third-party payors;

    effective competition with other therapies;

    establishment and maintenance of healthcare coverage and adequate reimbursement and patients' willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement;

    establishment of a physician training system and network for administration of our product candidates by injection into the ICM;

    enforcement and defense of intellectual property rights and claims; and

    maintenance of a continued acceptable safety, tolerability and efficacy profile of our product candidates following approval.

        If we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business. If we are unable to advance our product candidates to clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

Preclinical and clinical development involve a lengthy and expensive process with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidates or any future product candidates.

        All of our product candidates are in preclinical development and their risk of failure is high. We currently rely exclusively on GTP for our preclinical and IND-enabling studies. It is impossible to predict when or if any of our product candidates will receive regulatory approval. To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and lengthy, complex and expensive clinical trials that our product candidates are safe and effective in humans. Clinical testing can take many years to complete, and its outcome is inherently uncertain. We will rely on CROs for the clinical development of our lead candidates. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials or early cohorts of our clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials or later cohorts of our clinical trials. Early clinical trials and in particular initial cohorts of early clinical trials often enroll significantly fewer patients than later stage clinical trials or later cohorts of the same clinical trial and may not be as predictive as larger trials. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing. Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products. A number of companies in the biotechnology industry have

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suffered significant setbacks in advanced clinical trials due to lack of efficacy or to unfavorable safety profiles, notwithstanding promising results in earlier trials. There is typically a high rate of failure of product candidates proceeding through clinical trials. Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our future clinical trials will ultimately be successful or support clinical development of our current or any of our future product candidates.

        We or our collaborators may experience delays in initiating or completing clinical trials. We or our collaborators also may experience numerous unforeseen events during, or as a result of, any future clinical trials that we could conduct that could delay or prevent our ability to receive marketing approval or commercialize our lead product candidates or any future product candidates, including:

    regulators or institutional review boards, or IRBs, the FDA or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

    we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

    clinical trial sites deviating from trial protocol or dropping out of a trial;

    clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon product development programs;

    the number of subjects required for clinical trials of any product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;

    our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators;

    we may elect to, or regulators, IRBs, or ethics committees may require that we or our investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants in our trials are being exposed to unacceptable health risks;

    the cost of clinical trials of any of our product candidates may be greater than we anticipate;

    the quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be inadequate to initiate or complete a given clinical trial;

    our inability to manufacture sufficient quantities of our product candidates for use in clinical trials;

    reports from clinical testing of other therapies may raise safety or efficacy concerns about our product candidates;

    our failure to establish an appropriate safety profile for a product candidate based on clinical or preclinical data for such product candidate as well as data emerging from other molecules in the same class as our product candidate; and

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    the FDA or ex-U.S. regulatory agencies may require us to submit additional data such as long-term toxicology studies, or impose other requirements before permitting us to initiate a clinical trial.

        Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the number and location of clinical sites we enroll, the proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the inability to obtain and maintain patient consents, the risk that enrolled participants will drop out before completion, competing clinical trials and clinicians' and patients' perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs or therapeutic biologics that may be approved for the indications being investigated by us. Furthermore, we expect to rely on our collaborators, CROs and clinical trial sites to ensure the proper and timely conduct of our future clinical trials, including the patient enrollment process, and we have limited influence over their performance. Additionally, we could encounter delays if treating physicians encounter unresolved ethical issues associated with enrolling patients in future clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles.

        We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA or other regulatory authorities, or if a clinical trial is recommended for suspension or termination by the Data Safety Monitoring Board for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

        Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition and results of operations significantly.

We have not tested any of our product candidates in clinical trials. Success in early preclinical studies or clinical trials may not be indicative of results obtained in later preclinical studies and clinical trials.

        All of our product candidates are in the preclinical discovery stage. Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time of such testing may vary substantially according to the type, complexity and novelty of the program, and often can be several years or more per program. Delays associated with programs for which we are conducting preclinical testing and studies may cause us to incur additional operating expenses. Though gene therapy product candidates like ours have been evaluated by others in clinical trials, our product candidates have never

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been evaluated in human clinical trials, and we may experience unexpected or adverse results in the future. We will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates are safe and effective, with a favorable benefit-risk profile, for use in their target indications before we can seek regulatory approvals for their commercial sale. Our initial clinical trials will begin with relatively small cohorts before expanding in size in subsequent cohorts. If safety issues arise in an early cohort, we may be delayed or prevented from subsequently expanding into larger trial cohorts. Earlier gene therapy clinical trials conducted by others also utilized adeno-associated viral, or AAV, vectors. However, these studies should not be relied upon as evidence that our planned clinical trials will succeed. Trial designs and results from previous trials are not necessarily predictive of our future clinical trial designs or results, and initial positive results we may observe may not be confirmed upon full analysis of the complete trial data. In addition, the positive results we have observed for our product candidates in preclinical animal models may not be predictive of our future clinical trials in humans. Our product candidates may also fail to show the desired safety and efficacy in later stages of clinical development even if they successfully advance through initial clinical trials.

Interim "top-line" and preliminary data from our clinical trials that we or our partners announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

        From time to time, we may make public interim topline or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary or topline data that were previously made public. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between interim or preliminary or topline data and final data could significantly harm our reputation and business prospects.

If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed.

        From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory, manufacturing and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of preclinical studies and clinical trials and the submission of regulatory filings, including IND submissions. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones are, and will be, based on a variety of assumptions. The actual timing of these milestones can vary significantly compared to our estimates, in some cases for reasons beyond our control. We may experience numerous unforeseen events during, or as a result of, any future clinical trials that we conduct that could delay or prevent our ability to receive marketing approval or commercialize our product candidates.

Gene therapy is a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. Currently, only a limited number of gene therapy products have been approved in the United States and in foreign countries.

        Our current product candidates are based on gene therapy technology and our future success depends on the successful development of this novel therapeutic approach. The regulatory requirements that govern any novel gene therapy product candidates we develop are not entirely clear and are subject to change. The clinical study requirements of the FDA and ex-U.S. regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential

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products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied product candidates. Further, as we are developing novel treatments for diseases in which there is little clinical experience with new endpoints and methodologies, there is heightened risk that the FDA or comparable foreign regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. To date, only a limited number of gene therapy products have been approved in the United States and foreign countries, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States or other jurisdictions. Further, approvals by an ex-U.S. regulatory agency may not be indicative of what the FDA may require for approval, or vice versa.

Our product candidates may cause undesirable and unforeseen side effects, which could delay or prevent their advancement into clinical trials or regulatory approval, limit the commercial potential or result in significant negative consequences.

        While new AAV vectors have been developed to reduce side effects previously reported in third-party gene therapy treatments, gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material.

        Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration which, while not necessarily adverse to the patient's health, could substantially limit the effectiveness of the treatment. For example, in previous third-party clinical trials involving AAV vectors for gene therapy, some subjects experienced the development of a T-cell antibody response, whereby after the vector is within the target cells, the cellular immune response system triggers the removal of transduced cells by activated T-cells. Further, following administration of any AAV vector, patients are likely to develop neutralizing antibodies specific to the vector administered. Other preclinical studies have suggested that high dosages of AAV administration may result in toxicity due to degeneration of the dorsal root ganglia. Preliminary results of our NHP toxicology studies for our PBGM01 and PBFT02 product candidates have demonstrated trigeminal ganglia and dorsal root ganglia toxicity. Based on these results, and if our vectors demonstrate a similar effect in other programs, we may decide or be required to perform additional preclinical studies or to halt or delay further clinical development of our product candidates.

        In addition to side effects caused by the product candidate, the administration process or related procedures also can cause adverse side effects. Each of our lead product candidates are expected to be administered by injection into the ICM. While this method of administration has been available for decades, its use for therapies is relatively new, no therapies are currently approved using ICM administration, and it may be perceived as having greater risk than more common methods of administration, such as intravenous injection. If any such adverse events occur, our clinical trials could be suspended or terminated. If we cannot demonstrate that any adverse events were not caused by the drug or administration process or related procedures, the FDA or ex-U.S. regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to not initiate, delay, suspend or terminate any future clinical trial of any of our product candidates, the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may harm our business, financial condition and prospects significantly.

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        Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategies, or REMS, to ensure that the benefits of the product outweigh its risks, which may include, among other things, a Medication Guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners. Furthermore, if we or others later identify undesirable side effects caused by our product candidate, several potentially significant negative consequences could result, including:

    regulatory authorities may suspend or withdraw approvals of such product candidate;

    regulatory authorities may require additional warnings on the label;

    we may be required to change the way a product candidate is administered or conduct additional clinical trials;

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

    our reputation may suffer.

        Any of these occurrences may harm our business, financial condition and prospects significantly.

Adverse public perception of genetic medicines may negatively impact regulatory approval of, and/or demand for, our potential products.

        Regulatory approval of and/or demand for our potential products will depend in part on public acceptance of the use of genetic medicine for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that genetic medicines are unsafe, unethical or immoral, and consequently, our products may not gain the acceptance of the public or the medical community. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop.

        There have been several significant adverse side effects reported in genetic medicine treatments in the past. For example, in 1999, there was public backlash against gene therapy following the death of a clinical trial subject in a gene therapy clinical trial that utilized an adenovirus vector. It was later discovered that adenoviruses could generate an extreme immune system reaction that can be life-threatening. Dr. Wilson, our Chief Scientific Advisor, was a co-investigator of the 1999 trial while he was Director of the Institute for Human Gene Therapy of Penn. Serious adverse events in our clinical trials, or other clinical trials involving gene therapy by us or our competitors, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception and potential regulatory delays in the clinical testing or approval of our product candidates.

As an organization, we have limited experience designing and no experience implementing clinical trials and we have never conducted pivotal clinical trials. Failure to adequately design a trial, or incorrect assumptions about the design of the trial, could adversely affect the ability to initiate the trial, enroll patients, complete the trial, or obtain regulatory approval on the basis of the trial results, as well as lead to increased or unexpected costs.

        The design and implementation of clinical trials is a complex process. As an organization, we have limited experience designing and no experience implementing clinical trials, and we may not successfully or cost-effectively design and implement clinical trials that achieve our desired clinical endpoints efficiently, or at all. A clinical trial that is not well designed may delay or even prevent initiation of the trial, can lead to increased difficulty in enrolling patients, may make it more difficult to obtain regulatory approval for the product candidate on the basis of the study results, or, even if a product candidate is approved, could make it more difficult to commercialize the product successfully or obtain reimbursement from third-party payors. Additionally, a trial that is not well-designed could be inefficient or more expensive than it otherwise would have been, or we may incorrectly estimate the costs to implement the clinical trial, which could lead to a shortfall in funding.

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The disorders we seek to treat have low prevalence and it may be difficult to identify patients with these disorders, which may lead to delays in enrollment for our trials or slower commercial revenue if approved.

        Genetically defined disorders generally, and especially those for which our current product candidates are targeted, have low incidence and prevalence. For example, we estimate incidence of infantile GM1 is approximately 1.4 in 100,000 live births, that the incidence of Krabbe disease is approximately 2.6 in 100,000 births and that there are approximately 3,000 to 6,000 people in the United States with FTD-GRN. While certain states currently have mandatory newborn genetic screening for Krabbe disease, there is no mandatory screening for GM1. Without mandatory screening, it may be difficult for us to identify a sufficient number of eligible patients to conduct our clinical trials. These could be significant obstacles to the timely recruitment and enrollment of a sufficient number of eligible patients into our trials. Further, we expect to rely in part on our relationships with the Orphan Disease Center and other patient advocacy groups to assist in identifying eligible patients, and any deterioration of those relationships could impede our ability to successfully enroll patients. Patient enrollment may be affected by other factors including:

    the severity of the disease under investigation;

    design of the study protocol;

    the eligibility criteria for the trial;

    the perceived risks, benefits and convenience of administration of the product candidate being studied;

    our efforts to facilitate timely enrollment in clinical trials;

    the availability of other clinical trials being conducted for the same indication;

    the patient referral practices of physicians; and

    the proximity and availability of clinical trial sites to prospective patients.

        Our inability to enroll a sufficient number of patients with these diseases for our planned clinical trials would result in significant delays and could require us to not initiate or abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

        Additionally, our projections of both the number of people who have GM1, FTD, Krabbe disease and our other product candidates, as well as the people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates, including third party analyses commissioned by us. The total addressable market opportunity for our product candidates will ultimately depend upon, among other things, the final approved product labeling for each of our product candidates, if our product candidates are approved for sale in our target indications, acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients globally may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our products, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business. Our products may potentially be dosed on a one-time basis, which means that patients who enroll in our clinical trials may not be eligible to receive our products on a commercial basis if they are approved, leading to lower revenue potential.

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Even if we complete the necessary clinical trials, we cannot predict when, or if, we will receive regulatory approval to commercialize a product candidate and the approval may be for a more narrow indication than we seek.

        Prior to commercialization, our product candidates must be approved by the FDA pursuant to a biologics license application, or BLA, in the United States and by similar regulatory authorities outside the United States. The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. Our company does not have experience in submitting and supporting the applications necessary to gain marketing approvals. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate's safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.

        Approval of our product candidates may be delayed or refused for many reasons, including the following:

    the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials, including the lack of a placebo control;

    the FDA may not agree that the efficacy endpoints used in our clinical trials are appropriate to establish clinical benefit in the intended populations;

    we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe and effective for any of their proposed indications;

    the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

    we may be unable to demonstrate that our product candidates' clinical and other benefits outweigh their safety risks;

    the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical programs or clinical trials;

    the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;

    the facilities of the third-party manufacturers with which we contract may not be adequate to support approval of our product candidates; and

    the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

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    Even if our product candidates meet their safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.

        Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of narrow indications, warnings or REMS. These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the product labeling claims that are necessary or desirable for the successful commercialization of our product candidates. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates and materially and adversely affect our business, financial condition, results of operations and prospects.

The FDA and other ex-U.S. regulatory agencies have demonstrated caution in their regulation of gene therapy treatments. Ethical and legal concerns about gene therapy and genetic testing may result in additional regulations or restrictions on the development and commercialization of our product candidates, which may be difficult to predict.

        The FDA and other ex-U.S. regulatory agencies at both the federal and state level in the United States, U.S. congressional committees, and foreign governments, have expressed interest in further regulating the biotechnology industry, including gene therapy and genetic testing. Any such further regulation may delay or prevent commercialization of some or all of our product candidates.

        Regulatory requirements in the United States and abroad governing gene therapy products have changed frequently and may continue to change in the future. In addition to the FDA, the Institutional Biosafety Committee and IRB of each institution at which we conduct our planned clinical trials, would need to review the proposed clinical trial to assess the safety of the trial. Within the FDA, the Office of Cellular, Tissue and Gene Therapies, within the Center for Biologics Evaluation and Research, or CBER, consolidates the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee advises CBER on its review. Adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates.

        These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

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Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

        The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

        Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop important activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed abroad and will limit our ability to realize their full market potential.

        In order to eventually market any of our product candidates in any particular foreign jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding safety and efficacy. Approval by the FDA in the United States, if obtained, does not ensure approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be costly and time-consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. The foreign regulatory approval process involves all of the risks associated with FDA approval. In addition, gene therapy products are considered genetically-modified organism, or GMO, products and are regulated as such in each country. Designation of the type of GMO product and subsequent handling and disposal requirements can vary across countries and is variable throughout the European Union. Addressing each specific country requirement and obtaining approval to commence a clinical trial in these countries could result in delays in starting, conducting, or completing a clinical trial. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets and expect to rely on third-party consultants. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.

        In addition, the United Kingdom's pending exit from the European Union, or the EU, which is referred to as "Brexit," continues to create political and economic uncertainty, particularly in the United Kingdom and the EU. Since a significant proportion of the regulatory framework in the United Kingdom is derived from EU directives and regulations, the withdrawal of the United Kingdom from the EU could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the EU.

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We may not be successful in our efforts to build a pipeline of additional product candidates.

        Our business model is centered on developing therapies for patients with rare, monogenic CNS disorders by establishing focused selection criteria to select, develop and advance product candidates that we believe will have a high probability of technical and regulatory success through development into commercialization. We may not be able to continue to identify and develop new product candidates in addition to the pipeline of product candidates that we have established through our collaboration with Penn's GTP. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development. For example, they may be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be drugs that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our approach, we will not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.

Risks Related to Our Reliance on Third Parties

We currently rely exclusively on our collaboration with Penn for our preclinical research and development programs, including for discovering, preclinically developing and conducting all IND-enabling studies for our lead product candidates and our near-term future pipeline. Failure or delay of Penn to fulfil all or part of its obligations to us under the agreement, a breakdown in collaboration between the parties or a complete or partial loss of this relationship would materially harm our business.

        Our collaboration with Penn is critical to our business. We have entered into a Research, Collaboration & License Agreement dated September 18, 2018, or the Penn License Agreement, with Penn to discover and develop certain AAV vector based therapeutics, and the products developed under such collaboration currently represent all of our product pipeline and discovery programs. We currently rely exclusively on Penn for all of our preclinical research and development capabilities, and in particular GTP under the direction of Dr. Wilson. Pursuant to the Penn License Agreement, Penn is responsible for discovery, preclinical development activities, including all IND-enabling non-clinical studies and research grade manufacturing, and other collaborative activities set forth in the plan for the funded research. Either party has the right in certain circumstances to terminate the collaboration pursuant to the terms of the Penn License Agreement. If Penn delays or fails to perform its obligations under the Penn License Agreement, disagrees with our interpretation of the terms of the collaboration or our discovery plan or terminates our existing agreement, our pipeline of product candidates would be significantly adversely affected and our prospects will be materially harmed.

        The term of the research funding portion of the Penn License Agreement, under which we have the ability to acquire exclusive rights to additional gene therapy products for rare, monogenic CNS indications, expires in September 2022. In addition, our rights to technology from Penn's next-generation capsid program, under which we can select next generation capsids for our product candidates is currently set to expire at the end of 2021. If we seek to extend the research portion of our collaboration, we will need to negotiate a new or amended agreement, which may not be available to us on equally favorable terms, if at all. Penn has also entered into collaborations with third parties, including certain of our competitors, addressing targets and disease indications outside the scope of our collaboration. As a result, Penn may have competing interests with respect to their priorities and resources. We may have disagreements with Penn with respect to the interpretation of the Penn License Agreement, use of resources or otherwise that could cause our relationship with Penn to deteriorate. As a result, Penn may reduce their focus on, and resources allocated to, our programs, potentially delaying or terminating our ability to advance product candidates through preclinical studies. Additionally, if Dr. Wilson were to leave Penn or to otherwise no longer be meaningfully involved with us, our preclinical research and development capabilities may be substantially reduced.

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        Further, under the Penn License Agreement, Penn is primarily responsible for prosecuting and maintaining our licensed intellectual property, and it may fail to properly prosecute, maintain or defend such intellectual property. In such event, if we are unable to otherwise maintain or defend such intellectual property, we could face the potential invalidation of the intellectual property or be subjected to litigation or arbitration, any of which would be time-consuming and expensive. To enforce the licensed intellectual property rights under the Penn License Agreement, we will need to coordinate with Penn, which could slow down or hamper our ability to enforce our licensed intellectual property rights. In such event, we could face increased competition that could materially and adversely affect our business.

        For a further description of the Penn License Agreement, see "Business—License Agreement."

We rely on third parties to conduct our preclinical studies, will rely on them to conduct clinical trials and rely on them to perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

        Although we have recruited a team that has experience with clinical trials, as a company we have no experience in conducting clinical trials. Moreover, we currently rely exclusively on Penn for our discovery and preclinical research and will continue to rely upon medical institutions, clinical investigators, contract laboratories and other third parties, or our CROs, to conduct future clinical trials for our product candidates. We expect to rely heavily on these parties for execution of preclinical and future clinical trials for our product candidates and control only certain aspects of their activities. If these parties reduce the levels of efforts and resources to our product candidate activities, prioritize work with a competitor of ours or if a dispute were to arise between us and these parties, they may not meet our expected deadlines or provide us with sufficient materials for our regulatory filings. Nevertheless, we will be responsible for ensuring that each of our preclinical and clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards and our reliance on CROs will not relieve us of our regulatory responsibilities. For any violations of laws and regulations during the conduct of our preclinical studies and clinical trials, we could be subject to warning letters or enforcement action that may include civil penalties up to and including criminal prosecution.

        We, Penn and our CROs will be required to comply with regulations, including cGCPs for conducting, monitoring, recording and reporting the results of preclinical and clinical trials to ensure that the data and results are scientifically credible and accurate and that the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any drugs in clinical development. The FDA enforces cGCP regulations through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our future clinical trials will comply with cGCPs. In addition, our clinical trials must be conducted with product candidates produced in accordance with the requirements in cGMP regulations. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action.

        Although we currently design and intend to continue designing our planned clinical trials for our product candidates, for the foreseeable future CROs will conduct all of our planned clinical trials. As a

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result, many important aspects of our development programs, including their conduct and timing, will be outside of our direct control. Our reliance on third parties to conduct future preclinical studies and clinical trials will also result in less day-to-day control over the management of data developed through preclinical studies and clinical trials than would be the case if we were relying entirely upon our own staff.

        If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any preclinical studies or clinical trials with which such CROs are associated with may be extended, delayed or terminated. In such cases, we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates in the subject indication could be harmed, our costs could increase and our ability to generate revenue could be delayed.

We expect to rely on third parties to conduct our clinical trials. If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss expected deadlines or terminate the relationship, our development program could be delayed with potentially material and adverse effects on our business, financial condition, results of operations and prospects.

        We expect to rely on third-party clinical investigators, CROs, clinical data management organizations and consultants to assist or provide the design, conduct, supervision and monitoring of clinical trials of our product candidates. Because we intend to rely on these third parties and will not have the ability to conduct all clinical trials independently, we will have less control over the timing, quality and other aspects of clinical trials than we would have had we conducted them on our own. These investigators, CROs and consultants will not be our employees and we will have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. The third parties with which we may contract might not be diligent, careful or timely in conducting our clinical trials, resulting in the clinical trials being delayed or unsuccessful.

        If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we will be responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial as well as applicable legal and regulatory requirements. The FDA generally requires preclinical studies to be conducted in accordance with good laboratory practices and clinical trials to be conducted in accordance with good clinical practices, including for designing, conducting, recording and reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control will not relieve us of these responsibilities and requirements. Any adverse development or delay in our preclinical studies or clinical trials as a result of our reliance on third parties could have a material and adverse effect on our business, financial condition, results of operations and prospects.

        If any of our relationships with these third-party CROs or others terminate, we may not be able to enter into alternative arrangements or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is

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a natural transition period when a new CRO begins work. As a result, delays may occur, which can materially adversely impact our ability to meet our desired clinical development timelines.

We may in the future enter into collaborations with other third parties for the discovery, development and commercialization of our product candidates. If any of our current or future collaborators cease development efforts under our collaboration agreements, or if any of those agreements are terminated, these collaborations may fail to lead to commercial products and we may never receive milestone payments or future royalties under these agreements.

        We may in the future enter into third-party collaborations for research, development and commercialization of other therapeutic technologies or product candidates. Biotechnology companies are our likely future collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements.

        With any future collaboration agreements, we expect to have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Moreover, our ability to generate revenues from these arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements.

        Our potential future collaborations involving our product candidates may pose the following risks to us:

    collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

    collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on preclinical studies or clinical trial results, changes in the collaborators' strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

    collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

    collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

    collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

    collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability;

    collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation, indemnification obligations and potential liability;

    disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; collaborations

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      may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;

    if a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated; and

    collaboration agreements may restrict our right to independently pursue new product candidates.

        As a result of the foregoing, any future collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. Any failure to successfully develop or commercialize our product candidates pursuant to our current or any future collaboration agreements could have a material and adverse effect on our business, financial condition, results of operations and prospects.

        Moreover, to the extent that any of our existing or future collaborators were to terminate a collaboration agreement, we may be forced to independently develop our product candidates and discovery programs, including funding preclinical studies or clinical trials, assuming marketing and distribution costs and maintaining and defending intellectual property rights, or, in certain instances, abandon product candidates altogether, any of which could result in a change to our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.

We may not be successful in finding additional collaborators for continuing development of certain of our product candidates or successfully commercializing or competing in the market for certain indications.

        We may decide to pursue collaborations with additional pharmaceutical and biotechnology companies for the development and potential commercialization of some of our product candidates. We face significant competition in seeking appropriate collaborators. Any new collaboration may be on terms that are not optimal for us, and we may not be able to maintain any new collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meet expectations or the collaborator terminates the collaboration. In addition, a significant number of recent business combinations among large pharmaceutical companies has resulted in a reduced number of potential future collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. The terms of any additional collaborations or other arrangements that we may establish may not be favorable to us.

        We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

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        We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

We may have conflicts with our collaborators that could delay or prevent the development or commercialization of our product candidates.

        We may have conflicts with our collaborators, including Penn, such as conflicts concerning the interpretation of preclinical or clinical data, the achievement of milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership of intellectual property developed during our collaboration. If any conflicts arise with any of our collaborators, including Penn, such collaborator may act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each of which could delay or prevent the development or commercialization of our product candidates, and in turn prevent us from generating revenues: unwillingness on the part of a collaborator to pay us milestone payments or royalties we believe are due to us under a collaboration, which could require us to raise additional capital; uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations; unwillingness by the collaborator to cooperate in the development or manufacture of the product, including providing us with product data or materials; unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities; initiating of litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts by either

We may in the future seek to engage in strategic transactions to acquire or in-license new products, product candidates or technologies. If we are unable to successfully complete, or realize the benefits from, such transactions it may adversely affect our ability to develop and commercialize product candidates, impact our cash position, increase our expenses and present significant distractions to our management.

        From time to time, we may consider strategic transactions, such as additional collaborations, acquisitions of companies, asset purchases, joint ventures and in-licensing of new products, product candidates or technologies that we believe will complement or augment our existing business. If we acquire assets with promising markets or technologies, we may not be able to realize the benefit of acquiring such assets if we are not able to successfully integrate them with our existing technologies. We may encounter numerous difficulties in developing, testing, manufacturing and marketing any new products resulting from a strategic acquisition that delay or prevent us from realizing their expected benefits or enhancing our business.

        We cannot assure you that following any such strategic transaction, we will achieve the expected synergies to justify the transaction. For example, such transactions may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management's time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs,

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higher than expected acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the transaction or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.

        Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and would have a material and adverse effect on our business, financial condition, results of operations and prospects. Conversely, any failure to enter any strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.

Risks Related to Manufacturing

Gene therapies are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in delays in our development or commercialization programs or otherwise harm our business.

        We currently rely on third parties to develop, manufacture and test clinical supplies of our product candidates. For our initial clinical trials, we will rely on the manufacturing facility of Paragon Gene Therapy, a unit of Catalent Biologics, Inc., or Paragon, for supply of our product candidates, and on Penn to manage the transfer of technology to Paragon that is necessary for production. We expect to establish our own manufacturing facility for long-term commercial market supply. However, we have limited experience as a company in developing manufacturing facilities. We may face delays in constructing our facilities and transferring technology to our facilities or have difficulty hiring experts to staff and operate our own manufacturing facility and, accordingly, our production capacity could be limited. The manufacturing processes used to produce our product candidates are complex, novel and have not been validated for commercial use. Many factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.

        Our product candidates require processing steps that are more complex than those required for most small molecule drugs. Moreover, unlike small molecules, the physical and chemical properties of a biologic such as ours generally cannot be fully characterized. As a result, assays of the finished product may not be sufficient to ensure that the product is consistent from lot-to-lot or will perform in the intended manner. Accordingly, we employ multiple steps to control the manufacturing process to assure that the process works reproducibly and the product candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, low lot yields, product recalls, product liability claims or insufficient inventory. As a result, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet the FDA or other applicable standards or specifications with consistent and acceptable production yields and costs.

        In addition, the FDA and ex-U.S. regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA or ex-U.S. regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures, low lot yields or product recalls. Lot failures, low lot yields or

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product recalls could cause us to delay product launches or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

        We, or our third-party collaborators, also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing personnel needed to operate our manufacturing processes, which could result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements.

        Any problems in our, or our third-party collaborators', manufacturing process or facilities could result in delays in our planned clinical trials and increased costs, and could make us a less attractive collaborator for potential partners, including larger biotechnology companies and academic research institutions, which could limit our access to additional attractive development programs. It could also require us to find alternative manufacturing processes, which may be unavailable to us on attractive terms, or at all. Problems in our manufacturing process could restrict our ability to meet potential future market demand for our products.

Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.

        As product candidates proceed through preclinical studies to late-stage clinical trials towards potential approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the materials manufactured using altered processes. Such changes may also require additional testing, FDA notification or FDA approval. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commence sales and generate revenue.

We currently rely and expect to continue to rely on third-party manufacturers to produce clinical supply of our product candidates, but we have not entered into binding agreements with any such manufacturers to support commercialization. The competition for gene therapy contract development, manufacturing and testing services is intense. Additionally, these manufacturers do not have experience producing our product candidates at commercial levels and may not achieve the necessary regulatory approvals or produce our product candidates at the quality, quantities, locations and timing needed to support commercialization.

        We do not currently plan to independently manufacture most of the material for our planned clinical programs. We currently rely, and expect to continue to rely, on third parties for the production of our preclinical study and planned clinical trial materials and, therefore, we can control only certain aspects of their activities. The competition for gene therapy contract development, manufacturing and testing is intense. Reliance on third-party manufacturers may expose us to different risks than if we were to manufacture product candidates ourselves, including but not limited to potential competition from other genetic biotechnology companies for the use of such third-party manufacturers.

        We have not yet secured manufacturing capabilities for commercial quantities of our product candidates. Although we intend to establish our own manufacturing facility for long-term commercial market supply, we may need to rely on third-party manufacturers for commercialization of our product candidates if regulatory approval is achieved. To date, we have only entered into agreements with such manufacturers to support our clinical studies. We may be unable to negotiate binding agreements with the manufacturers to support our potential commercialization activities at commercially reasonable terms.

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        Before any of our third-party manufacturers and suppliers can begin to commercially manufacture our product candidates, they must demonstrate to regulatory authorities that the planned chemistry, manufacturing and controls for our gene therapy product candidates meet certain requirements. Manufacturing of product candidates for clinical and commercial purposes must comply with the cGMP and applicable ex-U.S. regulatory requirements. The cGMP requirements govern quality control and documentation policies and procedures. Complying with cGMP and ex-U.S. regulatory requirements will require that we expend time, money and effort in production, recordkeeping and quality control to assure that our product candidates meet applicable specifications and other requirements. Our third-party manufacturers' also must demonstrate to the FDA that they can make the product candidate in accordance with the cGMP requirements as part of a pre-approval inspection prior to FDA approval of the product candidate. Failure to pass a pre-approval inspection might significantly delay FDA approval of our product candidates. If any of our third-party manufacturers fail to comply with these requirements, we would be subject to possible regulatory action, which could limit the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition and results of operations may be materially harmed.

        In addition, our third-party manufacturers may fail to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

        Even if our third-party manufacturers comply with applicable regulatory requirements, we cannot assure you that they will be able to successfully manufacture additional product candidates at a larger scale in a timely or economical manner, or at all. If they are unable to successfully increase our manufacturing scale or capacity, the development, testing, and clinical trials of our product candidates may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business.

Our third-party manufacturers and suppliers use biological materials and may use hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.

        Our third-party manufacturers and suppliers may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. The operations of our third-party manufacturers and suppliers also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

Any contamination in our third parties' manufacturing process, shortages of raw materials, labor or reagents or failure of any of our key suppliers to deliver necessary components of our platform could result in delays in our clinical development or marketing schedules.

        Given the nature of biologics manufacturing, there is a risk of contamination. Any contamination could materially adversely affect our or our third-party vendor's ability to produce our gene therapies on schedule and could therefore harm our results of operations and cause reputational damage.

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        The raw materials required in our third-party vendors manufacturing processes are derived from biological sources. We cannot assure you that our third-party vendors have, or will be able to obtain on commercially reasonable terms, or at all, sufficient rights to these materials derived from biological sources. Such raw materials are difficult to procure and may also be subject to contamination or recall. A material shortage, contamination, recall, or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt the clinical and commercial manufacturing of our product candidates, which could materially and adversely affect our operating results and development timelines.

        We rely on third-party suppliers for the supply and manufacture of certain components of our technology. Should our ability to procure these material components from our suppliers be compromised, our ability to continuously operate would be impaired until an alternative supplier is sourced, qualified and tested, which could limit our ability to produce a clinical and commercial supply of our product candidates and harm our business.

We depend on third-party suppliers for materials used in the manufacture of our product candidates, and the loss of these third-party suppliers or their inability to supply us with adequate materials could harm our business.

        We rely on third-party suppliers for certain materials and components required for the production of our product candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of materials involve several risks, including limited control over pricing, availability, and quality and delivery schedules. There is substantial demand and limited supply for certain of the raw materials used to manufacture gene therapy products. As a small company, our negotiation leverage is limited and we are likely to get lower priority than our competitors that are larger than we are. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.

Risks Related to Commercialization

We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies or technologies that are more advanced or effective than ours, which may harm our business and financial condition, and our ability to successfully market or commercialize our product candidates.

        The biotechnology and pharmaceutical industries, including the genetic medicines field, are characterized by rapidly changing technologies, competition and a strong emphasis on intellectual property. We are aware of several companies focused on developing gene therapies in various indications as well as several companies addressing methods for modifying genes and regulating gene expression. We may also face competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions.

        For the treatment of GM1, there are no approved disease-modifying therapies. We consider our most direct competitors with respect to PBGM01 for the treatment of GM1 to be Axovant Gene Therapies, Ltd., which began its clinical trial for a gene therapy treatment for juvenile GM1 in May

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2019, and Lysogene, S.A., which is expected to submit an IND soon for a clinical trial for a gene therapy treatment for GM1.

        For the treatment of FTD, there are no approved disease-modifying therapies. We consider our most direct competitors with respect to PBFT02 for the treatment of FTD-GRN to be Alector, Inc., which is conducting a Phase 2 clinical trial immune-neurology treatment for FTD-GRN and Prevail Therapeutics Inc., which is expected to initiate soon a clinical trial for a gene therapy treatment for FTD-GRN. Alkermes plc and Arkuda Therapeutics, Inc. are conducting preclinical research into small molecule approaches targeting specific histone deacetylase treat FTD-GRN patients. We are also aware of other therapeutic approaches in preclinical development that may target FTD-GRN patients.

        For the treatment of Krabbe disease, there are no approved disease-modifying therapies. We are not aware of any companies with clinical stage gene therapy product candidates for the treatment of Krabbe disease. We are aware of an ongoing disease progression study being conducted by the Children's Hospital of Pittsburgh and certain academic studies. There is some evidence that human stem cell transplant is beneficial for pre-symptomatic infants with Krabbe disease.

        Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and other resources than we do, such as larger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of competitors. Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidates that we may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, if ever. Additionally, new or advanced technologies developed by our competitors may render our current or future product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

The commercial success of any of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

        Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting our products. Even with the requisite approvals from the FDA in the United States and other regulatory authorities internationally, the commercial success of our product candidates will depend, in part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and our product candidates in particular, as medically necessary, cost-effective and safe. Any product that we commercialize may not gain acceptance by physicians, patients, health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of gene therapy products and, in particular, our product candidates, if approved for commercial sale, will depend on several factors, including:

    the efficacy, durability and safety of such product candidates as demonstrated in clinical trials;

    the potential and perceived advantages of product candidates over alternative treatments;

    the cost of treatment relative to alternative treatments;

    the clinical indications for which the product candidate is approved by the FDA or ex-U.S. regulatory authorities;

    the willingness of physicians to prescribe new therapies and use ICM administration;

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    our ability to successfully train neurosurgeons and interventional radiologists in ICM administration of our product candidates;

    the willingness of the target patient population to try new therapies;

    the prevalence and severity of any side effects;

    product labeling or product insert requirements of the FDA or ex-U.S. regulatory authorities, including any limitations or warnings contained in a product's approved labeling;

    relative convenience and ease of administration;

    the strength of marketing and distribution support;

    the timing of market introduction of competitive products;

    publicity concerning our products or competing products and treatments; and

    sufficient third-party payor coverage and adequate reimbursement and patients' willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement.

        Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched.

If in the future we are unable to establish U.S. or global sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates if they are approved and we may not be able to generate any revenue.

        We currently do not have a marketing or sales team for the marketing, sales and distribution of any of our product candidates that may receive regulatory approval. In order to commercialize any product candidates after approval, we must build on a territory-by-territory basis marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If our product candidates receive regulatory approval, we may decide to establish an internal sales or marketing team with technical expertise and supporting distribution capabilities to commercialize our product candidates, which will be expensive and time-consuming and will require significant attention of our executive officers to manage. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of any of our product candidates that we obtain approval to market.

        With respect to the commercialization of all or certain of our product candidates, we may choose to collaborate, either globally or on a territory-by-territory basis, with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements when needed on acceptable terms, or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval or any such commercialization may experience delays or limitations. If we are not successful in commercializing our product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater

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commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. The development of our three lead product candidates and three ongoing discovery programs require significant resources. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Risks Related to Intellectual Property

If we are unable to obtain and maintain patent protection or other necessary rights for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad or our rights under licensed patents is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected.

        Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection in the United States and other countries for our current product candidates and future products, as well as our core technologies, including our manufacturing know-how. We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to the development of our business by seeking, maintaining and defending our intellectual property, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene therapy. Additionally, we intend to rely on regulatory protection afforded through rare drug designations, data exclusivity and market exclusivity as well as patent term extensions, where available.

        Currently, our intellectual property protection consists solely of patent applications that we have in-licensed from Penn under the Penn License Agreement. The in-licensed patent applications are directed to certain new AAV capsids, to recombinant AAV viruses, or rAAV, capable of delivering certain genes into human cells to treat monogenic disorders of the CNS to methods of treating those monogenic diseases with rAAV, as well as certain aspects of our manufacturing capabilities and related technologies.

        We also have options under the Penn License Agreement to add additional intellectual property to our existing license, as described in the section "Business—License Agreement." To date, we have exercised the option with respect to Charcot-Marie Tooth disease. At present, there are no patent families directed to this newly licensed indication.

        The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our licensed patent applications will mature into issued patents, and cannot provide any assurances that any such patents, if issued, will include claims with a scope sufficient to protect our current and future product candidates or otherwise provide any competitive advantage. Additionally, patents can be enforced only in those jurisdictions in which the patent has issued. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally twenty years after its first nonprovisional U.S. filing. The natural expiration of a patent outside of the United States varies in accordance with provisions of applicable local law, but is generally 20 years from the earliest local filing

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date. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

        Moreover, our exclusive license is subject to field restrictions and retained rights, which may adversely impact our competitive position. See "Business—License Agreement." Our licensed patent portfolio may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our product candidates, including biosimilar versions of such products. In addition, the patent portfolio licensed to us is, or may be, licensed to third parties outside our licensed field, and such third parties may have certain enforcement rights. Thus, patents licensed to us could be put at risk of being invalidated or interpreted narrowly in litigation filed by or against another licensee or in administrative proceedings brought by or against another licensee in response to such litigation or for other reasons.

        Other parties have developed technologies that may be related or competitive to our own and such parties may have filed or may file patent applications, or may have received or may receive patents, claiming inventions that may overlap or conflict with those claimed in our own patent applications or issued patents. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and in other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether the inventors of our licensed patents and applications were the first to make the inventions claimed in those patents or pending patent applications, or that they were the first to file for patent protection of such inventions. Further, we cannot assure you that all of the potentially relevant prior art relating to our licensed patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application. As a result, the issuance, scope, validity and commercial value of our patent rights cannot be predicted with any certainty. Further, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

        In addition, the patent prosecution process is expensive and time-consuming, and we or our licensors may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, the scope of the claims initially submitted for examination may be significantly narrowed by the time they issue, if at all. It is also possible that we or our licensors will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We cannot provide any assurances that we will be able to pursue or obtain additional patent protection based on our research and development efforts, or that any such patents or other intellectual property we generate will provide any competitive advantage. Moreover, we do not have the right to control the preparation, filing and prosecution of patent applications, or to control the maintenance of the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be filed, prosecuted or maintained in a manner consistent with the best interests of our business.

        Even if we acquire patent protection that we expect should enable us to maintain competitive advantage, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Third parties, including competitors, may challenge the inventorship, scope, validity, or enforceability thereof, which may result in such patents being narrowed, invalidated or held unenforceable. If issued, our licensed patents may be challenged in patent offices in the United States and abroad, or in court. For example, we may be subject to a third-party submission of prior art to the U.S. Patent and Trademark Office, or USPTO, challenging the validity of one or more claims of our licensed patents, once issued. Such submissions may also be made prior to a patent's issuance, precluding the granting of a patent based on one of our pending licensed patent applications. We may

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become involved in opposition, reexamination, inter partes review, post-grant review, derivation, interference, or similar proceedings in the United States or abroad challenging the claims of patents that we have licensed, once issued. Furthermore, patents that we have licensed may be challenged in court, once issued. Competitors may claim that they invented the inventions claimed in such patents or patent applications prior to the inventors of our licensed patents, or may have filed patent applications before the inventors of our licensed patents did. A competitor may also claim that we are infringing its patents and that we therefore cannot practice our technology as claimed under our licensed patent applications and patents, if issued. As a result, one or more claims of our licensed patents may be narrowed or invalidated. In litigation, a competitor could claim that our patents, if issued, are not valid for a number of reasons. If a court agrees, we would lose our rights to those challenged patents.

        Even if they are unchallenged, our licensed patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our licensed patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, even if we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention if the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license. Moreover, a third party may develop a competitive product that provides benefits similar to one or more of our product candidates but that uses a vector or an expression construct that falls outside the scope of our patent protection or license rights. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.

        Although currently all of our patent applications are in-licensed, similar risks would apply to any patents or patent applications that we may own or in-license in the future.

        In addition to patent protection, if any of our product candidates are approved by the FDA as a biological product under a BLA in the United States, we believe the product would qualify for a 12-year period of exclusivity. Other regulatory exclusivities may be available, such as Orphan Drug exclusivity, with analogous data, marketing, and orphan exclusivities in various foreign countries. However, the scope of such regulatory exclusivities is subject to change, and may not provide us with adequate and continuing protection sufficient to exclude others from commercializing products similar to our product candidates.

All of our current product candidates and discovery programs are licensed from or based upon licenses from a third party and are field limited to certain indications. If this license agreement is terminated or interpreted to narrow our rights, our ability to advance our current product candidates or develop new product candidates based on these technologies will be materially adversely affected.

        We now depend on Penn, and will continue to depend on Penn and on licenses and sublicenses from other third parties, as well as potentially on other strategic relationships with third parties, for the research, development, manufacturing and commercialization of our current product candidates. If any of our licenses or relationships or any in-licenses on which our licenses are based are terminated or breached, we may:

    lose our rights to develop and market our current product candidates;

    lose patent or trade secret protection for our current product candidates;

    experience significant delays in the development or commercialization of our current product candidates;

    not be able to obtain any other licenses on acceptable terms, if at all; or

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    incur liability for damages.

        Additionally, even if not terminated or breached, our intellectual property licenses or sublicenses may be subject to disagreements over contract interpretation which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial or other obligations.

        If we experience any of the foregoing, it could have a materially adverse effect on our business and could force us to cease operations which could cause you to lose all of your investment.

If we breach our license agreements it could have a material adverse effect on our commercialization efforts for our product candidates.

        If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties, we could lose license rights that are important to our business. Our current lead product candidates and pipeline are and our anticipated near term pipeline will be, licensed from Penn.

        Under the Penn License Agreement, we are subject to various obligations, including diligence obligations such as development and commercialization obligations, as well as potential royalty payments and other obligations. If we fail to comply with any of these obligations or otherwise breach our license agreements, our licensors may have the right to terminate the applicable license in whole or in part. Generally, the loss of any one of our current licenses, or any other license we may acquire in the future, could harm our business, prospects, financial condition and results of operations.

        Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including:

    the scope of rights granted under the license agreement and other interpretation-related issues;

    whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

    our right to sublicense patent and other intellectual property rights to third parties under collaborative development relationships;

    our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations;

    the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

    whether and the extent to which inventors are able to contest the assignment of their rights to our licensors.

        If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms or at all, we may be unable to successfully develop and commercialize the affected product candidates. In addition, if disputes arise as to ownership of licensed intellectual property, our ability to pursue or enforce the licensed patent rights may be jeopardized. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.

Our strategy of obtaining rights to key technologies through in-licenses may not be successful.

        We seek to expand our product candidate pipeline in part by in-licensing the rights to key technologies. The future growth of our business will depend in part on our ability to in-license or

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otherwise acquire the rights to additional product candidates or technologies. We cannot assure you that we will be able to in-license or acquire the rights to any product candidates or technologies from third parties on acceptable terms or at all.

        The in-licensing and acquisition of these technologies is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire product candidates or technologies that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to license rights to us. Furthermore, we may be unable to identify suitable product candidates or technologies within our area of focus. If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and prospects could suffer.

Third parties may initiate legal proceedings alleging claims of intellectual property infringement, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

        Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and future products and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and frequent litigation regarding patents and other intellectual property rights. We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates, future products and technology. Our competitors or other third parties may assert infringement or misappropriation claims against us, alleging that our therapeutics, manufacturing methods, formulations or administration methods are covered by their patents. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing product candidates. For example, in connection with our formation, we were indirectly informed of claims that third parties may potentially raise against us or our collaborators regarding our AAVhu68 capsid. We believe that we would have valid defenses to these and any other such claims; however, if any such claims were ultimately successful, we might require a license to continue to use and sell any product candidates using such AAV vector. Such licenses may not be available on commercially reasonable terms, or at all.

        Further, we do not know which processes we will use for commercial manufacture of our future products, or which technologies owned or controlled by third parties may prove important or essential to those processes. Given the vast number of patents in our field of technology, we cannot be certain or guarantee that we do not or will not infringe existing patents or that we will not infringe patents that may be granted in the future. Many companies have filed, and continue to file, patent applications related to gene therapy and orphan diseases. Some of these patent applications have already been allowed or issued and others may issue in the future. Since this area is competitive and of strong interest to pharmaceutical and biotechnology companies, there will likely be additional patent applications filed and additional patents granted in the future, as well as additional research and development programs expected in the future. Furthermore, because patent applications can take many years to issue, may be confidential for 18 months or more after filing and can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use, sale or importation of our product candidates or future products. If a patent holder believes the manufacture, use, sale, offer for sale or importation of one of our product candidates or future products infringes its patent, the patent holder may sue us even if we have licensed other patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant product revenue and against whom our licensed patent portfolio may therefore have no deterrent effect.

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        It is also possible that we have failed to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Moreover, it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to our product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology. In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale, importation or use of a current or future product candidate, or we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our future products or the manufacture or use of our future products.

        Third parties may assert infringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future. If we were to challenge the validity of an issued U.S. patent in court, such as an issued U.S. patent of potential relevance to some of our product candidates or future products or manufacture or methods of use, we would need to overcome a statutory presumption of validity that attaches to every U.S. patent. This means that in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent's claims. There is no assurance that a court would find in our favor on questions of infringement or validity.

        Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we are found, or believe there is a risk we may be found, to infringe a third party's intellectual property rights, we could be required or may choose to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any such license on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. Without such a license, we could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our future products or force us to cease some of our business operations, which could materially harm our business. Alternatively, we may need to redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. If we lose a foreign patent lawsuit alleging our infringement of a competitor's patents, we could be prevented from marketing our therapeutics in one or more foreign countries and/or be required to pay monetary damages for infringement or royalties in order to continue marketing. Claims that we have misappropriated the confidential information, trade secrets or other intellectual property of third parties could have a similar negative impact on our business. Any of these outcomes would have a materially adverse effect on our business.

        Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our future products or processes. Patent litigation is costly and time-consuming, and some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. We may not have sufficient resources to bring these actions to a successful conclusion. Furthermore, because of the substantial amount of discovery

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required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts, adversely affect our ability to raise additional funds, and could limit our ability to continue our operations.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.

        In addition to the protection afforded by patents, we rely upon unpatented trade secret protection, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our contractors, collaborators, scientific advisors, employees and consultants and invention assignment agreements with our consultants and employees. We may not be able to prevent the unauthorized disclosure or use of our technical know-how or other trade secrets by the parties to these agreements, however, despite the existence generally of confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures is difficult and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the contractors, collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation. As a result, we could lose our trade secrets. Enforcing a claim that a third party illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing or unwilling to protect trade secrets.

        Our trade secrets could otherwise become known or be independently discovered by our competitors. Competitors could purchase our product candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If our trade secrets are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be adversely affected, as could our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent. While an unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in premature abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidates, we may

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not be able to stop a competitor from marketing drugs that are the same as or similar to our product candidates, which would have a material adverse effect on our business.

We may not be able to protect our intellectual property rights throughout the world.

        Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly in developing countries. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Further, licensing partners may not prosecute patents in certain jurisdictions in which we may obtain commercial rights, thereby precluding the possibility of later obtaining patent protection in these countries. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

        Our in-licensed patent family drawn to AAVhu68 capsids is pending in major pharmaceutical markets including the United States, Canada, Europe, Japan, Korea, and China, as well as in 19 other jurisdictions; we will not be able to enforce the patent in any jurisdictions in which the application has not been filed. The four additional licensed patent families can still be filed in all jurisdictions; however, filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and we or our licensor may be unable to predict and may fail to seek patent protection in jurisdictions in which protection may ultimately be desired.

        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

        Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. The outcome following legal assertions of

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invalidity and unenforceability is unpredictable. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent's claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

        Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Changes in patent law in the United States and in non-U.S. jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

        As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.

        Past or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. For example, in March 2013, under the Leahy-Smith America Invents Act, or America Invents Act, the United States moved from a "first to invent" to a "first-inventor-to-file" patent system. Under a "first-inventor-to-file" system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. The America Invents Act includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new post-grant review system. The effects of these changes are currently unclear as the USPTO continues to promulgate new regulations and procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the "first-inventor-to-file" provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of the act and new regulations on the specific patents discussed in this filing have not been determined and would need to be reviewed. However, the America Invents Act and its implementation could increase the uncertainties

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and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

        Additionally, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in the case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not eligible for patent protection. We cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents. Any similar adverse changes in the patent laws of other jurisdictions could also have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be subject to claims asserting that our employees, consultants, advisors or collaborators have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of or other rights to what we regard as our own or licensed intellectual property.

        Many of our employees, consultants or advisors, and the employees, consultants or advisors of our licensors, are currently, or were previously, employed at or affiliated with universities, hospitals or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual's current or former employer. Moreover, some of our licensors, and our or our licensors' employees, consultants or advisors are or have been affiliated or have a contractual relationship with multiple institutions and companies including our competitors and may have or have had an obligation to them. Such institutions and companies could challenge our license rights or our licensors' intellectual property ownership rights. Litigation may be necessary to defend against these claims and we may be obligated to indemnify our employees, consultants, advisors or collaborators in certain instances. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

        In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.

Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

        Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting our product candidates might expire before or shortly after we or our partners commercialize those candidates. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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If we do not obtain patent term extension for any product candidates we may develop, our business may be materially harmed.

        Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent per product may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, even if we were to seek a patent term extension, it may not be granted because of, for example, the failure to exercise due diligence during the testing phase or regulatory review process, the failure to apply within applicable deadlines, the failure to apply prior to expiration of relevant patents, or any other failure to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.

Some intellectual property that we have in-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as "march-in" rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.

        Many of the intellectual property rights we have licensed are generated through the use of U.S. government funding and are therefore subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act, and implementing regulations. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us or our licensors to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as "march-in rights"). The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. These time limits have recently been changed by regulation, and may change in the future. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. In addition, the U.S. government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.

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Risks Related to Government Regulation

The pricing, insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.

        Our lead product target indications are indications with small patient populations. In order for products that are designed to treat smaller patient populations to be commercially viable, the reimbursement for such products must be higher, on a relative basis, to account for the lack of volume. Accordingly, we will need to implement a coverage and reimbursement strategy for any approved product candidate that accounts for the smaller potential market size. If we are unable to establish or sustain coverage and adequate reimbursement for any future product candidates from third-party payors, the adoption of those products and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved.

        We expect the cost of a single administration of gene therapy products, such as those we are developing, to be substantial when and if they achieve regulatory approval. Therefore, we expect that coverage and reimbursement by government and private payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of any of our product candidates will depend substantially, both domestically and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

        There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, since CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. However, one payor's determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Further, a payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. It is difficult to predict what CMS will decide with respect to reimbursement for novel products such as ours since there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may be more conservative than CMS.

        Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as our product candidates. In many countries, particularly the countries of the EU, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared

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with the United States and may be insufficient to generate commercially reasonable revenues and profits.

        Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of certain third-party payors, such as health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market.

        In addition to CMS and private payors, professional organizations such as the American Medical Association can influence decisions about reimbursement for new products by determining standards for care. In addition, many private payors contract with commercial vendors who sell software that provide guidelines that attempt to limit utilization of, and therefore reimbursement for, certain products deemed to provide limited benefit to existing alternatives. Such organizations may set guidelines that limit reimbursement or utilization of our product candidates. Even if favorable coverage and reimbursement status is attained for one or more products for which we or our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

A Breakthrough Therapy Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and it does not increase the likelihood that our product candidates will receive marketing approval.

        We may seek a Breakthrough Therapy Designation for our product candidates if the clinical data support such a designation for one or more product candidates. A breakthrough therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug, or biologic in our case, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Biologics designated as breakthrough therapies by the FDA may also be eligible for accelerated approval.

        Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under non-expedited the FDA review procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product no longer meets the conditions for qualification.

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A Regenerative Medicine Advanced Therapy, or RMAT, Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and it does not increase the likelihood that our product candidates will receive marketing approval.

        We plan to seek RMAT Designations if the clinical data support such a designation for one or more product candidates. RMAT Designation is an expedited program for the advancement and approval of regenerative medicine products where preliminary clinical evidence indicates the potential to address unmet medical needs for life-threatening diseases or conditions. Similar to Breakthrough Therapy Designation, the RMAT Designation allows companies developing regenerative medicine therapies to work more closely and frequently with the FDA, and RMAT-designated products may be eligible for priority review and accelerated approval. FDA has confirmed that gene therapies, including genetically modified cells, that lead to a sustained effect on cells or tissues may meet the definition of a regenerative medicine therapy. For product candidates that have received an RMAT Designation, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.

        RMAT Designation is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for RMAT Designation, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of RMAT Designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under non-expedited FDA review procedures and does not assure ultimate approval by the FDA. In addition, even if a product candidate qualifies as an RMAT therapy, the FDA may later decide that the product candidate no longer meets the conditions for qualification.

If we decide to pursue a Fast Track Designation by the FDA, it may not lead to a faster development or regulatory review or approval process.

        We may seek Fast Track Designation for one or more of our product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for FDA Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

If we decide to seek Orphan Drug Designation for some of our product candidates, we may be unsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for supplemental market exclusivity.

        As part of our business strategy, we may seek Orphan Drug Designation for one or more of our product candidates, and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as tax advantages and user fee waivers. Opportunities for grant funding toward clinical trial costs may also be available for clinical trials of drugs for rare diseases, regardless of whether the drugs are designated for the orphan use. In addition, if a product that has

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Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years, except in limited circumstances. For large molecule drugs, including gene therapies, sameness is determined based on principal molecular structural features of a product. As applied to gene therapies, the FDA has recently issued draft guidance in which it stated it would consider certain key features, such as the transgenes expressed by the gene therapy and the vectors used to deliver the transgene, to be principal molecular structural features. With regard to vectors, the FDA intends to consider whether two vectors from the same viral class are the same or different on a case-by-case basis. The FDA does not intend to consider minor differences between transgenes and vectors to be different principal molecular structural features. The FDA also intends to consider whether additional features of the final gene therapy product, such as regulatory elements and the cell type that is transduced (for genetically modified cells), should also be considered to be principal molecular structural features.

        Even if we obtain Orphan Drug Designation for our product candidates in specific indications, we may not be the first to obtain marketing approval of these product candidates for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. If a competitor with a product that is determined by the FDA to be the same as one of our product candidates obtains marketing approval before us for the same indication we are pursuing and obtains orphan drug exclusivity, our product candidate may not be approved until the period of exclusivity ends unless we are able to demonstrate that our product candidate is clinically superior. Even after obtaining approval, we may be limited in our ability to market our product. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different principal molecular structural features can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same principal molecular structural features for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we may seek Orphan Drug Designation for our product candidates, we may never receive such designations.

        The recent tax reform legislation, which was signed into law on December 22, 2017 reduced the amount of the qualified clinical research costs for a designated orphan product that a sponsor may claim as a credit from 50% to 25%. Thus, further limiting the advantage and may impact our future business strategy of seeking the Orphan Drug Designation.

Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.

        Our product candidates and the activities associated with their development and potential commercialization, including their testing, manufacture, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMPs, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and

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documents, including periodic inspections by the FDA and other regulatory authorities and requirements regarding the distribution of samples to physicians and recordkeeping.

        The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of any approved product. The FDA closely regulates the post-approval marketing and promotion of drugs and biologics to ensure drugs and biologics are marketed only for the approved indications and in accordance with the provisions of the approved product labeling. The FDA imposes stringent restrictions on manufacturers' communications regarding use of their products. If we promote our product candidates beyond their potentially approved indications, we may be subject to enforcement action for off-label promotion. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

        In addition, later discovery of previously unknown adverse events or other problems with our product candidates, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

    restrictions on such product candidates, manufacturers or manufacturing processes;

    restrictions on the labeling or marketing of a product;

    restrictions on product distribution or use;

    requirements to conduct post-marketing studies or clinical trials;

    warning or untitled letters;

    withdrawal of any approved product from the market;

    refusal to approve pending applications or supplements to approved applications that we submit;

    recall of product candidates;

    fines, restitution or disgorgement of profits or revenues;

    suspension or withdrawal of marketing approvals;

    refusal to permit the import or export of our product candidates;

    product seizure; or

    injunctions or the imposition of civil or criminal penalties.

        Non-compliance with European requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Our product candidates for which we intend to seek approval may face competition from biosimilars sooner than anticipated.

        With the enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, an abbreviated pathway for the approval of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as interchangeable based on its similarity to an existing reference product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product is approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its

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ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

        We believe that if any of our product candidates is approved as a biological product under a BLA, it should qualify for the 12-year period of exclusivity. However, there is a risk that the FDA will not consider any of our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Finally, there has been public discussion of potentially decreasing the period of exclusivity from the current 12 years. If such a change were to be enacted, our product candidates, if approved, could have a shorter period of exclusivity than anticipated.

Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.

        In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products for which we obtain marketing approval.

        For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the Affordable Care Act, or the ACA, was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. As implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

        Moreover, the Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or what the impact of such changes on our business, if any, may be.

Our operations and relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to penalties including criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

        Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any product candidates for which we obtain marketing approval.

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        Restrictions under applicable U.S. federal and state healthcare laws and regulations may include the following:

    the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

    federal false claims laws, including the federal False Claims Act, imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

    the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

    HIPAA, as amended by the Health Information Technology for Economic and Clinical Health, or HITECH, Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

    the federal Physician Payment Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program, with specific exceptions, to report payments and other transfers of value to physicians and teaching hospitals, as well as certain ownership and investment interests held by physicians and their immediate family, which includes annual data collection and reporting obligations; and

    analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

        Some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Other state laws require reporting of certain pricing information, including price increases. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

        Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of product candidates from government-funded healthcare programs, such as Medicare and Medicaid, disgorgement, oversight monitoring, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is

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found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.

Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business

We expect to rapidly expand our manufacturing, development and regulatory capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

        We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of manufacturing and clinical strategy, and growing our capability to conduct clinical trials. To manage our current development programs and anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

        We are highly dependent on the research and development, clinical and business development expertise of our management, scientific and clinical team. We also benefit from the research expertise of Dr. Wilson, our Chief Scientific Advisor. Although we have entered into a consulting agreement with Dr. Wilson, he may terminate his relationship with us at any time. Although we have entered into employment letter agreements or employment agreements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and manufacturing strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

        Recruiting and retaining qualified scientific, clinical, manufacturing and, if needed, sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize drugs, particularly within the gene therapy space. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.

Our internal computer systems, or those of our third-party collaborators or other contractors, may fail or suffer security breaches, which could result in a material disruption of our development programs.

        We believe that we take reasonable steps that are designed to protect the security, integrity and confidentiality of the information we collect, use, store, and disclose, but inadvertent or unauthorized

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data access may occur despite our efforts. For example, our system protections may be ineffective or inadequate, or we could be impacted by software bugs or other technical malfunctions, as well as employee error or malfeasance. While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition, while we believe we have adequate insurance coverage to compensate for any losses associated with such events, the coverage may in fact not be adequate to cover all potential losses. The development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated.

        To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

We are subject to a variety of privacy and data security laws, and our failure to comply with them could harm our business.

        We maintain a large quantity of sensitive information, including confidential business and personal information in connection with our preclinical studies and our employees, and are subject to laws and regulations governing the privacy and security of such information. In the United States, there are numerous federal and state privacy and data security laws and regulations governing the collection, use, disclosure and protection of personal information, including federal and state health information privacy laws, federal and state security breach notification laws, and federal and state consumer protection laws. Each of these constantly evolving laws can be subject to varying interpretations. In May 2018, a new privacy regime, the General Data Protection Regulation or the GDPR, took effect in the European Economic Area, or the EEA. The GDPR governs the collection, use, disclosure, transfer or other processing of personal data of European persons. Among other things, the GDPR imposes requirements regarding the security of personal data and notification of data processing obligations to the competent national data processing authorities, changes the lawful bases on which personal data can be processed, expands the definition of personal data and requires changes to informed consent practices, as well as more detailed notices for clinical trial subjects and investigators. In addition, the GDPR increases the scrutiny of transfers of personal data from clinical trial sites located in the EEA to the United States and other jurisdictions that the European Commission does not recognize as having "adequate" data protection laws, and imposes substantial fines for breaches and violations (up to the greater of €20 million or 4% of our consolidated annual worldwide gross revenue). The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.

        Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly. In addition, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing regulatory requirements. For example, California enacted the California Consumer Privacy Act, or the CCPA, on June 28, 2018, which takes effect on January 1, 2020 and has been dubbed the first "GDPR-like" law in the United

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States. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Other states are beginning to pass similar laws. For example, an amendment to Nevada's privacy laws, which went into effect October 1, 2019, requires us to offer to consumers the right to opt-out of the sale of their personal information.

Our ability to utilize our net operating loss carryforwards may be subject to limitation.

        As of December 31, 2019, we had federal state and city net operating loss carryforwards, or NOLs, of $44.0 million, $44.0 million and $43.8 million, respectively; an aggregate of $0.3 million of the federal and state NOLs will begin to expire in 2037, if unused, and the remainder will carryforward indefinitely. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any. Under legislative changes made by U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act, or the TCJA, U.S. federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the ability to utilize such federal net operating losses to offset taxable income is limited to 80% of our taxable income before the deduction for such net operating loss carryovers. It is uncertain if and to what extent various states will conform to the TCJA.

        Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the IRC, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We have not undertaken a Section 382 study, and it is possible that we have previously undergone one or more ownership changes so that our use of net operating losses is subject to limitation. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

U.S. federal income tax reform and changes in other tax laws could adversely affect us.

        In December 2017 the TCJA was signed into law, significantly reforming the IRC. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of business interest, allows for the expensing of capital expenditures, taxes certain foreign earnings on a current basis, and modifies or repeals many business deductions and credits.

        We are still awaiting guidance from the IRS and other tax authorities on some of the TCJA changes that may affect us, and components of the TCJA could be repealed or modified in future legislation. Furthermore, it is uncertain if and to what extent various states will conform to the TCJA or any newly enacted federal legislation. In addition, new legislation or regulation which could affect our tax burden could be enacted by any governmental authority. We cannot predict the timing or extent of such tax-related developments which could have a negative impact on our financial results. Additionally, we use our best judgment in attempting to quantify and reserve for these tax obligations. However, a challenge by a taxing authority, our ability to utilize tax benefits such as carryforwards or

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tax credits, or a deviation from other tax-related assumptions could have a material adverse effect on our business, results of operations, or financial condition.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

        Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including, weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

        Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business.

Our employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

        We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We intend to adopt a code of conduct applicable to all of our employees upon the completion of this offering, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

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Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidates that we may develop.

        We will face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials and will face an even greater risk if we commercialize any of our product candidates. If we cannot successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

    decreased demand for any product candidates that we may develop;

    injury to our reputation and significant negative media attention;

    initiation of investigations by regulators;

    withdrawal of clinical trial participants;

    significant time and costs to defend the related litigation;

    diversion of management and scientific resources from our business operations'

    substantial monetary awards to trial participants or patients;

    loss of revenue; and

    the inability to commercialize any product candidates that we may develop.

        As a preclinical company, we do not currently hold product liability insurance coverage. We will need to purchase product liability insurance coverage as we initiate our clinical trials, as we expand our clinical trials, and if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. A successful product liability claim or series of claims brought against us, could decrease our cash and adversely affect our business and financial condition.

We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations which can harm our business.

        We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other partners from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other partners, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

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Risks Related to Our Common Stock and this Offering

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

        Our stock price is likely to be volatile. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

    results of preclinical studies or clinical trials of our product candidates or those of our competitors;

    unanticipated or serious safety concerns related to the use of any of our product candidates;

    adverse regulatory decisions, including failure to receive regulatory approval for any of our product candidates;

    the success of competitive drugs or technologies;

    regulatory or legal developments in the United States and other countries applicable to our product candidates;

    the size and growth of our prospective patient populations;

    developments concerning our collaborators, our external manufacturers or in-house manufacturing capabilities;

    inability to obtain adequate product supply for any product candidate for preclinical studies, clinical trials or future commercial sale or inability to do so at acceptable prices;

    developments or disputes concerning patent applications, issued patents or other proprietary rights;

    the recruitment or departure of key personnel;

    the level of expenses related to any of our product candidates or clinical development programs;

    the results of our efforts to discover, develop, acquire or in-license additional product candidates or drugs;

    actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts or publications of research reports about us or our industry;

    variations in our financial results or those of companies that are perceived to be similar to us;

    changes in the structure of healthcare payment systems;

    market conditions in the biotechnology sector;

    our cash position or the announcement or expectation of additional financing efforts;

    general economic, industry and market conditions; and

    other factors, including those described in this "Risk Factors" section, many of which are beyond are control.

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An active trading market for our common stock may not develop and you may not be able to resell your shares at or above the initial public offering price, or at all.

        Prior to this offering, there has been no public market for shares of our common stock. Although we have applied to list our common stock on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price of our common stock will be determined through negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our common stock after this offering. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the initial public offering price or at the time that they would like to sell.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

        The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

Our executive officers, directors, principal stockholders and their affiliates will continue to exercise significant influence over our company after this offering, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control.

        As of January 31, 2020, our executive officers, directors, beneficial owners of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 89% of our capital stock and, upon the closing of this offering, that same group will hold approximately 74% of our outstanding capital stock (assuming no exercise of the underwriters' option to purchase additional shares, no exercise of outstanding options and no purchases of shares in this offering by any members of this group). Further, certain of our directors, executive officers, employees and other persons associated with us have indicated an interest to purchase an aggregate of up to 2.5% of the common stock in this offering at the initial public offering price in a directed share program.

        After this offering, this group of stockholders will have the ability to control us through this ownership position even if they do not purchase any additional shares in this offering. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

        See "Principal Stockholders" in this prospectus for more information regarding the ownership of our outstanding common stock by our executive officers, directors and beneficial owners of 5% or more of our capital stock.

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Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

        We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting our planned clinical trials, manufacturing and commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have 39,398,295 shares of common stock outstanding based on the number of shares outstanding as of December 31, 2019. This includes the 7,400,000 shares that we sell in this offering, which may be resold in the public market immediately without restriction. The remaining 31,998,295 shares of our common stock will be subject to lock-up agreements with the underwriters of this offering and/or market standoff agreements that restrict the stockholders' ability to transfer shares of our common stock for 180 days from the date of this prospectus.

        Moreover, after this offering, holders of an aggregate of 26,803,777 shares of our common stock will have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. See "Description of Capital Stock—Registration Rights." We also intend to register all shares of common stock that we may issue under our equity incentive plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting" section of this prospectus. Any sales of securities by these stockholders could have a material adverse effect on the market price of our common stock.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

        We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will be limited to the appreciation of stock. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in value of the stock. We cannot guarantee you that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

        Our management will have broad discretion to use the net proceeds from this offering, including for any of the purposes described in the section entitled "Use of Proceeds," and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity to influence our decisions on how to use the proceeds, and we may not apply the net proceeds of this offering in ways that increase the value of your investment. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. We expect to use the net proceeds from this offering to advance preclinical and clinical development of our product candidate programs; and for general corporate purposes, including working capital. We may also use a portion of the proceeds for the acquisition of, or investment in, technologies, intellectual property or businesses that complement our business, although we have no present commitments or agreements to this effect.

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The failure by our management to apply these funds effectively could harm our business. Pending their use, we intend to invest the net proceeds from this offering in marketable securities that may include investment-grade interest-bearing securities, money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

        The initial public offering price of our common stock will be substantially higher than the pro forma as adjusted net tangible book value per share of our common stock. Therefore, you will suffer immediate and substantial dilution in the net tangible book value of our common stock you purchase in this offering. Assuming an initial public offering price of $17.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, purchasers of common stock in this offering will experience immediate dilution of $9.52 per share in net tangible book value of our common stock. In addition, purchasers of common stock in this offering will have contributed approximately 36% of the aggregate price paid by all purchasers of our stock but will own only approximately 19% of our common stock outstanding after this offering.

        In the past, we issued options and other securities to acquire common stock at prices below the initial public offering price. To the extent these outstanding securities are ultimately exercised, investors purchasing common stock in this offering will sustain further dilution. See "Dilution" for a more detailed description of the dilution to new investors in the offering.

If we fail to establish and maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors' views of us and, as a result, the value of our common stock.

        We are not currently required to comply with the Securities and Exchange Commission's, or SEC's, rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Stock Market LLC, or Nasdaq.

        As we grow, we expect to hire additional personnel and may utilize external temporary resources to implement, document and modify policies and procedures to maintain effective internal controls. However, it is possible that we may identify deficiencies and weaknesses in our internal controls. If material weaknesses or deficiencies in our internal controls exist and go undetected or unremediated,

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our financial statements could contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our common stock to decline.

We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives.

        As a public company, particularly after we are no longer an "emerging growth company," we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

We are an "emerging growth company" and "smaller reporting company," and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

    not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    being permitted to present only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure in this prospectus;

    reduced disclosure obligations regarding executive compensation; and

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

        We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of reduced reporting burdens in this prospectus. In particular, we have provided only two years of audited financial statements and have not included all of the executive compensation information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting

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company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

        In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

        We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

The exclusive forum provision in our restated certificate of incorporation may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

        Our restated certificate of incorporation, to the fullest extent permitted by law, will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, or the DGCL, our restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or the Exchange Act. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum provision and asserts claims under the Securities Act, inasmuch as Section 22 of the Securities Act, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rule and regulations thereunder. There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

        This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

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        In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions in our restated certificate of incorporation and our restated bylaws that will become effective upon the completion of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

    establish a classified board of directors so that not all members of our board are elected at one time;

    permit only the board of directors to establish the number of directors and fill vacancies on the board;

    provide that directors may only be removed "for cause" and only with the approval of two-thirds of our stockholders;

    require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;

    authorize the issuance of "blank check" preferred stock that our board could use to implement a stockholder rights plan, also known as a "poison pill";

    eliminate the ability of our stockholders to call special meetings of stockholders;

    prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

    prohibit cumulative voting; and

    establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

        Moreover, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

        Any of these provisions of our charter documents or Delaware law could, under certain circumstances, depress the market price of our common stock. See the section entitled "Description of Capital Stock."

We may be subject to securities litigation, which is expensive and could divert management attention.

        The market price of our common stock may be volatile. The stock market in general, and Nasdaq and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements concerning our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by such terminology as "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect" and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" and elsewhere in this prospectus. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements include statements about:

    our ability to develop, obtain regulatory approval for and commercialize PBGM01, PBFT02, PBKR03 and our future product candidates;

    the timing of our planned IND submissions, initiation of clinical trials and timing of expected clinical results for PBGM01, PBFT02, PBKR03 and our other future product candidates;

    our success in early preclinical studies or clinical trials, which may not be indicative of results obtained in later studies or trials;

    the potential benefits of our product candidates;

    our ability to obtain regulatory approval to commercialize our existing or any other future product candidate;

    our ability to identify patients with the diseases treated by PBGM01, PBFT02, PBKR03 or our future product candidates, and to enroll patients in trials;

    the success of our efforts to expand our pipeline of product candidates and develop marketable products;

    our ability to obtain, maintain and protect our intellectual property;

    our reliance upon intellectual property licensed from third parties;

    our ability to identify, recruit and retain key personnel;

    our expected use of net proceeds from this offering and the sufficiency of such net proceeds, together with our cash and cash equivalents, to fund our operations;

    our financial performance; and

    developments or projections relating to our competitors or our industry.

        Forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management's beliefs and assumptions are not guarantees of future performance or development.

        You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot

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guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.

        You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

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MARKET, INDUSTRY AND OTHER DATA

        This prospectus contains estimates and other statistical data made by independent parties, as well as analyses by independent third parties that we commissioned, and relating to our industry and the markets in which we operate, including estimates and statistical data about our market position, market opportunity, the incidence of certain medical conditions and other industry data. These data, to the extent they contain estimates or projections, involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates or projections. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications and reports, based on our industry experience we believe that the publications are reliable, the conclusions contained in the publications and reports are reasonable and the third-party information included in this prospectus and in our estimates is accurate and complete. While we are not aware of any misstatements regarding the industry, survey or research data provided herein, our estimates involve risks and uncertainties and are subject to change based upon various factors, including those discussed under the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements." These and other factors could cause results to differ materially from those expressed in these publications and reports.

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USE OF PROCEEDS

        We estimate the net proceeds from this offering will be approximately $113.8 million, or $131.3 million if the underwriters exercise in full their option to purchase additional shares, assuming an initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

        Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by $6.9 million, assuming the number of shares of common stock offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of 1,000,000 in the number of shares of common stock offered would increase (decrease) the net proceeds by $15.8 million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

        We currently intend to use the net proceeds we receive from this offering, together with our existing cash and cash equivalents, as follows:

    approximately $39 million to fund further development of our PBGM01 product candidate through completion of our IND submission and receipt of initial clinical data from the first two cohorts of our planned Phase 1/2 clinical trial;

    approximately $42 million to fund further development of our PBFT02 product candidate through completion of our IND submission and receipt of initial clinical data from the first two cohorts of our planned Phase 1/2 clinical trial;

    approximately $34 million to fund further development of our PBKR03 product candidate through completion of our IND submission and receipt of initial clinical data from the first two cohorts of our planned Phase 1/2 clinical trial;

    approximately $63 million to advance our discovery and candidate selection stage programs; and

    any remaining amounts to fund working capital and general corporate purposes.

        Based on our planned use of the net proceeds, we estimate such funds, together with our existing cash and cash equivalents, will be sufficient for us to fund our operating expenses and capital expenditure requirements through the second quarter 2022. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.

        The expected use of the net proceeds from the offering represents our intentions based upon our current plans and business conditions. The amounts we actually expend in these areas, and the timing thereof, may vary significantly from our current intentions and will depend on a number of factors, including the success of research and product development efforts, cash generated from future operations and actual expenses to operate our business. We may use a portion of the net proceeds for the acquisition of, or investment in, businesses that complement our business, although we have no present commitments or agreements. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering.

        The expected net proceeds of this offering will not be sufficient for us to fund any of our product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of our product candidates.

        Pending the uses described above, we intend to invest the net proceeds from this offering in short term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2019:

    on an actual basis;

    on a pro forma basis giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of December 31, 2019 into an aggregate of 26,803,777 shares of common stock immediately prior to the completion of this offering as if such conversion had occurred on December 31, 2019 and (ii) the effectiveness of our restated certificate of incorporation in connection with the completion of this offering; and

    on a pro forma as adjusted basis giving further effect to the issuance and sale of 7,400,000 shares of common stock in this offering at an assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

        You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Financial Data" and our financial statements and related notes, each included elsewhere in this prospectus.

 
  As of December 31, 2019  
(in thousands, except share and per share amounts)
  Actual   Pro forma   Pro forma
as adjusted(1)
 

Cash and cash equivalents

  $ 158,874   $ 158,874   $ 273,431  

Convertible preferred stock, $0.0001 par value per share; 118,825,466 shares authorized, issued and outstanding as of December 31, 2019, actual; no shares issued or outstanding, pro forma and pro forma as adjusted. 

  $ 230,605   $   $  

Stockholders' (deficit) equity:

                   

Preferred stock, $0.0001 par value per share: no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized, no shares issued or outstanding pro forma and pro forma as adjusted

             

Common stock, $0.0001 par value per share: 179,000,000 shares authorized, 5,194,518 shares issued and 4,293,039 shares outstanding, actual; 300,000,000 shares authorized, 31,998,295 shares issued and 31,096,816 shares outstanding, pro forma; 300,000,000 shares authorized, 39,398,295 shares issued and 38,496,816 shares outstanding, pro forma as adjusted

        3     4  

Additional paid-in-capital

    2,410     233,012     346,805  

Accumulated deficit

    (58,663 )   (58,663 )   (58,663 )

Total stockholders' (deficit) equity

    (56,253 )   174,352     288,146  

Total capitalization

  $ 174,352   $ 174,352   $ 288,146  

(1)
The pro forma as adjusted information is illustrative only and will change based on the actual initial public offering price and other terms of this offering as determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in-capital, total stockholders'

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    equity and total capitalization by $6.9 million, assuming that the number of shares offered remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 in the number of shares of common stock offered would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in-capital, total stockholders' equity and total capitalization by $15.8 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.

The table above excludes the following shares:

2,577,719 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2019 under our 2018 Plan with a weighted-average exercise price of $5.90 per share;

2,408,078 shares of common stock issuable upon the exercise of options granted after December 31, 2019 under the 2018 Plan with an exercise price of $11.00 per share;

673,471 shares of common stock issuable upon the exercise of options we expect to grant to certain of our directors, executive officers and other employees pursuant to our 2020 Equity Incentive Plan immediately following effectiveness of the registration statement of which this prospectus forms a part at an exercise price equal to the initial public offering price per share; and

5,123,352 additional shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 1,991,259 additional shares of common stock reserved for future issuance under our 2018 Plan as of December 31, 2019, (ii) 3,266,529 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan after the issuance of the awards described above, which will become effective on the date immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part and (iii) 434,000 shares of common stock reserved for future issuance under our 2020 Employee Stock Purchase Plan, which will become effective on the date of the effectiveness of the registration statement of which this prospectus forms a part. Upon completion of this offering, any remaining shares of common stock available for issuance under our 2018 Plan will be added to the shares of common stock reserved under our 2020 Equity Incentive Plan and we will cease granting awards under our 2018 Plan. Our 2020 Equity Incentive Plan and our 2020 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares of common stock reserved under the plans each year, as more fully described in "Executive Compensation—Equity Compensation Plans and Other Benefit Plans;" and

901,479 shares issued but not outstanding for accounting purposes due to being subject to forfeiture or repurchase, or securing promissory notes that were subsequently canceled.

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.

        Net tangible book deficit per share is determined by dividing our total tangible assets (which excludes deferred offering costs) less our total liabilities and convertible preferred stock by the number of shares of common stock outstanding. Our historical net tangible book deficit as of December 31, 2019 was $(58.0) million, or $(13.50) per share, based on 4,293,039 shares of common stock outstanding as of December 31, 2019. Our pro forma net tangible book value as of December 31, 2019 was $172.6 million, or $5.55 per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets (which excludes deferred offering costs) reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of December 31, 2019, after giving effect to the automatic conversion of our convertible preferred stock as of December 31, 2019 into an aggregate of 26,803,777 shares of common stock immediately prior to the completion of this offering.

        Net tangible book value dilution per share to new investors in this offering represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving effect to (i) the pro forma adjustments set forth above and (ii) our sale in this offering of 7,400,000 shares of our common stock at an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2019 would have been $288.1 million, or $7.48 per share of our common stock. This represents an immediate increase in pro forma net tangible book value of $1.93 per share to our existing stockholders and an immediate dilution of $9.52 per share to investors in this offering, as illustrated in the following table:

Assumed initial public offering price, per share

        $ 17.00  

Historical net tangible book deficit as of December 31, 2019

  $ (13.50 )      

Increase in net tangible book value per share attributable to the conversion of outstanding preferred stock

    19.05        

Pro forma net tangible book value per share as of December 31, 2019

    5.55        

Increase in pro forma net tangible book value per share attributable to new investors in this offering

    1.93        

Pro forma as adjusted net tangible book value per share after this offering

          7.48  

Dilution per share to new investors participating in this offering

        $ 9.52  

        Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $6.9 million, or $0.18 per share, and the dilution in pro forma as adjusted net tangible book value per share to new investors in this offering by $0.82 per share, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase of 1,000,000 in the number of shares of common stock offered in this offering would increase our pro forma as adjusted net tangible book value by $15.8 million, or $0.22 per share, and would decrease dilution per share to new investors in this offering by $0.22 per

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share and each decrease of 1,000,000 in the number of shares of common stock offered in this offering would decrease our pro forma as adjusted net tangible book value by $15.8 million, or $0.22 per share, and would increase dilution per share to new investors in this offering by $0.22 per share, assuming the assumed initial public offering price per share remains the same and after deducting the estimated underwriting discounts and commissions.

        If the underwriters exercise in full their option to purchase additional shares, the pro forma as adjusted net tangible book value per share after this offering would be $7.72 per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $2.17 per share and the dilution to new investors in this offering would be $9.28 per share.

        The following table shows, as of December 31, 2019, on the pro forma as adjusted basis described above, the differences between the existing stockholders and the purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes proceeds received from the issuance of common and convertible preferred stock, cash received from the exercise of stock options and the value of any stock issued for services, and the average price paid per share (in thousands, except per share amounts and percentages):

 
  Shares
purchased
   
   
   
 
 
  Total consideration    
 
 
  Weighted average price
per share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

    31,096,816     81 % $ 226,547,969     64 % $ 7.29  

New investors

    7,400,000     19     125,800,000     36     17.00  

Total

    38,496,816     100 % $ 352,347,969     100 %      

        Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters' option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own 79% and our new investors would own 21% of the total number of shares of our common stock outstanding upon the completion of this offering.

        Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by $7.4 million, assuming that the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 in the number of shares of common stock offered in this offering would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by $17.0 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.

        The number of shares of common stock outstanding as of December 31, 2019 excludes:

    2,577,719 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2019 under our 2018 Equity Incentive Plan, or the 2018 Plan, with a weighted-average exercise price of $5.90 per share;

    2,408,078 shares of common stock issuable upon the exercise of options granted after December 31, 2019 under the 2018 Plan with an exercise price of $11.00 per share;

    673,471 shares of common stock issuable upon the exercise of options we expect to grant to certain of our directors, executive officers and other employees pursuant to our 2020 Equity Incentive Plan immediately following effectiveness of the registration statement of which this

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      prospectus forms a part at an exercise price equal to the initial public offering price per share; and

    5,123,352 additional shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 1,991,259 shares of common stock reserved for future issuance under our 2018 Plan as of December 31, 2019, (ii) 3,266,529 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan after the issuance of the awards described above, which will become effective on the date immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part; and (iii) 434,000 shares of common stock reserved for future issuance under our 2020 Employee Stock Purchase Plan, which will become effective on the date of the effectiveness of the registration statement of which this prospectus forms a part. Upon completion of this offering, any remaining shares of common stock available for issuance under our 2018 Plan will be added to the shares of common stock reserved under our 2020 Equity Incentive Plan and we will cease granting awards under our 2018 Plan. Our 2020 Equity Incentive Plan and our 2020 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares of common stock reserved under the plans each year, as more fully described in "Executive Compensation—Equity Compensation Plans and Other Benefit Plans;" and

    901,479 shares issued but not outstanding for accounting purposes due to being subject to forfeiture or repurchase, or securing promissory notes that were subsequently canceled.

        To the extent that these outstanding stock options are exercised, new stock options or other equity awards are granted or we issue additional shares of common stock in the future, there will be further dilution to new investors. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

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SELECTED FINANCIAL DATA

        The following tables set forth our selected financial data as of, and for, the periods ended on the dates indicated. The selected statements of operations data presented below for the years ended December 31, 2018 and 2019 and the selected balance sheet data as of December 31, 2018 and 2019 are derived from our financial statements included elsewhere in this prospectus. The selected financial data included in this section are not intended to replace the financial statements and related notes included elsewhere in this prospectus. The following selected financial data should be read in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.

 
  Year ended
December 31,
 
(in thousands, except share and per share data)
  2018   2019  

Statements of Operations Data:

             

Operating expenses:

             

Research and development

  $ 9,167   $ 29,738  

Acquired in-process research and development

    3,371     500  

General and administrative

    928     6,951  

Loss from operations

    (13,466 )   (37,189 )

Change in fair value of future tranche right liability

    696     (9,141 )

Interest income

        696  

Net loss

  $ (12,770 ) $ (45,634 )

Net loss per share of common stock, basic and diluted(1)

  $ (3.55 ) $ (10.77 )

Weighted-average common shares outstanding, basic and diluted(1)

    3,597,913     4,236,061  

Pro forma net loss per share of common stock, basic and diluted (unaudited)(1)

        $ (1.90 )

Pro forma weighted average shares outstanding, basic and diluted (unaudited)(1)

          23,962,816  

(1)
See Note 3 to our financial statements included elsewhere in this prospectus for a description of how we compute net loss per share of common stock, basic and diluted, pro forma net loss per share of common stock, basic and diluted, and the weighted average shares outstanding used in the computation of these per share amounts.
 
  December 31,  
(in thousands)
  2018   2019  

Balance Sheet Data:

             

Cash and cash equivalents

  $ 24,861   $ 158,874  

Working capital(1)

    33,092     162,094  

Total assets

    33,461     178,613  

Total liabilities

    2,516     4,261  

Total convertible preferred stock

    43,118     230,605  

Total stockholders' deficit

    (12,173 )   (56,253 )

(1)
We define working capital as current assets less current liabilities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. You should review the section titled "Risk Factors" in this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described below.

Overview

        We are a genetic medicines company focused on developing transformative therapies for rare, monogenic central nervous system, or CNS, disorders with limited or no approved treatment options. Our vision is to become the premier genetic medicines company by developing and ultimately commercializing therapies that dramatically and positively transform the lives of patients suffering from these life-threatening disorders. To achieve our vision, we have assembled a world-class team whose members have decades of collective experience in genetic medicines and rare disease drug development and commercialization. The field of genetic medicine is rapidly expanding and we believe we have a differentiated approach to developing treatments for rare, monogenic CNS disorders that enables us to select and advance product candidates with a higher probability of technical and regulatory success. We have entered into a strategic research collaboration with the Trustees of the University of Pennsylvania's, or Penn's, Gene Therapy Program, or GTP, headed by Dr. James Wilson, a leader in the genetic medicines field. Through this collaboration we have assembled a deep portfolio of genetic medicine product candidates, including our three lead product candidates: PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBFT02 for the treatment of frontotemporal dementia, or FTD, and PBKR03 for the treatment of Krabbe disease. We plan to submit Investigational New Drug applications, or INDs, for PBGM01 in the first half of 2020, for PBFT02 in the second half of 2020 and for PBKR03 in the second half of 2020, and expect to initiate Phase 1/2 trials for GM1 in the second half of 2020, for FTD in the first half of 2021 and for Krabbe disease in the first half of 2021. We will also continue to explore entering into new collaborations to expand our pipeline.

        We were incorporated in July 2017 under the laws of the State of Delaware. Since inception, we have devoted substantially all of our resources to acquiring and developing product and technology rights, conducting research and development, organizing and staffing our company, business planning and raising capital. We have incurred recurring losses, the majority of which are attributable to research and development activities, and negative cash flows from operations. We have funded our operations through the sale of convertible preferred stock. Our net loss was $12.8 million and $45.6 million for the years ended December 31, 2018 and 2019, respectively. As of December 31, 2019, we had an accumulated deficit of $58.7 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our net losses may fluctuate significantly from quarter-to-quarter and

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year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

        We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

        As of December 31, 2019, we had cash and cash equivalents of $158.9 million. We expect our existing cash and cash equivalents, together with the net proceeds from this offering, will enable us to fund our operating expenses and capital expenditure requirements through the second quarter of 2022.

        The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of our product candidates, or when, if ever, material net cash inflows may commence from our product candidates. We anticipate that our expenses will increase substantially if, and as, we:

    continue to advance the preclinical and clinical development of our existing product candidates and discovery stage programs;

    seek regulatory approvals for any product candidates that successfully complete clinical trials;

    hire additional clinical, quality control, regulatory, manufacturing, scientific and administrative personnel;

    expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;

    maintain, expand and protect our intellectual property portfolio; and

    incur additional legal, accounting or other expenses in operating our business, including the additional costs associated with operating as a public company.

        Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our preclinical and clinical trials. We may elect to discontinue, delay or modify preclinical and clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. Commercialization of any product candidates that receive regulatory approval will take several years, and we expect to spend a significant amount in development costs.

        Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

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License Agreement

University of Pennsylvania

        In September 2018, we entered into a sponsored research, collaboration and licensing agreement, or the Penn Agreement, with the Trustees of the University of Pennsylvania, or Penn, for preclinical research and development collaborations and exclusive license rights to patents for certain products and technologies. As part of the Penn Agreement, we paid Penn an initial upfront, non-creditable and non-refundable fee of $2.5 million and issued 839,130 shares of our common stock with a then estimated fair value of $0.9 million, all of which was expensed as in-process research and development in our statement of operations. We will also fund certain preclinical development activities as agreed upon in the Penn Agreement.

        The Penn Agreement allows us to exercise options to obtain exclusive intellectual property rights for certain current and future products in specified indications for non-refundable upfront fees ranging from $0.8 million to $1.0 million per product indication. We have currently exercised options to license six product candidates from Penn. Following the expiration of the research term of the Penn Agreement, which is set to expire in 2022 and may be extended upon the parties' mutual agreement, we will be required to pay Penn an annual license maintenance fee of $0.3 million, which may be creditable against certain future royalties under specified circumstances.

        The Penn Agreement requires that we make payments of up to $16.5 million per product candidate in aggregate upon the achievement of specific development milestone events by such licensed product for a first indication, reduced development milestone payments for the second and third indications and no development milestone payments for subsequent indications. In addition, on a product by product basis, we are obligated to make up to $55.0 million in sales milestone payments on each licensed product based on annual sales of the licensed product in excess of defined thresholds.

        Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product. In addition, we are obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement. For more information, please see "Business—License Agreement."

Collaboration Agreement

Paragon

        In June 2019, we entered into a collaboration agreement, or the Paragon Collaboration Agreement, with Paragon Bioservices, Inc., a unit of Catalent Biologics, Inc., or Paragon. The Paragon Collaboration Agreement contemplates that the two companies will enter into a long-term manufacturing and supply agreement, which is currently being negotiated. As part of the Paragon Collaboration Agreement, we paid Paragon a $10.0 million upfront fee for the commissioning, qualification, validation and equipping of a clean room suite. Subject to validation of the clean room, we are also committed to pay an annual fee of $4.0 million for five years for the use of the clean room suite.

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Components of Results of Operations

Research and Development and Acquired In-Process Research and Development

        Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. These expenses include:

    expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval, including payments to Penn for preclinical development;

    costs incurred in obtaining technology licenses related to technology that has not reached technological feasibility and has no alternative future use;

    personnel expenses, including salaries, benefits and share-based compensation expense for employees engaged in research and development functions;

    costs of funding research performed by third parties, including pursuant to agreements with CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

    expenses incurred under agreements with contract manufacturing organizations, or CMOs, including manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical study and clinical trial materials;

    fees paid to consultants who assist with research and development activities;

    expenses related to regulatory activities, including filing fees paid to regulatory agencies; and

    allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.

        We track outsourced development costs and other external research and development costs to specific product candidates on a program-by-program basis, such as expenses incurred under our collaboration with Penn, fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, early research and other costs which are deployed across multiple projects under development.

        Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including share-based compensation, conduct our clinical trials, including later-stage clinical trials, for current and future product candidates and prepare regulatory filings for our product candidates.

        Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.

General and Administrative Expenses

        General and administrative expense consists primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance, accounting, legal, and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.

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        We expect that our general and administrative expense will increase in the future to support our continued research and development activities, potential commercialization efforts and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and the SEC, insurance and investor relations costs. If any of our current or future product candidates obtains U.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team.

Change in Fair Value of Future Tranche Right Liability

        Our Series A-1 convertible preferred stock issued in September 2018 included a future tranche participation right permitting investors to purchase 22,209,301 shares of Series A-2 convertible preferred stock at a fixed purchase price of $2.15 per share through December 31, 2019. The future tranche right was recorded at fair value using a Black-Scholes option pricing model and was re-measured at each reporting period until the redemption feature was exercised in May 2019, at which time the then estimated fair value was reclassified to convertible preferred stock.

Interest Income

        Interest income consists of interest earned on our cash equivalents, which consist of a commercial money market account. We expect our interest income to increase due to our investment of cash received from the sale of shares of our convertible preferred stock in 2019 as well as the net proceeds from this offering.

Income Taxes

        Since our inception, we have not recorded any income tax benefits for the net losses we have incurred for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized. As of December 31, 2019, we had U.S., state and city net operating loss carryforwards of $44.0 million, $44.0 million and $43.8 million, respectively, which may be available to offset future taxable income. As of December 31, 2019, we also had federal tax credits of $1.5 million, which may be used to offset future tax liabilities. These tax credit carryforwards will begin to expire in 2037. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

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Results of Operations

Comparison of the Years Ended December 31, 2018 and 2019

        The following table sets forth our results of operations for the years ended December 31, 2018 and 2019.

 
  Year ended
December 31,
   
 
(in thousands)
  2018   2019   Change  

Operating expenses:

                   

Research and development

  $ 9,167   $ 29,738   $ 20,571  

Acquired in-process research and development

    3,371     500     (2,871 )

General and administrative

    928     6,951     6,023  

Loss from operations

    (13,466 )   (37,189 )   (23,723 )

Change in fair value of future tranche right liability

    696     (9,141 )   (9,837 )

Interest income

        696     696  

Net loss

  $ (12,770 ) $ (45,634 ) $ (32,864 )

Research and Development Expenses

        Research and development expenses increased by $20.6 million from $9.2 million for the year ended December 31, 2018 to $29.7 million for the year ended December 31, 2019. The increase was primarily attributable to an increase of $16.7 million in research and development costs incurred in connection with the Penn Agreement as well as an increase in other research costs of $1.0 million. We also had a $2.7 million increase in personnel-related costs and a $0.3 million increase in facility and other costs due to increases in employee headcount in the research and development function.

        We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis. Research and development expenses are summarized by program in the table below:

 
  Year ended
December 31,
 
(in thousands)
  2018   2019  

GM1

  $ 2,074   $ 5,916  

FTD-GRN

    5,114     9,897  

Krabbe

    606     5,737  

MLD

    573     2,034  

ALS

    402     1,229  

CMT2A

        27  

Internal costs, including personnel related

    398     4,072  

  $ 9,167   $ 29,738  

Acquired In-Process Research and Development Expenses

        Acquired in-process research and development expenses was $3.4 million for the year ended December 31, 2018 compared to $0.5 million for the year ended December 31, 2019. The decrease in acquired in-process research and development expense was due to lower license fees incurred under the Penn Agreement.

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General and Administrative Expenses

        General and administrative expenses increased by $6.0 million from $0.9 million for the year ended December 31, 2018 to $7.0 million for the year ended December 31, 2019. The increase was primarily due to a $3.8 million increase in personnel related and share-based compensation expense due to increases in employee headcount. Our professional fees and facility costs increased by $2.1 million and $0.2 million, respectively, as we expanded our operations to support our research and development efforts.

Change in Fair Value of Future Tranche Right Liability

        The change in fair value of our future tranche right liability related to our Series A-1 preferred stock was primarily due to the increase in the estimated fair value of our Series A-2 convertible preferred stock. The future tranche right liability was settled in May 2019.

Interest Income

        We recognized interest income of $0.7 million during the year ended December 31, 2019, primarily due to the investment of cash proceeds.

Liquidity and Capital Resources

Overview

        From inception through December 31, 2019, we funded our operations through the sale of convertible preferred stock, receiving aggregate net proceeds of $222.1 million. As of December 31, 2019, we had $158.9 million in cash and cash equivalents and had an accumulated deficit of $58.7 million.

Funding Requirements

        Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.

        Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

    the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

    the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

    the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

    the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

    the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

    our ability to establish additional collaborations on favorable terms, if at all;

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    the costs required to scale up our clinical, regulatory and manufacturing capabilities;

    the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval; and

    revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

        We will need additional funds to meet operational needs and capital requirements for clinical trials, other research and development expenditures, and business development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

        Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug 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 or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, 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.

Cash Flows

        The following table shows a summary of our cash flows for the periods indicated:

 
  Year ended
December 31,
 
(in thousands)
  2018   2019  

Cash used in operating activities

  $ (18,567 ) $ (39,896 )

Cash used in investing activities

    (2,543 )   (1,693 )

Cash provided by financing activities

    45,971     175,602  

Net increase in cash and cash equivalents

  $ 24,861   $ 134,013  

Net Cash Used in Operating Activities

        During the year ended December 31, 2018, we used $18.6 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $12.8 million, the $0.7 million noncash gain on the change in the fair value of our future tranche right liability, and a $8.5 million net increase in our operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates. Cash used in these activities was partially offset by acquired in-process research and development noncash charges of $3.4 million for amounts incurred in connection with the Penn Agreement as well as the change in our deferred rent balance.

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        During the year ended December 31, 2019, we used $39.9 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $45.6 million and a $5.9 million net increase in our operating assets and liabilities. Cash used was offset by noncash charges of $9.1 million for the loss on the change in fair value of our future tranche right liability, $1.5 million in share-based compensation, $0.5 million related to an acquired in-process research and development charge, $0.1 million in depreciation expense and a $0.5 million change in our deferred rent balance.

Net Cash Used in Investing Activities

        During the years ended December 31, 2018 and 2019, we used $28,000 and $1.2 million, respectively, for the purchase of property and equipment. We also used $2.5 million and $0.5 million during the years ended December 31, 2018 and 2019, respectively, to purchase technology rights from Penn.

Net Cash Provided by Financing Activities

        During the years ended December 31, 2018 and 2019, financing activities provided $46.0 million and $176.2 million, respectively, from the sale of our convertible preferred stock. During 2019, we received $0.2 million from the exercise of stock options and paid $0.8 million in deferred offering costs.

Contractual Obligations and Other Commitments

        The following table summarizes our contractual obligations and commitments at December 31, 2019:

(in thousands)
  Less than
1 year
  1 to
3 years
  3 to
5 years
  More than
5 years
  Total  

Operating lease

  $ 210   $ 435   $ 457   $ 358   $ 1,460  

Clean room fee owed to Paragon(1)

        8,000     8,000     4,000     20,000  

Total

  $ 210   $ 8,435   $ 8,457   $ 4,358   $ 21,460  

(1)
Assumes clean room is validated in 2021.

        In September 2018, we entered into an agreement to lease 8,887 square feet of office space in Philadelphia, Pennsylvania, for a term of seven years. The lease includes a renewal option for an additional five years. The initial rent commenced at $0.2 million per year, with 2.5% annual base rent increases plus operating expenses, real estate taxes, utilities and janitorial fees. We occupied this space in early 2019.

        The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. Payments due upon cancellation consisting only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation are not included in the preceding table as the amount and timing of such payments are not known.

        The contractual obligations table does not include any potential royalty payments that we may be required to make under our license and collaboration agreement with Penn. We excluded these royalty payments given that the timing of any such payments cannot be reasonably estimated at this time. We also did not include any amounts committed to fund research and development with Penn due to certain provisions for early cancellation of such committed amounts.

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Off-Balance Sheet Arrangements

        During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies

        Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are described in more detail in Note 3 to our financial statements included elsewhere in this prospectus, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements.

Research and Development Expenses

        Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred.

        We accrue an expense for preclinical studies and clinical trial activities performed by Penn and other vendors based upon estimates of the proportion of work completed. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

        We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Share-Based Compensation

        We measure compensation expense for all share-based awards based on the estimated fair value of the share-based awards on the grant date. We use the Black-Scholes option pricing model to value our stock option awards. We recognize compensation expense on a straight-line basis over the requisite

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service period, which is generally the vesting period of the award. We have not issued awards for which vesting is subject to a market or performance conditions.

        The Black-Scholes option-pricing model requires the use of subjective assumptions that include the expected stock price volatility and the fair value of the underlying common stock on the date of grant. See Note 9 to our financial statements included elsewhere in this prospectus for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted during the year ended December 31, 2019. Our first share-based award was a grant of stock options in February 2019.

        The following table summarizes by grant date the number of shares of common stock subject to stock options granted from January 1, 2019, as well as the associated per share exercise price and the estimated fair value per share of our common stock as of the grant date:

Grant date
  Number of
options granted
  Exercise price
per share
  Estimated fair
value per share
of common stock
 

February 6, 2019

    1,239,973   $ 1.02   $ 1.02  

March 29, 2019

    26,097   $ 1.02   $ 1.02  

April 30, 2019

    523,544   $ 1.02   $ 1.02  

June 26, 2019

    121,498   $ 1.60   $ 1.60  

October 23, 2019

    1,373,458   $ 8.07   $ 8.07  

October 31, 2019

    347,388   $ 8.07   $ 8.07  

November 21, 2019

    54,850   $ 8.07   $ 8.07  

January 15, 2020

    431,372   $ 11.00   $ 11.00  

January 28, 2020

    1,965,428   $ 11.00   $ 11.00  

February 7, 2020

    11,278   $ 11.00   $ 11.00  

        Based on an assumed initial public offering price of $17.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, the aggregate intrinsic value of vested and unvested stock options outstanding as of December 31, 2019 was $0.9 million and $27.7 million, respectively.

Estimating the Fair Value of Common Stock

        We are required to estimate the fair value of the common stock underlying our share-based awards when performing the fair value calculations using the Black-Scholes option pricing model. Because our common stock is not currently publicly traded, the fair value of the common stock underlying our stock options has been determined on each grant date by our board of directors, with input from management, considering our most recently available third-party valuation of common shares. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the estimated fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant.

        The third-party valuations of our common stock were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Guide. In addition, our board of directors considered various objective and subjective factors to estimate the estimated fair value of our common stock, including:

    the estimated value of each security both outstanding and anticipated;

    the anticipated capital structure that will directly impact the value of the currently outstanding securities;

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    our results of operations and financial position;

    the status of our research and development efforts;

    the composition of, and changes to, our management team and board of directors;

    the lack of liquidity of our common stock as a private company;

    our stage of development and business strategy and the material risks related to our business and industry;

    external market conditions affecting the life sciences and biotechnology industry sectors;

    U.S. and global economic conditions;

    the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial public offering, or IPO, or a sale of our company, given prevailing market conditions; and

    the market value and volatility of comparable companies.

        In determining the estimated fair value of common stock, our board of directors considered the subjective factors discussed above in conjunction with the most recent valuations of our common stock that were prepared by an independent third-party. The independent valuation prepared as of January 15, 2019 was utilized by our board of directors when determining the estimated fair value of common stock for the awards granted from February 2019 through April 2019. Independent valuations were also prepared as of May 8, 2019, August 27, 2019 and December 10, 2019 and utilized for the awards granted in June 2019, October 2019 and 2020, respectively. Our board of directors, relying in part on these third-party valuations, determined valuations of our common stock of $1.02, $1.60, $8.07 and $11.00 per share as of January 15, 2019, May 8, 2019, August 27, 2019 and December 10, 2019, respectively, and such valuations by the board of directors were used for the purposes of determining the share-based compensation expense.

        Following the closing of this offering, the fair value of our common stock will be the closing price of our common stock on the Nasdaq Global Market as reported on the date of the grant.

Recent Accounting Pronouncements

        See Note 3 to our financial statements found elsewhere in this prospectus for a description of recent accounting pronouncements applicable to our financial statements.

Qualitative and Quantitative Disclosures About Market Risk

        We are exposed to market risk related to changes in interest rates. As of December 31, 2019, we had cash and cash equivalents of $158.9 million consisting of bank deposits and a commercial money market account. Due to the short-term duration of our cash equivalents, an immediate 10% change in interest rates would not have a material effect on the fair market value.

JOBS Act Transition Period

        In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to

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companies that comply with new or revised accounting pronouncements as of public company effective dates.

        We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (1) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of this offering, (ii) in which we have total annual gross revenues of at least $1.07 billion or (iii) in which we are deemed to be a "large accelerated filer" under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

        In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

        We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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BUSINESS

Overview

        We are a genetic medicines company focused on developing transformative therapies for rare, monogenic CNS disorders with limited or no approved treatment options. Our vision is to become the premier genetic medicines company by developing and ultimately commercializing therapies that dramatically and positively transform the lives of patients suffering from these life-threatening disorders. To achieve our vision, we have assembled a world-class team whose members have decades of collective experience in genetic medicines and rare disease drug development and commercialization. The field of genetic medicine is rapidly expanding and we believe we have a differentiated approach to developing treatments for rare, monogenic CNS disorders that enables us to select and advance product candidates with a higher probability of technical and regulatory success. We have entered into a strategic research collaboration with Penn's GTP, headed by Dr. James Wilson, a leader in the genetic medicines field. Through this collaboration we have assembled a deep portfolio of genetic medicine product candidates, including our three lead product candidates: PBGM01 for the treatment of GM1, PBFT02 for the treatment of FTD and PBKR03 for the treatment of Krabbe disease. We plan to submit INDs for PBGM01 in the first half of 2020, for PBFT02 in the second half of 2020 and for PBKR03 in the second half of 2020, and expect to initiate Phase 1/2 trials for GM1 in the second half of 2020, for FTD in the first half of 2021 and for Krabbe disease in the first half of 2021. We will also continue to explore entering into new collaborations to build our pipeline.

        Our research collaboration with GTP provides us with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates and exclusive rights to certain rare, monogenic CNS disorders. As part of this collaboration, we have exclusive rights to all discovery work and IND-enabling research for up to 12 rare, monogenic CNS indications that we select. In addition to our three lead product candidates, we have three ongoing discovery programs and an option to license six additional programs from GTP. Further, we have limited exclusive rights to certain new capsid technology arising from GTP for our product candidates within our rare, monogenic CNS field of use. We have global commercial rights to all of our product candidates and believe that our approach to developing therapies for rare, life-threatening diseases that are currently underserved presents an opportunity to efficiently advance our product candidates through clinical development, regulatory approval and ultimately to commercialization.

        We founded Passage Bio with the intent to build a differentiated CNS genetic medicines company delivering transformative therapies to patients by combining our team's experience in rare and neurological disease development, manufacturing and commercialization with the pioneering research expertise of GTP in gene therapy. We are purposefully focusing on rare, monogenic CNS disorders for which we believe our genetic medicine approach provides distinct technical advantages based on decades of research by GTP. GTP conducts rigorous preclinical studies to identify promising product candidates. Our collaboration provides us with access to cutting edge capabilities and innovation in the field of genetic medicine research, including in capsid engineering and next-generation capsid libraries, vector engineering, transgene design and gene therapy modalities, animal disease models and related studies for lead-optimization of product candidates. Further, we believe our team's deep clinical development experience in rare and neurological diseases will enable well planned clinical trials with the potential for efficient advancement to regulatory approval. In addition, we are engaging with key opinion leaders, practitioners and patient advocacy groups in the field of rare, monogenic CNS disorders that provide strategic input and help inform our clinical development activities. We believe that our ability to execute on the above tenets provides us with product candidates that have an improved profile for clinical development and an enhanced probability of success.

        We are focused on developing and commercializing disease-modifying therapies that can have a transformative impact on patients' lives. Utilizing our rigorous selection process, we have assembled a

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deep portfolio of product candidates for rare, monogenic CNS disorders. Our first product candidate, PBGM01, utilizes a next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GLB1 gene encoding lysosomal beta-galactosidase, or b-gal, for infantile GM1. Our second product candidate, PBFT02, utilizes an AAV1 capsid to deliver to the brain a functional GRN gene encoding progranulin, or PGRN, for FTD caused by progranulin deficiency, or FTD-GRN. Our third product candidate, PBKR03, utilizes a next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional gene encoding the hydrolytic enzyme galactosylceramidase, or GALC, for infantile Krabbe disease. There are currently no approved disease-modifying therapies for these diseases. We believe our lead product candidates have the potential to provide patients with significantly improved outcomes, given our chosen route of ICM administration, which is an injection at the craniocervical junction, our target choice of secreted proteins that leverage the cross-correction mechanism, thereby reducing transduction requirements and our capsid and transgene selection process which allows us to choose vectors that are fit-for-purpose for specific indications.

        We also have three programs in the discovery stage: PBML04 for MLD, PBAL05 for ALS, and PBCM06 for CMT2A. PBML04 is targeting MLD patients who have mutations in the ARSA gene, PBAL05 is targeting ALS patients who have a gain-of-function mutation in the C9orf72 gene and PBCM06 is targeting CMT2A patients who have a mutation in the MFN2 gene. We also have an option to license six additional programs from Penn in rare, monogenic CNS indications through 2022.

        We are led by pioneers and experts with decades of collective experience in genetic medicines, rare disease drug development, manufacturing and commercialization. Our scientific founders, Dr. Stephen Squinto, Dr. James Wilson and Dr. Tadataka Yamada, are world leaders in research and development in the fields of rare disease and genetic medicine. Our founders' involvement in both academic research and clinical drug development allows us to gain early insight into emerging technologies that informs our business strategy. We have assembled a team whose members have extensive experience in successfully developing, manufacturing and commercializing rare disease and genetic medicine products at companies such as Alexion Pharmaceuticals, Allos Therapeutics, Biogen, GlaxoSmithKline, Janssen Pharmaceuticals, Lycera, Merck & Co., Momenta Pharmaceuticals, NPS Pharmaceuticals, Pharmasset, Ultragenyx Pharmaceutical and ViroPharma. Since our inception through December 31, 2019 we have raised $225.5 million. Our investors include OrbiMed Advisors, Versant Venture, Frazier Life Sciences, LAV Prescience Limited, New Leaf Ventures, Vivo Capital, Access Industries, Boxer Capital, Highline Capital, Logos Capital and Sphera Global Healthcare.

Our Pipeline

        We have assembled a deep portfolio of genetic medicine product candidates for rare, monogenic CNS disorders characterized by high unmet medical needs. We intend to further expand our portfolio

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with genetic medicine product candidates for other rare, monogenic CNS disorders as well as other treatment approaches as technology advances in the field. Our development programs consist of:

GRAPHIC


*
Program includes ongoing natural history study of infantile and juvenile GM1 gangliosidosis patients

PBGM01 for the Treatment of GM1

        We are currently developing PBGM01, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GLB1 gene encoding b-gal for infantile GM1. Infantile GM1 is the most common and severe form of GM1, in which patients have mutations in the GLB1 gene that produce little or no residual b-gal enzyme activity. b-gal is an enzyme that catalyzes the first step in the natural degradation of GM1 ganglioside. Reduced b-gal activity results in the accumulation of toxic levels of GM1 ganglioside in neurons throughout the brain, causing rapidly progressive neurodegeneration, with a life expectancy of two to four years. Currently, there are no disease-modifying therapies approved for the treatment of GM1. We believe PBGM01 could provide patients with significantly improved outcomes. In preclinical models, we have observed meaningful transduction of both the CNS and critical peripheral organs for GM1 patients using our ICM method of administration in combination with our next-generation AAVhu68 capsid. We expect to submit an IND in the first half of 2020 and initiate a Phase 1/2 trial in the second half of 2020 and anticipate clinical data to be available in the first half of 2021.

PBFT02 for the Treatment of FTD-GRN

        We are currently developing PBFT02, which utilizes an AAV1 capsid to deliver to the brain a functional GRN gene encoding PGRN for the treatment of FTD-GRN. FTD-GRN is an inheritable form of FTD in which patients have mutations in the GRN gene, causing a deficiency in PGRN. PGRN is a complex and highly conserved protein thought to have multiple roles in cell biology, development and inflammation. Emerging evidence suggests that PGRN's pathogenic contribution to FTD and other neurodegenerative disorders relates to a critical role in lysosomal function. Currently, there are no disease-modifying therapies approved for the treatment of FTD-GRN. We believe PBFT02 may provide patients with significantly improved outcomes. In an NHP model, we observed superior transduction

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results of the CNS using our ICM method of administration and an AAV1 capsid compared to other AAV capsids. We expect to submit an IND in the second half of 2020 and initiate a Phase 1/2 trial in the first half of 2021 and anticipate clinical data to be available in the second half of 2021.

PBKR03 for the Treatment of Krabbe Disease

        We are currently developing PBKR03, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GALC gene encoding the hydrolytic enzyme galactosylceramidase for infantile Krabbe disease. Krabbe disease is an autosomal recessive lysosomal storage disease caused by mutations in the GALC gene, which provides instructions for making an enzyme called galactosylceramidase, which breaks down certain fats, including galactosylceramide and psychosine. This results in the accumulation of psychosine, resulting in widespread death of myelin-producing cells in the CNS and in the peripheral nervous system, or PNS. Without myelin, nerves in the brain and other parts of the body cannot transmit signals properly, leading to the signs and symptoms of Krabbe disease. Currently, there are no disease-modifying therapies approved for the treatment of Krabbe disease. We believe PBKR03 may provide patients with significantly improved outcomes. In preclinical models, we have observed meaningful transduction of both the CNS and other critical peripheral organs for Krabbe patients using our ICM method of administration in combination with our next-generation AAVhu68 capsid. We expect to submit an IND in the second half of 2020 and initiate a Phase 1/2 trial in the first half of 2021 and anticipate clinical data to be available in the second half of 2021.

Discovery Programs

        We also have three programs in the discovery and candidate selection stage, PBML04 for MLD, PBAL05 for ALS, and PBCM06 for CMT2A. PBML04 is targeting MLD patients who have mutations in the ARSA gene, PBAL05 is targeting ALS patients who have a gain-of-function mutation in the C9orf72 gene and PBCM06 is targeting CMT2A patients who have a mutation in the MFN2 gene. Beyond this portfolio, through our research collaboration with GTP, we also have the option to license programs for six additional indications in rare, monogenic CNS indications through 2022.

Our Strategy

        Our vision is to become the premier genetic medicines company by developing and ultimately commercializing therapies that dramatically and positively transform the lives of patients suffering from life-threatening CNS disorders with limited or no approved treatment options.

        We leverage the decades of experience of our scientific founders, Dr. Squinto, Dr. Wilson and Dr. Yamada, as well as the transformative potential of genetic medicine technology to develop treatments that improve outcomes for patients with serious, life-threatening, rare diseases. Patients are considered every step of the way, in every decision we make.

        Key elements of our strategy include:

    Focus on rare, underserved indications for which we can have a transformative impact on patients' lives.  We believe that genetic medicine has the potential to have a transformative impact on rare, monogenic CNS disorders, and on patients' lives, by providing them with a treatment for life-threatening diseases with no approved disease-modifying treatments.

    Rapidly advance our lead product candidates into clinical development through commercialization.  We leverage our collaboration with GTP, as well as our internal capabilities, to select optimal product candidates for each indication based on extensive preclinical data, including animal data and disease-specific animal models and biomarkers, thus enhancing the probability of clinical success of our product candidates. Our goal is to select candidates that

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      have the potential to address high unmet clinical needs and have transformative therapeutic effects for our patients. We are working to advance product candidates into the clinic and we expect to submit INDs for GM1 in the first half of 2020, for FTD in the second half of 2020 and for Krabbe disease in the second half of 2020. If our clinical trials are successful, we plan to meet with regulatory authorities to discuss expedited regulatory approval strategies.

    Advance and expand our pipeline by identifying and developing additional product candidates into the clinic.  We believe our differentiated drug development approach as well as our internal and partnered research capabilities may allow us to address a broad range of rare, monogenic CNS disorders, thus expanding our pipeline. Through our collaboration with GTP, we are continuing to develop additional genetic medicine product candidates targeting life-threatening, rare, CNS monogenic disorders. Beyond our three initial lead product candidates, we have three additional products advancing through the discovery stage. We also have the option to license six additional rare, monogenic CNS indications from GTP through 2022.

    Extend existing and establish new relationships with patients and patient advocacy groups.  Patients are at the core of what we do. We have been engaging with them and with their advocacy groups since our inception, and have acquired an intimate understanding of how we can positively impact their lives. These relationships deeply inform us as we develop and ultimately seek to commercialize our product candidates. Our relationship with the ODC, which is currently performing a natural history study for GM1 we are funding, represents an example of our strategy, and has been helping us to engage effectively with patients.

    Continue to develop proprietary manufacturing capabilities.  We believe the quality, reliability and scalability of our genetic medicine manufacturing techniques and know-how will be a critical advantage to our long-term success. We currently have access to a state-of-the-art purpose-fit manufacturing suite through Paragon Gene Therapy, a unit of Catalent Biologics, Inc., or Paragon. We expect this facility will be capable of producing supplies of our product candidates sufficient to conduct our clinical trials and potentially for initial commercial launch of our lead product candidates, if approved. We will continue to invest in developing our manufacturing capabilities and plan to establish our own manufacturing facility for long-term commercial supplies.

    Selectively enter into new discovery relationships with premier research institutions and expand our existing collaboration.  We will continue to foster our well-established relationship with Penn, and potentially enter into new collaborations to build our pipeline. We will look to nurture our genetic medicine technology capabilities by keeping abreast of advances in next-generation capsid development, promoter selection, transgene design, gene silencing and gene editing, which will help us to engineer optimal product profiles to address life-threating rare, monogenic CNS disorders characterized by high unmet medical needs.

Genetic Medicine Background

        Each person's genetic material, or genome, consists of deoxyribonucleic acid, or DNA, in sequences of genetic code called genes. The DNA in the human genome contains approximately three billion nucleotide base pairs, and small changes, or mutations, routinely occur in the base pairs. A mutation in a single gene can alter the amount or activity of the protein expressed by the gene, causing deformities and disease. Currently, there are estimated to be over 10,000 diseases caused by a genetic abnormality in a single gene. These are also known as monogenic diseases.

        The development of molecular therapeutics to modulate human gene expression and correct disease-causing genetic defects had its advent several decades ago, and with advances in science and a deeper understanding of human genetics it has expanded to include a broader range of genetic medicines with the potential to modulate gene expression through additional molecular mechanisms.

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These transformative genetic medicines include gene therapy (delivery of an external gene to replace a defective gene), gene silencing (delivery of a DNA or ribonucleic acid, or RNA, based therapeutic that modulates the transcription or translation of an injurious gene product), gene editing (delivery of a DNA or RNA-based therapeutic that corrects the expression of targeted genes) and combinations of these therapeutic modalities. We believe that this expanded molecular biological tool box will provide new therapeutics with the potential to deliver highly potent and safe interventions across a diverse set of genetic diseases, offering several advantages, including:

    Potential to treat most diseases of genetic etiology.  Theoretically, it should be possible to design and deliver a genetic medicine to correct the expression of any human protein whose presence, absence or activity causes disease.

    Potential to target mechanisms that have not been effectively or safely modulated by traditional small molecule or protein-based therapeutics.  The inherent specificity of genetic medicines for unique nucleic acid sequences can provide a high therapeutic index resulting from high potency and the potential to deliver adequate doses while avoiding off-target safety liabilities.

    Efficient delivery of transformative therapeutics.  Because genetic medicines are designed to deliver a long-standing effect following a single administration, a single dose of these therapeutics has the potential to provide clinical benefits for many years.

        Genetic medicines can be designed to mitigate challenges faced by other approaches in the development of therapeutics for the CNS. Rare, monogenic CNS disorders are among the most devastating in their impact on patients and their families. These disorders are generally life-threatening to patients. There is a significant need for genetic medicines that can target these genes because the brain is susceptible to mutations in single genes. Due to a historical preference in the drug industry to develop drugs for broader CNS indications, many of these rare CNS disorders currently have no approved therapies. We are focused on rare, monogenic CNS disorders because they offer a compelling opportunity for the effective application of genetic medicines.

Our Approach

        The field of genetic medicine is rapidly expanding and we believe we have developed a differentiated approach to developing treatments for rare, monogenic CNS disorders that allows us to select and advance product candidates with a higher probability of technical and regulatory success. Our gene therapy product candidates use an AAV, a small, non-pathogenic virus that is genetically engineered to function as a delivery vehicle, or vector. The AAV is administered to a patient to introduce a healthy copy of a mutated gene to the cells in a process referred to as transduction. The components of an AAV gene therapy vector include the therapeutic gene that makes up the DNA payload, or the transgene, the outer viral shell that encloses the DNA payload, or the capsid, and any promotors added to the vector to boost expression of the transgene. The AAV is often described by the serotype, or strain, of the vector. The core tenets of our approach include a rigorous process for selecting product candidates, mitigation of early development risk through relationships with leading researchers and academic institutions, and mitigation of clinical development risk through deep relationships with patient advocacy groups, key opinion leaders and practitioners. Together, these relationships allow us to directly benefit from decades of collective experience, the latest technologies and contemporary perspectives from patients and their experiences.

Rigorous Process for Selecting Product Candidates

        In selecting our product candidates, we focus initially on optimizing transduction and expression of transgenes in the indication-specific target tissues. This involves prioritizing the following principles: selection of the route of administration to maximize transgene biodistribution; selection of capsid, transgene and promoter to optimize efficiency of transduction and expression in the target tissue;

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leveraging biological mechanisms such as cross-correction to maximize availability of transgene product to target cells; and the effective use of biomarkers to assess treatment effects on transduction, transgene expression and on disease pathophysiology.

    Optimal route of administration:  Identifying the optimal route of administration for AAV gene therapy is critical to achieving safe and effective levels of transgene expression in the targeted location in the CNS. The optimal route of administration for CNS treatments should also leverage the immuno-privileged aspects of the CNS to reduce the potential effects of neutralizing antibodies on AAV capsids, which are often faced by gene therapy product candidates. We will evaluate preclinical studies and other data to decide the preferred route of administration on a program-by-program basis. For our three lead product candidates, we believe that ICM delivery is the optimal route of administration as compared to other potential delivery mechanisms due to its diffuse delivery distribution, potential for improved biodistribution to the brain and spinal cord and transduction, and lower expected toxicity. Delivery through ICM can also reduce the potential impact of neutralizing antibodies as compared with intravenous administration. We believe that by using ICM we can achieve comparable protein expression at lower dosages than would be required by other delivery routes.

    Capsid, transgene and promoter selection:  For each of our programs, we conduct rigorous studies to select the capsid, transgene and promoter to use for our product candidate. We identify the optimal AAV gene therapy for each of our indications depending on the target indication, our goal of CNS and/or PNS transduction, and the target brain regions and cell types. Typically, we compare multiple capsids in NHPs to identify the capsid best suited for each program.

    Cross-correction:  Our three lead product candidates exploit the cross-correction mechanism by which secreted gene product from transduced cells is taken up by non-transduced neurons. We believe this cross-correction mechanism can help overcome the limits of vector biodistribution and CNS transduction inefficiency that are characteristic of other genetic medicine approaches, and ultimately drive clinical benefit.

    Effective use of biomarkers:  Our development program targets must have measurable, predictive biomarkers to inform early and efficient clinical development decisions. These include pharmacodynamic biomarkers to confirm achievement of target levels of transduction and gene expression, and disease activity and progression biomarkers to confirm downstream effects on the underlying disease pathophysiology.

Mitigation of Early Development Risk of Programs Prior to IND Submission

        We have a strategic research collaboration with GTP, which is led by our co-founder and Chief Scientific Advisor, Dr. Wilson, and which we believe positions us at the forefront of gene therapy research. This collaboration provides us with access to differentiated discovery technology and expertise that informs the basis of our product candidate selection and subsequent development.

        Our strategic research collaboration with GTP provides us with access through 2022 to one of the premier gene therapy research institutes in the world for the discovery and preclinical development of gene therapy product candidates and exclusive rights to certain rare, monogenic CNS disorders, including next-generation AAV capsid technology and vector engineering, and state-of-the art preclinical animal studies, including NHP models. GTP currently employs approximately 250 staff with cutting edge expertise and capabilities in gene therapy research and preclinical development.

        Our collaboration with GTP allows us to choose programs that have been validated through extensive testing in preclinical disease models, and, once selected, to collaborate with GTP on further preclinical optimization of our product candidate, such as vector choice, transgene construct and route

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of administration. We believe this collaboration improves our probability of technical and regulatory success in developing product candidates that provide transformative clinical benefits.

        Once we select a particular rare, monogenic CNS indication for further development, GTP, with our close involvement and oversight, embarks on a rational discovery and development program to design product candidates that may provide improved clinical benefit. We usually evaluate transduction efficiency and biodistribution using multiple different capsids in NHPs to select the capsid best suited for the targeted indication. GTP also works to optimize the delivery method used for each product candidate by balancing delivery, efficacy, safety, host immunity and ease of administration. We believe the translational preclinical characterization provided by GTP, including the use of NHP models for vector screening and toxicology, reduces the early-stage development risk of our product candidates.

        Pursuant to our research collaboration, GTP will also notify us of any additional AAV capsids it discovers, develops or engineers as part of its next-generation AAV capsid program through 2021. We then have the option to acquire the right to use such AAV capsids for our product candidates for our selected indications.

Mitigation of Clinical Development Risk through Our Relationship with the Orphan Disease Center at Penn

        We also have a strong relationship with the ODC. As part of our research collaboration with GTP, we have access to the ODC's insights and capabilities in the study of rare diseases. We leverage our close working relationship with the ODC to develop historical and prospective external data for each disease for use in building comparable patient profiles of participants in interventional trials. In addition, we believe the ODC's close ties to leading clinical centers for rare, monogenic CNS disorders will improve our ability to identify potential patients for trial enrollment, and enhance patient retention and data quality. The ODC is currently performing a natural history study for GM1 funded by us.

Our Product Candidates

GM1—PBGM01

Overview of GM1

        GM1 is a rare and often life-threatening monogenic recessive lysosomal storage disease that results in progressive damage to both the CNS and the peripheral tissues. The infantile form of the disease is characterized by onset in the first year of life with symptoms including hypotonia (reduced muscle tone), progressive CNS dysfunction leading to deafness, blindness, enlarged liver and spleen, rigidity and progressive skeletal dysplasia that leads to restrictive lung disease and aspiration pneumonia. The disease rapidly progresses, with a life expectancy of two to four years.

        GM1 is caused by recessive mutations in the GLB1 gene, which encodes lysosomal acid beta-galactosidase, or b-gal, an enzyme that catalyzes the first step in the natural degradation of GM1 ganglioside. Reduced b-gal activity results in the accumulation of toxic levels of GM1 ganglioside in neurons throughout the brain, causing rapidly progressing neurodegeneration. GM1 manifests as a continuum of clinical severity, ranging from infants with earlier onset and more severe and rapidly progressive disease to those with later juvenile or adult onset, slower progression and less severe manifestations.

        The global incidence of GM1 has been estimated to be 0.5 to 1 in 100,000 live births, with infantile GM1 representing approximately 62.5% of such cases. No states include GM1 in mandatory infant screening. We engaged a third-party data-analytics firm to conduct an analysis of a variety of de-identified electronic medical records. Based on this analysis, we estimate the incidence of infantile GM1 to be approximately 1.4 in 100,000. Currently, there are no approved disease-modifying therapies available. Supportive treatment options include the use of feeding tubes or ventilators for infants with GM1.

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Program Selection

        We chose GM1 as one of our lead clinical programs because it met our criteria for rare, monogenic CNS disorders in which we believe we can develop product candidates with a higher probability of technical and regulatory success and have a substantial impact on the lives of severely underserved patients. GM1 offers potential cross-correction, biomarker data and preclinical validation that are supportive of advancing GM1 into the clinic.

    Cross-correction:  Following treatment with PBGM01, we expect newly synthesized b-gal to be secreted by transduced cells, which could provide a depot of secreted enzyme that could be taken up by other cells, resulting in the potential for cross-correction and broad CNS and peripheral organ enzyme replacement.

    Biomarkers:  There are known biomarkers in GM1 that are measurable and available to assist in drug development.

    Pharmacodynamic biomarkers. In our preclinical studies, biomarkers including b-gal activity and hexosaminidase, or HEX, activity showed treatment-related effects in PBGM01-treated GLB1 knockout mice. Cerebrospinal fluid, or CSF, collected at the time of necropsy showed b-gal activity exceeding that of disease-free heterozygous control mice. b-gal activity in the brains of PBGM01-treated GLB1 knockout mice was similar to normal control mice. Peripheral organs, including the heart, lungs, liver and spleen, also exhibited elevated b-gal activity in PBGM01-treated mice.

    Disease progression biomarkers. Recent MRI studies of infants with GM1 have shown longitudinal changes in infantile GM1 consistent with progressive brain atrophy and ventricular enlargement, suggesting that brain MRI would be a useful biomarker to detect and help verify treatment effects on disease pathophysiology.

    Preclinical validation:  We used our GLB1 knockout mouse disease model showing both clinical and histological manifestations of GM1 in preclinical studies. In these studies, we observed a robust dose-related improvement in both neurological status, histologic lysosomal storage pathology and survival following treatment with PBGM01.

Product Candidate Development Strategy

        We have chosen the earliest and most severe form of GM1 for clinical development for several reasons. Within GM1, infantile GM1 represents the greatest medical need, as affected infants often do not survive two years, and thus are in immediate need of an effective therapy. We expect treatment-related efficacy to be measurable sooner after treatment in this more rapidly progressing form of GM1. Children with later onset forms of GM1, caused by less severe reductions of b-gal enzyme activity, generally demonstrate slower progression and more variable clinical courses, likely requiring larger and longer clinical trials and a broader control group. If our initial clinical trials in infantile GM1 are successful, we intend to explore expansion of the indication with trials in later onset forms of GM1.

Our Product Candidate

        We are developing PBGM01 to treat infantile GM1, with a single dose of PBGM01 by ICM injection. PBGM01 utilizes a next-generation AAVhu68 viral vector to deliver modified DNA encoding the b-gal enzyme to a patient's cells. The goal of this vector and delivery approach is to increase levels of the b-gal enzyme in both the CNS and the peripheral tissues. We selected the AAVhu68 capsid and ICM route due to the superior transduction observed in cells of the CNS and peripheral organs, which are both affected in GM1 disease patients. Based on prior capsid comparison studies, we chose the AAVhu68 vector because it has the potential to provide corrective b-gal enzyme to both the CNS and peripheral tissues, which we believe gives us the potential to treat both the CNS pathologies and the peripheral manifestations observed in GM1 disease.

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        We believe gene replacement with PBGM01 and consequent wide brain distribution and uptake of the b-gal enzyme has the potential to greatly reduce the accumulation of GM1 gangliosides, reversing neuronal toxicity, thereby restoring developmental potential and improving the quality of life for treated patients. We will evaluate this clinically by assessing prevention of further developmental regression and restoration of developmental trajectories, as measured by developmental milestones using accepted clinical scales, observer reported outcomes and video recordings.

Preclinical Studies

    Proof of Concept GLB1 Knockout Mouse Study.

        Preclinical studies were conducted using a GLB1 knockout mouse model of GM1 (mice that carry homozygous mutations in the GLB1 gene, or GLB1–/– mice). The studies compared GLB1–/– mice treated with PBGM01, GLB1–/– mice treated with vehicle (phosphate-buffered saline, or PBS) and disease-free mice that are heterozygous GLB1 mutation carriers, or GLB1+/– mice, treated with vehicle. In this study, all mice were treated at one month of age and observed until four months of age, which is when GM1 mice typically develop marked gait abnormalities associated with brain GM1 ganglioside levels similar to those of infantile GM1 patients with advanced disease. All mice were treated with an intracerebroventricular, or ICV, injection of either PBGM01 (denoted in the following graphics as AAV) or vehicle. Ninety days after treatment, all animals were euthanized and tissues collected, referred to as necropsy, for histological and biochemical analysis. Serum b-gal activity was measured at various time points following treatment (days 0, 10, 28, 60 and 90). b-gal activity in the brain, CSF and peripheral organs were evaluated at the time of necropsy.

        The figure below shows that PBGM01-treated GLB1–/– mice had substantially higher serum b-gal activity following treatment than vehicle-treated GLB1–/– mice and similar b-gal activity to vehicle treated heterozygous control mice. Elevated serum b-gal activity as measured in nanomolar per milliliter per hour, or nmol/ml/h, was achieved shortly after treatment for all PBGM01-treated mice and persisted throughout the study for all but two PBGM01-treated mice, both of which exhibited antibodies against human b-gal.

Serum b-gal Activity

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        The following figure shows b-gal activity in the brain as measured in nanomolar per milligram per hour, or nmol/mg/h, and CSF following necropsy. b-gal activity in the PBGM01-treated mice exceeded the vehicle-treated GLB1–/– mice in both the brain and the CSF.

Treatment with PBGM01 Increased b-gal Activity in the Brain and CSF in A Knockout Mouse Model

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*p<0.05, **p<0.01, NS=not significant.

        Statistical significance is important and when used herein is denoted by p-values. The p-value is the probability that the reported result was achieved purely by chance (for example, a p-value < 0.001 means that there is a less than 0.1% chance that the observed change was purely due to chance). Generally, a p-value less than 0.05 is considered to be statistically significant.

        The following figure shows b-gal activity in the lungs, liver, heart and spleen following necropsy. In each organ, b-gal activity in the PBGM01-treated GLB1–/– mice exceeded activity levels in vehicle-treated GLB1–/– mice. This data supports the potential of PBGM01 to provide corrective b-gal enzyme activity to peripheral organs and suggests that treatment with PBGM01 could address both the CNS and peripheral manifestations observed in GM1 patients.

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Treatment with PBGM01 Increased b-gal Activity in Peripheral Organs in A Knockout Mouse Model

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**p<0.01, NS=not significant.

        We also assessed correction of brain abnormalities using biochemical and histological assays following necropsy. Lysosomal enzymes are frequently upregulated in lysosomal storage diseases, an observation that has been confirmed in GM1 patients. Therefore, we measured the activity of the lysosomal enzyme HEX in brain lysates. The figure below shows that the activity of HEX in PBGM01-treated GLB1–/– mice was normalized as compared to GLB1+/– control mice, while vehicle-treated GLB1–/– mice exhibited elevated total HEX activity.

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Treatment with PBGM01 normalized Hexosaminidase Activity in Brain in A Knockout Mouse Model

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**p<0.01, NS=not significant.

    Histological Analysis

        In addition to the knockout mouse model, we also performed a histological analysis comparing PBGM01-treated GLB1–/– mice to both vehicle-treated GLB1–/– mice and GLB1+/– control mice following necropsy. We evaluated lysosomal storage lesions by staining brain sections with filipin, a fluorescent molecule that binds GM1 ganglioside, as well as immunostaining for lysosomal-associated membrane protein 1. Filipin staining revealed marked GM1 ganglioside accumulation in neurons of the cortex, hippocampus and thalamus of the vehicle-treated GLB1–/– mice, which was normalized in the GLB1–/– mice treated with PBGM01. Immunohistochemistry demonstrated increased lysosomal membrane staining in the cortex and thalamus of vehicle-treated GLB1–/– mice, which was reduced in PBGM01-treated GLB1 –/– mice similar to GLB1+/– control mice.

    Evaluation of Treatment-Effects on Neurological Function

        In order to evaluate neurological function in PBGM01-treated GLB1–/– mice, gait analysis was performed at four months of age (three months after PBGM01 or vehicle administration) over two consecutive days using the CatWalk XT gait analysis system, a commonly used assessment of motor performance in mice. Average walking speed and the length of the hind paw print were quantified for each animal across at least three assessments on the second day of testing. Slower speed and elongated paw prints are indicative of impaired motor performance. As shown in the figure below, walking speed and paw print length improved significantly in PBGM01-treated GLB1–/– mice compared to vehicle-treated GLB1–/– mice, and were similar to the GLB1+/– control mice.

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Treatment with PBGM01 Improved Gait Assessment in A Knockout Mouse Model

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*p<0.05, **p<0.01, NS=not significant.

    Dose Ranging Pharmacology Study

        A pharmacology study was conducted to evaluate the minimum effective dose, or MED, and b-gal expression levels in a GLB1 knockout mouse model of GM1 following ICV administration of PBGM01. In this study, GLB1–/– mice were ICV-administered with PBGM01 at four separate dose levels. Other GLB1–/– mice and heterozygous GLB1 mice were ICV-administered with vehicle. The mice were separated into two groups, with one group necropsied at day 150, or the Day 150 Group, and one group necropsied at day 300, or the Day 300 Group. There were twelve mice in each cohort in each group.

        In this study, ICV administration of PBGM01 resulted in stable, dose-dependent increases in transgene product expression in the brain and peripheral organs, resolution of brain lysosomal storage lesions, improvements in neurological phenotype and increased survival of GLB1–/– mice. The lowest dose evaluated is considered the MED based on statistically significant improvements in survival, neurological exam scores and brain storage lesions at that dose.

    Survival Data

        The figure below shows survival data of each cohort in the Day 300 Group of the study. All 12 vehicle-treated GLB1–/– mice were euthanized according to the study defined euthanasia criteria prior to the scheduled study endpoint due to disease progression with neurological signs, characterized by ataxia, tremors and limb weakness. The median survival of this group was 268 days (185-283 days). In the lowest dose cohort, five of twelve mice were euthanized due to disease progression. In the second lowest dose cohort, one of twelve mice was euthanized due to disease progression. All mice in the two highest dose cohorts survived to the study endpoint.

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Survival Curves Following Administration of PBGM01 or Vehicle

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    Neurological Examinations

        A standardized neurological examination was performed in a blinded fashion every 60 days through day 240, and an average total severity score was obtained. Data for the Day 150 Group and Day 300 Group were combined by treatment and genotype. The figure below shows average total severity score for each cohort as of each assessment period. The results of vehicle-treated GLB1–/– mice exhibited progressively higher total severity scores indicative of progressive neurological signs beginning at the day 120 assessment. At the lowest dose of PBGM01, a progressive increase in the total severity score was also observed at the day 120 assessment, although the total severity score was significantly lower than that of the vehicle-treated GLB1–/– mice at the same assessment point. At the second lowest PBGM01 dose, minimal abnormalities were detectable in seven of twelve mice at the day 240 assessment. At the two highest doses of PBGM01, neurological abnormalities were not apparent, and total severity scores for these groups were similar to those of the vehicle-treated GLB1+/– controls at each assessment point.

Neurological Examinations Through Day 240

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    Histological Analysis

        A histological analysis was also performed comparing brain sections of PBGM01-treated GLB1–/– mice, vehicle treated GLB1–/– mice and vehicle treated GLB1+/– control mice at

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baseline, day 150 and day 300. Brain sections were stained for the lysosomal membrane protein LAMP1, and cortical cells positive for LAMP1 (i.e., cells exhibiting lysosomal distention) were quantified in scanned sections using an automated program. For animals that did not survive to the scheduled day 300 necropsy due to disease progression (all animals survived to day 150), brains were collected at the time of euthanasia, and data are presented as part of the day 300 cohort. The results of this analysis are shown in the figure below. Untreated GLB1–/– baseline mice necropsied on day 1 exhibited a higher proportion of LAMP1-positive cells in the brain compared to that of untreated GLB1+/– baseline controls. At both day 150 and day 300, PBGM01-treated mice exhibited a dose-dependent reduction in the proportion of LAMP1-positive cells compared to vehicle-treated necropsied GLB1–/– controls. At the two highest doses of PBGM01, the proportion of LAMP1-positive cells were reduced to levels similar to those of vehicle-treated GLB1+/– controls at day 150 and day 300.

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    b-gal Activity

        b-gal activity was measured in serum on the day of dosing and every 60 days thereafter until day 240. At necropsy, b-gal activity was measured in the brain and peripheral organs (heart, liver, spleen, lung and kidney). As shown in the figure below, average b-gal activity in serum in GLB1–/– mice in the Day 300 Group administered the highest dose of PBGM01 was approximately 10-fold greater than that of vehicle-treated GLB1+/– controls. At the second highest dose of PBGM01, serum b-gal activity in GLB1–/– mice was similar to that of vehicle-treated GLB1+/– controls. Serum b-gal activity in GLB1–/– mice for all other PBGM01 doses was similar to that of vehicle-treated GLB1–/– controls.

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b-Galactosidase Activity in Serum of Glb1–/– Mice Treated with PBGM01 or Vehicle (Day 240)

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        As shown in the figure below, b-gal activity was detectable in the CSF of all mice evaluated. GLB1–/– mice that were administered the two highest doses of PBGM01 displayed average CSF b-gal activity levels exceeding that of vehicle-treated GLB1+/– controls. CSF was not collected from vehicle-treated GLB1–/– mice because none survived to day 300. The shaded gray area in the figure below reflects the range of b-gal activity in CSF from GLB1–/– mice based on data from ten vehicle-treated animals from a prior study. b-gal activity in CSF was generally dose-dependent, although b-gal activity appeared to be similar in the two lowest dose groups.

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b-Galactosidase Activity in CSF of PBGM01-Treated GLB1–/– Mice and Vehicle-Treated Controls (Day 300)

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        The figures below show b-gal activity in the brain, heart and liver following necropsy. In the brain, b-gal activity increased in a dose-dependent manner in PBGM01-treated GLB1–/– mice. Average b-gal activity for all dose groups was higher than that of the vehicle-treated GLB1–/– controls. However, only the two highest dose groups exhibited higher average b-gal activity than that of the vehicle-treated GLB1+/– controls at both assessment points.

        Some peripheral organs also exhibited dose-dependent increases in b-gal activity after PBGM01 administration. The heart displayed dose-dependent increases in b-gal activity, resulting in average levels higher than that of vehicle-treated GLB1–/– mice at all doses. However, only the two highest doses restored b-gal activity to levels similar to or higher than that of vehicle-treated GLB1+/– controls at both assessment points.

        The liver displayed dose-dependent increases in b-gal activity after PBGM01 administration. At all doses except the lowest dose, average b-gal activity levels at both assessment points were higher than that of vehicle-treated GLB1–/– mice and similar to or higher than that of vehicle-treated GLB1+/– controls.

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b-Galactosidase Activity in Brain, Heart and Liver of PBGM01-Treated
GLB1–/– Mice and Vehicle-Treated Controls

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NHP Toxicology Study

        A 120-day good laboratory practice, or GLP, -compliant toxicology study was conducted in NHPs to assess the safety, tolerability and biodistribution and excretion (shedding) profile of PGM01 following ICM administration.

        Juvenile male and female rhesus macaques received a single ICM administration of vehicle or one of three dose levels of PGM01. Animals from each cohort were euthanized either 60 or 120 days following administration. In-life evaluations included clinical observations performed daily, multiple scheduled physical exams, standardized neurological monitoring, sensory nerve conduction studies, or NCS, body weights, clinical pathology of the blood and CSF, evaluation of serum-circulating neutralizing antibodies and assessment of vector pharmacokinetics and vector excretion. Animals were necropsied, and tissues were harvested for a comprehensive histopathological examination, measurement of T-cell responses and biodistribution analysis.

        Key results from this study were:

    ICM administration of PBGM01 was well-tolerated at all doses evaluated. PBGM01 produced no adverse effects on clinical and behavioral signs, body weight, or neurological and physical examinations. There were no abnormalities of blood and CSF clinical pathology related to PBGM01 administration except for a mild transient increase in CSF leukocytes in some animals.

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    ICM administration of PBGM01 resulted in vector distribution in the CSF and high levels of gene transfer to the brain, spinal cord and dorsal root ganglia, or DRG. PBGM01 also reached high levels in peripheral blood and liver.

    Evaluation of PBGM01 DNA excretion demonstrated detectable vector DNA in urine and feces five days after administration, which reached undetectable levels within 60 days.

    T-cell responses to the vector capsid and/or human transgene product were detectable in the peripheral blood mononuclear cells and/or tissue lymphocytes (liver, spleen, bone marrow) in the majority of PBGM01-treated animals. T-cell responses were not generally associated with any abnormal clinical or histological findings.

    Pre-existing neutralizing antibodies to the vector capsid were detected in some animals and did not appear to influence gene transfer to the brain and spinal cord, although the presence of pre-existing neutralizing antibodies correlated with reduced hepatic gene transfer.

    PBGM01 administration resulted in asymptomatic degeneration of the trigeminal ganglia, or TRG, and DRG sensory neurons and their associated central and peripheral axons. The severity of these lesions was typically minimal to mild. These findings were not clearly dose-dependent, although there was a trend of more severe lesions in the mid-dose and high dose cohorts. Degeneration of sensory neuron cell bodies was less severe at day 120 than day 60, indicating that these lesions are not progressive, although the subsequent axon degeneration and fibrosis may continue to evolve over several months. Consistent with these findings, two animals that exhibited the most severe axon loss and fibrosis of median nerves upon necropsy at day 120 had exhibited a reduction in median nerve sensory action potential amplitudes by day 28 with no subsequent progression. Due to the presence of asymptomatic sensory neuron lesions in all dose groups, a no-observed adverse effect level was not defined.

        The figures below show the degeneration in the DRG, the spinal cord and median nerve axon and median nerve fibrosis as of day 120, as measured by histological analysis and scoring of severity of lesions from 0 (none) to 5 (severe). The two animals that exhibited the most severe axon loss and fibrosis with decreased sensory nerve action potential are shown in red.

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Severity of DRG, Spinal Cord and Median Nerve Lesions at Day 120

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        The figures below show the change in median sensory nerve conduction as of each measuring point in the study, as measured by median sensory action potential in microvolts.

Median Sensory Nerve Conduction Studies

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Clinical Development

        Our clinical development plan is to start with trials in infantile GM1, and if successful, explore expansion of the indication with trials in later onset forms of GM1. In November 2018 a pre-IND

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meeting was held with the FDA and we received feedback on our proposed Phase 1/2 clinical trial. We have also received feedback from the European Medicines Agency, or EMA, regarding our preclinical studies and proposed clinical trial.

        We intend to submit an IND for PBGM01 in the first half of 2020, and plan to initiate a multi-center, open-label, single-arm Phase 1/2 clinical trial of PBGM01 in patients with a diagnosis of infantile GM1 with GLB1 mutations and reduced enzyme activity beginning in the United States in the second half of 2020. We intend this trial to have two dose-escalating cohorts (three patients per cohort) testing a low dose that exceeds the MED determined by the studies in the GLB1 knockout mouse model and a 3-fold greater high dose, followed by a third confirmatory cohort. The Data Safety Monitoring Board, or DSMB, will review after the four week follow-up is complete for the third subject enrolled in each cohort. Patients will be evaluated over two years, followed by rollover into a long-term follow up study to monitor safety and selected biomarker and efficacy measures. The following graphic illustrates this planned trial design.

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        We expect that pre-specified co-primary endpoints will include safety and efficacy. Efficacy will be evaluated by prevention of further developmental regression and by restoration of developmental trajectories, as measured by developmental milestones using accepted clinical scales, observer-reported outcomes and video recordings. Secondary outcomes will include plasma and CSF b-gal enzyme activity and disease progression endpoints including evaluations using EEG and MRI.

        Depending on the results from the first two cohorts, we plan to obtain input from regulatory agencies on the requirements to submit for regulatory approval for commercialization in the United States and internationally.

Natural History Data

        We are currently funding a GM1 natural history study being conducted by the ODC to collect prospective data on clinical disease progression in infantile and juvenile GM1. This data will be used to construct natural history patient profiles for use as matched case controls for comparison to the profiles

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of treated participants in our planned Phase 1/2 clinical trial. This natural history study will be conducted at many of the same leading GM1 clinical centers in the United States and internationally at which we will also conduct our interventional trial, allowing for control of regional differences in supportive care.

FTD—PBFT02

Overview of FTD-GRN

        FTD is one of the more common causes of early-onset (midlife) dementia, causing impairment in behavior, language and executive function, and occurs at similar frequency to Alzheimer disease in patients younger than 65 years. FTD presents as a rapidly progressive clinical syndrome. Changes in personal and social conduct occur in early stages of the disease, including loss of inhibition, apathy, social withdrawal, hyperorality (mouthing of objects) and ritualistic compulsive behaviors. These symptoms are severely disabling and may lead to misdiagnosis as a psychological or emotionally based problem, or, in the elderly, be mistaken for withdrawal or eccentricity. FTD progresses to immobility and loss of speech and expression. Survival averages eight years after onset of symptoms.

        In approximately 5% to 10% of individuals with FTD, the disease is caused by mutations in the granulin, or GRN, gene, causing a deficiency of progranulin. PGRN is a complex and highly conserved protein thought to have multiple roles in cell biology, development and inflammation. Emerging evidence suggests that PGRN's pathogenic contribution to FTD and other neurodegenerative disorders relates to a critical role in lysosomal function.

        There are no disease modifying therapies approved for the treatment of FTD. Anti-depressants have been shown to manage some behavioral symptoms. We engaged a third party data-analytics firm to conduct an analysis of a variety of de-identified electronic medical records. Based on this analysis, we estimate the prevalence of FTD in the United States to be approximately 62,000. The prevalence of FTD due to GRN mutation found in literature is 5% to 10%. Accordingly, we estimate the prevalence of FTD-GRN deficiency in the United States to be approximately 3,000 to 6,000.

Program Selection

        We chose FTD-GRN as one of our initial lead programs because it meets our criteria for rare, monogenic CNS disorders in which we believe we can develop product candidates with a higher probability of technical and regulatory success:

    Cross-correction:  Following treatment with PBFT02, we believe overexpressing PGRN in a subset of cells in the CNS could provide a depot of secreted protein that could be taken up by surrounding cells, resulting in the potential for cross-correction and broad restoration of neuronal lysosomal function across the entire brain.

    Biomarkers:  There are known biomarkers in FTD-GRN that are measurable and available to assist in drug development.

    Pharmacodynamic biomarkers. PGRN is a secreted protein that can be measured in the CSF and plasma, and it has been shown to be reduced in the CSF of human GRN mutation carriers.

    Disease progression biomarkers. We expect to be able to use recent progress in the identification of clinical disease progression biomarkers for FTD, including CSF, neuroimaging and retinal biomarkers, to facilitate clinical development by enabling early detection of treatment effects on disease pathophysiology.

    Preclinical Validation:  In our preclinical studies in GRN– /– mice, ICV administration resulted in increased levels of PGRN in the CNS and CSF, with resolution of lysosomal storage lesions.

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      ICM administration in NHPs (which do not have the disease phenotype) resulted in robust increases in PGRN levels in CNS and CSF.

Our Product Candidate

        We are developing PBFT02 to treat FTD-GRN with a single dose of PBFT02 by ICM injection. PBFT02 is a gene therapy that utilizes an AAV1 viral vector to deliver a modified DNA encoding the GRN gene to a patient's cells. The goal of this vector and delivery approach is to provide higher than normal levels of PGRN to the CNS to overcome the progranulin deficiency in GRN mutation carriers, who have been observed to have reduced CSF PGRN levels ranging from 30% to 50% of the PGRN levels observed in normal, mutation non-carriers. We selected the AAV1 capsid and ICM delivery route due to the superior transduction of the transgene observed in NHP studies throughout the brain, including particularly high transduction of the ependymal cells that line the ventricles (CSF spaces) of the brain and secrete CSF, which circulates around the brain. Secretion of PGRN into the CSF by ependymal cells is expected to increase CSF levels of PGRN and the bioavailability of PGRN to other brain regions.

Preclinical Studies

    Proof-of-Concept Pharmacology Mouse Model

        A pharmacology study was conducted in a mouse model using an AAVhu68 vector to assess whether delivery of the human GRN gene to the brain can elevate brain PGRN levels, eliminate existing lysosomal storage material and reduce the upregulated lysosomal enzyme HEX activity in GRN–/– mice (shown in the figures below as knockout, or KO, mice), which are present in the brain of GRN–/– mice as early as two months of age. Therefore, we treated GRN–/– mice at two to three months of age with an ICV injection of either an AAVhu68 vector expressing human GRN (shown in the figures below as AAV) or PBS vehicle, with ten mice in each group. In addition, a cohort of ten wild type, or WT, mice were injected with vehicle. Animals were euthanized 60 days after injection and necropsy was performed.

    Biomarker Evaluation

        The level of human PGRN protein in the brain and CSF (in nanograms per milliliter, or ng/mL) was measured using an enzyme-linked immunosorbent assay, or ELISA, to determine transduction levels. As shown in the figure below on the right, measurable levels of human PGRN were confirmed in the brain in the AAV-treated group, while in both the vehicle-treated and wild type groups, human PGRN was below detection levels. We further evaluated PGRN protein levels in the CSF, as shown in the figure below on the left. AAV-treated mice displayed a higher average CSF concentration of human PGRN than both the vehicle-treated and wild type groups.

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AAV Mediated Expression of Human PGRN (hPGRN) Protein in the CSF and Brain

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    Histological Analysis

        After confirming PGRN protein expression in the brain of GRN–/– mice, we assessed whether PGRN overexpression reduced the number of lipofuscin deposits in the hippocampus, thalamus and cortex. As shown in the figure below, AAV-treated GRN–/– mice exhibited fewer lipofuscin deposits (indicated by fluorescent spots) in all brain regions compared to those of vehicle-treated GRN–/– mice and comparable lipofuscin deposits to wild-type mice.

Comparison of Lipofuscin Deposits in the Brain

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*p<0.05, ***p<0.001, ****p<0.0001

    Vector Comparison Study in Non-Human Primates

        PBFT02 utilizes an AAV1 vector to deliver to the brain a functional GRN gene encoding progranulin. The AAV1 vector was chosen over other potential vectors because it demonstrated a high tropism for the ependymal cells that line the brain ventricles in NHP studies.

        A study was conducted that was designed to evaluate the expression of human PGRN protein in the CSF of adult NHPs following ICM delivery of different AAV vectors. The primary goal of the study was to determine whether ICM AAV delivery could achieve CSF PGRN levels similar to those demonstrated to be pharmacologically active in the knockout mouse model, and to identify the vector capsid and transgene sequence that achieved the most robust expression. In the study, adult rhesus macaques received a single ICM injection of an AAV1, AAV5 or AAVhu68 vector expressing human GRN, with two NHPs per group. The AAVhu68 (v2) vector utilized a different GRN coding sequence and different promoter than what was used in the other vectors evaluated. Human PGRN protein was measured by enzyme-linked immunosorbent assay in the CSF and plasma. Increasing expression of PGRN outside of the CNS should not be required for the treatment of FTD-GRN, and the levels of PGRN protein in plasma was measured to ascertain if any of the vectors disproportionality increased PGRN outside of the CSF, which could cause potentially undesirable side effects.

        The figures below show that production of human PGRN protein in the CSF of all treated NHPs exceeded levels found in healthy normal human control samples. Production was highest in the CSF of NHPs treated with the AAV1 vector, resulting in concentrations more than 50-fold higher than normal human CSF PGRN concentrations. PGRN production in plasma was similar to normal human control levels for the AAVhu68 and AAV1 vectors. Plasma analysis was not performed on the AAVhu68 (v2) group.

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Production of Human PGRN Protein in CSF and Plasma of NHPs Following ICM AAV Delivery

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        In this NHP study, animals were necropsied 28 days after vector administration. Ependymal cell transduction was evaluated by immunohistochemistry in multiple regions of the brain of animals treated with AAVhu68 and animals treated with AAV1. As shown in the figure below, transduction of the ependymal cells (as shown by density of darkened ependymal cells) was substantially higher in the animals treated with AAV1 (48%) as compared to the animals treated with AAVhu68 (1-2%).


Ependymal cell transduction following ICM delivery of AAV1 and AAVhu68 vectors expressing GFP in NHPs

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        Based on the results from the NHP vector comparison study, we selected AAV1 as the capsid for our PBFT02 product candidate.

        In our NHP preclinical studies, the production of PGRN using a AAV1 capsid was 3 to 5 times greater than AAVhu68 and AAV5. Thus, we believe PBFT02 has the potential to provide a large CNS depot of progranulin that could be taken up by neurons broadly throughout the brain, restoring lysosomal function and neuronal survival, thereby slowing or stopping progression of the FTD. Further,

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AAV1 does not strongly transduce the liver and does not result in comparatively elevated levels of circulating PGRN. This may be an advantage by reducing the potential risk of unknown side effects of PGRN outside the CNS.

        GRN mutation carriers have been demonstrated to have reduced CSF progranulin levels ranging from 30% to 50% of the PGRN levels observed in normal, mutation non-carriers. Based on our preclinical studies, we believe that PBFT02 has the potential to sufficiently increase extracellular PGRN levels to overcome intracellular PGRN deficiency, without greatly increasing peripheral PGRN levels.

NHP Toxicology Study

        A 90-day GLP-compliant toxicology study was conducted to assess the safety and tolerability of PBFT02 administered through ICM in adult NHPs. Three dose levels were used to assess the safety and tolerability of PBFT02 administered by ICM.

        Preliminary histological analysis showed findings primarily within the DRG, TRG, dorsal white matter tracts of the spinal cord and peripheral nerves. These findings consisted of neuronal degeneration within the DRG/TRG and axonal degeneration (i.e. axonopathy) within the dorsal white matter tracts of the spinal cord and peripheral nerves. Overall, these findings were observed across all PBFT02-treated groups; however, the incidence and severity tended to be higher in individual animals from the mid and high dose groups at both time points. Nerve conduction studies of the median sensory nerve were normal, with no evidence of treatment-related effects.


Severity of DRG, Spinal Cord and Median Nerve Lesions at Day 90

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Median Sensory Nerve Conduction Studies

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Clinical Development

        Our clinical development plan is to treat FTD-GRN with a single dose of PBFT02 via ICM injection, with our initial clinical trial focused on symptomatic FTD patients who have the GRN mutation.

        The planned trial's primary endpoints will be safety and tolerability. In addition, we will look at several secondary endpoints, including CSF progranulin levels, FTD disease progression biomarkers and brain imaging, to assess the impact of PBFT02 treatment.

    We will utilize functional and clinical scales that have been well-accepted in FTD, as well as comparisons of clinical progression profiles of treated and control participants.

    We intend to evaluate CSF PGRN levels as a measure of CNS transduction.  While the amount of extracellular progranulin required to overcome genetic progranulin insufficiency in neurons is unknown, our data with AAV1 in NHPs suggest that PBFT02 could result in approximately five-fold greater levels of CNS PGRN compared to other vectors. We intend to study doses of PBFT02 that we expect to achieve above-normal levels of CNS PGRN, and determine empirically the amount of PGRN replacement required to interrupt the pathophysiology of FTD.

    We intend to measure the effect of treatment on retinal lipofuscin deposits, which have been well-characterized in humans with FTD-GRN. In support of this clinical biomarker, studies in the knockout mouse disease model demonstrated a robust reduction of lipofuscin deposits in the hippocampus, thalamus and cortex following treatment with PBFT02.

    We will utilize MRI to track changes in the thickness of the middle frontal cortex and parietal regions, which are the most commonly affected brain regions across all clinical presentations in the target population. Patients with PGRN deficiency display neuronal cell loss primarily in the frontal and temporal cortical lobes, and whole brain volume typically decreases at a rate of 3.4% per year after symptom onset.

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    We will utilize CSF biomarkers to assess potential treatment effects on neurodegeneration, and associated neuro-inflammatory and microglial activity, including treatment-related changes in CSF levels of neurofilament light chain and other neurodegenerative, microglial and inflammatory biomarkers.

        We intend to submit an IND for PBFT02 in the second half of 2020, and plan to initiate a multi-center, open-label, single-arm Phase 1/2 clinical trial of PBFT02 in patients with a diagnosis of FTD with a GRN mutation beginning in the United States in the first half of 2021. This trial is expected to be a two cohort dose-escalation trial, with three patients per cohort and the potential for a third confirmatory cohort. The primary endpoints of the trial will include safety and tolerability. Endpoints will be measured at 12 and 24 months for safety, and one and six months for certain biomarkers. The DSMB will review after the four week follow-up is complete for the last subject enrolled in each cohort. All patients will be followed for a total of five years to monitor safety and selected biomarker and efficacy measures. The following graphic illustrates this planned trial design.

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        A pre-IND meeting with the FDA was held in March 2019 and we received feedback on our proposed Phase 1/2 clinical trial. We also intend to seek feedback from regulatory agencies outside the United States.

        Depending on the results from the first two cohorts, we plan to obtain input from regulatory agencies on the requirements to submit for regulatory approval for commercialization in the United States and internationally.

Krabbe Disease—PBKR03

Overview of Krabbe Disease

        Krabbe disease is a rare and often life-threatening lysosomal storage disease that presents early the patient's life, resulting in progressive damage to both the brain and PNS. Infants may present with extreme irritability and excessive crying, feeding difficulties, fisted hands, poor head control, stiffness and arching. The early infantile form of Krabbe disease typically manifests before six months of age and is the most severe form, accounting for 60% to 70% of Krabbe disease diagnoses. In these patients

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the disease course is highly predictable and rapidly progresses to include loss of acquired milestones, staring episodes, apnea, peripheral neuropathy, severe weakness, unresponsiveness to stimuli, seizures, blindness, deafness and death by two years of age. Late infantile patients present symptoms that are similar to those of early infantile Krabbe disease, with a median survival of approximately five years from onset of symptoms. Late infantile Krabbe disease is defined by onset between seven to twelve months of age. It comprises approximately 10% to 30% of cases and exhibits greater variability in clinical presentation.

        Krabbe disease is an autosomal recessive lysosomal storage disease caused by mutations in the GALC gene, which provides instructions for making an enzyme called galactosylceramidase, which breaks down certain fats, including galactosylceramide and psychosine. The myelin-producing cells in the CNS and PNS are particularly sensitive to the accumulation of psychosine, resulting in widespread death of these cell populations. Without myelin, nerves in both the brain and other parts of the body cannot transmit signals properly, leading to the signs and symptoms of Krabbe disease.

        There are no approved disease-modifying treatments for Krabbe disease. There is only supportive care for Krabbe disease including feeding tubes, respiratory support and seizure control until death. Although there is some evidence that human stem cell transplant, or HSCT, is beneficial for pre-symptomatic infants with Krabbe disease, there is no established way to predict which patients will become symptomatic. Furthermore, there are serious risks associated with HSCT, including relatively high rates of mortality. When performed after the onset of overt symptoms in these patients, HSCT provides only minimal neurologic improvement and does not substantially improve survival.

        Currently, six states conduct mandatory screening for Krabbe disease and an additional four states passed legislation to include Krabbe disease in mandatory screening, but such screening has not yet been added. We engaged a third party data-analytics firm to conduct an analysis of screening data from the six states with screening history and based on this evaluation of screening data, we believe the incidence of Krabbe to be approximately 2.6 in 100,000 births.

Program Selection

        We chose infantile Krabbe as one of our first clinical programs because it met our criteria for rare, monogenic CNS disorders in which we believe we can develop product candidates with a higher probability of technical and regulatory success. The indication presents cross-correction, biomarker data and preclinical validation that are supportive of advancing Krabbe into the clinic.

    Cross-Correction:  Following treatment with PBKR03, newly synthesized galactosylceramidase is expected to be secreted by transduced cells, potentially providing a depot of secreted enzyme that could be taken up by other cells, resulting in the potential for cross-correction and broad CNS and PNS enzyme replacement.

    Biomarkers:  There are known biomarkers in Krabbe disease that are measurable and available to assist in drug development.

    Pharmacodynamic biomarkers. GALC activity has been shown to be reduced in patients with Krabbe disease and can be measured in CSF and plasma. Psychosine levels are also measurable and elevated in patients with Krabbe disease. We will measure these biomarkers in CSF and plasma to assess the efficiency of transduction and restoration of GALC activity by PBKR03.

    Disease progression biomarkers. We will leverage a number of neuroimaging, electrophysiological and fluid biomarkers to assess treatment effects on disease progression, including CNS myelination as measured by diffusion-tensor MRI, nerve conduction velocity, or NCV, to assess peripheral nerve myelin and conduction, and visual and brain stem-evoked potentials to assess CNS myelination and conduction.

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    Preclinical validation:  In preclinical studies in a mouse model of Krabbe disease, CSF delivery of PBKR03 resulted in GALC expression levels in the CNS that rescued motor function and improved survival. CSF delivery in mice also reduced peripheral nerve demyelination and globoid cell infiltration.

Our Product Candidate

        We are developing PBKR03 to treat infantile Krabbe disease, the most common and severe form of Krabbe disease. PBKR03 utilizes a next-generation AAVhu68 capsid to deliver DNA encoding the GALC enzyme to a patient's cells. PBKR03 will be administered as a single dose by ICM injection into the CSF.

        The AAVhu68 capsid and ICM route of administration were selected for the superior transduction observed in preclinical studies for cells of the CNS and PNS, which are both affected in Krabbe disease patients. This vector has the potential to provide corrective GALC enzyme to both the CNS and PNS, which we believe could treat both the CNS pathologies and the significant peripheral neuropathy observed in many Krabbe disease patients.

Preclinical Studies

    Vector Selection Study in Pre-Symptomatic Twitcher Mice

        A proof of concept study was conducted in pre-symptomatic twitcher mice to establish the route of administration, capsid and dose range best suited for treating infantile Krabbe disease. A twitcher mouse, denoted in the following figures as twi/twi, is a naturally-occurring mouse mutant caused by an abnormality in the gene coded for galactosylceramidase, and therefore is genetically equivalent to Krabbe disease. Four different AAV capsids encoding human GALC were tested: AAV3b, AAV5, AAV1 and AAVhu68. Each AAV vector was administered ICV. As a control, a group of pre-symptomatic twitcher mice were administered PBS vehicle only. As shown in the figure below, while all four capsids enhanced survival compared to the vehicle-treated control mice, the AAVhu68 capsid yielded superior survival over AAV3b, AAV5 and AAV1. Therefore, we selected the AAVhu68 capsid for subsequent studies.


Survival Curves Following ICV Delivery of GALC to Presymptomatic Twitcher Mice Using Different AAV Capsids

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    Pharmacodynamic Study in Twitcher Mice

        After selecting our AAVhu68 capsid for use, we then used the twitcher mouse model to examine treatment effects of PBKR03. In preclinical studies, PBKR03 was delivered into the CSF by ICV injection.

        As shown in the figures below, 28 days after ICV administration of PBKR03, GALC activity levels observed in the brain, liver and serum of PBKR03-treated twitcher mice were higher than the levels observed in the same tissues of vehicle-treated twitcher mice and healthy control mice (denoted by +/+ in the figure below).

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    Pharmacology Study in Twitcher Mice

        A pharmacology study in early-symptomatic twitcher (twi/twi) mice was also conducted. Twitcher mice were ICV-administered PBKR03 on post-natal day, or PND, 12. Other age-matched early symptomatic twitcher mice, unaffected heterozygotes (twi/+) and wild-type (+/+) mice were ICV-administered PBS vehicle only on PND 12. PND 12 was selected as the day of dosing because it is shortly after the onset of PNS demyelination in an animal with brain maturation equivalent to a 2-month-old infant.

        Beginning ten days after administration, all mice were monitored daily for clinical signs. Clinical signs were scored using an assessment of clasping ability, gait, tremor, kyphosis, and fur quality. These measures effectively assess the clinical status of subject mice based upon the symptoms they typically present. Scores above 0 indicate clinical deterioration.

        Using this assessment, early-symptomatic twi/twi mice administered PBKR03 displayed clinical scores close to 0, which was comparable to the scores of unaffected twi/+ and +/+ mice, as shown in the figure below. In contrast, the age-matched vehicle-treated twi/twi mice displayed higher assessment scores over most of the time course, indicating clinical deterioration.

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Clinical Scoring

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        As a complementary functional assay, the rotarod test, a commonly used test to evaluate motor coordination in mice, was performed on PND 35. As shown in the figure below, the early symptomatic PBKR03-treated twi/twi mice displayed fall latencies comparable to those of the unaffected twi/+ and +/+ mice, while the age matched vehicle-treated twi/twi mice displayed statistically significantly shorter fall latencies (p<0.05), indicating deterioration of neuromotor function.

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Complementary Functional Assay:

Rotarod Day 35—Symptomatic Treatment

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        To determine whether the observed benefits of PBKR03 administration on functional endpoints correlated with histologic improvements, all mice were necropsied 28 days following ICV administration, and the sciatic nerve of the hind limb was examined histologically. The sciatic nerve was selected for histology because peripheral nerves are more affected by demyelination in twi/twi mice compared to the CNS.

        As shown in the figures below, the sciatic nerve of vehicle-treated +/+ controls was enriched with myelin (dark blue staining) and generally devoid of globoid cell infiltrates (pink staining). However, in vehicle-treated symptomatic twi/twi mice, severe subtotal demyelination was observed in the sciatic nerve, accompanied by nerve thickening and the infiltration of globoid cells. In contrast, myelin was preserved in the sciatic nerve of symptomatic PBKR03-treated twi/twi mice, although not to the extent observed in age-matched +/+ mice. Fewer globoid cells were also observed in the nerve of PBKR03-treated twi/twi mice compared to vehicle treated twi/twi mice.


Sciatic Nerve Histology Following ICV Administration of PBKR03 to Symptomatic Twitcher Mice:

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    Naturally Occurring Krabbe Dog Model

        A preclinical study is ongoing in a naturally occurring Krabbe dog model evaluating treatment with PBKR03 administered directly to the CSF using the ICM route of administration. In this study, four Krabbe dogs were treated with a single administration of PBKR03, two Krabbe dogs were treated with a sham and one wild type control dog was also treated with a sham.

        As shown in the figure below, all four PBKR03-treated Krabbe dogs demonstrated rapid GALC enzyme secretion into the CSF, with all four treated dogs exceeding normal wild-type levels (shown by the dotted line) by day 28, and three of the four dogs remaining at or above normal levels at day 180.


CSF GALC Activity—PBKR03 treated

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        As shown in the figures below, periodic NCV recordings demonstrated slowed or undetected signals in sham-treated Krabbe dogs, while all four PBKR03-treated Krabbe dogs had normalized velocities similar to the wild type control dog.


Nerve Conduction Velocities in Tibial Motor and Radial Sensory Nerves

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    Histological Analysis

        A histological analysis evaluating myelination and neuroinflammation levels was also conducted. As shown in the figures below, one PBKR03-treated Krabbe dog showed substantially improved levels of

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myelination and decreased neuroinflammation on necropsy at 28 weeks as compared to a sham-treated Krabbe dog on necropsy at eight weeks.


Histology: Myelination and Neuroinflammation Correction at 28 Weeks

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        All of the PBKR03-treated Krabbe dogs had growth similar to the wild-type dog, as shown by the body weight curve in the figure below.


Body Weight Curve

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        Further, as shown in the figure below on the left, after day 70, none of the dogs exhibited meaningful CSF pleocytosis, or increase in white cell count, with normal wild-type dog levels shown by the dotted line. There were no treatment-related histopathological lesions at 6 months in the PBKR03-treated Krabbe dogs.


CSF and Sensory Neurons Safety Monitoring

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    NHP Toxicology Study

        GTP is conducting an IND-enabling NHP toxicology study using PBKR03 that we intend to use to support a first-in-human trial in early infantile Krabbe patients.

Clinical Development

        Our clinical development plan is to start with trials in infantile Krabbe, and if successful, consider further exploration of expansion of the indication with trials in later onset forms of Krabbe. The trial's primary endpoints will be safety and tolerability. We will also evaluate several secondary endpoints, such as those listed below, to assess the impact of PBKR03 treatment:

    We will confirm CNS and peripheral transduction with assays of CNS and serum GALC activity and psychosine levels.

    We will assess the effect of PBKR03 on disease pathology.  We intend to propose to measure changes in myelination, functional outcomes related to myelination, and potential disease biomarkers.

    We will measure treatment effects on central demyelination.  We will utilize diffusion-tensor magnetic resonance imaging anisotropy measurements of white matter regions and fiber tracking of corticospinal motors tracts, changes in which are indicators of disease state and progression.

    We will measure peripheral demyelination.  We will measure this indirectly via nerve conduction velocity studies on the motor nerves (deep peroneal, tibial and ulnar nerves) and sensory nerves (sural and median nerves) to monitor for fluctuations indicative of a change in biologically active myelin.

    We will assess the ability of PBKR03 to delay or prevent vision loss for those subjects that have not developed significant vision loss prior to treatment. Development of visual impairment is common in early infantile Krabbe, with 61.2% of the population developing vision loss at some point in the disease according to one study. Measurement of Visual Evoked Potentials will be used to objectively measure responses to visual stimuli as an indicator of central visual impairment or loss.

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    We will measure early indications of auditory abnormalities will be measured.  Hearing loss is also common during disease progression and will be measured.

    We will obtain longitudinal brain MRI scans to detect and verify AAV-treatment effects on disease pathophysiology. Recent brain MRI studies of infants with infantile Krabbe have shown predominance of increased intensity in the dentate/cerebellar white matter as well as changes in the deep cerebral white matter.

    We will clinically measure restoration of developmental potential and improving the quality of life for treated patients. We believe gene replacement with PBKR03 could significantly reduce the accumulation of galactolipids such as galactocerebroside that often leads to demyleniation in both the CNS and PNS, or reduction in toxic glycosphingolipids of psychosine reversing neuronal toxicity, resulting in meaningful clinical benefit to patients. We will measure clinical benefit by prevention of further developmental regression and by restoration of developmental trajectories, as measured by developmental milestones using accepted clinical scales, observer-reported outcomes and video recordings.

        We intend to submit an IND for PBKR03 in the second half of 2020, and plan to initiate a multi-center, open-label, single-arm Phase 1/2 clinical trial of PBKR03 in patients with a diagnosis of infantile Krabbe disease GALC mutations and reduced enzyme activity beginning in the United States in the first half of 2021. We intend this trial to have two dose escalating cohorts (three patients in each cohort) testing a low dose that exceeds the MED in the twitcher mouse model, and a 3-fold greater high dose, followed by a third confirmatory cohort. Prespecified co-primary endpoints will include safety, tolerability and efficacy demonstrated as prevention of further developmental regression and by restoration of developmental trajectories, as measured by developmental milestones using accepted clinical scales, observer reported outcomes and video recordings. The DSMB will review after the four week follow-up is complete for the third subject enrolled in each cohort. Patients will be evaluated over two years, followed by rollover into a long-term follow up study to monitor safety and selected biomarker and efficacy measures. The following graphic illustrates this planned trial design.

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        A pre-IND meeting was held with the FDA in April 2019 and we received feedback on our proposed Phase 1/2 clinical trial. We have also received feedback from the EMA regarding our preclinical studies and proposed clinical trial.

        In collaboration with the ODC, we are also currently looking to develop comparator data sets for our Krabbe clincial trial. Clinical understanding of Krabbe disease has been summarized in several case studies and natural history studies.

        Based on the results from this Phase 1/2 trial, we plan to obtain input from regulatory agencies on the requirements to submit for regulatory approval for commercialization in the United States and internationally.

Trigemnial Ganglia and Dorsal Root Ganglia Toxicity

        The primary finding of the NHP toxicology studies for both PBGM01 and PBFT02 (preliminary results) was trigeminal root ganglia and dorsal root ganglia toxicity with consequent peripheral and spinal cord axonopathy. These findings have been previously reported as an AAV platform risk based on NHP studies in which minimal to mild DRG toxicity was observed within 14 to 30 days after dosing, without clinical manifestations. Chronic studies examining DRG toxicity have revealed no increase in severity and no clinical manifestations at four to six months or up to four years after administration. Similarly, no clinical manifestations were observed in any animals on detailed neurological examinations or daily observations in the PBGM01 and PBFT02 toxicology studies.

        To better understand the clinical significance of these findings, we plan to implement clinical monitoring in our GM1, FTD and Krabbe disease interventional trials, consisting of both nerve conduction studies and neurological exams focused on sensory and peripheral nerve function.

Discovery Programs

        We also have three programs in the discovery and candidate selection stage, PBML04 for MLD, PBAL05 for ALS and PBCM06 for CMT2A. MLD is a monogenic autosomal recessive sphingolipid storage disease caused by mutations in the gene encoding the lysosomal enzyme ARSA. Patients with MLD display progressive leukodystrophy (demyelination) in the CNS and PNS, neuronal cell death, and subsequent loss of all motor and cognitive function, resulting in premature death, especially in patients with early disease onset. PBAL05 is targeting ALS patients who have a gain-of-function mutation in the C9orf72 gene. ALS is a motor neuron disease characterized by rapid degeneration of upper and lower motor neurons, leading to progressive weakness and premature death. Most cases of ALS are sporadic with an unknown etiology, but there are also genetic forms of the disease inherited in an autosomal dominant fashion. Mutations in the C9orf72 gene are the most common genetic defects implicated in ALS, accounting for approximately 34% of familial ALS cases and approximately 5% of sporadic ALS cases. Mitofusin 2, or MFN2, gene mutations are associated with CMT2A, which is a neurological disorder that presents complex phenotypes, including not only neuropathy-related features but also systemic impairment of the CNS. CMT2A is the most frequent axonal form of CMT, accounting for approximately 20% of the diagnosed cases. Clinically, the classic form of CMT2A is characterized by physical weakness, foot deformities, difficulty in walking and areflexia. We are coordinating with GTP in conducting discovery stage preclinical studies for these programs. Beyond this portfolio, through our research collaboration with GTP, we also have the option to license programs for six additional indications.

Manufacturing

        Gene therapy manufacturing is a critical factor in the successful development and commercialization of novel genetic medicines, and to that end, we have established a relationship with

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Paragon, a contract development and manufacturing organization, or CDMO, for our initial manufacturing needs.

        Our gene therapy manufacturing strategy utilizes a production platform approach with HEK293 mammalian cells as the substrate, triple plasmid transient transfection and single-use fixed-bed iCellis® 500 bioreactor system for the manufacture of our AAV product candidates. We are using a well-characterized production platform that has been used for both commercial and clinical AAV products and product candidates. We believe our approach will enable rapid development, control of product quality and regulatory compliance. Paragon has extensive experience with the iCellis® 500 bioreactor platform and HEK293 transient transfection gene therapy manufacturing. As part of our research collaboration with GTP, we have access to broad and deep early-stage process science capabilities and experience to enable technology transfer of scalable processes to our CDMO, and state-of-the art analytical capabilities for product quality testing and analytical characterization. GTP currently provides us with the preclinical toxicology research-grade vector supplies, while Paragon will provide us with the cGMP AAV clinical supplies for our clinical trials, following a technology transfer process from Penn to Paragon. The production process for two of our lead candidates has been scaled up to GMP standards at Paragon's facility and clinical materials for our three lead product candidates are currently being manufactured.

        We have entered into an initial agreement with Paragon for a fully dedicated clean room suite at their newly constructed commercial manufacturing facility in Maryland, and are in the process of finalizing a master services agreement. We plan to initiate cGMP manufacturing of our products in this dedicated suite, giving us the ability to meet production requirements for our current lead product candidates through early commercialization. We believe that our platform manufacturing approach along with the dedicated manufacturing capabilities and capacity provide a core strategic advantage and positions us to be a leading drug development company to address rare, monogenic CNS disorders.

        We believe that our manufacturing capabilities provide us with the advantages of better control of drug development timelines, improved control of vector supply for a portfolio of clinical assets and improved control of product quality through the improvements of the manufacturing platform.

        We expect to establish our own manufacturing facility for long-term commercial market supply. As the research and development pipeline advances and grows, we intend to pursue internal manufacturing capacity build out as needed.

        We also anticipate that we will continue to make significant investments to further optimize our manufacturing capabilities to produce high-quality, cost-effective AAV vectors and we will continue to make investments in process and analytical sciences, internally or with third parties, to evaluate and develop manufacturing process improvements that may increase the productivity and efficiency of our manufacturing platform processes.

Competition

        The biotechnology and pharmaceutical industries, including the genetic medicines field, are characterized by rapidly changing technologies, competition and a strong emphasis on intellectual property. We are aware of several companies focused on developing gene therapies in various indications as well as several companies addressing methods for modifying genes and regulating gene expression. We may also face competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions with genetic medicine and other therapeutic approaches.

        We consider our most direct competitors with respect to PBGM01 for the treatment of GM1 to be Axovant Gene Therapies, Ltd., which recently began its clinical trial for a gene therapy treatment for juvenile GM1, and Lysogene, S.A., which is expected to initiate soon a clinical trial for a gene therapy

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treatment for GM1. While our initial focus is on infantile GM1, we understand the clinical trials being conducted by Axovant and Lysogene are for patients with juvenile GM1.

        We consider our most direct competitors with respect to PBFT02 for the treatment of FTD-GRN to be Alector, Inc., which is conducting a Phase 2 clinical trial for immune-neurology treatment for FTD-GRN, and Prevail Therapeutics Inc., which is expected to initiate a clinical trial for a gene therapy treatment for FTD-GRN. Alkermes plc and Arkuda Therapeutics, Inc. are conducting preclinical research using small molecule approaches to treat FTD-GRN patients. We are also aware of other therapeutic approaches in preclinical development that may target FTD-GRN patients.

        We are not aware of any companies with clinical stage gene therapy product candidates for the treatment of Krabbe disease. We are aware of an ongoing disease progression study being conducted by the Children's Hospital of Pittsburgh and certain academic studies.

        Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and other resources than we do, such as larger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of competitors. Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidates that we may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, if ever. Additionally, new or advanced technologies developed by our competitors may render our current or future product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

License Agreement

University of Pennsylvania

        In September 2018, we entered into a Research, Collaboration and License Agreement, as amended, or the Penn Agreement, with The Trustees of the University of Pennsylvania, or Penn. Under the Penn Agreement, Penn granted us an exclusive, worldwide license, with the right to sublicense, under certain patent rights controlled by Penn (i) as of the effective date or (ii) arising out of the conduct of research funded by us, in each case to develop and commercialize licensed products for specific rare monogenic central nervous system, or CNS, indications. Penn also granted us a non-exclusive, worldwide license, with the right to sublicense in connection with the foregoing patent rights or a licensed product, under certain Penn know-how and materials necessary or reasonably useful to develop and commercialize such licensed products. The Penn license grant covers up to twelve specific rare monogenic CNS indications. Programs for the indications must be started during the first four years of the Penn Agreement. In addition, upon written notification by us and provided Penn has the right to do so, the Penn license grant automatically includes: (i) one or more additional indication(s) that may be treatable by the same licensed product if such indications are in the rare monogenic CNS field, and (ii) provided certain conditions are met, one or more additional indication(s) outside the rare monogenic CNS field for a specific licensed product.

        As part of our collaboration with Penn, we also agreed to fund certain research in the laboratory of Dr. James Wilson, or the Wilson Laboratory, relating to preclinical development of selected product candidates, with the goal of identifying and preclinically developing up to twelve product candidates for further clinical development and commercialization by us.

        Our initial collaboration was for five rare monogenic CNS indications; however, we have the option, for the first four years of the Penn Agreement, to collaborate with Penn and the Wilson

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Laboratory on up to seven additional rare monogenic CNS indications, in each case upon payment of an option fee in the low seven figures. To date, we have exercised the option as to one additional rare monogenic CNS indication, CMT2A.

        Further, during the term of the Next Generation Program, Penn has agreed to notify Passage of any additional AAV capsids discovered, developed or engineered by the Wilson Laboratory as part of its "next generation" AAV capsid program. Upon payment of an option fee in the high six figures, we may add available intellectual property covering any such next-generation capsid to the Penn license grant for any given indication that is within the collaboration, and will have an exclusive period of time to "lock in" the particular next-generation capsid for such indication that will be used in the licensed product. At the end of the exclusivity period, Penn will have the right to non-exclusively license the patent rights for any such next-generation capsid that is not "locked-in" for use in the licensed product for the indication.

        In addition, Penn will notify us of any patented manufacturing methods developed by the Wilson Laboratory during the specified research term, and we have the option to obtain a non-exclusive license under those patent rights controlled by Penn for our licensed products.

        On an indication-by-indication basis, Penn has agreed to ensure that the Wilson Laboratory will not collaborate with any commercial third party to develop another gene therapy product for the same indication during, or for one year following, its work for us on a given indication and licensed product. Under the licensed Penn patent rights, Penn retains the right to conduct (and to authorize non-commercial third parties to conduct) certain educational, research, clinical and patient care activities.

        As consideration for the licensed rights, we issued Penn 839,130 shares of our common stock. We also paid Penn a one-time license issuance fee of $2.5 million, and have agreed to pay Penn an annual license maintenance fee in the low six figures, which annual fee is creditable against royalties following the first commercial sale of a licensed product. In addition, for each licensed product, we are obligated to pay Penn up to $16.5 million in aggregate development milestone payments upon the achievement of specific development milestone events by such licensed product for a first indication, and reduced milestone payments for the second and third indications. We are also obligated to pay Penn, on a licensed product-by-licensed product basis, up to $55 million in aggregate commercial milestone payments. We have also agreed to pay Penn, on a licensed product-by-licensed product and country-by-country basis during the royalty period, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product. On a licensed product-by-licensed product and country-by-country basis, the royalty period is from the date of first commercial sale of such licensed product in a country until the latest of (i) the expiration of the last valid claim within the licensed patent rights covering such licensed product in the country in which such licensed product is made, used or sold, (ii) the expiration of the data exclusivity term conferred by the applicable regulatory authority in such country with respect to such licensed product, and (iii) the tenth anniversary of the first commercial sale of such licensed product in such country. In addition, we have agreed to pay Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses of our rights under the Penn Agreement. If we add a new program to the collaboration, the foregoing milestone, royalty and sublicensing income payments may be increased depending on when the program is added.

        Under the Penn Agreement, we are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product for each of the licensed indications for prophylactic, diagnostic and therapeutic uses in humans. We may satisfy this obligation by achieving, for each licensed product, certain diligence events by a specified achievement date, which dates may be extended under certain circumstances. Pursuant to the agreement, Penn will be responsible for preclinical development activities, including all IND-enabling non-clinical studies and

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research grade manufacturing, and other collaborative activities set forth in the plan for the funded research, and we will be responsible for regulatory strategy and operations, clinical development, GMP manufacture and commercialization of all licensed products.

        The agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the later of (i) the expiration of the last valid claim of the licensed patent rights that covers the exploitation of such licensed product in such country, and (ii) the expiration of the royalty period. At any time after the four year research term, we may terminate the agreement in its entirety, or for a licensed product, for convenience upon 90 days' prior written notice to Penn. Penn may terminate the agreement on an indication-by-indication basis if we fail to meet any diligence event and fail to timely cure such breach, or the agreement in its entirety if we fail to pay the research funding, fail to comply with applicable laws, grant a security interest in any of the licensed patent rights, fail to achieve certain financing obligations, or make certain challenges to the licensed patent rights. Either party may terminate the agreement for the other party's insolvency or material breach that is not cured within a specified period of time.

Intellectual Property

        Our commercial success depends in part on our ability to obtain and maintain proprietary and/or intellectual property protection in the United States and other countries for our current product candidates and future products, as well as our core technologies, including our manufacturing know-how. We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to the development of our business by seeking, maintaining and defending our intellectual property, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene therapy. Additionally, we intend to rely on regulatory protection afforded through rare drug designations, data exclusivity and market exclusivity as well as patent term extensions, where available.

        Currently, our patent protection consists of patent applications that we have in-licensed from Penn under the Penn Agreement for our product candidates in our licensed indications. The in-licensed patent applications are directed to a new AAV capsid and certain defined variants, to recombinant AAV viruses, or rAAVs, capable of delivering certain genes into human cells to treat monogenic diseases of the CNS, to methods of treating those monogenic diseases with rAAV, as well as certain aspects of our manufacturing capabilities and related technologies. Our in-licensed patent portfolio currently includes:

    a patent family with applications pending in the United States and 21 foreign jurisdictions including Europe, China, Japan, Korea, Canada, India, Mexico, Brazil, and Israel, with claims directed to rAAVs having an AAVhu68 capsid. We exclusively licensed the patent family for licensed products within our rare, monogenic field of use indications. Any patents that may issue from applications in this family are expected to expire on February 27, 2038, absent any term adjustments or extensions;

    a patent family with a pending application in Argentina and a pending Patent Cooperation Treaty, or PCT, application, with claims directed to an rAAV containing a coding sequence of human b-galactosidase for use in treating GM1. Based on the PCT filing, national and regional patent applications may be filed in the United States, the European Patent Office, and depending on the individual case, in several other jurisdictions. Any patents that may issue from applications in this family are expected to expire on September 30, 2039, absent any term adjustments or extensions; and

    three patent families, each of which currently consists of one or more pending, unpublished, U.S. provisional patent applications, with claims directed to rAAV for use in treating rare CNS

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      monogenic disorders. The CNS monogenic disorders covered by the three patent families include (a) Krabbe disease; (b) MLD; and (c) FTD. Any patents that may issue from applications in this family are expected to expire between February 2040 and May 2040, absent any term adjustments or extensions.

        We also have options under the Penn Agreement to add additional intellectual property to our existing license, as described in the section "License Agreement." To date, we have exercised an option with respect to Charcot-Marie Tooth disease, or CMT. At present, there are no patent families directed to this newly licensed indication.

        The term of individual patents may vary based on the countries in which they are obtained. Generally, patents issued from applications filed in the United States are effective for 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of FDA regulatory review period. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective national filing date.

        In addition to patents and patent applications that we license, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, significant aspects of our AAV manufacturing capabilities and gene therapy technology are based upon trade secrets and know-how. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, and obtain and maintain control and/or ownership of certain technologies, in part, through confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how, including by implementing measures intended to maintain the physical security of our premises and the physical and electronic security of our information technology systems.

        Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to our licensed intellectual property, we cannot be sure that patents will issue with respect to any of the pending patent applications to which we license rights or with respect to any patent applications that we or our licensors may file in the future, nor can we be sure that any of our licensed patents or any patents that may be issued in the future to us or our licensors will be commercially useful in protecting our product candidates and methods of manufacturing the same. Moreover, we may be unable to obtain patent protection for certain of our product candidates generally, as well as with respect to certain indications. See the section entitled "Risk Factors—Risks Related to Our Intellectual Property" for a more comprehensive description of risks related to our intellectual property.

Government Regulation and Product Approval

        Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

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FDA Approval Process

        In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under the FDC Act, except the section of the FDC Act which governs the approval of New Drug Applications, or NDAs. Biological products, such as gene therapy products, are approved for marketing under provisions of the Public Health Service Act, or PHSA, via a Biologics License Application, or BLA. However, the application process and requirements for approval of BLAs are very similar to those for NDAs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

        Biological product development for a new product or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an IND which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

        Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including Good Laboratory Practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term preclinical tests, such as tests of reproductive toxicity and carcinogenicity in animals, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational biologic to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with Good Clinical Practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

        The FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. The trial protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB's requirements, or may impose other conditions if it believes that the patients are subject to unacceptable risk.

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        Clinical trials to support BLAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the biologic into patients, the product is tested to assess safety, dosage tolerance, metabolism, pharmacokinetics, pharmacological actions, side effects associated with drug exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug or biologic for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug or biologic and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the drug or biologic. In rare instances, including instances of gene therapies intended for rare diseases, a single Phase 3 trial with other confirmatory evidence may be sufficient where there is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.

        In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

        After completion of the required clinical testing, a BLA is prepared and submitted to the FDA. FDA approval of the BLA is required before marketing and distribution of the product may begin in the United States. The BLA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting a BLA is substantial. The submission of most BLAs is additionally subject to a substantial application user fee. Under an approved BLA, the applicant is also subject to an annual program fee. These fees typically increase annually. A BLA for a drug that has been designated as an orphan drug is not subject to an application fee, unless the BLA includes an indication for other than a rare disease or condition. The FDA has 60 days from its receipt of a BLA to determine whether the application will be accepted for filing based on the Agency's determination that it is adequately organized and sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of BLAs. Most applications are classified as Standard Review products that are reviewed within ten months of the date the FDA accepts the BLA for filing; applications classified as Priority Review are reviewed within six months of the date the FDA accepts the BLA for filing. A BLA can be classified for Priority Review when the FDA determines the biologic product has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information, or information intended to clarify information already provided in the BLA submission.

        The FDA may also refer applications for novel biologic products, or biologic products that present difficult questions of safety or efficacy, to be reviewed by an advisory committee—typically a panel that includes clinicians, statisticians and other experts—for review, evaluation, and a recommendation as to whether the BLA should be approved. The FDA is not bound by the recommendation of an advisory committee, but generally follows such recommendations. Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the biologic product is manufactured. The FDA will not

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approve the product unless compliance with cGMP is satisfactory and the BLA contains data that provide substantial evidence that the biologic is safe, pure, potent and effective in the claimed indication.

        After the FDA evaluates the BLA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the BLA submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA's satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the biologic with specific prescribing information for specific indications. As a condition of BLA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product's safe use, or ETASU. An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product's safety or efficacy.

        Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved BLA, including changes in indications, product labeling, manufacturing processes or facilities, require submission and FDA approval of a new BLA or BLA supplement before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing BLAs.

Additional Standard for Gene Therapy Products

        In addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving the use of gene therapy. FDA has issued various guidance documents regarding gene therapies, which outline additional factors that FDA will consider at each of the above stages of development and relate to, among other things: the proper preclinical assessment of gene therapies; the CMC information that should be included in an IND application; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high. For instance, FDA usually recommends that sponsors observe all surviving subjects who receive treatment using gene therapies that are based on adeno-associated virus vectors in clinical trials for potential gene therapy-related delayed adverse events for a minimum 5-year period, followed by 10 years of annual queries, either in person or by questionnaire. FDA does not require the long-term tracking to be complete prior to its review of the BLA.

Orphan Drug Designation

        Under the Orphan Drug Act, the FDA may grant orphan drug designation to biological products intended to treat a rare disease or condition—generally a disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will be recovered from sales of the product.

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        Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the biological product and its potential orphan disease use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first BLA applicant to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product in the approved indication. For large molecule drugs, including gene therapies, sameness is determined based on the principal molecular structural features of a product. As applied to gene therapies, the FDA has recently issued draft guidance in which it stated it would consider certain key features, such as the transgenes expressed by the gene therapy and the vectors used to deliver the transgene, to be principal molecular structural features. With regard to vectors, the FDA intends to consider whether two vectors from the same viral class are the same or different on a case-by-case basis. The FDA does not intend to consider minor differences between transgenes and vectors to be different principal molecular structural features. The FDA also intends to consider whether additional features of the final gene therapy product, such as regulatory elements and the cell type that is transduced (for genetically modified cells), should also be considered to be principal molecular structural features. During the seven-year marketing exclusivity period, the FDA may not approve any other applications to market a biological product containing the same principal molecular structural features for the same indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. A product can be considered clinically superior if it is safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biological product for the same disease or condition, or the same biological product for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA user fee.

Fast Track Designation and Priority Review

        FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. Any product submitted to FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review.

        Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.

Breakthrough Therapy Designation

        The FDA is also required to expedite the development and review of biological products that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the biologic product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The sponsor of a new biologic product candidate may request that the FDA designate the candidate for a specific indication as a Breakthrough Therapy concurrent with, or after, the filing of the IND for the biologic product candidate. The FDA must determine if the biological product qualifies for Breakthrough Therapy designation within 60 days of receipt of the sponsor's request.

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Regenerative Medicine Advanced Therapy (RMAT) Designation

        The RMAT designation is an expedited program for the advancement and approval of regenerative medicine therapies that are intended to treat, modify, reverse, or cure a serious condition and where preliminary clinical evidence indicates the potential to address unmet medical needs for life-threatening diseases or conditions. Similar to Breakthrough Therapy designation, the RMAT allows companies developing regenerative medicine therapies to work earlier, more closely, and frequently with the FDA, and RMAT-designated products may be eligible for priority review and accelerated approval. Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the PHS Act and Title 21 of the Code of Federal Regulations Part 1271. The FDA confirmed that gene therapies, including genetically modified cells, that lead to a sustained effect on cells or tissues may meet the definition of a regenerative medicine therapy. For product candidates that have received a RMAT designation, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. The timing of a sponsor's request for designation and FDA response are the same as for the Breakthrough Therapy designation program.

Disclosure of Clinical Trial Information

        Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.

Pediatric Information

        Under the Pediatric Research Equity Act, or PREA, NDAs or BLAs or supplements to NDAs or BLAs must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the biological product is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any biological product with orphan product designation except a product with a new active ingredient that is a molecularly targeted cancer product intended for the treatment of an adult cancer and directed at a molecular target determined by FDA to be substantially relevant to the growth or progression of a pediatric cancer that is subject to an NDA or BLA submitted on or after August 18, 2020.

Additional Controls for Biologics

        To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend biologics licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States.

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        After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the lot manufacturing history and the results of all of the manufacturer's tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before allowing the manufacturer to release the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. As with drugs, after approval of a BLA, biologics manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.

Biosimilars

        The Biologics Price Competition and Innovation Act of 2009, or BPCIA, creates an abbreviated approval pathway for biological products shown to be highly similar to or interchangeable with an FDA-licensed reference biological product. Biosimilarity sufficient to reference a prior FDA-approved product requires that there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown through analytical trials, animal trials, and a clinical trial or trials, unless the Secretary of Health and Human Services waives a required element. A biosimilar product may be deemed interchangeable with a previously approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. To date a handful of biosimilar products and no interchangeable products have been approved under the BPCIA. Complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to biosimilar product implementation, which is still being evaluated by the FDA.

        A reference biologic is granted 12 years of exclusivity from the time of first licensure, or BLA approval, of the reference product, and no application for a biosimilar can be submitted for four years from the date of licensure of the reference product. The first biologic product submitted under the biosimilar abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against a finding of interchangeability for other biologics for the same condition of use for the lesser of (i) one year after first commercial marketing of the first interchangeable biosimilar, (ii) 18 months after the first interchangeable biosimilar is approved if there is no patent challenge, (iii) eighteen months after resolution of a lawsuit over the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or (iv) 42 months after the first interchangeable biosimilar's application has been approved if a patent lawsuit is ongoing within the 42-month period.

Post-Approval Requirements

        Once a BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.

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        Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, biological product manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a biologic product's manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Other U.S. Healthcare Laws and Compliance Requirements

        In the United States, biotechnology company activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General and the Office for Civil Rights), the U.S. Department of Justice, or DOJ, and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs, may have to comply with the anti-fraud and abuse provisions of the Social Security Act, the federal false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended, as applicable.

        The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, recommending or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti- Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and/or formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. In addition, the statutory exceptions and regulatory safe harbors are subject to change.

        Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).

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        The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

        Federal false claims laws, including the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the civil False Claims Act even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies' marketing of the product for unapproved, and thus generally non-reimbursable, uses and purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes.

        HIPAA created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

        Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

        Data privacy and security regulations by both the federal government and the states in which business is conducted may also be applicable. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and disclosure of protected health information to specifically authorized situations, and requires covered entities to implement security measures to protect health information that they maintain in electronic form. Among other things, HITECH made HIPAA's security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

        Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for

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which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.

        Commercial distribution of products requires compliance with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. In addition, several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. Certain local jurisdictions also require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Sales and marketing activities are also potentially subject to federal and state consumer protection and unfair competition laws.

        Violation of any of the federal and state healthcare laws described above or any other governmental regulations may result in penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, imprisonment, injunctions, private "qui tam" actions brought by individual whistleblowers in the name of the government, refusal to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings.

Coverage, Pricing and Reimbursement

        Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which regulatory approval is obtained. In the United States and markets in other countries, sales of any products for which regulatory approval is received for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. Expensive pharmaco-economic studies may need to be conducted in order to demonstrate the medical necessity and cost-effectiveness of product candidates, in addition to the costs required to obtain the FDA approvals. Product candidates may not be considered medically necessary or cost-effective. A payor's decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor's determination to provide coverage for a product does not assure that other payors will also provide

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coverage for the product. Adequate third-party reimbursement may not be available to enable the maintenance of price levels sufficient to realize an appropriate return on investment in product development.

        Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

        The marketability of any product candidates for which regulatory approval is received for commercial sale may suffer if the government and other third-party payors fail to provide coverage and adequate reimbursement. In addition, emphasis on managed care in the United States has increased and is expected to continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which regulatory approval is received, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

        In March 2010, President Obama enacted the ACA, which has begun to substantially change healthcare financing and delivery by both governmental and private insurers, and has also begun to significantly impact the pharmaceutical and biotechnology industry. The ACA will impact existing government healthcare programs and will result in the development of new programs.

        Among the ACA provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following:

    an annual, nondeductible fee on any entity that manufacturers or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs, that began in 2011;

    an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the Average Manufacturer Price, or AMP for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the AMP;

    a Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers' outpatient drugs to be covered under Medicare Part D;

    extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

    expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals beginning in 2014 and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers' Medicaid rebate liability;

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    expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and

    a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

        Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA's individual mandate to carry health insurance, and delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.

        There has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration's budget proposals for fiscal years 2019 and 2020 contain further drug price control measures that could be enacted during the budget process or in other future legislation. Further, the Trump administration released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. HHS has already started soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent the generation revenue, attainment profitability, or commercialization of products. In addition, it is possible that there will be further legislation or regulation that could harm the business, financial condition and results of operations.

Employees

        As of December 31, 2019, we had 20 full-time employees. From time to time, we also retain independent contractors to support our organization. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.

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Facilities

        Our principal executive office is located in Philadelphia, Pennsylvania, where we lease a total of 8,887 square feet of office and laboratory space that we use for our administrative, research and development and other activities. The lease expires in June 2026, unless we exercise our option to extend the lease term through June 2031.

Legal Proceedings

        From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of management, would have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.

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MANAGEMENT

Executive Officers and Directors

        The following table provides information regarding our executive officers and directors as of January 31, 2020:

Name
  Age   Position

Executive officers:

       

Bruce Goldsmith, Ph.D. 

  54   Chief Executive Officer, President and Director

Stephen Squinto, Ph.D. 

  63   Acting Head of Research and Development and Director

Jill M. Quigley

  44   Chief Operating Officer

Richard S. Morris

  46   Chief Financial Officer

Gary Romano, M.D., Ph.D. 

  59   Chief Medical Officer

Alex Fotopoulos

  51   Chief Technical Officer

Edgar B. (Chip) Cale

  56   General Counsel and Corporate Secretary

Non-employee directors:

 

 

 

 

Carl L. Gordon, Ph.D., CFA(4)

  55   Director

Patrick Heron(1)(3)

  49   Director

Saqib Islam(1)

  50   Director

Sandip Kapadia(1)

  49   Director

Liam Ratcliffe, M.D., Ph.D.(3)

  56   Director

Tom Woiwode, Ph.D.(2)

  48   Director

Tadataka Yamada, M.D.(2)(3)

  74   Director

Athena Countouriotis, M.D.(2)(5)

  48   Director

(1)
Member of the Audit Committee.

(2)
Member of the Compensation Committee.

(3)
Member of the Nominating and Governance Committee.

(4)
Dr. Gordon has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part.

(5)
Dr. Countouriotis's appointment as a director will be effective upon the effectiveness of the registration statement of which this prospectus forms a part.

Executive Officers

        Bruce A. Goldsmith, Ph.D, M.B.A. has served as our Chief Executive Officer and President and as a member of our board of directors since January 2020. Dr. Goldsmith served as an Advisor and Venture Partner at Deerfield Ventures from January 2019 to January 2020. From April 2019 to January 2020, Dr. Goldsmith also served as Interim Chief Executive Officer of Civetta Therapeutics. Prior to that, Dr. Goldsmith served initially as Chief Business Officer and then as Chief Operating Officer at Lycera, Corp. from April 2013 to January 2019. From 2008 to 2012, Dr. Goldsmith served as Vice President and then Senior Vice President of Corporate Development at Allos Therapeutics. Prior to Allos, Dr. Goldsmith served in various leadership roles at GPC Biotech in 2007 and Tibotec Therapeutics, a subsidiary of Johnson & Johnson, from 2005 to 2007. Dr. Goldsmith also previously held various positions at Johnson & Johnson in oncology global strategic marketing, business development and licensing and acquisition finance. Prior to joining Johnson & Johnson, Dr. Goldsmith

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was a research fellow at Novartis Pharma, K.K., where he conducted scientific research in a neurodegeneration drug discovery group. Dr. Goldsmith received a B.A. in Biology from Colgate University, a Ph.D. in Biology with a research thesis in neuroscience from the University of Pennsylvania, and an M.B.A. from Columbia University. We believe that Dr. Goldsmith is qualified to serve on our board of directors due to his experience in the biopharmaceutical and biotechnology industry.

        Stephen Squinto, Ph.D., has served as our Acting Head of Research and Development since January 2020, and prior to that served as our interim Chief Executive Officer from September 2018 to January 2020. Dr. Squinto has served as a member of our board of directors since September 2018. Dr. Squinto has also served as an Executive Partner at OrbiMed Advisors LLC since January 2015. Since August 2017, Dr. Squinto has also served as acting Head of Research and Development of SpringWorks Therapeutics, Inc., a biopharmaceutical company. Dr. Squinto co-founded Alexion Pharmaceuticals and from January 2012 to January 2015, he served as its Executive Vice President and Chief Global Operations Officer and from 2007 to 2012, he served as its Global Head of Research and Development. Dr. Squinto currently serves on the board of directors of Springworks Therapeutics, Inc. Dr. Squinto previously served on the boards of directors of Arvinas, Inc., a pharmaceutical company, and Audentes Therapeutics, Inc., a biotechnology company. Dr. Squinto received a B.A. in Chemistry and a Ph.D. in Biochemistry and Biophysics from Loyola University of Chicago. We believe that Dr. Squinto is qualified to serve on our board of directors due to his experience in the biopharmaceutical and biotechnology industry, including his operational experience in drug discovery and development.

        Jill M. Quigley, has served as our Chief Operating Officer since November 2018. From January 2017 to November 2018, Ms. Quigley served as Chief Executive Officer and General Counsel of Nutrinia Ltd., a pharmaceutical company focused on the treatment of rare conditions of the gastrointestinal tract. From July 2012 to December 2016, Ms. Quigley served as Senior Counsel of NPS Pharmaceuticals, a biotechnology company focused on developing treatments for rare diseases, which was acquired by Shire plc in March 2015. From 2011 to 2012, Ms. Quigley served as Corporate Counsel for Pharmasset, Inc., a pharmaceutical company. Ms. Quigley began her career as an associate with the law firm of Dechert LLP and later served as Assistant Corporate Counsel for Integra LifeSciences Holdings Corporation. Ms. Quigley received a B.A. in in Communications, Legal Institutions, Economics & Government (CLEG) from American University and a J.D. from Rutgers School of Law.

        Richard S. Morris, has served as our Chief Financial Officer since October 2019. From November 2017 to July 2019, Mr. Morris served as Executive Vice President and Chief Financial Officer of Context Therapeutics, LLC, a biopharmaceutical company. From May 2014 to December 2016, Mr. Morris served as Chief Financial Officer of Vitae Pharmaceuticals, Inc., a biopharmaceutical company. Prior to that, Mr. Morris served in various leadership roles at ViroPharma Incorporated, including a