Intellia Therapeutics, Inc. - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2020

OR

For the transition period from            to           

Commission File Number: 001-37766

INTELLIA THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

857-285-6200

(Registrant’s Telephone Number, Including Area Code)  

Securities Registered Pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   ☒    No   ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares outstanding of the registrant’s common stock as of May 1, 2020: 51,380,479 shares.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets (unaudited)

(Amounts in thousands except share and per share data)

See notes to condensed consolidated financial statements.

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INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(Amounts in thousands except per share data)

See notes to condensed consolidated financial statements.

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INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)

See notes to condensed consolidated financial statements.

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INTELLIA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements (unaudited)

Intellia Therapeutics, Inc. (“Intellia” or the “Company”) is a leading genome editing company focused on developing curative therapeutics utilizing a biological tool known as CRISPR/Cas9, which stands for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”). This is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). The Company believes that CRISPR/Cas9 technology has the potential to transform medicine by editing disease-associated genes with a single treatment course, and that it can also be used to create novel engineered cell therapies that can replace a patient’s diseased cells or effectively target various cancers and autoimmune diseases. The Company is leveraging its leading scientific expertise, clinical development experience and intellectual property (“IP”) position to unlock a broad set of therapeutic applications for CRISPR/Cas9 genome editing and to develop a potential new class of therapeutic products.

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2019.

The unaudited condensed consolidated financial statements include the accounts of Intellia Therapeutics, Inc. and its wholly owned, controlled subsidiary, Intellia Securities Corp. All intercompany balances and transactions have been eliminated in consolidation. Comprehensive loss is comprised of net loss and gain/loss on marketable securities.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these condensed consolidated financial statements have been made in connection with the calculation of revenues, research and development expenses and equity-based compensation expense. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances at the time such estimates are made. Actual results could differ from those estimates. The Company periodically reviews its estimates in light of changes in circumstances, facts and experience. The extent of the impact of the coronavirus disease 19 (“COVID-19”) pandemic on the Company’s operational and financial performance will depend on certain developments, including the length and severity of this pandemic, as well as its effect on our employees, collaborators and vendors, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its consolidated results of operations or financial position.

The effects of material revisions in estimates are reflected in the condensed consolidated financial statements prospectively from the date of the change in estimate. Certain prior year amounts have been reclassified in order to conform to the current year presentation.

In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

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Liquidity

Since its inception through March 31, 2020, the Company has raised an aggregate of $658.7 million to fund its operations, of which $155.5 million was through its collaboration agreements, $170.5 million was from its initial public offering and concurrent private placements, $141.0 million was from a follow-on public offering, $106.7 million was from at-the-market offerings and $85.0 million was from the sale of convertible preferred stock. The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2020, as well as research and cost reimbursement funding from its collaboration agreement with Regeneron, will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these condensed consolidated financial statements.

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included in the Annual Report for the year ended December 31, 2019. There have been no material changes during the three months ended March 31, 2020, other than as noted below.

Recent Accounting Pronouncements – Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new standard modifies disclosure requirements related to fair value measurement. The Company adopted ASU 2018-13 on January 1, 2020. The adoption did not have a material impact on the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard changes how credit losses are measured for most financial assets and certain other instruments. For trade and other receivables, the standard requires the use of a new forward-looking “expected credit loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. With certain exceptions, the guidance is applied using a modified retrospective approach by reflecting adjustments through a cumulative-effect impact to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2016-13 on January 1, 2020. The adoption did not have a material effect on the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2020.

Recent Accounting Pronouncements – Issued but not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in ASU 2019-12 are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted. The Company does not anticipate that the adoption of ASU 2019-12 will have a material effect on the Company’s condensed consolidated financial statements.

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The following table summarizes the Company’s available-for-sale marketable securities as of March 31, 2020 and December 31, 2019 at net book value:

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At March 31, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income was composed of activity related to the Company’s available-for-sale marketable securities. There were no material realized gains or losses in the three months ended March 31, 2020 or for the year ended December 31, 2019 and, as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income during the period. The Company did not have any securities in a material unrealized loss position at March 31, 2020.

The Company's available-for-sale securities that are classified as short-term marketable securities in the condensed consolidated balance sheet mature within one year or less as of the balance sheet date. Available-for-sale securities that are classified as noncurrent in the condensed consolidated balance sheet mature after one year but within five years from the balance sheet date. At March 31, 2020 and December 31, 2019, the Company did not hold any investments that matured beyond five years of the balance sheet date.

The Company classifies fair value-based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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As of March 31, 2020 and December 31, 2019, the Company’s financial assets recognized at fair value on a recurring basis consisted of the following:

The Company’s financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value. After completing our validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2020 or December 31, 2019.

Other financial instruments, including accounts receivable, accounts payable and accrued expense, are carried at cost, which approximate fair value due to the short duration and term to maturity.

Accrued expenses consisted of the following:

Litigation

There have been no material changes to any of the outstanding litigation, nor is the Company a party to any new litigation, since December 31, 2019. For further information please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2019.

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License Agreements

The Company is party to license agreements, which include contingent payments. These payments will become payable if and when certain development, regulatory and commercial milestones are achieved. As of March 31, 2020, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, the Company has formed, and intends to seek other opportunities to form, strategic alliances with collaborators who can augment its leadership in CRISPR/Cas9 therapeutic development. As of March 31, 2020 and 2019, the Company’s accounts receivable and contract liabilities were primarily related to the Company’s collaborations with Novartis Institutes for BioMedical Research (“Novartis”) and Regeneron Pharmaceuticals, Inc. (“Regeneron”).

The following table presents changes in the Company’s accounts receivable and contract liabilities during the three months ended March 31, 2020 and 2019 (in thousands):

During the three months ended March 31, 2020 and 2019, the Company recognized the following revenues as a result of changes in the contract liability balance (in thousands):

Costs to obtain and fulfill a contract

The Company did not incur any expenses to obtain collaboration agreements and costs to fulfill those contracts do not generate or enhance resources of the Company. As such, no costs to obtain or fulfill a contract have been capitalized in any period.

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Regeneron Pharmaceuticals, Inc.

In April 2016, the Company entered into a license and collaboration agreement with Regeneron (the “Regeneron Agreement”). The research collaboration term ends in April 2022, except that Regeneron may make a one-time payment of $25.0 million to extend the term for an additional two-year period. In July 2018, the Company and Regeneron finalized the form of the Co-Development and Co-Promotion (“Co/Co”) agreement that will be used as the basis for each Co/Co agreement directed to a target. Simultaneously, the Company and Regeneron executed the Co/Co agreement directed to the first collaboration target, transthyretin amyloidosis (“ATTR”), for which the Company is the clinical and commercial Lead Party and Regeneron is the Participating Party. On December 13, 2019, Regeneron informed the Company that it would exercise its rights under the ATTR Co/Co agreement to decrease its share of worldwide development costs and profits from 50% to 25%, effective six months after its notice. Since December 31, 2019 there have been no material changes to the key terms of or accounting for the Regeneron Agreement or the ATTR Co/Co agreement. For further information on the terms and conditions of the Company’s existing collaboration agreements please see the notes to the consolidated financial statements included in its Annual Report for the year ended December 31, 2019.

Revenue Recognition – Collaboration Revenue. Through March 31, 2020, the Company recorded a $75.0 million upfront payment under the Regeneron Agreement and $28.8 million for research and development services under the ATTR Co/Co agreement. Through March 31, 2020, the Company has recognized $78.2 million of collaboration revenue under both arrangements, including $7.9 million during the three months ended March 31, 2020 and $5.7 million during the three months ended March 31, 2019, in the condensed consolidated statements of operations and comprehensive loss. This includes $4.8 million and $2.6 million during the three months ended March 31, 2020 and 2019, respectively, representing payments due from Regeneron pursuant to the ATTR Co/Co agreement, which is accounted for under Accounting Standards Codification 808, Collaborative Arrangements. As of March 31, 2020, there was approximately $25.7 million of the aggregate transaction price of the Regeneron Agreement remaining to be recognized, which the Company expects to be recognized ratably through April 2022.

As of March 31, 2020 and December 31, 2019, the Company had accounts receivable of $8.4 million and $3.6 million, respectively, and deferred revenue of $25.7 million and $28.8 million, respectively, related to these arrangements.

Novartis Institutes for BioMedical Research

In December 2014, the Company entered into a strategic collaboration agreement with Novartis (the “2014 Novartis Agreement”), primarily focused on the research of new ex vivo CRISPR/Cas9-edited therapies using chimeric antigen receptor T (“CAR-T”) cells and hematopoietic stem cells (“HSCs”). The agreement was amended in December 2018 (the “Novartis Amendment”) to also include research on ocular stem cells (“OSCs”). In December 2019, per the terms of the 2014 Novartis Agreement, the research term ended, although the 2014 Novartis Agreement remains in effect, for which the Company will be eligible to receive milestone and royalty payments in the future. Since December 31, 2019, there have been no material changes to the key terms of the 2014 Novartis Agreement and the Novartis Amendment. For further information on the terms and conditions of the agreements, please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2019.

Revenue Recognition – Collaboration Revenue. Through March 31, 2020, excluding amounts allocated to Novartis’ purchase of the Company’s Class A-1 and Class A-2 Preferred Units, the Company had recorded a total of $62.4 million in cash and accounts receivable under the 2014 Novartis Agreement and the Novartis Amendment. Through March 31, 2020, the Company recognized $62.4 million of collaboration revenue, including a $5.0 million development milestone payment that was previously constrained during the three months ended March 31, 2020 and $4.7 million during the three months ended March 31, 2019, in the condensed consolidated statements of operations and comprehensive loss related to the 2014 Novartis Agreement and the Novartis Amendment. As of December 31, 2019, the aggregate transaction price had been recognized in full.

Revenue Recognition – Milestone. During the three months ended March 31, 2020, the U.S. Food and Drug Administration (“FDA”) accepted the investigational new drug (“IND”) application submitted by Novartis for a CRISPR/Cas9-based engineered cell therapy for the treatment of sickle cell disease. As a result of meeting this milestone, the Company recognized $5.0 million as collaboration revenue within the condensed consolidated statement of operations and comprehensive loss. No other milestones under the 2014 Novartis Agreement and the Novartis Amendment were achieved during the three months ended March 31, 2020 or 2019. The Company is eligible to receive additional downstream success-based milestones and royalties.

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As of March 31, 2020 and December 31, 2019, the Company had accounts receivable of $5.0 million and $1.0 million, respectively, related to the 2014 Novartis Agreement and the Novartis Amendment. As of March 31, 2020 and December 31, 2019, the Company had no deferred revenue related to the 2014 Novartis Agreement and the Novartis Amendment.

In October 2014, the Company entered into an agreement to lease office and laboratory space at 130 Brookline Street (the “130 Brookline Lease”) in Cambridge, Massachusetts under an operating lease agreement with a term through January 2020, with an option to extend the term of the lease for an additional five-year period. In April 2019, the Company executed an amendment to the lease to extend the term of the lease for the additional five-year period, through January 2025. Upon the execution of the original lease, the Company provided a $0.3 million security deposit. The Company has recorded this security deposit in other assets on the condensed consolidated balance sheets. In March 2020, the Company entered into a second amendment to the 130 Brookline Lease (the “Second Amendment”). The Second Amendment amends certain terms of the Company’s existing lease, dated October 21, 2014, as amended on April 5, 2019. The Second Amendment extends the term of the 130 Brookline Lease by approximately six years through January 31, 2031. This extended term is included as part of the lease liability and right-of-use asset at March 31, 2020. The Second Amendment also provides an option to extend the lease for two consecutive five-year terms. The Company recognized a right-of-use asset and lease liability of approximately $7.3 million related to the Second Amendment.

In March 2020, the Company entered into an agreement to lease approximately 39,000 square feet of office and laboratory space at 281 Albany Street in Cambridge, Massachusetts under an operating lease agreement (the “281 Albany Lease”). The 281 Albany Lease is expected to commence on October 1, 2020, and the Company’s obligation to pay rent will start on the date that is six months after the commencement date or the date on which the Company occupies the premises, whichever occurs earlier (the “Rent Commencement Date”). The initial term of the 281 Albany Lease is ten years following the Rent Commencement Date. The base rent under the 281 Albany Lease is $99.00 per square foot per year during the first year of the term, which is subject to scheduled annual increases up to $128.87 per square foot per year during the last year of the initial term, plus certain operating expenses and taxes. In addition, the landlord will contribute an aggregate of $4.4 million toward the cost of construction and tenant improvements for the premises. The Company has the option to extend the 281 Albany Lease for two successive five-year terms.

In April 2016, the Company adopted the Amended and Restated 2015 Stock Option and Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) and other stock-based awards. Recipients of incentive stock options and non-qualified stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the fair value of such stock on the grant date. Stock options granted under the 2015 Plan generally vest 25% on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining three years, unless they contain specific performance-based vesting provisions. The maximum term of stock options granted under the 2015 Plan is ten years.  

As of March 31, 2020, there were 2,556,282 shares available for future issuance. The number of shares reserved for issuance under the 2015 Plan shall be cumulatively increased by four percent of the number of shares of stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares of stock as determined by the board of directors.

Equity-based compensation expense is classified in the condensed consolidated statements of operations and comprehensive loss as follows:

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Restricted Stock

Restricted stock is measured at fair value based on the quoted price of the Company’s common stock.

The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2020:

As of March 31, 2020, there was $2.6 million of unrecognized equity-based compensation expense related to restricted stock that is expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 2.6 years. As of March 31, 2020, 71,875 of the unvested restricted stock outstanding are performance-based RSUs that vest upon obtaining certain scientific, financial and regulatory milestones through 2020. These performance-based RSUs are not included in computing the diluted loss per share because the performance criteria had not been met as of the end of the reporting period.

In January 2020, the Company granted 181,020 RSUs to certain employees that include a performance condition in addition to a service condition. The RSUs vest over a period of three years and are subject to accelerated vesting based on the Company’s programs achieving certain development milestones before December 1, 2022. To date, the Company has not accelerated the vesting of the RSUs. The grant date fair value of the RSUs is $15.05.

Stock Options

The weighted average grant date fair value of options, estimated as of the grant date using the Black-Scholes option pricing model, was $7.96 and $8.94 per option for those options granted during the three months ended March 31, 2020 and 2019, respectively. The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the three months ended March 31, 2020 and 2019 was $0.3 million and $0.1 million, respectively. Key assumptions used to apply this pricing model were as follows:

Risk-free Interest Rate.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with maturities approximately equal to the option’s expected term.

Expected Dividend Yield.  The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

Expected Volatility.  The expected volatility was derived from a blend of average historical stock volatilities of several peer companies within the Company’s industry and the Company’s historical volatility, both over a period equivalent to the expected term of the stock option grants.

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Expected Term.  The expected term represents the period that stock option awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term.

The Company uses the market closing price of its common stock as reported on the Nasdaq Global Select Market to determine the fair value of the shares of common stock underlying stock options. The following is a summary of stock option activity for the three months ended March 31, 2020:

As of March 31, 2020, there was $39.3 million of unrecognized compensation cost related to stock options that have not yet vested. These costs are expected to be recognized over a weighted average remaining vesting period of 2.8 years.

Of the unvested stock options outstanding as of March 31, 2020, 213,750 are performance-based stock options that vest upon obtaining certain scientific, financial and regulatory milestones through 2020. At March 31, 2020, 173,750 performance-based options are not included in computing the diluted loss per share because the performance criteria had not been met as of the end of the reporting period.

The Company calculates basic loss per share by dividing net loss for each respective period by the weighted average number of common shares outstanding for each respective period. The Company computes diluted loss per share after giving consideration to the dilutive effect of stock options and unvested restricted stock that are outstanding during the period, except where such securities would be anti-dilutive.

Basic and diluted loss per share was calculated as follows:

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The following common stock equivalents were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive: 

The following tables present changes in stockholders’ equity for the three months ended March 31, 2020 and 2019 (in thousands, except share data):

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At-the-Market Offering Programs

On October 12, 2018, the Company filed a Registration Statement on Form S-3 (the “2018 Shelf”) with the SEC in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof for the purposes of selling, from time to time, its common stock, convertible securities or other equity securities in one or more offerings. The Company also simultaneously entered into an Open Market Sale Agreement (the “2018 Sales Agreement”) with Jefferies LLC, (the “Sales Agent”), to provide for the offering, issuance and sale by the Company of up to an aggregate amount of $100.0 million of its common stock from time to time in “at-the-market” offerings under the 2018 Shelf and subject to the limitations thereof. The Company paid to the Sales Agent cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2018 Sales Agreement. In November 2018, the Company issued 1,659,300 shares of its common stock at $18.00 per share in accordance with the 2018 Sales Agreement for net proceeds of $28.5 million, after payment of cash commissions to the Sales Agent and approximately $0.4 million related to legal, accounting and other fees in connection with the sales. During the year ended December 31, 2019, the Company issued an additional 4,231,348 shares of its common stock, in a series of sales, at an average price of $16.57 per share, in accordance with the 2018 Sales Agreement, for aggregate net proceeds of $67.8 million, after payment of cash commissions to the Sales Agent and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. All shares related to the 2018 Sales Agreement had been sold as of December 31, 2019.

On August 23, 2019, the Company filed a Registration Statement on Form S-3, as amended (the “2019 Shelf”) with the SEC in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof. The Company also simultaneously entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with the Sales Agent, to provide for the offering, issuance and sale by the Company of up to an aggregate amount of $150.0 million of its common stock from time to time in “at-the-market” offerings under the 2019 Shelf and subject to the limitations thereof. The Company agreed to pay to the Sales Agent cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sales Agreement. During the year ended December 31, 2019, the Company issued 287,231 shares of its common stock, in a series of sales, at an average price of $16.48 per share, in accordance with the 2019 Sales Agreement for aggregate net proceeds of $4.4 million, after payment of cash commissions to the Sales Agent and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. During the three months ended March 31, 2020, the Company issued 351,252 shares of its common stock in a series of sales at an average price of $15.05 per share in accordance with the 2019 Sales Agreement, for aggregate net proceeds of $5.1 million after payment of cash commissions to the Sales Agent and approximately $0.1 million related to legal, accounting and other fees in connection with the sales. As of March 31, 2020, $0.5 million of these proceeds were recorded as a current asset on the Company’s condensed consolidated balance sheet, representing offerings with trade dates in March 2020 that were settled by April 2, 2020.

As of March 31, 2020, $140.0 million in shares of common stock remain eligible for sale under the 2019 Sales Agreement.

Research Material Supplier

In the ordinary course of business, the Company may purchase materials or supplies from entities that are associated with a party that meets the criteria of a related party of the Company. These transactions are reviewed quarterly and to date have not been material to the Company’s condensed consolidated financial statements.

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

Forward-looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

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All of our express or implied forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

Management Overview

Intellia Therapeutics, Inc. (“we,” “us,” “our,” “Intellia,” or the “Company”) is a leading genome editing company focused on developing curative therapeutics utilizing a biological tool known as CRISPR/Cas9, which stands for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”). This is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). We believe that CRISPR/Cas9 technology has the potential to transform medicine by editing disease-associated genes with a single treatment course, and that it also can be used to create novel engineered cell therapies that can replace a patient’s diseased cells or effectively target various cancers and autoimmune diseases. We are leveraging our leading scientific expertise, clinical development experience and intellectual property (“IP”) position to unlock a broad set of therapeutic applications for CRISPR/Cas9 genome editing and to develop a potential new class of therapeutic products.

Our management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim periods and with Regulation S-X, promulgated under the Securities Exchange Act of 1934, as amended. This discussion and analysis should be read in conjunction with these unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q as well as in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2019.

Our mission is to build a company to develop curative genome editing treatments that can positively transform the lives of people living with severe and life-threatening disease. We believe we can deliver on our mission and provide long-term benefits for all of our stakeholders by focusing on four key elements:

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Our strategy is to build a full-spectrum genome editing company, by leveraging our CRISPR/Cas9 platform across two areas: in vivo applications, in which CRISPR/Cas9 is the therapy, delivered to target cells within the body; and ex vivo applications, in which CRISPR/Cas9 creates the therapy of engineered human cells. All of our revenue to date has been collaboration revenue. Since our inception and through March 31, 2020, we have raised an aggregate of approximately $658.7 million to fund our operations, of which $155.5 million was through our collaboration agreements, $170.5 million was from our initial public offering and concurrent private placements, $141.0 million was from a follow-on offering, $106.7 million was from at-the-market offerings and $85.0 million was from the sale of convertible preferred stock.

The breadth of our CRISPR/Cas9 platform and delivery technology allows us to pursue a multitude of therapeutic targets/clinical indications. Specifically, we can target diseases that have the potential to be addressed by directly editing specific genes (i.e., gene knockout, repair, or insertion) as well as diseases that may be targeted by genetically engineered cell therapies. The successful treatment of these disorders may require various types of genome edits, CRISPR/Cas9 elements and DNA templates. We have assembled multiple in vivo and engineered cell therapy capabilities into a pipeline that reflects our full-spectrum approach and leverages the modularity inherent in our platform.

Our diversified pipeline includes in vivo development programs targeting genetic diseases, including transthyretin amyloidosis (“ATTR”), which we are co-developing with Regeneron Pharmaceuticals, Inc. (“Regeneron”), and hereditary angioedema (“HAE”). Our pipeline also includes ex vivo programs consisting of two separate efforts: (i) a set of proprietary programs focused on engineered cell therapies to treat various cancers and autoimmune diseases including our lead ex vivo program to target Wilms’ Tumor 1 (“WT1”) for acute myeloid leukemia (“AML”); and (ii) partnered programs developed in collaboration with Novartis Institutes for BioMedical Research, Inc. (“Novartis”), focused on chimeric antigen receptor (“CAR”) T (“CAR-T”) cells, hematopoietic stem cells (“HSCs”), the stem cells from which all of the various types of blood cells originate, and stem cells in the eye, or ocular stem cells (“OSCs”).

Our Pipeline  

Our diversified pipeline includes in vivo and ex vivo programs. Our in vivo programs focus on treating patients that have significant unmet medical needs due to diseases attributable to genes expressed in the liver – ATTR (which we are co-developing with Regeneron) and HAE. Delivery plays a key role in our in vivo therapeutic approach. We have shown in animal models that our proprietary lipid nanoparticle (“LNP”) delivery technology, which encapsulates the therapeutic Cas9 messenger RNA (“mRNA”) and guide RNA (“gRNA”) into LNPs, can systemically deliver these therapeutic components to the liver.

For ex vivo applications, our wholly owned programs focus on next-generation, engineered cell therapy solutions that utilize antigen-specific T cell receptors (“TCRs”). The cells to be modified ex vivo can come from the individual patient (autologous source) or from another individual (allogeneic source). Our goal for the ex vivo pipeline is to move from autologous to allogeneic therapies, and from liquid to solid tumors.

We believe our full spectrum approach to in vivo and ex vivo programs positions us to build a pipeline across a wide range of indications.

In Vivo Programs

Our selection criteria include identifying diseases that originate in the liver; have well-defined mutations that can be addressed by a single knockout, repair or insertion approach; have readily measurable therapeutic endpoints with observable clinical responses; and for which effective treatments are absent, limited or unduly burdensome. Our initial in vivo indications target genetic liver diseases, including ATTR and HAE. Our current efforts on in vivo delivery focus on the use of LNPs for delivery of the CRISPR/Cas9 complex to the liver.

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Transthyretin Amyloidosis – (“ATTR”)

ATTR is a progressive and fatal disorder resulting from deposition of insoluble amyloid fibrils into multiple organs and tissues leading to systemic failure. Blood-borne transthyretin (“TTR”) protein is produced by hepatocytes and normally circulates as a soluble homotetramer that facilitates transport of vitamin A, via retinol binding protein, as well as the thyroid hormone, thyroxine. Mutations in the TTR gene lead to the production of TTR proteins that are destabilized in their tetramer form. These tetramers more readily dissociate into the monomeric form, and thence to an aggregative form that results in amyloid deposits in tissues. These deposits cause damage in those tissues, resulting in a disorder known as hereditary TTR amyloidosis (“hATTR”). Over 120 different genetic mutations are currently known to cause hATTR.

Deposits of TTR amyloid in the heart, nerves and/or other tissues can lead to diverse disease manifestations, including two main hereditary forms – hATTR with polyneuropathy (“hATTR-PN”), and hATTR with cardiomyopathy (“hATTR-CM”). Typical onset of disease symptoms is during adulthood and can be fatal within 2 to 15 years. Estimates suggest that approximately 50,000 patients suffer from hATTR worldwide.

In addition to the hereditary forms described above, ATTR can also develop spontaneously in the absence of any TTR gene mutation. This wild-type ATTR (“wtATTR”) is increasingly being recognized as a significant and often undiagnosed cause of heart failure in the elderly and is the subject of active investigation. Recent estimates suggest that, globally, between 200,000 and 500,000 people may suffer from wtATTR with cardiomyopathy (“wtATTR-CM”).

In non-human primate (“NHP”) studies, we have demonstrated our ability to reduce circulating TTR protein to estimated therapeutically relevant levels after a single systemic administration of LNPs containing our CRISPR/Cas9 complex. In December 2019, we completed a year-long durability study of our lead LNP formulation, maintaining an average reduction of more than 95% of serum TTR protein after a single dose in NHPs. The data from our various NHP studies has also demonstrated the transient nature of our proprietary modular LNP delivery system, which was rapidly cleared from circulation, with all CRISPR/Cas9 complex undetectable in blood and liver within ten days of administration. Our lead candidate, NTLA-2001, applies an in vivo liver knockout approach for the treatment of ATTR. We have manufactured clinical-scale materials for a Phase 1 study of NTLA-2001 and remain on track to submit an investigational new drug application (“IND”) or IND-equivalent for this program in mid-2020. Subject to the impact of COVID-19, we plan to dose the first patient in the second half of 2020. NTLA-2001 is part of a Co-Development and Co-Promotion (“Co/Co”) agreement directed to the first collaboration target, ATTR, for which we are the clinical and commercial Lead Party and Regeneron is the Participating Party. On December 13, 2019, Regeneron informed us that it would exercise its right under the ATTR Co/Co agreement to decrease its share of worldwide development costs and profits from 50% to 25%, effective six months after its notice. Pursuant to the ATTR Co/Co agreement, Regeneron funded approximately 50% of the program’s development costs through 2019. Starting June 2020 and thereafter, Regeneron will share approximately 25% of worldwide development costs and commercial profits for the ATTR program.

Hereditary Angioedema – (“HAE”)

HAE is a rare genetic disorder characterized by recurrent, painful and unpredictable episodes of severe swelling. The most common areas of the body to develop swelling are the limbs, face, intestinal tract and airway. Minor trauma or stress may trigger an attack but swelling often occurs without a known trigger. Episodes involving the intestinal tract cause severe abdominal pain, nausea and vomiting. Swelling in the airway can restrict breathing and lead to life-threatening obstruction of the airway. The disease is caused by increased levels of bradykinin, a protein which leads to swelling. Most patients with HAE have a deficiency of C1 esterase inhibitor (“C1-INH”) protein, which normally prevents the unregulated release and buildup of bradykinin. HAE is estimated to affect 1 in 50,000 people, with an estimated 11,000 to 21,500 diagnosed HAE patients in the U.S. and Europe.

Currently there are multiple therapies approved to treat HAE, including acute and prophylactic approaches. Acute treatments are used to treat patients who are experiencing an attack. Prophylactic treatments are used to reduce the number of attacks that a patient may experience. Prophylactic treatments have proven to be effective in reducing the number of attacks for most patients, though some patients still experience breakthrough attacks and such treatment options require regular injections which can be associated with significant treatment burden and impact on quality of life.

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Using our modular LNP delivery system, we aim to knock out the prekallikrein B1 (“KLKB1”) gene with a single course of treatment to reduce plasma kallikrein activity to prevent excess bradykinin production leading to HAE attacks. We believe KLKB1 knockout to be safe, as humans with prekallikrein deficiency appear to have no known health effects. In addition, inhibition of kallikrein activity has proven to be a clinically effective approach as a prophylactic treatment for HAE.

On May 7, 2020, we announced a development candidate for the treatment of HAE, NTLA-2002. As part of an ongoing durability study of our lead LNP formulation in support of NTLA-2002, we have now demonstrated six months of sustained therapeutically relevant reduction of serum kallikrein levels and activity following a single dose in NHP’s. We expect to submit an IND or IND-equivalent for NTLA-2002 in the second half of 2021. NTLA-2002 is subject to an option by Regeneron to enter into a Co/Co agreement, which must be exercised within a limited time period after development candidate selection. We will be the lead party if the option is exercised.

Ex Vivo Programs

We are independently researching and developing proprietary engineered cell therapies to treat various oncological and autoimmune diseases, for example TCR-engineered T cells for immuno-oncology applications and engineered regulatory T cells for autoimmune disorders. Our diverse product strategy includes multiple elements. In particular:

In addition, our partner Novartis is developing therapies using CAR-T cells for oncology indications, as well as HSC and OSC-based therapies.

Acute Myeloid Leukemia (“AML”)

AML includes a heterogenous group of blood cancers arising from the malignant expansion of hematopoietic cells of the myeloid lineage. AML is associated with weakness, fatigue and bleeding resulting from the depletion of healthy myeloid cells, and is typically rapidly progressive and fatal without immediate treatment. AML is an aggressive and hard-to-treat cancer, resulting in less than 30% of patients living more than five years after diagnosis. AML is the most common acute leukemia in adults and is associated with the largest number of annual deaths from leukemia in the U.S. It is estimated that there have been nearly 11,000 deaths due to AML, as well as over 21,000 new AML cases in the U.S. in 2019. While AML can occur at any age, the prevalence of the disease increases with age, resulting in a median age at diagnosis of 67 years.

Over the past several years, new treatments have emerged for AML with different mechanisms of action. While these treatments have led to improvements in response rates and in some cases increased overall survival, the outcomes demonstrated thus far have been incremental in nature and long-term outcomes in AML continue to be extremely poor.

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We have nominated NTLA-5001 as our first engineered T cell therapy development candidate for the treatment of AML, utilizing our TCR-directed approach to target the WT1 intracellular antigen. Our WT1-directed TCR T-cell therapy aims to develop a broadly applicable treatment for AML, regardless of mutational subtypes of a patient’s leukemia. This approach employs CRISPR/Cas9 complexes to knock out and replace the endogenous TCR with a natural, high affinity therapeutic TCR. The resulting cells are engineered to be capable of specific and potent killing of AML blasts without bone marrow cell toxicity. In February 2020, we presented data demonstrating that the selection of a natural, high-affinity TCR, in combination with our CRISPR-enabled engineering and targeted insertion, results in an engineered T cell capable of specific and potent killing of primary AML blasts. Importantly, our studies showed that CRISPR-enabled engineering overcomes key challenges of traditional TCR approaches, such as mispairing between therapeutic and endogenous TCR, therefore creating a more homogenous T cell product. The cells engineered with our lead WT1 TCR also exhibited no detectable reactivity to bone marrow cells, which express WT1 at low levels. We continue to advance IND-enabling activities, including process development to support clinical T cell manufacturing. We are on track to submit an IND or IND-equivalent for NTLA-5001 in the first half of 2021.

Research Collaboration with Novartis

In December 2019, the research term under our collaboration agreement with Novartis ended, although the 2014 Novartis Agreement remains in effect. Accordingly, Novartis has selected various CAR-T cell, HSC and OSC targets for continued development, for which we will be eligible to receive milestone and royalty payments in the future. Further, we are eligible to earn up to $230.3 million in development, regulatory and sales-based milestone payments and mid-single-digit royalties, in each case, on a per-product basis for the products developed by Novartis, subject to certain target-based limitations. During the three months ended March 31, 2020, the U.S. Food and Drug Administration (“FDA”) accepted the IND application submitted by Novartis, for a CRISPR/Cas9-based engineered cell therapy for the treatment of sickle cell disease. As a result of meeting this milestone, we recognized a $5.0 million milestone payment that was previously constrained as collaboration revenue within the condensed consolidated statement of operations and comprehensive loss. For more information regarding our collaboration with Novartis, see the section below entitled “Collaborations - Novartis.”

Other Research Programs

We are pursuing a number of in vivo and ex vivo genome editing programs. Within our in vivo research efforts, we continue to work on programs such as primary hyperoxaluria Type 1, alpha-1 antitrypsin deficiency and, in collaboration with Regeneron, hemophilia B, which leverage our capabilities to knockout, insert and make consecutive edits to the genome. We are also investigating delivery strategies that target tissues outside of the liver.

Within our ex vivo research efforts, we are developing engineered cell therapies to treat a range of hematological and solid tumors. We are pursuing modalities, such as TCR, with broad potential in multiple indications. Further, we continue to advance efforts to move from autologous to allogeneic and from liquid to solid tumors. Our researchers are developing and improving cell-engineering manufacturing and delivery processes that, we believe, are designed to allow us to deliver T cell therapies with high levels of editing, achieve robust levels of expansion, ensure desirable memory phenotypes, improve function and reduce translocations. These platform advances will support NTLA-5001 and other ongoing research programs.

Collaborations

To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, we have formed, and may seek other opportunities to form, strategic alliances with collaborators who can augment our leadership in CRISPR/Cas9 therapeutic development.

Regeneron

As described in Note 7, “Collaborations—Regeneron Pharmaceuticals, Inc.,” in April 2016, we entered into a license and collaboration agreement with Regeneron (the “Regeneron Agreement”). The Regeneron Agreement has two principal components: (i) a product development component under which the parties will research, develop and commercialize CRISPR/Cas-based therapeutic products primarily focused on genome editing in the liver; and (ii) a technology collaboration component, pursuant to which the parties will engage in research and development activities aimed at discovering and developing novel technologies and improvements to CRISPR/Cas technology to enhance our genome editing platform. Under the Regeneron Agreement, we also may access the Regeneron Genetics Center and proprietary mouse models to be provided by Regeneron for a limited number of our liver programs.

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Through March 31, 2020, we have recorded a $75.0 million upfront payment under the Regeneron Agreement and $28.8 million for research and development services under the ATTR Co/Co agreement. Through March 31, 2020, we have recognized $78.2 million of collaboration revenue under both arrangements, including $7.9 million and $5.7 million during the three months ended March 31, 2020 and 2019, respectively. This includes $4.8 million and $2.6 million during the three months ended March 31, 2020 and 2019, respectively, representing payments due from Regeneron pursuant to the ATTR Co/Co agreement, which is accounted for under Accounting Standards Codification 808, Collaborative Arrangements. As of March 31, 2020 and December 31, 2019, we had accounts receivable of $8.4 million and $3.6 million, respectively, and deferred revenue of $25.7 million and $28.8 million, respectively, related to these arrangements.

Novartis

As described in Note 7, “Collaborations—Novartis Institutes for BioMedical Research, Inc.,” in December 2014, we entered into a strategic collaboration agreement with Novartis (the “2014 Novartis Agreement”), primarily focused on the development of new ex vivo CRISPR/Cas9-edited therapies using CAR-T cells and HSCs. The agreement was amended in December 2018 (the “Novartis Amendment”) to also include research on OSCs.

Through March 31, 2020, excluding amounts allocated to Novartis’ purchase of the Company’s Class A-1 and Class A-2 Preferred Units, we had recorded a total of $62.4 million in cash and accounts receivable under the 2014 Novartis Agreement and the Novartis Amendment. Through March 31, 2020, we have recognized $62.4 million of collaboration revenue, including $5.0 million related to a development milestone that was previously constrained in the three months ended March 31, 2020 and $4.7 million in the three months ended March 31, 2019. As of March 31, 2020 and December 31, 2019, we had accounts receivable of $5.0 million and $1.0 million, respectively, related to the 2014 Novartis Agreement and the Novartis Amendment. As of March 31, 2020 and December 31, 2019, we had no deferred revenue related to the 2014 Novartis Agreement and the Novartis Amendment.

Financial Overview

Collaboration Revenue

Our revenue consists of collaboration revenue, including amounts recognized related to upfront technology access payments for licenses, technology access fees, research funding and milestone payments earned under our collaboration and license agreements with Novartis and Regeneron.

Research and Development

Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits, which includes equity-based compensation, for full-time research and development employees, allocated facility-related expenses, overhead expenses, clinical manufacturing costs, license and milestone fees, contract research services and other related costs.

General and Administrative

General and administrative expenses consist primarily of compensation and benefits, including equity-based compensation, for our executive, finance, legal, business development and support functions. Also included in general and administrative expenses are allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing, tax and legal services, including IP-related legal services, and other consulting fees and expenses.

Interest Income

Interest income is income earned on our cash, cash equivalents and marketable securities.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and the related footnotes thereto.

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Comparison of Three Months Ended March 31, 2020 and 2019

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

Collaboration Revenue

Collaboration revenue increased $2.5 million to $12.9 million during the three months ended March 31, 2020, as compared to $10.4 million during the three months ended March 31, 2019. The increase in collaboration revenue during the three months ended March 31, 2020 is primarily caused by a $2.2 million increase in research and development services related to our ATTR program with Regeneron, increasing to $4.8 million during the three months ended March 31, 2020 as compared to $2.6 million during the three months ended March 31, 2019, as well as $5.0 million from a milestone triggered by the Novartis IND submission earned during the three months ended March 31, 2020 as compared to $4.7 million related to the research portion of the Novartis collaboration during the three months ended March 31, 2019.

During the three months ended March 31, 2020 and 2019, collaboration revenue consisted of amounts recognized from deferred revenue related to an upfront payment received and amounts for research and development services under the Regeneron Agreement as well as amounts recognized from deferred revenue related to upfront technology access payments for licenses, technology access fees, research funding and, in 2020, milestone payments under the 2014 Novartis Agreement and Novartis Amendment.

Research and Development

Research and development expenses increased by approximately $10.9 million to $34.7 million during the three months ended March 31, 2020, as compared to $23.7 million during the three months ended March 31, 2019.

The following table summarizes our research and development expenses for the three months ended March 31, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

The increase in research and development expenses for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily attributable to:

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Through 2020, we expect research and development expenses to increase as we continue to grow our development team and advance our ATTR, AML and HAE programs towards clinical development.

General and Administrative

General and administrative expenses increased by approximately $0.8 million to $11.3 million during the three months ended March 31, 2020, compared to $10.5 million during the three months ended March 31, 2019. This increase was primarily related to a $0.4 million increase in legal fees associated with intellectual property related fees due to an increase in patent activity and a $0.2 million increase related to technology expenses allocated to general and administrative costs.

Interest Income

Interest income decreased by approximately $0.6 million to $1.2 million during the three months ended March 31, 2020 as compared to $1.9 million during the three months ended March 31, 2019. This decrease was due to a decline in investment income due to a lower investment balance and a general decrease in interest rates.

Liquidity and Capital Resources

Since our inception through March 31, 2020, we have raised an aggregate of $658.7 million to fund our operations, of which $155.5 million was through our collaboration agreements, $170.5 million was from our initial public offering and concurrent private placements, $141.0 million was from a follow-on public offering, $106.7 million was from at-the-market offerings and $85.0 million was from the sale of convertible preferred stock.

As of March 31, 2020, we had $250.3 million in cash, cash equivalents and marketable securities.

We are entitled to receive research payments under our collaboration with Novartis and are also eligible to earn a significant amount of milestone payments and royalties, in each case, on a per-product basis under our collaboration with Novartis and on a per-target basis under our collaboration with Regeneron. Our ability to earn these milestone payments and the timing of achieving these milestones is dependent upon the outcome of our research and development activities and is uncertain at this time. Our rights to payments under our collaboration agreements are our only committed external source of funds.

At-the-Market Offering Programs

On October 12, 2018, we filed a Shelf Registration Statement on Form S-3 (the “2018 Shelf”) with the SEC in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof for the purposes of selling, from time to time, our common stock, convertible securities or other equity securities in one or more offerings. We also simultaneously entered into an Open Market Sale Agreement (the “2018 Sales Agreement”) with Jefferies LLC (the “Sales Agent”), to provide for the offering, issuance and sale of up to an aggregate amount of $100.0 million of our common stock from time to time in “at-the-market” offerings under the 2018 Shelf and subject to the limitations thereof. We have paid the Sales Agent cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2018 Sales Agreement. In November 2018, we issued 1,659,300 shares of our common stock at $18.00 per share in accordance with the 2018 Sales Agreement for aggregate net proceeds of $28.5 million, after payment of cash commissions to the Sales Agent and approximately $0.4 million related to legal, accounting and other fees in connection with the sale. During the twelve months ended December 31, 2019, we issued an additional 4,231,348 shares of our common stock, in a series of sales, at an average price of $16.57 per share, in accordance with the 2018 Sales Agreement, for aggregate net proceeds of $67.8 million, after payment of cash commissions to the Sales Agent and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. All shares related to the 2018 Sales Agreement had been sold as of December 31, 2019.

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On August 23, 2019, we filed a Registration Statement on Form S-3, as amended (the “2019 Shelf”) with the SEC in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof. We also simultaneously entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with the Sales Agent, to provide for the offering, issuance and sale by us of up to an aggregate amount of $150.0 million of our common stock from time to time in “at-the-market” offerings under the 2019 Shelf and subject to the limitations thereof. We agreed to pay to the Sales Agent cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sales Agreement. During the year ended December 31, 2019, we issued 287,231 shares of our common stock, in a series of sales, at an average price of $16.48 per share, in accordance with the 2019 Sales Agreement, for aggregate net proceeds of $4.4 million, after payment of cash commissions to the Sales Agent and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. During the three months ended March 31, 2020, we issued 351,252 shares of our common stock in a series of sales at an average price of $15.05 per share in accordance with the 2019 Sales Agreement, for aggregate net proceeds of $5.1 million, after payment of cash commissions to the Sales Agent and approximately $0.1 million related to legal, accounting and other fees in connection with the sales. As of March 31, 2020, $0.5 million of these proceeds were recorded as a current asset on our condensed consolidated balance sheet, representing offerings with trade dates in March 2020 that were settled in April 2020.

As of March 31, 2020, $140.0 million in shares of common stock remain eligible for sale under the 2019 Sales Agreement.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, research and development contracted services, compensation and related expenses, laboratory and office facilities, research supplies, legal and regulatory expenses, patent prosecution filing and maintenance costs for our licensed IP and general overhead costs. During 2020, we expect our expenses to increase compared to prior periods in connection with our ongoing activities, as we continue to grow our research and development team and begin clinical development.

Because our lead programs are still in preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any future product candidates or whether, or when, we may achieve profitability. Until such time as we can generate substantial product revenues, if ever, we expect to finance our ongoing cash needs through equity financings and collaboration arrangements. We receive cost reimbursements from Regeneron for the ATTR program. Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaboration with Novartis and on a per-target basis under our collaboration with Regeneron, subject to the provisions of our agreements with each of them. Except for these sources of funding, we will not have any committed external source of liquidity. To the extent that we raise additional capital through the future sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Outlook

Based on our research and development plans and our expectations related to the progress of our programs, we expect that our cash, cash equivalents and marketable securities as of March 31, 2020, as well as research and cost reimbursement funding from Regeneron, will enable us to fund our ongoing operating expenses and capital expenditure requirements at least to the end of 2021, excluding any potential milestone payments or extension fees that could be earned and distributed under the collaboration agreements with Regeneron and Novartis or any strategic use of capital not currently in the base case planning assumptions. We have based this estimate on current assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

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

Cash Flows

The following is a summary of cash flows for the three months ended March 31, 2020 and 2019:  

Net cash used in operating activities

Net cash used in operating activities of $38.5 million and $21.5 million during the three months ended March 31, 2020 and 2019, respectively, primarily reflect increased spend in our research and development activities, offset in part by the receipt of $1.0 million and $7.5 million from our collaboration partners, respectively, during those periods.

Net cash provided by investing activities

During the three months ended March 31, 2020 and 2019, our investing activities provided net cash of $57.4 million and $5.7 million, respectively. The increase in the three months ended March 31, 2020 is primarily due to an increase of $58.3 million from marketable securities activity during the period, as $89.5 million in marketable securities matured and $31.2 million in marketable securities were purchased. The increase in the three months ended March 31, 2019 is primarily due to an increase of $7.2 million from marketable securities activity during the period, as $26.5 million in marketable securities matured and $19.3 million in marketable securities were purchased. These increases in cash provided by investing activity were offset in part by the use of $0.8 million and $1.5 million related to purchases of property and equipment in the three months ended March 31, 2020 and 2019, respectively.

Net cash provided by financing activities

Net cash provided by financing activities of $4.9 million during the three months ended March 31, 2020 includes $4.5 million in net proceeds from at-the-market offerings and $0.3 million in cash received from the exercise of stock options. Net cash provided by financing activities of $4.0 million during the three months ended March 31, 2019 includes $3.6 million in net proceeds from at-the-market offerings and $0.4 million in cash received from the exercise of stock options.

Critical Accounting Policies

Our critical accounting policies require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. Management has determined that our most critical accounting policies are those relating to revenue recognition and equity-based compensation. There have been no changes to our critical accounting policies from those which were discussed in our Annual Report for the year ended December 31, 2019.

Recent Accounting Pronouncements

Please read Note 2, “Summary of Significant Accounting Policies”, to our condensed consolidated financial statements included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.

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Contractual Obligations  

In March 2020, we entered into a second amendment to the 130 Brookline Lease (the “Second Amendment”). The Second Amendment amends certain terms of our existing lease, dated October 21, 2014, as amended on April 5, 2019. The Second Amendment extends the term of the 130 Brookline Lease by approximately six years through January 31, 2031. This extended term is included as part of the lease liability and right-of-use asset at March 31, 2020. The Second Amendment also provides an option to extend the lease for two consecutive five-year terms. The Company recognized a right-of-use asset and lease liability of approximately $7.3 million related to the Second Amendment.

In March 2020, we entered into an agreement to lease approximately 39,000 square feet of office and laboratory space at 281 Albany Street in Cambridge, Massachusetts under an operating lease agreement (the “281 Albany Lease”). The 281 Albany Lease is expected to commence on October 1, 2020, and our obligation to pay rent will start on the date that is six months after the commencement date or the date on which we occupy the premises, whichever occurs earlier (the “Rent Commencement Date”). The initial term of the 281 Albany Lease is ten years following the Rent Commencement Date. The base rent under the 281 Albany Lease is $99.00 per square foot per year during the first year of the term, which is subject to scheduled annual increases up to $128.87 per square foot per year during the last year of the initial term, plus certain operating expenses and taxes. In addition, the landlord will contribute an aggregate of $4.4 million toward the cost of construction and tenant improvements for the premises. We have the option to extend the 281 Albany Lease for two successive five-year terms.

There were no other material changes to our contractual obligations during the three months ended March 31, 2020. For a complete discussion of our contractual obligations, please refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for the year ended December 31, 2019.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under the rules and regulations of the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk  

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2020, we had cash equivalents and marketable securities of $246.6 million consisting of interest-bearing money market accounts, commercial paper, corporate and financial institution debt securities, U.S. Treasury securities and asset-backed securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are primarily in marketable securities. Due to the short-term duration of our investment portfolios and the low risk profile of our investments, we do not believe an immediate change of 100 basis points, or one percentage point, would have a material effect on the fair market value of our investment portfolio. Declines in interest rates, however, would reduce future investment income.

We do not have any foreign currency or derivative financial instruments. Inflation generally affects us by increasing our cost of labor and program costs. We do not believe that inflation had a material effect on our results of operations during the three months ended March 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), to allow timely decisions regarding required disclosure.

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Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2020.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, in March 2020, most of our employees began working remotely. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment.  We are continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation related to intellectual property (“IP”), commercial arrangements and other matters, including the matter noted below. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If we were unable to prevail in any such legal proceedings, our business, results of operations, liquidity and financial condition could be adversely affected.

“Item 3. Legal Proceedings” of our Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2019 includes additional discussion of our current legal proceedings.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. Careful consideration should be given to the following risk factors, in addition to the other information set forth in this Quarterly Report on Form 10-Q, our Annual Report for the year ended December 31, 2019 and in other documents that we file with the SEC, in evaluating us and our business. If any of the following risks and uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks described below are not intended to be exhaustive and are not the only risks facing us. New risk factors can emerge from time to time, and it is not possible to predict the impact that any factor or combination of factors may have on our business, prospects, financial condition and results of operations.

Risks Related to the Discovery, Development, Manufacturing and Commercialization of Product Candidates

CRISPR/Cas9 genome editing technology is not yet clinically validated for human therapeutic use. The approaches we are taking to discover and develop novel therapeutics using CRISPR/Cas9 systems are unproven and may never lead to marketable products. If we are unable to develop viable product candidates, achieve regulatory approval for any such product candidate or market and sell any product candidates, we may never achieve profitability.

We are focused on developing curative medicines utilizing the CRISPR/Cas9 genome editing technology, including in vivo therapies and engineered cell therapies. Although there have been significant advances in recent years in the fields of gene therapy, which typically involves introducing a copy of a gene into a patient’s cells, and genome editing in recent years, in vivo CRISPR-based genome editing technologies are relatively new, and their therapeutic utility is largely unproven. In addition, even though cell therapy products have been developed and received regulatory approval in key jurisdictions, such as the United States (“U.S.”) and European Union (“EU”), no genome editing in vivo therapy or genome-edited engineered cell therapy has been approved, and the potential to successfully obtain approval remains unproven.

The CRISPR/Cas9 therapies, whether in vivo or engineered cell therapies, that we intend to develop have not yet been clinically tested by us, and we are not aware of any clinical trials for safety or efficacy having been completed by third parties involving these CRISPR/Cas9-based therapies. The scientific evidence to support the feasibility of developing in vivo products or engineered cell therapies based on the CRISPR/Cas9 technology is both preliminary and limited. Successful development of products by us will require solving a number of issues, including developing or obtaining technologies to safely deliver a therapeutic agent into target cells within the human body or engineer human cells while outside of the body such that the modified cells can have a therapeutic effect when delivered to the patient, optimizing the efficacy and specificity of such products, and ensuring the therapeutic selectivity, efficacy, potency, purity and safety of such products. There can be no assurance we will be successful in solving any or all of these issues.

We have principally concentrated our research efforts to date on bringing CRISPR/Cas9-based therapeutics to the clinic for various initial indications, and our future success is highly dependent on the successful development of CRISPR-based genome editing technologies, cellular delivery methods and therapeutic applications for these indications. These indications are the principal focus of our on-going development efforts, and we may decide to alter or abandon these programs as new data become available and we gain experience in developing CRISPR/Cas9-based therapeutics. We cannot be sure that our CRISPR/Cas9 efforts and technologies will yield satisfactory products that are safe and effective, sufficiently pure or potent, manufacturable, scalable or profitable in our selected indications or any other indication we pursue. We cannot guarantee that progress or success in developing any particular CRISPR/Cas9 therapeutic product will translate to other CRISPR/Cas9 products.

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Public perception and related media coverage of potential therapy-related efficacy or safety issues, including adoption of new therapeutics or novel approaches to treatment, as well as ethical concerns related specifically to genome editing and CRISPR/Cas9, may adversely influence the willingness of subjects to participate in clinical trials, or if any therapeutic is approved, of physicians and patients to accept these novel and personalized treatments. Physicians, health care providers and third-party payors often are slow to adopt new products, technologies and treatment practices, particularly those that may also require additional upfront costs and training. Physicians may not be willing to undergo training to adopt these novel and potentially personalized therapies, may decide the particular therapy is too complex or potentially risky to adopt without appropriate training, and may choose not to administer the therapy. Further, due to health conditions, genetic profile or other reasons, certain patients may not be candidates for the therapies. In addition, responses by the U.S., state or foreign governments to negative public perception, ethical concerns or financial considerations may result in new legislation, regulations, or medical standards that could limit our ability to develop or commercialize any product candidates, obtain or maintain regulatory approval or otherwise achieve profitability. Based on these and other factors, health care providers and payors may decide that the benefits of these new therapies do not or will not outweigh their costs.

Our ability to generate product revenue is dependent on the success of our application of CRISPR/Cas9 technology for human therapeutic use, which is at an early stage of development and will require significant additional discovery efforts, preclinical testing and clinical studies and manufacturing capabilities, as well as applicable regulatory guidance regarding preclinical testing and clinical studies from the U.S. Food and Drug Administration (“FDA”) and other similar regulatory authorities, before we can seek regulatory approval and begin commercial sales of any potential product candidates.

Our ability to generate product revenue is highly dependent on our ability to obtain regulatory approval of and successfully commercialize one or more of our product candidates. Any product candidates we discover will require preclinical and clinical activities and studies, regulatory review and approval in each jurisdiction in which we intend to market the products, substantial investment, establishing manufacturing capabilities, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. Before obtaining marketing approval from regulatory authorities for the sale of a product candidate, we must conduct extensive clinical trials to demonstrate the safety, purity and potency, as well as the efficacy, of the product candidates in humans. We cannot be certain that we will be successful on any of these endeavors, or that any of our product candidates will be successful in clinical trials and, even if successful, that we will receive regulatory approval.

Our approach to developing therapies centers on using the CRISPR/Cas9 technology to alter, introduce or remove genetic information in vivo to treat various disorders, or to engineer human cells ex vivo to create therapeutic cells that can be introduced into the human body to address the underlying disease. Because these are new therapeutic approaches, discovering, developing, manufacturing and commercializing our product candidates subject us to a number of challenges, including:

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Additionally, because our in vivo technology potentially involves genome editing across multiple cell and tissue types, we are subject to many of the challenges and risks that other genome editing therapeutics and gene therapies face, including:

Further, because our ex vivo product candidates involve editing human cells and then delivering modified cells to patients, we are subject to many of the challenges and risks that engineered cell therapies face. For example, clinical trials using engineered cell-based gene therapies may require unique products to be created for each patient and such individualistic manufacturing may be both inefficient and cost-prohibitive.

To date, human clinical trials utilizing either in vivo or ex vivo CRISPR/Cas9-based therapeutics are still at an early stage. There is no certainty that the FDA or other similar agencies will continue to apply to all our CRISPR/Cas9 product candidates the same regulatory pathway and requirements it is applying to other in vivo therapies or ex vivo engineered therapeutics; and the FDA and other regulatory authorities have provided limited additional specific written guidance regarding preclinical or clinical studies or regulatory considerations for either in vivo or ex vivo therapeutics using genome editing technology. In addition, if any product candidates encounter safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and business could be significantly harmed. Further, competitors that are developing in vivo or ex vivo products with similar technology may experience problems with their product candidates or programs that could in turn cause us to identify problems with our product candidates and programs that would potentially harm our business.

Also, uncertainty exists regarding the future scope and effect of the FDA’s application of its regulatory framework to CRISPR/Cas9 therapies, in particular relating to the review and approval of human therapeutic products because the current U.S. administration and federal legislators have publicly declared their intention to modify the current legal framework governing the FDA. Any such changes to the FDA requirements could impact our ability to obtain approval for our products or sell them profitably. Also, upon completing its transition period as it exits the EU, the United Kingdom (“UK”) may enact legislation related to the approval and oversight of human therapeutics in that nation. Until any such legislation is enacted, we will be uncertain as to its effects on our business, including our ability to seek and obtain approval for our products in the UK.

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Results, including positive results, from our initial preclinical activities and studies are not necessarily predictive of our other ongoing and future preclinical and clinical studies, and they do not guarantee or indicate the likelihood of approval of any potential product candidate by the FDA or any other regulatory agency. If we cannot replicate the positive results from any of our preclinical or clinical activities and studies, we may be unable to successfully develop, obtain regulatory approval for and commercialize any potential product candidate.

There is a high failure rate, as well as potential substantial and unanticipated delays, for product candidates progressing through preclinical and clinical studies. Even if we are able to successfully complete our ongoing and future preclinical and clinical activities and studies for any potential product candidate, we may not be able to replicate, or may have to engage in significant efforts and resource and time investments to replicate, any positive results from these or any other studies in any of our future preclinical and clinical trials, and they do not guarantee approval of any potential product candidate by the FDA or any other necessary regulatory authorities in a timely manner or at all. Companies in the pharmaceutical and biotechnology industries have commonly suffered significant setbacks or delays in clinical studies after achieving positive results in early stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made before, during and after clinical studies were underway, or observations regarding the lack of safety or efficacy made in clinical studies, which could include new or previously unreported adverse events. In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in the relevant laws, regulations or regulatory policy during the period of product development.

Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in such studies nonetheless failed to obtain FDA or other necessary regulatory agency approval. If we fail to obtain results in our on-going, planned and future preclinical and clinical activities and studies sufficient to meet the requirements of the relevant regulatory agencies, the development timeline and regulatory approval and commercialization prospects for any potential product candidate, and, correspondingly, our business and financial prospects, would be materially adversely affected.

Negative public opinion and increased regulatory scrutiny of CRISPR/Cas9 use, genome editing or gene therapy generally may damage public perception of the safety of any product candidates that we develop and adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates.

Gene therapy in general, and genome editing in particular, remain novel technologies, with only a limited number of gene therapy products approved to date in the U.S. and EU. Public perception may be influenced by claims that gene therapy or genome editing, including the use of CRISPR/Cas9, is unsafe or unethical, or carries an undue risk of side effects, such as improper insertion of a gene sequence into a patient’s chromosome could lead to cancer, and gene therapy or genome editing may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians who specialize in the treatment of diseases targeted by our product candidates prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available. In addition, responses by the U.S., state or foreign governments to negative public perception or ethical concerns may result in new legislation or regulations that could limit our ability to develop or commercialize any product candidates, obtain or maintain regulatory approval or otherwise achieve profitability. More restrictive statutory regimes, government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death. Serious adverse events such as these in our clinical trials, or other clinical trials involving gene therapy or genome editing products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidate. In addition, the use of the technology by third parties in areas that are not being pursued by us, such as for targeting and editing of embryonic cells, could adversely impact public and governmental perceptions regarding the ethics and risks of the CRISPR/Cas9 technology and lead to social or legal changes that could limit our ability to apply the technology to develop human therapies addressing disease. For example, reports of the use of CRISPR/Cas9 in China and Russia to edit embryos in utero have generated and may continue to create negative public perception about the use of the technology in humans. Negative public and governmental perception of the technology, or additional governmental regulation of our technologies, could also adversely affect our stock price or our ability to enter into revenue generating collaborations or obtain additional funding from the public markets.

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Inconclusive results, lack of efficacy, adverse events or additional safety concerns in clinical trials that we or others conduct may impede the regulatory approval process or overall market acceptance of our future product candidates.

Therapeutic applications of genome editing technologies, and CRISPR/Cas9 in particular, for both in vivo products and in engineered cell therapies, are unproven and must undergo rigorous clinical trials and regulatory review before receiving marketing authorization. If the results of our clinical studies or those of any other third parties, including with respect to genome editing technology or engineered cell therapies, are inconclusive, fail to show efficacy or if such clinical trials give rise to safety concerns or adverse events, we may:

Additionally, our future product candidates could potentially cause other adverse events that have not yet been predicted and the potentially permanent nature of genome editing effects, including CRISPR/Cas9’s effects, on genes or novel cell therapies in the organs of the human body may make these adverse events irreversible. The inclusion of critically ill patients in our clinical studies or those of our competitors may result in deaths or other adverse medical events, including those due to other therapies or medications that such patients may be using. Any of these events could prevent us from achieving or maintaining regulatory approval or market acceptance of our future product candidates and impair our ability to achieve profitability.

Clinical development involves 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 any product candidates.

All of our lead programs are still in the discovery or preclinical stage, and their risk of failure is high. It is impossible to predict when or if any of our programs will prove effective and safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of any of our future product candidates in humans. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. 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. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

Successful completion of clinical trials is a prerequisite to submitting a BLA to the FDA, and similar applications to comparable foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. We do not know whether any of our clinical trials will begin or be completed on schedule, if at all.

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

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 relevant ethics committee, the Data Safety Monitoring Board (“DSMB”) for such trial, or the FDA or other relevant regulatory authorities. Such authorities may impose such a suspension or termination 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, manufacturing or quality control issues, 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. 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.

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Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or 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 preclinical or future clinical development programs may harm our business, financial condition and prospects significantly.

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

The biotechnology and pharmaceutical industries, including the genome editing field and engineered cell therapies, are characterized by rapidly changing technologies, significant competition and a strong emphasis on intellectual property. We face substantial competition from many different sources, including large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions.

Competitors in our efforts to provide genetic therapies to patients can be grouped into at least three sets based on their product discovery platforms:

Our competitors also include companies that are or will be developing other genome editing methods as well as small molecules, biologics, in vivo gene therapies, engineered cell therapies (both autologous and allogeneic) and nucleic acid-based therapies for the same indications that we are targeting with our CRISPR/Cas9-based therapeutics.

Any advances in gene therapy, engineered cell therapies or genome editing technology made by a competitor may be used to develop therapies that could compete against any of our product candidates.

Many of these competitors have substantially greater research and development capabilities and financial, scientific, technical, intellectual property, manufacturing, marketing, distribution and other resources than we do, and we may not be able to successfully compete with them.

To become and remain profitable, we must discover, develop, manufacture 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 clinical trials of product candidates, obtaining marketing approval for product candidates, manufacturing at a sufficient scale, marketing and selling products that are approved and satisfying any pre-approval, approval and post-marketing requirements. Even if we are successful in selecting and developing any product candidates, in order to compete successfully we may need to be first-to-market or demonstrate that our CRISPR/Cas9-based products are superior to therapies based on the same or different treatment methods. If we are not first-to-market or are unable to demonstrate such superiority, any products for which we are able to obtain approval may not be commercially successful. Furthermore, in certain jurisdictions, if a competitor has orphan drug status for a product and if our product candidate is determined to be contained within the scope of a competitor’s orphan drug exclusivity, then approval of our product for that indication or disease could potentially be blocked, for example, for up to seven years in the U.S. and 10 years in the EU.

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We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our ability to complete clinical trials or our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for any future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the U.S. If patients are unwilling to participate in our clinical studies because of concerns about, or negative publicity from, adverse events in the genome editing, gene therapy or engineered cell therapy fields, the novel nature of the CRISPR/Cas9 genome editing technology, the irreversibility of the effects of CRISPR/Cas9 or for other reasons, including competitive clinical studies for similar patient populations, then the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. Other events, such as the coronavirus disease 2019 (“COVID-19”) pandemic also could adversely impact the initiation, continuation and completion of our clinical trials by, for example, delaying the dosing of patients, reducing the number of patients, healthcare providers or clinical facilities available or willing to participate in the clinical trials. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical studies altogether. In addition, any patients who would otherwise be eligible for clinical trials that we may hold may instead enroll in clinical trials of product candidates of our competitors.

Patient enrollment is affected by other factors including: