Wave Life Sciences Ltd. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2018

For the transition period from              to             

Commission File No. 001-37627

WAVE LIFE SCIENCES LTD.

(Exact name of registrant as specified in its charter)

+65 6236 3388

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☒    NO  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ☐    NO  ☒

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

Indicate by check mark whether the registrant has submitted 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

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

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

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

The aggregate market value of the registrant’s voting and non-voting ordinary shares held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the ordinary shares were last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (June 29, 2018) was $746,006,159. The number of outstanding ordinary shares of the registrant as of February 26, 2019 was 34,192,106.

DOCUMENTS INCORPORATED BY REFERENCE

If the Registrant’s Definitive Proxy Statement relating to the 2019 Annual General Meeting of Shareholders (the “Proxy Statement”) is filed with the Commission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, then portions of the Proxy Statement will be incorporated by reference into Part III of this Annual Report on Form 10-K. If the Proxy Statement is not filed within such 120-day period, then the Registrant will file an amendment to this Annual Report within such 120-day period that will contain the information required to be included or incorporated by reference into Part III of this Annual Report.

WAVE LIFE SCIENCES LTD.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

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Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning 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,” that involve substantial risks and uncertainties. In some cases, forward-looking statements are identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “goals,” “intend,” “likely,” “may,” “might,” “ongoing,” “objective,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” “will” and “would” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, such statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about our ability to fund our working capital requirements; our success, cost and timing of our product development activities and clinical trials; the timing of, and our ability to, obtain and maintain regulatory approvals for any of our product candidates; our ability to identify and develop new product candidates; our intellectual property position; our commercialization, marketing and manufacturing capabilities and strategy; our ability to develop sales and marketing capabilities; our estimates regarding future expenses and needs for additional financing; our ability to identify, recruit and retain key personnel; our financial performance; and developments and projections relating to our competitors in the industry. You should refer to the “Risk Factors” section of this Annual Report to Form 10-K and in our other filings with the Securities and Exchange Commission for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, these statements should not be regarded as representations or warranties by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

As used in this Annual Report on Form 10-K, unless otherwise stated or the context otherwise indicates, references to “Wave,” the “Company,” “we,” “our,” “us” or similar terms refer to Wave Life Sciences Ltd. and our wholly-owned subsidiaries.

The Wave Life Sciences Ltd. and Wave Life Sciences Pte. Ltd. names, the Wave Life Sciences mark, PRISM and the other registered and pending trademarks, trade names and service marks of Wave Life Sciences Ltd. appearing in this Annual Report on Form 10-K are the property of Wave Life Sciences Ltd. This Annual Report on Form 10-K also contains additional trade names, trademarks and service marks belonging to Wave Life Sciences Ltd. and to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties. Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the ® and ™ symbols, but such reference should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

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PART I

Overview

We are a clinical-stage genetic medicines company committed to delivering life-changing treatments for people battling devastating diseases. Using PRISM, our proprietary discovery and drug development platform that enables the precise design, optimization and production of novel stereopure oligonucleotides, we aspire to develop best in class medicines across multiple therapeutic modalities.

Nucleic acid therapeutics, including oligonucleotides, are a growing and innovative class of drugs comprised of a sequence of nucleotides that are linked together by a backbone of chemical bonds. We are initially developing oligonucleotides that target the ribonucleic acid (“RNA”) to either reduce the expression of disease-promoting proteins or transform the production of dysfunctional mutant proteins into the production of functional proteins. RNA is a critical molecule that can adopt complex three-dimensional structures and affect various cellular functions. By intervening at the RNA level, we have the potential to address diseases that have historically been difficult to treat with small molecules or biologics. Oligonucleotides have additional advantages as a therapeutic class including the ability to target multiple tissue types, often without the need for a delivery vehicle, and the ability to modulate the frequency of dosing to ensure broad distribution within tissues and account for cell turnover. Oligonucleotides also have well-established manufacturing processes and validated test methods based on decades of improvements.

The oligonucleotides we are developing with PRISM are stereopure. A stereopure oligonucleotide is comprised of molecules with atoms precisely arranged in three-dimensional orientations at each linkage. We believe that controlling the position of the sulfur atom following phosphorothioate (“PS”) modification will optimize the pharmacological profile of our oligonucleotides by maximizing the potential therapeutic benefit while minimizing the potential for side effects and safety risks. The stereopure oligonucleotides we are developing differ from the mixture-based oligonucleotides currently on the market or in development by others. Our preclinical studies have demonstrated that our stereopure oligonucleotides may achieve superior pharmacological properties compared with mixture-based oligonucleotides. Through our work in developing stereopure oligonucleotides, we have created and continue to evolve PRISM, our proprietary discovery and drug development platform.

PRISM enables us to target genetically defined diseases with stereopure oligonucleotides across multiple therapeutic modalities. PRISM combines our unique ability to construct stereopure oligonucleotides with a deep understanding of how the interplay among oligonucleotide sequence, chemistry and backbone stereochemistry impacts key pharmacological properties. By exploring these interactions through iterative analysis of in vitro and in vivo outcomes and artificial intelligence-driven predictive modeling, we continue to define design principles that we deploy across programs to rapidly develop and manufacture clinical candidates that meet pre-defined product profiles.

Our goal is to develop and commercialize disease-modifying medicines for genetically defined diseases with a high degree of unmet medical need, and to become a fully integrated genetic medicines company. Our initial focus for our clinical development programs is in neurology, which we broadly define as genetic diseases within the neuromuscular system and central nervous system. We are conducting clinical trials of our lead program in Duchenne muscular dystrophy (“DMD”) targeting exon 51 and our two lead programs in Huntington’s disease (“HD”). We are advancing three additional development programs, targeting exon 53 in DMD and C9ORF72 in amyotrophic lateral sclerosis and frontotemporal dementia, and, subject to our submission of clinical trial applications and approval to proceed, we would expect topline clinical data readouts from these programs in the second half of 2020. In addition to neurology, we are advancing discovery research in ophthalmologic disorders, specifically inherited retinal diseases, and in hepatic diseases, and we expect to make continued investments in expanding the breadth of our portfolio. In further support of our pipeline, we continue to make substantial investments in, and leverage, PRISM to potentially develop the next generation of stereopure oligonucleotides. We have also established and continue to enhance our internal current good manufacturing practices (“cGMP”) manufacturing capabilities to increase control and visibility of our drug substance supply chain. These investments further improve our ability to secure drug substance for current and future development activities and may provide commercial-scale manufacturing capabilities.

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Our Current Programs

Additional details regarding our programs are set forth below.

Neurology: Muscle

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Neurology: Central Nervous System (“CNS”)

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Ophthalmology

Hepatic

Our Strategy

We are building a fully integrated genetic medicines company by leveraging PRISM to design, develop and commercialize optimized disease-modifying medicines for indications with a high degree of unmet medical need in genetically defined diseases. Our initial programs are focused in neurology and are aimed at addressing DMD, HD, ALS, FTD and SCA3. In parallel to our neurology programs, we are advancing preclinical programs in ophthalmology and hepatic diseases as well as exploring additional therapeutic areas that may benefit from the application of our platform.

The key components of our strategy are as follows:

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Oligonucleotides

The majority of traditional therapeutics, such as small molecules and biologics, work by interacting with proteins that contribute to the disease. However, there are thought to be a limited number of “druggable” proteins; it is currently estimated that approximately 80% of human protein targets cannot be addressed by these conventional approaches. In contrast, we believe that directing medicines to the RNA, which is critical to the production of proteins, rather than to the proteins themselves, has the potential to significantly increase the number of druggable targets. We also believe that utilizing and building upon the established scientific, regulatory, operational and commercial knowledge base with regard to genetic medicines that target RNA gives us the best chance of success to rapidly deliver therapies to the patients who need them.

Nucleic acid therapeutics, including oligonucleotides, are an innovative class of drugs that can modulate the function of target RNAs to ultimately affect the production of disease-associated proteins or prevent the accumulation of pathogenic RNA species, which are emerging as important factors in human disease. Oligonucleotides can regulate protein and RNA via several different molecular mechanisms. These mechanisms can be broadly categorized as silencing, those that promote degradation of the target RNA, including antisense and RNAi; splicing, those that involve binding to the target RNA and modulating its function by promoting exon skipping; and RNA-guided gene editing.

The unique capability of oligonucleotides to address a wide range of genomic targets that impact multiple therapeutic areas creates potentially significant market opportunities for us to develop molecules to treat a broad spectrum of human diseases, including diseases where no medicines currently exist or for which existing treatments are not optimal.

The oligonucleotides we are currently developing employ the following molecular mechanisms:

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Design of Oligonucleotides

Oligonucleotides are largely comprised of chemically modified, short-length RNA or deoxyribonucleic acid (“DNA”) strands, commonly known as oligonucleotides. Oligonucleotides are comprised of a sequence of nucleotides—the building blocks of RNA and DNA—that are linked together by a backbone of chemical bonds. In nucleic acid molecules that have not been modified for therapeutic use, the nucleotides are linked by phosphodiester (“PO”) bonds, as shown below.

Such unmodified nucleic acid molecules are unsuitable for use as therapeutics because they are rapidly degraded by enzymes called nucleases that are widely distributed in the human body, are rapidly cleared by the kidneys and are taken up poorly by targeted cells. The industry has employed chemical modifications of the nucleotides and PO bonds that improve the stability, biodistribution and cellular uptake of oligonucleotides.

The phosphorothioate (“PS”) modification was one of the earliest and remains one of the most common backbone modifications used in oligonucleotides. When introducing a PS modification, one of the nonbridging oxygen (O) atoms bonded to a phosphorus (P) atom is replaced with a sulfur (S) atom. This modification improves the stability of oligonucleotides by making them less susceptible to enzymatic degradation. Further, PS bond-containing oligonucleotides increase binding to plasma proteins, which improves biodistribution by preventing rapid renal excretion of these molecules.

Whereas traditional chemistry platforms for oligonucleotides require the full replacement of the naturally occurring PO with PS, we can judiciously use a combination of PO and PS in our stereopure nucleic acids. We believe this flexibility to selectively employ PS modifications only where desired may provide control over pharmacodynamics and may improve the safety of our product candidates.

The first FDA approval of a nucleic acid therapeutic occurred in 1998, and the most recent was in 2018. Nucleic acid therapeutic candidates that employ PS modifications are being developed by several different companies. PS modification is accepted as a state-of-the-art advancement in the field. We believe that PS modification will remain a key component of nucleic acid therapeutic development.

PS Modification Results in Complex Drug Mixtures

A consequence of introducing PS modifications into an oligonucleotide is that it also introduces a chiral center at each phosphorus, creating stereoisomers designated as either an “Sp” or “Rp” isomer. As shown below, these stereoisomers have identical chemical compositions but different three-dimensional arrangements of their atoms and consequently different chemical and biological properties.

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The isomeric configuration at each PS modification is random (either Rp or Sp) during conventional nucleic acid therapeutic synthesis. Because oligonucleotides contain a string of nucleotides with associated PS modifications, the synthesis process generates a complex mixture containing many stereoisomers. Specifically, each PS linkage doubles the number of stereoisomers in the product, so that a conventional preparation of a PS-containing oligonucleotide contains 2^N stereoisomers, where N represents the number of PS modifications. As shown below, a conventional, fully PS-modified oligonucleotide (20 nucleotides in length, 19 PS modifications) is a mixture of over 500,000 stereoisomers, each having the same nucleotide sequence but differing in the stereochemistry along their backbones.

Stereoisomers can possess different chemical and pharmacological properties. For example, certain stereoisomers can drive the therapeutic effects of a drug while others can be less beneficial or can even contribute to undesirable side effects. The greater the variation among a drug’s constituent stereoisomers, the greater the potential to diminish the drug’s efficacy and safety.

Prior to the development of our technology, it was not possible to create stereopure PS-modified oligonucleotides, meaning molecules where the configuration of each chiral PS linkage is precisely controlled during chemical synthesis. Moreover, because of the sheer number of stereoisomers present in a mixture, it would be impractical, if not impossible, to physically isolate the most therapeutically optimal stereoisomer from within a mixture. For these reasons, all PS-modified oligonucleotides currently on the market and in development by others are mixtures of many stereoisomers, which we believe are not optimized for stability, catalytic activity, efficacy or toxicity.

In small molecule therapeutics, U.S. regulators have long sought to eliminate the risks potentially posed by drug mixtures containing multiple stereoisomers. Since 1992, the FDA has recommended full molecular characterization of stereoisomers within small-molecule drug mixtures. Historically, it has not been possible to achieve such characterization for nucleic acid therapeutic drug mixtures, which can contain tens of thousands to millions of distinct pharmacological entities. Based on our published and ongoing preclinical studies, we believe that we can design and synthesize stereopure PS-modified oligonucleotides that demonstrate superior pharmacological properties compared with mixture-based oligonucleotides. We believe that PRISM has the potential to set a new industry standard for the molecular characterization of complex nucleic acid therapeutic drug mixtures.

Our Solution: PRISM

We have developed proprietary chemistry that enables the development of novel PO/PS-modified oligonucleotides in which stereochemistry is precisely controlled. This degree of control enables us to both rationally design and synthesize optimized stereopure oligonucleotides. We have published both our proprietary chemistry platform and its application to synthesize stereopure oligonucleotides in Nature Biotechnology (Iwamoto N, et al. Nature Biotechnol. 2017;35(9):845-851).

Through PRISM, our proprietary discovery and drug development platform, we have discovered and expect to continuously elaborate on the relationships between the chemical makeup of an oligonucleotide, including the three-dimensional orientation or arrangement of its atoms, and its pharmacology (i.e., stability of the drug, activity against the target, specificity for the target and immunogenicity of the drug). Our initial findings relating the stereochemical make up of oligonucleotides to their pharmacology were also featured in our Nature Biotechnology publication. In addition, we have defined relationships between various 2’-sugar modifications to the nucleotide (such as methoxy, methoxyethyl, fluoro, locked), and the stereochemistry of the backbone that enhances oligonucleotide pharmacology, providing an enhanced therapeutic profile.

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Our rational process for designing stereopure oligonucleotides, which is based on the interplay among oligonucleotide sequence, chemistry and backbone stereochemistry, allows us to selectively optimize for the molecular mechanism in order to generate best-in-class oligonucleotides. We are using these ongoing discoveries to guide our drug development activities that we believe will lead to medicines that can be dosed at lower concentrations, less frequently, or both, as well as with improved therapeutic profiles.

Advantages of Our Approach

We believe that PRISM is a significant advancement in the development of oligonucleotides. The advantages of our approach include:

Our Proprietary Chemistry – Proof of Concept

In preclinical models, which we believe are predictive of human biology, we have demonstrated that stereochemistry and pharmacology are directly related, and that these relationships inform the rational design and production of oligonucleotides. In proof-of-concept studies, we have used PRISM to design and synthesize diverse sets of oligonucleotides, which allowed us to characterize and compare the behavior of various stereoisomers. These preclinical studies, some of which have been published in Nature Biotechnology, have demonstrated that by controlling stereochemistry, we can optimize multiple aspects of pharmacology, including stability, catalytic activity, efficacy, specificity, immunogenicity, enhanced delivery, and broad tissue distribution, which in turn, we believe will lead to an enhanced therapeutic profile. As with any drug under development, we cannot be certain that the same favorable pharmacological properties we have observed in preclinical studies for our stereopure oligonucleotides will translate to humans. See “Risk Factors – Risks Related to the Discovery, Manufacturing, Development and Commercialization of Our Product Candidates” for a discussion of the risks associated with the development of pharmaceuticals, and oligonucleotides in particular.

In our Nature Biotechnology paper, we describe our studies using stereopure oligonucleotides and oligonucleotide mixtures based on mipomersen. We studied mipomersen because, at that time, it was the only systemically administered nucleic acid therapeutic approved for commercialization, and documents from the regulatory bodies that evaluated mipomersen for marketing approval were publicly available. Mipomersen (currently marketed by Kastle Therapeutics and formerly marketed by Sanofi Genzyme, under the brand name Kynamro) is approved for the treatment of homozygous familial hypercholesterolemia and is designed to silence production of Apolipoprotein B (“APOB”) via an antisense mechanism. Although mipomersen received marketing authorization in the United States in 2012, concerns about the drug’s tolerability and liver and cardiovascular safety led the European Medicines Agency (“EMA”) to refuse to grant marketing authorization for the drug in the European Union. One of the EMA’s central concerns about mipomersen was that a high proportion of patients stopped taking the drug within two years, mainly due to side effects such as flu-like symptoms, injection-site reactions and liver toxicity. The EMA considered these side effects important because mipomersen is intended for long-term treatment to maintain its cholesterol-lowering effect.

Mipomersen, an oligonucleotide containing 20 nucleotides and 19 PS modifications, is synthesized by traditional oligonucleotide chemistry; thus, it is actually a mixture of over 500,000 different stereoisomers (2¹⁹ = 524,288). We rationally designed and synthesized individual stereoisomers of mipomersen, each having position-specific and distinct stereochemistry, and conducted studies comparing these defined stereoisomers with the mipomersen stereomixture.

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Stability

We investigated the relationship between stereochemistry and stability by exposing our panel of individual stereoisomers and the stereomixture to metabolic enzymes, including nucleases, in rat liver homogenate or rat serum. We incubated each stereoisomer or the stereomixture separately in rat whole-liver homogenate for five days at physiological temperature and measured the percentage of each full-length stereoisomer and the stereomixture remaining daily. We found that stereochemistry had a profound impact on oligonucleotide stability.

As shown in the graph below, by day five, less than 15% of the stereomixture (mipomersen) remained. By contrast at day five, over 50% of our stereopure isomers 1, 2, 3 and 4 remained, with isomer 1 showing minimal degradation, indicating that these individual stereopure isomers have greater stability than the stereomixture. The mipomersen stereomixture, however, was more stable than several other stereoisomers (i.e., 5, 6 and 7).

We obtained similar results when we assessed the stability of the stereomixture and selected stereoisomers in rat serum. Overall, we found that increasing the proportion of Sp isomers increased the stability of the oligonucleotides.

Catalytic Activity

We investigated the relationship between stereochemistry and catalytic activity, which, in the case of the antisense modality, is a measure of the efficiency with which the drug leads to the knockdown of the target. In the human body, antisense drugs like mipomersen rely on the enzyme RNase H to degrade or knockdown the target mRNA. Yielding efficient RNase H catalytic activity is an essential pharmacological feature for drugs like mipomersen.

We evaluated the catalytic activity of the same panel of stereoisomers described above in in vitro enzymatic assays using human RNase H. We added RNase H to pre-formed duplexes containing the stereoisomers or the stereomixture bound to the target APOB mRNA, and we assessed the relative rates of target RNA degradation. To do this, we stopped the reactions at designated time points and quantified the amount of full-length APOB mRNA remaining.

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As shown below, the catalytic activity of the stereoisomers and the stereomixture differed considerably, as demonstrated by their efficiency in reducing the amount of the full-length target remaining over time. Certain stereoisomers, most notably stereoisomer 4, was far more catalytically active than the stereomixture as well as other stereoisomers. Importantly, stereoisomer 4 contains a pattern of PS stereochemistry denoted 3’-SpSpRp-5’ (“SSR”). We also identified stereoisomers with distinct patterns of PS stereochemistry that were less catalytically active than the stereomixture, most notably isomer 7.

Based on these and other data, we have established key design principles (i.e., the SSR motif) relating stereochemistry to RNase H catalytic activity. These principles can now be applied across antisense therapeutics and are compatible with a broad range of additional chemical modifications to the drug molecule.

Based on these studies and others, we believe we can synthesize stereopure oligonucleotides that possesses increased stability and catalytic activity, independent of nucleotide sequence.

Efficacy

We assessed whether improved stability and catalytic activity of our stereoisomers would translate into greater efficacy in an in vivo pharmacological study. We administered our panel of stereoisomers and the stereomixture to transgenic mice that express human APOB. This validated animal model was included in the preclinical package used for the regulatory approval of mipomersen in the United States.

We injected mice twice weekly with 10 mg/kg of stereoisomer 3, stereoisomer 5, or the stereomixture over a four-week period. We measured APOB protein levels in the serum weekly for six weeks. This treatment protocol and study design replicates the preclinical in vivo pharmacology study that was included in the regulatory submission for mipomersen.

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In the experiment, stereoisomer 3, which demonstrated increased catalytic activity and stability in vitro compared with the stereomixture and stereoisomer 5, led to greater reduction in serum APOB protein than either the stereomixture or stereoisomer 5. These data are illustrated in the graph below, where levels of APOB in serum, expressed as a percentage of APOB at baseline, is plotted with respect to time (days). Knockdown of APOB by the stereomixture (mipomersen) and stereoisomer 5 decreased dramatically following final dose (after day 28). In contrast, stereoisomer 3 demonstrated efficient and sustained target engagement, as evidenced by the magnitude and duration of knockdown, which persisted for over two weeks after the final dose.

Specificity

By controlling stereochemistry, we have discovered that we can change the pattern of RNase H cleavage in the target mRNA that is caused by PS-modified antisense. Indeed, we can use stereochemistry to direct cleavage toward specific positions within the target. This precision control enables us to design PS-modified nucleic acids that can direct RNase H to differentiate between two very similar targets. This level of specificity is desirable in cases where cleavage of one target is expected to have disease-modifying impacts, but cleavage of a closely related target is undesirable or potentially unsafe.

For example, HD is caused by mutations in one allele (which is one of two or more versions of a gene) of the HTT gene, resulting in the production of a disease-causing protein, while the other allele encodes a healthy protein. By optimizing stereochemistry, we can direct cleavage towards the mutated HTT allele based on a single-nucleotide difference between the disease-causing allele and the normal allele.

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In the experiment illustrated below, we performed in vitro RNase H enzymatic reactions similar to those presented previously. As before, we added RNase H to stereopure oligonucleotides or stereorandom oligonucleotides that were duplexed with mutant or healthy HTT RNA. We stopped the reactions at designated time points and quantified the amount of full-length mutant or healthy HTT RNA remaining. The stereorandom oligonucleotide (left panel) caused substantial reductions in both the mutant and healthy HTT RNA, whereas the optimized stereopure oligonucleotide (right panel) preferentially cleaved mutant HTT RNA while largely sparing the healthy HTT RNA.

We believe that our ability to use stereochemistry to precisely control the RNase H cleavage patterns resulting from PS-modified nucleic acids allows us to mitigate unwanted activity in vivo. This affords us a unique position to make allele-specific targeting (meaning the preferential interaction of an oligonucleotide with RNA transcribed from only one allele of a given gene) possible.

Through these preclinical studies, we have demonstrated the ability to use stereochemistry to precisely control cleavage and reduce off-target cleavage. We believe these findings can be applied in the design of nucleic acid therapies for a range of disease targets.

Immunogenicity

We investigated the relationship between stereochemistry and immunogenicity, which is the ability of a substance to activate an immune response. Immune activation has been observed with PS-modified oligonucleotides in preclinical toxicology studies. Flu-like symptoms and injection-site reactions in clinical studies are believed to be immune mediated.

Using NHP serum, we analyzed the activation of the complement system following exposure to our panel of individual stereopure isomers and the parent stereomixture. We incubated each isomer and stereomixture at physiological temperature in NHP serum from three individual animals. We removed samples from these incubations at designated times, and we assessed complement activation by measuring the increase in the amount of protein C3a. Protein C3a is formed when the complement system is activated and complement component 3 is cleaved. C3a levels in serum increase in direct proportion to the amount of pathway activation. We quantified serum C3a levels using the enzyme-linked immunosorbent assay (“ELISA”) analytical method, a technique used to determine the amount of a specific protein present in a biological sample.

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As shown below, the stereoisomers and the stereomixture yielded different levels of complement pathway activation as measured by C3a production. Certain stereoisomers, such as stereoisomers 1 and 2, showed less than half of the C3a production compared with the stereomixture (shown in black).

We have also assayed immune activation of stereoisomers and the parent stereomixture in a human TLR9 reporter assay (left panel below) and a human peripheral blood mononuclear cell (“PBMC”) cytokine panel (right panel below, IL-6 and MIP-1β are key cytokines in B-cell and macrophage activation, respectively). In the TLR9 assay, the 5’methylcytosine (“5mC”)-modified stereomixture activated TLR9 activity, whereas our stereopure isomer did not. Similarly, the 5mC-modified stereomixture (Isomer-1) led to IL-6 and MIP-1β secretion from PBMCs, where our stereopure isomer (Isomer-2) did not. Prior research has indicated that 5mC and 2’-modifications to a nucleic acid therapeutic containing the immune-activating CpG motif are sufficient to limit immune activation. However, substantial immune activation persists even when these modifications are incorporated, as seen in these experiments. PRISM allows us to design stereoisomers that yield notably less activation of the immune system.

Based on these studies, we believe that it is possible to modulate complement activation and potentially reduce the immunogenicity of PS-modified oligonucleotides by controlling stereochemistry.

Enhanced Delivery

We have also investigated the relationship between stereochemistry and cellular uptake, which is the ability of oligonucleotides to penetrate cells and access the appropriate subcellular compartment (i.e., the nucleus) for them to engage with their intended target. Designing oligonucleotides that enter cells at sufficient concentrations to provide a therapeutic effect has been a challenge for the oligonucleotides field.

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As shown below, we performed an intracellular trafficking assay using differentiating myoblast cell lines to compare the cellular localization of stereopure and stereorandom oligonucleotides in vitro. We washed and fixed treated cells and detected the oligonucleotides using a ViewRNA assay and an immunofluorescence microscope with deconvolution capabilities. Z-stacks were taken to eliminate artifacts. We compared the number of oligonucleotide foci (red, left panel below) in the nucleus (blue) of cultured cells that we treated with either a stereorandom oligonucleotide or one of our stereopure oligonucleotides. We detected substantially more foci per nucleus for our stereopure oligonucleotide compared with a stereorandom oligonucleotide of comparable sequence (right panel below).

Broad Tissue Distribution

Using PRISM, we are able to design oligonucleotides that do not need delivery vehicles, such as conjugates or viral vectors, to reach many tissues. Our oligonucleotides can be delivered via multiple routes of administration and distributed to multiple tissues at levels sufficient to potently impact the expression of a target gene (e.g., MALAT1). As shown below, we achieved broad tissue distribution in CNS, eye and muscle tissue in mice with no delivery vehicle.

CNS and eye tissues were harvested 1-week post-dose. Muscle tissue was collected 3-days post-dose. All tissues were processed, and mRNA was quantified by qPCR. Plots show percentage of mRNA remaining (Malat1) with respect to control mRNA (Hprt). For CNS and muscle, each symbol represents one animal; for eye, each symbol represents one eye. SR: Stereorandom, ICV: intracerebroventricular, IVT: intravitreal, SC: subcutaneous.

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In the CNS, we observe broad distribution of naked (unconjugated) oligonucleotides in mice after a single intracerebroventricular injection. Our oligonucleotides in clinical trials and in development for CNS programs are delivered by intrathecal injection.

Mice received a single 100 ug ICV injection of unconjugated, stereopure ASO targeting MALAT1. 10-weeks post-dose, CNS tissues were processed, and mRNA was quantified by qPCR. Plots show percentage of mRNA remaining (Malat1) with respect to control mRNA (Hprt). Each symbol represents one animal. Ctx: cortex, Str: striatum, Cb: cerebellum, Hp: hippocampus, SC: spinal cord, ICV: intracerebroventricular.

As we have expanded our investigations into the impact that stereochemistry has on the pharmacological properties of oligonucleotides, we have deployed the same patterns of backbone stereochemistry in the context of new and more diverse sequences and in the presence of distinct chemical modifications to the nucleoside. In these investigations, we have discovered an interplay between oligonucleotide sequence, chemistry and backbone stereochemistry: the impact that a particular pattern of backbone stereochemistry has on any one pharmacological property of an oligonucleotide can be augmented or curtailed by the oligonucleotide sequence or the accompanying chemical modifications. Our discovery efforts continuously elaborate on these relationships and have already revealed design rules that expedite the development of new candidates based on modality. The discovery of this interplay and delineation of design rules affords us an important advantage: to generate oligonucleotides that meet our desired product profiles, we can modulate a new and critical dimension of oligonucleotide therapeutics through the control of backbone stereochemistry, and we can modulate the sequence and chemistry. In certain situations, for example, when targeting a sequence containing a single-nucleotide polymorphism (SNP), the ability to modulate the target sequence can be limited. In these circumstances, our ability to control both backbone stereochemistry and chemistry increases the likelihood that we can develop a candidate that matches our desired product profile.

Our Initial Therapeutic Programs

Our most advanced therapeutic programs are in neurology, which we broadly define as genetic diseases within the neuromuscular system and CNS. Within neurology, we are focused on DMD, HD, ALS, FTD and SCA3. We have initiated clinical trials of suvodirsen, our lead program in DMD targeting exon 51, and our two lead programs in HD. We are advancing several other programs, including WVE-N531 targeting exon 53 in DMD, WVE-3972-01 targeting C9ORF72 in ALS and FTD and a program targeting ATXN3 in SCA3. We are also conducting preclinical research to develop a lead candidate in ophthalmology and continue to explore additional targets in CNS, neuromuscular and hepatic disorders.

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See below for more information on these programs and the diseases we are targeting.

Duchenne Muscular Dystrophy

Background and Market Opportunity

DMD is a rare, genetic progressive neuromuscular disorder caused by mutations in the DMD gene on the X chromosome that affects approximately one in 5,000 newborn boys around the world (approximately 20,000 new cases annually). The dystrophin protein is part of a protein complex called the dystrophin-associated protein complex that acts as an anchor, connecting each muscle cell’s structural framework with a lattice of proteins and other molecules outside the cell through the muscle cell membrane. The dystrophin-associated protein complex protects the muscle from injury during contraction and relaxation. Patients with DMD typically develop muscle weakness in the early years of life and become wheelchair-bound in their early teens. As the disease progresses, DMD patients typically develop respiratory, orthopedic and cardiac complications. Cardiomyopathy and breathing difficulties usually begin by the age of 20, and few individuals with DMD live beyond their thirties.

Current Treatments

While there are approved therapies for DMD, there is no cure, and there continues to be significant unmet medical need. In most countries, corticosteroids are the standard drug therapy, which slows the progression of muscle weakness and delays loss of ambulation by two to three years. In February 2017, the FDA approved Emflaza (deflazacort), the first corticosteroid approved as a treatment in the United States for DMD patients older than five years of age.

In 2016, Sarepta Therapeutics’ Exondys 51™ (eteplirsen) received accelerated approval in the United States. The FDA concluded that the data submitted demonstrated an increase in dystrophin production that is reasonably likely to confer clinical benefit in some patients with DMD, who have a confirmed mutation of the DMD gene amenable to exon 51 skipping. According to U.S. accelerated approval guidelines, no clinical benefit needs to be established at the time of FDA approval, and no clinical benefit of eteplirsen has yet been established. Thus, consistent with the FDA’s accelerated approval regulations, eteplirsen is being evaluated in a post-marketing approval clinical trial to verify and describe the drug’s clinical benefit. The required clinical trial is designed to assess whether eteplirsen improves motor function of DMD patients, who have a confirmed mutation of the DMD gene amenable to exon 51 skipping. Another exon-skipping nucleic acid therapeutic candidate for DMD, BioMarin Pharmaceutical’s drisapersen, received a complete response letter (“CRL”) from the FDA in January 2016, indicating that the review cycle was complete and that the application was not ready for approval in its present form.

In 2014, PTC Therapeutics’ Translarna™ (ataluren) was the first disease-modifying treatment to receive conditional approval by the EMA for the treatment of ambulatory DMD patients over 5 years of age who have a nonsense mutation (12% of DMD cases) in the DMD gene. In 2016, the EMA did not allow ataluren to convert to full marketing authorization, rather it granted a renewal of the conditional approval. In 2018, EMA expanded the conditional approval for Translarna to include treatment of ambulatory DMD patients ≤2 years of age who have a nonsense mutation in the DMD gene.

Our Programs

In DMD, we are advancing suvodirsen (WVE-210201), which targets exon 51, a region within the precursor messenger RNA (“pre-mRNA”) that is transcribed from the dystrophin gene (also referred to as the “DMD” gene). In November 2017, we initiated a global, multicenter, double-blind, randomized, placebo-controlled, single-ascending dose Phase 1 clinical trial of suvodirsen administered intravenously. The primary endpoint of the trial was safety and tolerability. The Phase 1 inclusion criteria allowed for participation by patients who are amenable to exon 51 skipping, ages 5-18, ambulatory and non-ambulatory, as well as those previously treated with eteplirsen or ataluren following an appropriate washout period. On December 6, 2018, we announced that the safety and tolerability data from the Phase 1 trial support initiation of a Phase 2/3 clinical trial of suvodirsen and that we selected a dose for the Phase 2/3 trial. We plan to present the results from the Phase 1 trial, as well as details of the Phase 2/3 trial design, at upcoming scientific meetings. As patients complete the Phase 1 trial, they have the option to enroll in an ongoing open label extension study (“OLE”) in which they continue to receive suvodirsen. The OLE is expected to enroll up to 40 patients who previously participated in the Phase 1 trial. Patients in the OLE are undergoing quarterly clinical assessments using validated clinical outcome measures and are having muscle biopsies taken so that an interim analysis may be conducted by measuring dystrophin expression using a standardized Western blot. Data from this interim analysis are intended to be an important component of a submission to the FDA for accelerated approval of suvodirsen in the United States, and we remain on track to deliver these data in the second half of 2019. Suvodirsen has been granted orphan drug designation for the treatment of DMD by the FDA and the European Commission, as well as rare pediatric disease designation by the FDA. We anticipate initiating the global, placebo-controlled Phase 2/3 efficacy and safety clinical trial of suvodirsen in 2019. The Phase 2/3 trial is designed to measure clinical efficacy and dystrophin expression, and we intend to use the results of this trial to seek regulatory approvals globally. On January 3, 2019, we announced that the Phase 2/3 trial of suvodirsen had been selected for the FDA pilot program for complex innovative trial designs (“CID pilot program”). In evaluating submissions for the CID pilot program, the FDA considered two key criteria: the innovative features of the Phase 2/3 trial design and the therapeutic need (i.e., therapeutics being developed for use in disease areas where there are limited or no treatment options). Through the CID pilot program, we intend to reduce the number of patients required to deliver conclusive clinical efficacy results, thereby minimizing the number of patients required in the placebo treatment arm and potentially accelerating completion of the trial. This marks the first time that the FDA has selected clinical protocols for its CID pilot program that was announced in August 2018.

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Our second development program in DMD, WVE-N531, targets exon 53. Subject to our submission of clinical trial applications and approval to proceed, we would expect to deliver topline clinical data for WVE-N531 in the second half of 2020.

Also in DMD, we are exploring programs targeting DMD exons 44, 45, 52, 54 and 55 and investigating alternative forms of delivery, including subcutaneous administration, for our existing and future DMD programs.

Exon 51

Suvodirsen was selected for clinical development, in part, based on its ability to demonstrate high exon 51 skipping efficiency and dystrophin protein restoration in patient-derived muscle cells. Efficiency at skipping exon 51 was determined by quantitative RT-PCR following exposure to equal concentrations of oligonucleotides. As shown below, suvodirsen demonstrated dose-dependent and more potent increases in exon skipping efficiency compared with analogs of eteplirsen and drisapersen.

Using patient-derived muscle cells, we analyzed suvodirsen’s impact on protein expression by Western blot after gymnotic uptake, meaning delivery of drug candidate to the cell in the absence of any carriers or conjugation. Results show that suvodirsen induced a clear dose-dependent restoration of dystrophin protein expression (Western blot shown below).

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At a 10 µM concentration of each compound (suvodirsen, other Wave isomers and analogs of drisapersen and eteplirsen), we quantified the extent of dystrophin protein restoration in vitro, and found that suvodirsen and other Wave isomers (WV-isomer 2 and WV-isomer 3) restored dystrophin protein expression to between 50% and 100% of that in normal skeletal lysates (Western blot shown below). Specifically, suvodirsen restored dystrophin protein expression to 52% of the levels found in normal skeletal muscle tissue lysates versus the approximate 1% restoration observed with other exon-skipping compounds.

We have confirmed target engagement of suvodirsen in an NHP study. We dosed animals with five 30 mg/kg weekly subcutaneous injections of suvodirsen over four weeks. Tissue samples were collected two days after the final dose, and nested PCR was performed to assess the presence of skipped RNA transcripts. As shown below, we detected skipped transcripts in all treated muscles that we assessed (right panel), indicating that suvodirsen successfully engaged with DMD pre-mRNA in vivo.

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As conventional oligonucleotides tend to accumulate in the liver and kidney, we also assessed the accumulation of WVE-210201 in the liver and kidney of a dystrophin-deficient mouse model (mdx-23 mice) after a single intravenous 30 mg/kg dose. As shown below, there was significantly less accumulation of suvodirsen in these tissues up to eight days after dosing compared with an analog of drisapersen.

Exon 53

Our second development program in DMD, WVE-N531, targets exon 53. Subject to our submission of clinical trial applications and approval to proceed, we would expect to deliver topline clinical data for WVE-N531 in the second half of 2020.

In vitro, WVE-N531 induced dose-dependent exon 53 skipping up to 49% and dystrophin protein restoration up to 71% in DMD patient-derived myoblasts carrying a deletion of exons 45-52. In these experiments, cells were exposed to WVE-N531 at 0.1 µM-10 µM under gymnotic conditions. After four days of oligonucleotide treatment, efficiency at skipping exon 53 was determined by quantitative RT-PCR. After six days of oligonucleotide treatment, protein lysate was analyzed by western blot for dystrophin protein expression.

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To further study the effects of stereopure oligonucleotides for DMD in vivo and determine the relationship between in vitro and in vivo effects, we conducted studies in mdx23 mice, a longstanding animal model of DMD. We developed surrogate oligonucleotides that have similar chemistry to suvodirsen and WVE-N531 but target exon 23 for study in mdx23 mice. The mdx23 mice have a defect in exon 23 of the DMD gene and lack functional dystrophin.

In this study, stereopure oligonucleotides with similar chemistry to WVE-N531 reached the myonuclei in gastrocnemius tissue of mdx23 mice within 24 hours following a single IV dose.

Four weekly IV doses of surrogate exon-53 targeting oligonucleotides induced efficient, dose-dependent exon skipping up to 20% in target muscle tissues of mdx23 mice, including gastronumus, diaphragm, and quadriceps, and restored dystrophin protein by up to 70-90% of that in healthy mice. In mdx23 mice, surrogate exon 53–targeting ASOs reduced serum enzymes elevated in DMD; serum creatine kinase levels were reduced by 87% compared with untreated mice, after 4 weekly doses.

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Dose relationships of exon skipping induced by stereopure oligonucleotides were similar in vivo and in vitro. Transcript levels observed with free uptake of oligonucleotides in cultured myoblasts were predictive of transcript and dystrophin protein levels in the mdx23 mouse model. These consistent data from mdx23 mice support Wave’s approach of selecting clinical candidates targeting exon 51 and exon 53 using a cellular free-uptake model.

Huntington’s Disease

Background and Market Opportunity

HD is a rare hereditary neurodegenerative disease that results in early death and for which there is no cure. HD is caused by a mutation (i.e., an expanded CAG triplet repeat) in the HTT gene, which results in production of mutant HTT (“mHTT”) protein. Accumulation of mHTT protein causes progressive loss of neurons in the brain, and can lead to neuronal cell death, causing cognitive, psychiatric and motor disability. HD patients still possess wild-type (healthy) HTT (“wtHTT”) protein, which is believed to be critical for neuronal function. Accordingly, suppression of wtHTT may have detrimental long-term consequences. Absence of wtHTT protein has been shown to be embryonically lethal in mice.

Symptoms of HD typically appear between the ages of 30 and 50 and worsen over the next 10 to 20 years. Many describe the symptoms of HD as similar to having amyotrophic lateral sclerosis (ALS), Parkinson’s Disease (PD) and Alzheimer’s Disease (AD) simultaneously. Patients experience a reduction in motor function and psychological disturbances. Life expectancy after symptom onset is approximately 20 years. In the most symptomatic stages, often lasting over 10 years, affected persons become fully dependent upon others to manage all activities of daily living; they lose the ability to make decisions, feed themselves and walk, often requiring premature placement in a long-term care facility. It is estimated that approximately 30,000 people in the United States have symptomatic HD and more than 200,000 others have a 50% risk for inheriting the disorder from their affected parent.

Current Treatments

There are no approved treatments that can reverse or slow HD progression. Current pharmacological therapies only address HD symptoms. Antipsychotics are used to manage depression, irritability and chorea (involuntary movements). Xenazine (tetrabenazine) and Austedo (deutetrabenazine) are the only two therapies approved for the treatment of chorea associated with HD in the United States.

Our Programs

In HD, we are advancing two programs, WVE-120101 and WVE-120102, each targeting a disease-associated single nucleotide polymorphism (“SNP”) within the huntingtin gene (“HTT”): rs362307 (“HTT SNP1”) and rs362331 (“HTT SNP2”), respectively. Targeting mRNA transcript with these SNPs allows us to lower the mutant allele transcript, while leaving the healthy transcript relatively intact (see figure below). We commonly refer to this method (or approach) as “allele specific targeting.” SNPs are naturally occurring variations within a given genetic sequence and in certain instances can be used to distinguish between two related copies of a gene where only one is associated with the expression of a disease-causing protein. HTT SNP1 and HTT SNP2 are two of the most common SNPs associated with the mHTT allele, which are believed to encompass up to 70% of the HD patient population. We have shown that by targeting HTT SNP1 and HTT SNP2 in preclinical in vitro studies, the production of disease-causing proteins associated with HD can be reduced. As part of ongoing, required and routine toxicology support of our clinical programs, we continue to conduct in vivo nonclinical toxicology studies for WVE-120101 and WVE-120102. A recent in vivo micronucleus assay yielded results that require additional nonclinical studies that we are planning to conduct. WVE-120101 and WVE-120102 have been granted orphan drug designation for the treatment of HD by the FDA.

In July 2017, we initiated PRECISION-HD, a global clinical program consisting of the PRECISION-HD1 and PRECISION-HD2 clinical trials. PRECISION-HD1and PRECISION-HD2 are two parallel, multicenter, double-blind, randomized, placebo-controlled Phase 1b/2a clinical trials evaluating WVE-120101 and WVE-120102, respectively, administered intrathecally, consisting of single-ascending dose and multiple-ascending dose portions. The primary objective of these two trials is to assess the safety and tolerability of intrathecal doses of WVE-120101 and WVE-120102, respectively, in early manifest HD patients. Additional objectives include measurement of total HTT protein and mutant HTT protein, and exploratory pharmacokinetic, pharmacodynamic, clinical and MRI endpoints. Each trial is expected to enroll approximately 50 Stage I or Stage II HD patients, ages 25-65, who have screened positively for the presence of SNP1 or SNP2. Outside of the United States, we are enrolling patients in both the single-ascending dose and multiple-ascending dose portions of the PRECISION-HD1 and PRECISION-HD2 trials. In the United States, we received approvals to proceed with the single-dose portions of both trials. However, the FDA indicated to us that we cannot progress to the multiple-ascending dose portions of these trials in the United States unless we conduct an additional preclinical study and present the resulting data to the FDA for its review. For the single-dose portion of the PRECISION-HD1 trial in the United States, escalation to our highest proposed doses is subject to the FDA’s review and approval of additional monitoring plans. We expect to deliver topline clinical data from the PRECISION-HD trials in the first half of 2019.

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Using PRISM, we are also designing investigational oligonucleotides to target a third SNP (SNP3) associated with the expanded CAG repeat on the mHTT allele. Preliminary in vitro studies show that these oligonucleotides preferentially target the mHTT transcript, while leaving the wtHTT mRNA largely intact in human neuronal systems. The ability of these oligonucleotides to reduce mHTT mRNA is dependent on the specific positioning of the Rp stereochemistry.

In our preclinical studies, as shown below, the stereopure oligonucleotide WVE-120101 (circles) or a stereorandom oligonucleotide (triangles) were bound to wtHTT or mHTT mRNA and incubated with human RNase H (left panel). WVE-120101 produced greater knockdown of mHTT compared with the stereorandom oligonucleotide. In addition, WVE-120101 was selective for mHTT over wtHTT, producing relatively little knockdown of wtHTT. The stereorandom oligonucleotide was not selective and knocked down both wtHTT and mHTT.

Using NHP serum, we analyzed the activation of the complement system following exposure to a panel of stereopure oligonucleotides and the parent stereorandom oligonucleotide, which were designed to target HTT. Each oligonucleotide was incubated at physiological temperature in NHP serum from three individual animals. Samples were removed at the indicated times, and complement activation was measured by the increase in C3a levels using the ELISA analytical method. As shown above (right panel), certain stereopure oligonucleotides and the stereorandom oligonucleotide demonstrated increased production of C3a; however, there was no production of C3a following exposure to WVE-120101, which also discriminated between wild-type and mutant HTT.

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WVE-120101 was tested for potency and selectivity of knocking down mHTT mRNA in a cellular reporter assay. WVE-120101 targeting the mHTT mRNA was co-transfected into HEK293 cells with two reporter plasmids: a plasmid with V5-tagged full-length HTT containing the U-variant SNP1 (mutant) and a plasmid with FLAG-tagged full-length HTT containing the C-variant SNP1 (wild-type). Knockdown of mHTT mRNA and mHTT protein was determined by quantitative reverse transcription PCR (RT-qPCR) and Western blot analysis, respectively. All results were normalized to a non-specific stereorandom oligonucleotide as a control. As shown below, WVE-120101 potently reduced mHTT mRNA (left panel) and mHTT protein (right panel) and exhibited significant selectivity for mHTT at all doses tested. This study demonstrates the ability to knock down the mHTT allele while leaving the wtHTT (healthy) allele relatively unaffected.

Following these promising preclinical experiments, we investigated distribution characteristics of WVE-120101 in NHPs. Based on our preclinical studies, we believe stereochemistry enables improved protein binding and distribution. The figure below demonstrates meaningful distribution of WVE-120101 in an NHP study. In this preclinical study, we employed an in situ hybridization (“ISH”) ViewRNA assay. The ViewRNA assay provides us with the ability to stain oligonucleotides, allowing increased visibility and understanding of the distribution of WVE-120101 in the brain. As shown below, we found perinuclear and nuclear distribution of WVE-120101 (red) in NHP gray matter structures following intrathecal administration. The NHP ViewRNA assay demonstrated broad tissue distribution, including in the cortex and striatum. These findings are encouraging as we believe that distribution and penetration into several areas of the brain will be critical for the successful treatment of HD.

Preclinical studies on WVE-120102 showed similar results with regard to RNase H-mediated activity, mHTT allele specificity, and distribution in NHP brain.

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Amyotrophic Lateral Sclerosis and Frontotemporal Dementia

A hexanucleotide G₄C₂ expansion found in the C9ORF72 gene is the most common cause of familial ALS and FTD and is a strong genetic risk factor for non-inherited (sporadic) forms of ALS and FTD. Some patients exhibit characteristics of both ALS and FTD, indicating that these diseases form part of a continuum of neurological disease with some overlap in symptoms between them.

ALS Background and Market Opportunity

ALS is a neurodegenerative disease characterized by the progression and degeneration of motor neurons in the brain and spinal cord. Diagnosis may take up to 12 months and is made clinically by assessing the signs of upper and lower motor neuron degeneration in the same region of the body. Patients initially present with limb-onset disease (approximately 70% of patients), bulbar-onset disease (approximately 25% of patients) or with initial trunk or respiratory involvement (approximately 5% of patients). Age of onset is generally in the mid-to-late 50’s, and median survival is three years; however, up to 24% of patients survive for five to ten years. Survival in patients with C9ORF72 ALS may be shorter than in patients with sporadic ALS.

In the United States and Europe combined, there are approximately three to five ALS patients per 100,000 people. This translates to approximately 13,000 diagnosed patients in the United States, although the total prevalence may be around 20,000. There are one or two newly diagnosed cases of ALS per year, per 100,000 people in the United States and Europe combined, resulting in approximately 5,000 newly diagnosed patients in the United States each year. While the majority of ALS cases are sporadic, approximately 10% of cases are found to be familial in nature. The C9orf72 gene mutation is currently the most common demonstrated mutation related to ALS and is present in approximately 40% of familial ALS and 8-10% of sporadic ALS patients.

ALS Current Treatments

There is significant unmet need for the treatment of ALS. Two medicines are currently approved in the United States for the treatment of ALS. Rilutek (riluzole), an inhibitor of glutamate release, was approved in 1995 for the treatment of patients with ALS. It was demonstrated to extend survival by three to six months. Radicava (edaravone) was approved in 2017 for the treatment of ALS. Administration of edaravone resulted in a significantly smaller decline in the ALS Functional Ration Scale-Revised (ALSFRS-R) through six months of treatment.

FTD Background and Market Opportunity

FTD is a neurodegenerative disorder of the frontal and anterior temporal lobes of the brain. It is characterized by changes in personality, cognition (e.g., language impairment and executive dysfunction), and behavior (e.g., disinhibition, apathy and compulsivity). Diagnostic criteria categorize FTD into either the behavioral variant (approximately 60% of patients) or speech/language variant (approximately 40% of patients) based on the primary symptom observed at presentation; however, FTD results in dementia in all patients. The majority of FTD associated with the G₄C₂ expansion in the C9ORF72 gene is categorized as the behavioral variant. FTD frequently has an onset in mid-life, and death typically occurs within three to 14 years of onset. FTD is the second most common form of early-onset dementia in people under the age of 65, after AD.

In FTD, the C9ORF72 gene mutations appear in approximately 38% of familial cases and approximately 6% of sporadic cases. FTD affects approximately 55,000 people in the United States.

FTD Current Treatments

There are currently no disease-modifying therapies approved for the treatment of FTD. Treatment to date has involved use of medications for symptomatic management.

Our Program

In amyotrophic lateral sclerosis (“ALS”) and frontotemporal dementia (“FTD”), we are advancing WVE-3972-01, which preferentially targets the transcript containing the GGGGCC (“G4C2”) expansion in the C9ORF72 gene. WVE-3972-01 is designed to minimize the impact on normal C9ORF72 protein in patients, thereby reducing potential on-target risk. The G4C2 expansion in the C9ORF72 gene is the most common cause of familial ALS and FTD and is a strong genetic risk factor for non-inherited (sporadic) forms of ALS and FTD. Subject to our submission of clinical trial applications and approval to proceed, we would expect to deliver topline clinical data for WVE-3972-01 in the second half of 2020.

Expansion of the G₄C₂ repeat alters the normal expression of the C9ORF72 gene and causes the production of repeat-containing RNAs. These RNAs accumulate in cellular nuclei in the form of RNA foci and can be translated into dipeptide repeat (“DPR”) proteins. Neuronal degeneration associated with the expression of the repeat expansion is hypothesized to arise either from a toxic

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loss-of-function mechanism due to a reduction in C9orf72 protein or a toxic RNA gain-of-function mechanism through the accumulation of RNA foci and/or DPRs in the brain and spinal cord.

By targeting the mRNA transcripts that contain the G₄C₂ expansion found in the C9orf72 gene, WVE‑3972‑01 has the potential to reduce both RNA-based and protein-based toxicity, thereby impacting the disease course and slowing the progression of ALS or FTD.

WVE-3972-01 preferentially reduces G₄C₂-repeat containing transcript levels in several in vitro models. For example, as shown below, administration of WVE-3972-01 to C9ORF72-ALS patient-derived induced pluripotent stem cell (iPSC) neurons under gymnotic conditions showed preferential knock down of C9orf72 repeat-containing transcripts relative to total transcripts. A clear dose-dependent decrease in repeat-containing transcripts was observed, with a calculated IC₅₀ of 0.4 μM. In contrast, total transcripts were only slightly reduced and only at the highest doses tested, with a maximal reduction of 42% at 10 μM. Notably, approximately 20% of the reduction in C9ORF72 total transcripts can be attributed to the reduction in the repeat-containing transcripts.

Importantly, WVE-3972-01 led to preferential knockdown of repeat-containing C9ORF72 transcripts in a mouse model. In the transgenic model, mice express the human C9ORF72 gene from a bacterial artificial chromosome (“BAC”). In these mice, WVE-3972-01 engaged C9ORF72 across cell types in regions of the CNS critically implicated in ALS. The figure below shows that our stereopure oligonucleotides (stereopure) led to preferential reduction of repeat-containing C9ORF72 transcripts (right panel) in the spinal cord compared with all transcripts (left panel) in C9ORF72 transgenic mice. The stereorandom oligonucleotide (random) was neither selective for the repeat-containing transcripts nor as potent as the stereopure oligonucleotides against repeat-containing transcripts.

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In addition, in animal models, WVE-3972-01 produced substantial reductions in DPR proteins and RNA foci, which remained low through eight weeks, the last observed time point (shown in the figures below). DPR proteins were reduced 76% and 87% in the spinal cord and the cortex, respectively. RNA foci were reduced by 70% in the spinal cord. These data have been replicated in blinded preclinical studies in an independent laboratory through our collaboration with Dr. Robert H. Brown, Jr., the Leo P. and Theresa M. LaChance Chair in Medical Research and Chair of the Department of Neurology at the University of Massachusetts Medical School (“UMMS”), Worcester, MA.

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Spinocerebellar ataxia 3

Background and Market Opportunity

SCA3 is a rare, hereditary (autosomal dominant) progressive neurodegenerative disorder that results in a lack of muscle control and coordination of the upper and lower extremities. Signs and symptoms of SCA3 may begin between childhood and late adulthood, and they vary greatly. Symptoms may include progressive clumsiness in the arms and legs, spasticity, difficulty with gait, and impaired speaking, swallowing and eye movements. Symptoms of the disease worsen over time, eventually leading to paralysis. Some patients with SCA3 develop dystonia or symptoms similar to those of PD, including twitching of the face or tongue, and nerve damage (neuropathy). Life expectancy ranges from the mid-30s in the more severe forms, to a nearly normal life expectancy for those with milder forms of the disease.

SCA3 is caused by a CAG-repeat expansion in the ATXN3 gene, resulting in an abnormally long polyglutamine stretch in the encoded ataxin-3 protein. Mutant ataxin-3 protein is thought to cause widespread neuronal loss in the brain and spinal cord, likely through a toxic gain-of-function mechanism. SCA3 is the most common dominantly inherited form of ataxia. The prevalence of SCA3 is believed to be one to two cases in 100,000 people with significant geographic and ethnic variations.

Current Treatments

There are currently no disease-modifying therapies approved for treatment of SCA3. Treatment to date has involved the use of medications for symptomatic management.

Our Program

In SCA3, we are advancing a lead candidate targeting ATXN3.

Ophthalmology

We are designing and advancing stereopure oligonucleotides for the potential treatment of rare, inherited eye diseases. Our research is assessing four inherited retinal diseases, which typically begin in childhood or adolescence and commonly lead to progressive vision loss: retinitis pigmentosa due to a P23H mutation in the RHO gene, Stargardt disease, Usher syndrome type 2A and Leber congenital amaurosis 10. Our preclinical data demonstrate that a single intravitreal injection of stereopure oligonucleotide in the eye of non-human primates resulted in greater than 95% knockdown of a target RNA in the retina for at least four months. Based on these data, we are working to design candidates that could achieve a therapeutic effect with only two doses per year. We expect to announce our first ophthalmology candidate in the second half of 2019.

We believe PRISM affords us a unique opportunity to address these challenging inherited retinal diseases. Oligonucleotides developed based on PRISM demonstrate superior potency and durability as compared to stereorandom oligonucleotides and are optimized to minimize immune activity and can yield selective activity against closely related sequences.

We have demonstrated with preclinical, proof of concept studies with oligonucleotides targeting MALAT1 that our stereopure compounds exhibit these desirable properties specifically in the eye. These studies (see below) give us confidence that we can develop therapeutic candidates with the potential to be potently and durably active, which would allow for less frequent administration via intravitreal (“IVT”) injection and would give us an advantage over molecules delivered via subretinal injection or that are less potent and require frequent IVT injection.

Our research is initially assessing four inherited retinal diseases:

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Our discovery research has tested the hypothesis that controlling the chirality of PS linkages in the backbones of oligonucleotides will provide a benefit in potency, distribution and duration of effect in the eye. In these studies, we have employed MALAT1 as a surrogate target. We generated stereopure compounds targeting MALAT1, a nuclear-enriched, long non-coding RNA and evaluated them in vitro in iCell neurons under gymnotic conditions. We successfully delivered stereopure MALAT1 oligonucleotides under gymnotic conditions to iCell neurons, with our best-performing compounds exhibiting IC₅₀ values approximately 24-fold lower than those of stereorandom oligonucleotides of comparable sequence and chemistry. We then evaluated lead stereopure oligonucleotides in vivo following a single IVT injection (5 µg or 50 µg) in the mouse eye. We assessed expression of MALAT1 RNA by qPCR, levels and distribution of oligonucleotides by hybridization ELISA and IHC, and duration of effect over a six-month period.

In the back of the eye (shown in the figure above), the stereorandom oligonucleotide (SR+, 50 µg) produced a 75% knockdown of MALAT1 mRNA, which was maintained for two weeks. By one month, MALAT1 expression recovered to 50% of normal, and this level of expression was maintained for at least three months. At the same dose (50 µg), the stereopure oligonucleotide achieved an 85% reduction in MALAT1 by seven days post-single IVT injection, which was maintained at one month. At three months post-dose, a 62% reduction persisted. At a 10-fold lower dose (5 µg), the stereopure oligonucleotide still exhibited greater knockdown of MALAT1 RNA through one month (70% vs. 50% knockdown) and three months (62% vs. 53%) than the stereorandom oligonucleotide. By six months, MALAT1 expression levels returned to normal at all doses for both stereorandom and stereopure oligonucleotides. In summary, the stereopure oligonucleotide achieved at least a 10-fold enhancement in potency in vivo compared with a stereorandom oligonucleotide, and this effect was sustained through three months.

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We assessed the pharmacokinetic (PK)-pharmacodynamic (PD) relationship for the stereorandom and stereopure MALAT1 oligonucleotides (shown in the figure above). This comparison revealed that the stereopure oligonucleotide yields both higher tissue exposure and greater MALAT1 knockdown than the stereorandom oligonucleotide in the posterior mouse eye.

In the front of the eye (shown in the figure above), the stereorandom oligonucleotide (SR, 50 μg) yielded a 65% knockdown of MALAT1. By two weeks, MALAT1 levels recovered to 50% of normal, which persisted through one month. By two months, MALAT1 levels rose to within 25% of normal, and persisted at this level through at least three months. By six months, MALAT1 RNA expression was normal. At the same dose (50 μg), the stereopure oligonucleotide achieved approximately 80% knockdown, which persisted for at least one month. By three months, MALAT1 levels recovered to more than 50% of normal, and this level of expression persisted for at least six months. At a 10-fold lower dose (5 μg), the stereopure oligonucleotide yielded results comparable to the 50 μg dose of stereorandom oligonucleotide at all time points. In summary, the stereopure oligonucleotide was 10-fold more potent than the stereorandom oligonucleotide in the front of the eye, and the duration of MALAT1 knockdown was shorter in the front of the eye than in the back of the eye with all oligonucleotides at all doses.

We have also evaluated lead stereopure oligonucleotides in vivo in non-human primates (“NHP”) following a single intravitreal injection (45 μg, 150 μg, or 450 µg) in the eye. This dose was determined by volume adjustment to correct for the approximately nine-fold larger NHP eye as compared to the mouse (i.e., 50 μg in the mouse is comparable to 450 μg in NHP). We assessed expression of MALAT1 RNA by qPCR, levels and distribution of oligonucleotides by hybridization ELISA and IHC, and duration of effect over a four-month period.

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In an in vivo experiment in NHPs (shown above), the stereopure oligonucleotide achieved a clear dose-dependent knockdown of MALAT1 RNA in multiple tissues of the eye (retina/choroid/sclera, iris and cornea) one week following a single IVT injection.

In a longer duration experiment in NHPs (shown above), a single IVT injection of 450 μg stereopure oligonucleotide resulted in a better than 95% knockdown of MALAT1 RNA expression by one week, and this effect persisted for at least four months.

These preclinical studies support the hypothesis that stereopure compounds can be designed to increase the potency, distribution and duration of effect in the eye compared with stereorandom oligonucleotides. Additional research is now being conducted to further characterize stereopure oligonucleotides against the genetic targets listed above to treat inherited retinal dystrophies.

Hepatic

We are collaborating with Pfizer to advance genetically defined targets for the treatment of metabolic diseases, bringing together PRISM across antisense and single-stranded RNAi modalities, along with GalNAc and Pfizer’s hepatic targeting technology for delivery to the liver. Pfizer has selected five targets, including Apolipoprotein C-III (APOC3), which is the maximum number of targets that Pfizer may select under the terms of the agreement. We will advance five targets from discovery through the selection of clinical candidates, at which point Pfizer may elect to exclusively license the programs and undertake further development and potential commercialization.

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Our stereopure GalNAc-conjugated APOC3 antisense oligonucleotide demonstrated an approximate 7-fold improvement in potency and an increase in durability in vivo in a human APOC3 transgenic mouse model compared with stereorandom GalNAc-conjugated APOC3 antisense oligonucleotides. In this experiment, we generated a single stereopure stereoisomer, containing the SSR motif, and compared it with a stereorandom isomer of the same sequence. Both were designed to target APOC3 mRNA, which is predominately expressed in the liver. These isomers were also chemically modified with a GalNAc moiety, which improves their access to the liver. To demonstrate in vivo efficacy and durability of response, we administered the isomers to mice harboring a human APOC3 transgene (B6.Cg-Tg(APOC3)2Bres/J), and we assessed knockdown activity by measuring serum APOC3 protein. Similar to the results shown above, the stereopure isomer led to more efficient knockdown of APOC3 (ED₅₀=0.3 mg/kg for stereopure vs. ED₅₀=~2.0 mg/kg for the stereorandom isomer) (left panel in figure below) that persisted much longer than that for the stereorandom isomer (right panel in figure below).

These data demonstrate that two pharmacological properties that we can control through stereochemistry, increasing in vitro stability with Sp isomers and increasing in vitro catalytic activity with the SSR motif, translate to improvements in important in vivo pharmacological properties, including target engagement and durability of response.

Emerging Areas

We believe that PRISM will unlock additional opportunities to drive the discovery and advancement of stereopure therapeutic candidates in our initial focus area of neurology, other therapeutic areas in which we are currently advancing discovery programs, as well as additional therapeutic areas. We continue to explore ways that our multi-modality chemistry may be optimized to address a multitude of rare genetic diseases. Based on our design principles, we have demonstrated our ability to rapidly design and select lead therapeutic candidates with optimized pharmacological properties in preclinical studies. We intend to continue to advance these discovery programs and explore opportunities to expand to other areas independently and through collaborations and partnerships.

Licensing Arrangements and Research Collaborations

Our business strategy is to develop and commercialize a broad pipeline of novel nucleic acid therapies. As part of this strategy, we have entered into, and may enter into new partnership and collaboration agreements as a means of advancing our own nucleic acid therapeutic programs, investing in third-party technologies to further strengthen PRISM and leveraging external partnerships to extend the reach of PRISM into therapeutic areas where our platform demonstrates a competitive advantage.

Our Partnerships

Takeda

In February 2018, Wave Life Sciences USA, Inc. (“Wave USA”) and Wave Life Sciences UK Limted (“Wave UK”) entered into a global strategic collaboration (the “Takeda Collaboration”) with Takeda Pharmaceutical Company Limited (“Takeda”), pursuant to which Wave USA, Wave UK and Takeda agreed to collaborate on the research, development and commercialization of oligonucleotide therapeutics for disorders of the Central Nervous System (“CNS”). The Takeda Collaboration provides Wave with at least $230.0 million in committed cash and Takeda with the option to co-develop and co-commercialize Wave’s CNS development programs in (1) Huntington’s disease (“HD”); (2) amyotrophic lateral sclerosis (“ALS”) and frontotemporal dementia (“FTD”); and (3) Wave’s discovery-stage program targeting ATXN3 for the treatment of spinocerebellar ataxia 3 (“SCA3”) (collectively, “Category 1 Programs”), which we will have the right to co-commercialize in the United States. In addition, Takeda will have the right to exclusively license multiple preclinical programs for CNS disorders, including Alzheimer’s disease and Parkinson’s disease

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(collectively, “Category 2 Programs”). In April 2018, the Takeda Collaboration became effective and Takeda paid Wave $110.0 million as an upfront payment. Takeda also agreed to fund Wave’s research and preclinical activities in the amount of $60.0 million during the four-year research term and to reimburse Wave for any collaboration-budgeted research and preclinical expenses incurred by Wave that exceed that amount.

Simultaneously with Wave USA and Wave UK’s entry into the collaboration and license agreement with Takeda (the “Takeda Collaboration Agreement”), the Company entered into a share purchase agreement with Takeda (the “Takeda Equity Agreement,” and together with the Takeda Collaboration Agreement, the “Takeda Agreements”) pursuant to which it agreed to sell to Takeda 1,096,892 of its ordinary shares at a purchase price of $54.70 per share. In April 2018, the Company closed the Takeda Equity Agreement and received aggregate cash proceeds of $60.0 million. The shares purchased by Takeda are subject to lock-up and standstill restrictions and carry certain registration rights, customary for transactions of this kind.

With respect to Category 1 Programs, Wave will be responsible for researching and developing products and companion diagnostics for Category 1 Programs through completion of the first proof of mechanism study for such products. Takeda will have an exclusive option for each target and all associated products and companion diagnostics for such target, which it may exercise at any time through completion of the proof of mechanism study. If Takeda exercises this option, Wave will receive an opt-in payment and will lead manufacturing and joint clinical co-development activities and Takeda will lead joint co-commercial activities in the United States and all commercial activities outside of the United States. Global costs and potential profits will be shared 50:50 and Wave will be eligible to receive development and commercial milestone payments. In addition to its 50% profit share, Wave is eligible to receive option exercise fees and development and commercial milestone payments for each of the Category 1 Programs.

With respect to Category 2 Programs, Wave has granted Takeda the right to exclusively license multiple preclinical programs during a four-year research term (subject to limited extension for programs that were initiated prior to the expiration of the research term, in accordance with the Takeda Collaboration Agreement). During that term, the parties may collaborate on preclinical programs for up to six targets at any one time. Wave will be responsible for researching and preclinically developing products and companion diagnostics directed to the agreed upon targets through completion of IND-enabling studies in the first major market country. Thereafter, Takeda will have an exclusive worldwide license to develop and commercialize products and companion diagnostics directed to such targets, subject to Wave’s retained rights to lead manufacturing activities for products directed to such targets. Takeda will fund Wave’s research and preclinical activities in the amount of $60.0 million during the research term and will reimburse Wave for any collaboration-budgeted research and preclinical expenses incurred by Wave that exceed that amount. Wave is also eligible to receive tiered high single-digit to mid-teen royalties on Takeda’s global commercial sales of products from each Category 2 Program.

Under the Takeda Collaboration Agreement, each party grants to the other party specific intellectual property licenses to enable the other party to perform its obligations and exercise its rights under the Takeda Collaboration Agreement, including license grants to enable each party to conduct research, development and commercialization activities pursuant to the terms of the Takeda Collaboration Agreement.

The term of the Takeda Collaboration Agreement commenced on April 2, 2018 and, unless terminated earlier, will continue until the date on which: (i) with respect to each Category 1 Program target for which Takeda does not exercise its option, the expiration or termination of the development program with respect to such target; (ii) with respect to each Category 1 Program target for which Takeda exercises its option, the date on which neither party is researching, developing or manufacturing any products or companion diagnostics directed to such target; or (iii) with respect to each Category 2 Program target, the date on which royalties are no longer payable with respect to products directed to such target.

Takeda may terminate the Takeda Collaboration Agreement for convenience on 180 days’ notice, in its entirety or on a target-by-target basis. Subject to certain exceptions, each party has the right to terminate the Takeda Collaboration Agreement on a target-by-target basis if the other party, or a third party related to such party, challenges the patentability, enforceability or validity of any patents within the licensed technology that cover any product or companion diagnostic that is subject to the Takeda Collaboration Agreement. In the event of any material breach of the Takeda Collaboration Agreement by a party, subject to cure rights, the other party may terminate the Takeda Collaboration Agreement in its entirety if the breach relates to all targets or on a target-by-target basis if the breach relates to a specific target. In the event that Takeda and its affiliates cease development, manufacturing and commercialization activities with respect to compounds or products subject to the Takeda Collaboration Agreement and directed to a particular target, Wave may terminate the Takeda Collaboration Agreement with respect to such target. Either party may terminate the Takeda Collaboration Agreement for the other party’s insolvency. In certain termination circumstances, Wave would receive a license from Takeda to continue researching, developing and manufacturing certain products, and companion diagnostics.

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Pfizer

In May 2016, we entered into a research, license and option agreement with Pfizer Inc. (the “Pfizer Collaboration Agreement”). Pursuant to the terms of the Pfizer Collaboration Agreement, we and Pfizer agreed to collaborate on the discovery, development and commercialization of stereopure oligonucleotide therapeutics for up to five programs (the “Pfizer Programs”), each directed at a genetically-defined hepatic target selected by Pfizer (the “Pfizer Collaboration”). Under the terms of the agreements we entered into with Pfizer and its affiliate, Pfizer paid us $40.0 million upfront, $30.0 million of which took the form of an equity investment in our ordinary shares, as described below. Subject to option exercises by Pfizer, we may earn potential research, development and commercial milestone payments, plus royalties, tiered up to low double-digits, on sales of any products that may result from the Pfizer Collaboration.

Under the Pfizer Collaboration Agreement, the parties agreed to collaborate during the four-year research term. During the research term, we are responsible to use our commercially reasonable efforts to advance up to five programs through to the selection of clinical candidates. At that stage, Pfizer may elect to license any of these programs exclusively and to have exclusive rights to undertake the clinical development of the clinical candidates into products and the potential commercialization of any such products thereafter. In addition, under the Pfizer Collaboration, we receive a non-exclusive, royalty-bearing sublicensable license to use Pfizer’s hepatic targeting technology in any of our own hepatic programs that are outside the scope of the collaboration (the “Wave Programs”). If we use Pfizer’s technology on our programs, Pfizer is eligible to receive potential development and commercial milestone payments from us. Pfizer is also eligible to receive tiered royalties on sales of any products that include Pfizer’s hepatic targeting technology.

Pfizer has selected five targets, including Apolipoprotein C-III (APOC3), which is the maximum number of targets that Pfizer may select under the terms of the agreement. Also, in connection with the Pfizer Collaboration, Pfizer agreed to be subject to certain standstill restrictions customary for transactions of this kind. The term of the Pfizer Collaboration Agreement runs from the effective date until the date of the last to expire payment obligations with respect to each Pfizer Program and with respect to each Wave Program, and expires on a program-by-program basis accordingly.

Simultaneously with the entry into the Pfizer Collaboration Agreement with Pfizer, we entered into a share purchase agreement with C.P. Pharmaceuticals International C.V., an affiliate of Pfizer (the “Pfizer affiliate”). Pursuant to the terms of the share purchase agreement, the Pfizer affiliate purchased 1,875,000 of our ordinary shares at a purchase price of $16.00 per share, for an aggregate purchase price of $30.0 million. The shares purchased by the Pfizer affiliate carry certain registration rights outlined in the share purchase agreement and certain of such shares remain subject to lock-up restrictions.

Our Technology Licenses

Max-Planck-Innovation GmbH

In June 2015, we entered into an agreement with Max-Planck-Innovation GmbH (“MI”), pursuant to which we obtained a co-exclusive royalty-bearing, worldwide license, with the right to sublicense, research, develop, manufacture and commercialize products in all fields of use under certain patent rights owned by Max-Planck-Gesellschaft (“MPG”), and patent rights owned by UMMS, which has been granted to us by MI, a wholly-owned subsidiary of MPG, acting as MPG’s technology transfer agency and UMMS’s authorized licensing agency for such patents. MPG and MI are collectively referred to herein as Max-Planck. Our license is one of two maximum allowable co-exclusive licenses for these patents, the other of which is currently held by Ionis.

Our patent rights under this license are to patent filings that relate to certain sequence and structural features of single-stranded RNA molecules that mediate target-specific RNA interference, and include both filings that are owned by Max-Planck and arose from research conducted by Thomas Tuschl, Ph.D. and his colleagues at the Max-Planck-Institute for Biophysical Chemistry, and also an issued U.S. patent owned by the University of Massachusetts (“UMASS”), that prevailed in an interference with one of the Max-Planck filings and was subsequently included, through a separate agreement between Max-Planck and UMASS, within the portfolio that Max-Planck is authorized to license. The Max-Planck licensed patent portfolio includes issued U.S. and Canadian patents, and pending U.S. and European patent applications, each of which has a projected 20-year term that extends into 2023.

We may unilaterally terminate the license agreement upon 90 days’ prior written notice and payment of all accrued amounts owing to Max-Planck. Max-Planck may terminate the agreement upon 30 days’ prior written notice if we challenge the validity of its patents, upon 30 days’ prior written notice if we undergo a change of control and cannot demonstrate that we will maintain a development and commercialization program that is substantially similar or greater in scope than the program prior to the change of control event, or in the event of our material breach which remains uncured after 60 days of receiving written notice of such breach (or 45 days in the case of nonpayment). Absent early termination, the agreement will automatically terminate upon the later of the expiration or abandonment of all issued patents and filed patent applications with the patent rights covered by the agreement or April 28, 2019.

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Our Research Collaborations

University of Oxford; Professor Matthew Wood’s Laboratory

Since April 2015, we have been collaborating with Dr. Matthew J.A. Wood, Professor of Neuroscience at the University of Oxford and Co-Director of the Oxford Centre for Neuromuscular Science under a translational research collaboration agreement with The Chancellor, Masters, and Scholars of the University of Oxford (“Oxford”). Dr. Wood’s research is in the field of degenerative disorders of the nervous system and muscle. His laboratory’s main focus is the investigation of novel therapeutic approaches using short nucleic acids to target mRNA. His team has been investigating the potential of single-stranded antisense oligonucleotides for the modification of mRNA splicing, for example in DMD. In October 2016, we extended our research collaboration for an additional 27 months in order for Oxford to characterize our proprietary isomers in murine models to further improve the pharmacology of oligonucleotides using our novel chemistries and to discover biomarkers associated with disease progression and pharmacological activity for the treatment of DMD. Under this collaboration, we are exploring additional exon targets, including exon 45 and exon 44 beyond our lead DMD programs, which target exon 51 and exon 53. In October 2017, we expanded our research collaboration with Oxford beyond DMD to include spinal muscular atrophy, with a term of 18 months.

University of Dundee

Since September 2015, we have been conducting research in collaboration with the University of Dundee (“Dundee”) that involves characterizing our proprietary isomers in order to improve the pharmacology of oligonucleotides for the treatment of keratin disorders. We and Dundee have received a five-year grant to support a collaborative research project entitled ‘Delivering gene silencing therapy to the epidermic and ocular surface,’ effective March 1, 2017.

University of Massachusetts Medical School

Since January 2017, we have been conducting research in collaboration with Dr. Robert H. Brown, Jr., the Leo P. and Theresa M. LaChance Chair in Medical Research and Chair of the Department of Neurology at UMMS, an internationally known researcher and physician in the field. Our research collaboration with UMMS is focused on characterizing our proprietary isomers in order to improve the pharmacology of oligonucleotides for the treatment of ALS and FTD, and investigating the mechanisms of action of specific and efficient knockdown of the targeted mutant C9ORF72 mRNA.

ReadCoor

Since April 2017, we have been collaborating with ReadCoor, Inc. (“ReadCoor”) to develop a registry of brain cell network maps and advance our chemistry for targeted drug delivery to the brain. ReadCoor is a company focused on leading the next generation of ‘omics by delivering the first panomic spatial sequencing platform to researchers, clinicians and pharmaceutical and diagnostics companies. The collaboration leverages ReadCoor’s proprietary FISSEQ (Florescent In-Situ Sequencing) platform designed to provide critical spatial data by combining next generation sequencing and three-dimensional imaging.

Deep Genomics

We initiated our research collaboration with Deep Genomics, Inc. in April 2018 to identify and develop novel therapies for the treatment of genetic neuromuscular disorders. Deep Genomics is building an artificial intelligence-powered discovery platform that combines automation, advanced biomedical knowledge, high volume data acquisition and machine learning to support the discovery and early development of genetic medicines. Under the collaboration, we will analyze and test oligonucleotides against potential therapeutic targets within multiple genes implicated in neuromuscular disorders. The collaboration aims to increase the size of patient populations that may be eligible for treatment by expanding the universe of druggable splicing targets beyond DMD and spinal muscular atrophy.

Manufacturing

To provide internal cGMP manufacturing capabilities and increase control and visibility of our drug product supply chain, we entered into a lease in September 2016 for a multi-use facility of approximately 90,000 square feet in Lexington, Massachusetts and initiated the build out of manufacturing space and related capabilities. In addition to manufacturing space, the Lexington facility includes additional laboratory and office space to support our growth. This facility supplements our existing Cambridge, Massachusetts laboratory and office space headquarters, enhances our ability to secure drug substance for current and future development activities and may provide commercial-scale manufacturing capabilities. In July 2017, we took occupancy of the Lexington facility and began manufacturing production in the fourth quarter of 2017.

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We believe that we have sufficient manufacturing capacity through our third-party contract manufacturers and our internal manufacturing facility to meet our current research, clinical and early-stage commercial needs. We believe that the addition of our internal cGMP manufacturing capabilities, together with the supply capacity we have established externally will be sufficient to meet our anticipated manufacturing needs for the next several years. We monitor the availability of capacity for the manufacture of drug substance and drug product and believe that our supply agreements with our contract manufacturers and the lead times for new supply agreements would allow us to access additional capacity if needed. We believe that our product candidates can be manufactured at scale and with production and procurement efficiencies that will result in commercially competitive costs.

Intellectual Property

We believe that we have a strong intellectual property position relating to the development and commercialization of our stereopure oligonucleotides. Our intellectual property portfolio includes filings designed to protect stereopure oligonucleotide compositions generally, as well as filings designed to protect stereopure compositions of oligonucleotides with particular stereochemical patterns (for example, that affect or confer biological activity). Our portfolio also includes filings for both proprietary methods and reagents, as well as various chemical methodologies that enable production of such stereopure oligonucleotide compositions. In addition, our portfolio includes filings designed to protect methods of using stereopure oligonucleotide compositions and filings designed to protect particular stereopure oligonucleotide products, such as those having a particular sequence, pattern of nucleoside and/or backbone modification, pattern of backbone linkages and/or pattern of backbone chiral centers.

We own or have rights to worldwide patent filings that protect our proprietary technologies for making stereopure oligonucleotide compositions, and that also protect the compositions themselves, as well as methods of using them, including in the treatment of diseases. As of February 1, 2019, our portfolio includes at least 18 issued U.S. patents, at least 40 issued foreign patents, and pending applications in at least 37 jurisdictions.

Synthetic Methodologies

Our patent portfolio includes multiple families that protect synthetic methodologies and/or key reagents for generating stereopure oligonucleotide compositions. Certain synthetic methodologies and/or key reagents are covered by families originally filed by the University of Tokyo. We have obtained exclusive rights to these families, which include two issued Japanese patents that have terms that extend to 2022-2025.

Additional synthetic methodologies and/or reagents are protected by families that we own. Certain families have 20-year expiration dates that range from 2029 to 2038. Some of these families have issued patents in several jurisdictions, including in major relevant jurisdictions such as the United States, Europe, and/or Japan; all have pending applications either at the international stage or in multiple jurisdictions.

We also co-own with the University of Tokyo certain filings that are directed to certain methods and/or reagents for synthesizing oligonucleotides; their 20-year expiration dates fall in 2031.

Stereopure Oligonucleotide Compositions

Certain of our patent filings protect stereopure compositions, particularly of therapeutically relevant oligonucleotides. Some such filings are directed to compositions whose oligonucleotides are characterized by particular patterns of chemical modification (including modifications of bases, sugars and/or internucleotidic linkages) and/or of internucleotidic linkage stereochemistry. Certain patent filings describe specific compositions designed for use in the treatment of particular diseases (e.g., HD, DMD). Several of our patent filings directed to stereopure compositions have entered national stage prosecution in multiple jurisdictions; others are in the international stage. Certain filings offer 20-year protection terms that extend into 2033-2038.

We also co-own with Shin Nippon Biomedical Laboratories, Ltd. various patent families that relate to stereopure oligonucleotide adjuvant compositions and have entered national stage prosecution in multiple jurisdictions; these have 20-year terms extending to 2033-2035.

Future Filings

We maintain a thoughtful and ambitious program for developing and protecting additional intellectual property, including new synthetic methodologies and reagents. We also intend to prepare and submit patent filings specifically directed to protecting individual product candidates and their uses as we finalize leads and collect relevant data, which is expected to include comparison data confirming novel and/or beneficial attributes of our product candidates.

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Singapore Intellectual Property Law

Section 34 of the Singapore Patents Act provides that a person residing in Singapore is required to obtain written authorization from the Singapore Registrar of Patents before filing an application for a patent for an invention outside of Singapore, unless all of the following conditions have been satisfied: (a) the person has filed an application for a patent for the same invention in the Singapore Registry of Patents at least two months before the filing of the patent application outside Singapore, and (b) the Singapore Registrar of Patents has not, in respect of this patent application, given directions to prohibit or restrict the publication of information contained in the patent application or its communication to any persons or description of persons pursuant to Section 33 of the Singapore Patents Act, or if the Singapore Registrar of Patents has given any such directions, all such directions have been revoked. A violation of Section 34 is a criminal offense punishable by a fine not exceeding S$5,000, or imprisonment for a term not exceeding two years, or both. There have been some instances where we have undertaken filings outside of Singapore, and there may be instances where we undertake such filings in the future, without first obtaining written authorization from the Singapore Registrar of Patents. When this has happened in the past, we have notified the Registrar and the Registrar has offered a compound of the offences against payment of a sum of S$50 in each of these cases. Under Singapore law, the Registrar has discretion to offer a compound of such offences against payment of a sum of money of up to S$2,000.

Competition

The biotechnology and pharmaceutical marketplace is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our expertise in oligonucleotides, scientific knowledge and intellectual property estate provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Not only must we compete with other companies that are focused on oligonucleotides, but any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Huntington’s Disease

There are no approved treatments available to slow the progression of HD. We believe, based on publicly available information, that Roche and Ionis (Phase 3) have an investigational drug in clinical development and several companies have ongoing preclinical programs in HD, including Sangamo Biosciences, Vaccinex, ProQR, Nuredis, uniQure, Spark Therapeutics, Voyager Therapeutics and PTC Therapeutics.

A number of companies are developing molecules to treat symptoms associated with HD, including, Prana Biotechnology (Phase 2), Omeros Corporation (Phase 2), Stealth BioTherapeutics (Phase 2) Azevan Pharmaceuticals (Phase 2), and Sage (Phase 1), among others.

Duchenne Muscular Dystrophy

Sarepta Therapeutics’ Exondys 51 (eteplirsen), an exon skipping nucleic acid therapeutic, was approved by the FDA for the treatment of DMD in the United States in September 2016. The FDA concluded that the data submitted demonstrated an increase in dystrophin production that is reasonably likely to predict clinical benefit in some patients with DMD who have a confirmed mutation of the DMD gene amenable to exon 51 skipping. No clinical benefit of eteplirsen has been established. Thus, in accordance with the U.S. accelerated approval regulations, the FDA is requiring Sarepta to conduct a clinical trial to verify and describe the drug’s clinical benefit. The required study would need to be designed to assess whether eteplirsen improves motor function of DMD patients with a confirmed mutation of the DMD gene amenable to exon 51 skipping. If the trial fails to verify clinical benefit, the FDA could initiate proceedings to withdraw approval of the drug. Sarepta submitted a market authorization application in the European Union and received a negative opinion from the EMA’s Committee for Medicinal Products for Human Use (CHMP). That opinion was confirmed by the CHMP after Sarepta requested a re-examination of the application. Sarepta had indicated it plans to seek follow up Scientific Advice to explore the approach to bring eteplirsen to Europe.

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PTC Therapeutics markets two approved therapies for DMD, Translarna (atularen) and Emflaza (deflazacort). Atularen was granted conditional market authorization by the EMA in 2014 for the treatment of nonsense mutation DMD for ambulatory patients. In October 2017, PTC Therapeutics received a CRL from the FDA declining to approve their NDA for ataluren. PTC Therapeutics filed a formal dispute resolution request with the FDA appealing this decision. In February 2018, the FDA reiterated their prior position and denied PTC Therapeutics’ appeal and recommended a possible path forward for ataluren based on the accelerated approval pathway. Deflazacort is an oral corticosteroid and was approved by the FDA for use in DMD under the brand name Emflaza in February 2017. PTC Therapeutics acquired the rights to Emflaza in April 2017.

We believe, based on publicly available information, that a number of other companies are developing molecules that may alter the progression of DMD through a variety of mechanisms. Those with programs in clinical development include companies developing exon skipping therapies for multiple additional exons (Sarepta Therapeutics and NS Pharma), gene therapies (Sarepta Therapeutics, Pfizer and Solid Biosciences), and other non-dystrophin targeted therapies (Roche, Catabasis Pharmaceuticals, Intalfarmaco, Capricor Therapeutics, FibroGen, Santhera, Malinckrodt, ReveraGen and Mitobridge). In addition, Exonics Therapeutics is developing CRISPR/Cas9 targeting exon 51 DMD.

Amyotrophic Lateral Sclerosis and Frontotemporal Dementia

There are two treatments approved in the United States for the treatment of ALS: riluzole, approved in 1995, and edaravone, approved in 2017. There are a number of companies with potential therapeutics for the treatment of ALS in clinical development, including AB Sciences (Phase 3 completed), Orphazyme (Phase3), BrainStorm Cell Therapeutics (Phase 3), Genentech (Phase 1) and ALS TDI (Phase 1). Only one company, Biogen, has initiated a clinical trial targeting C9ORF72.

There are no approved treatments available to slow the progression of FTD. Few companies have investigational therapies in clinical development specifically for FTD. Ionis /Biogen (Phase 1/2a) and AlzProtect (Phase 1) appear to be including FTD in their broader AD or tauopathies clinical development plans.

Government Regulation

FDA Approval Process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug and Cosmetic Act (“FDCA”), and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, a clinical hold, warning letters, recall or seizure of products, partial or total suspension of production, withdrawal of the product from the market, injunctions, fines, civil penalties or criminal prosecution.

FDA approval is required before any new drug, such as a new molecular or chemical entity, or a new dosage form, new use or new route of administration of a previously approved product, can be marketed in the United States. The process required by the FDA before a new drug product may be marketed in the United States generally involves:

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The manufacturing development, preclinical and clinical testing, and review process requires substantial time, effort and financial resources. Manufacturing development includes laboratory evaluation of product chemistry, formulation, development of manufacturing and control procedures, evaluation of stability, and the establishment of procedures to ensure continued product quality.

Nonclinical tests include animal studies to assess the toxicity and other safety characteristics of the product candidate, as well as other important aspects of drug pharmacology. The results of nonclinical tests, together with manufacturing information, analytical data and a proposed clinical trial protocol and other information, are submitted as part of an IND to the FDA. Nonclinical testing continues after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on a clinical hold. In such a case, the IND sponsor must resolve all outstanding concerns before the clinical trial can begin. As a result, our submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development, or if changes are made in trial design. Even if the IND becomes effective and the trial proceeds without initial FDA objection, the FDA may stop the trial at a later time if it has concerns, such as if unacceptable safety risks arise.

Further, an independent IRB at each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and informed consent information for subjects before the trial commences at that site and it must perform an ongoing review of the research on an annual basis until the trial is completed. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or that the trials are not being conducted in accordance with GCPs, and an IRB may also suspend a clinical trial at its site for similar reasons.

Clinical trials involve the administration of the product candidate to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Sponsors of clinical trials generally must register and report, at the NIH-maintained website clinicaltrials.gov, key parameters of a clinical trial. For purposes of an NDA submission, human clinical trials are typically conducted in the following sequential phases, which may overlap or be combined:

The results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of an NDA. NDAs must also contain extensive information relating to the product’s pharmacology, chemistry, manufacturing and controls and proposed labeling, among other things.

For some products, the FDA may require a Risk Evaluation and Mitigation Strategy (“REMS”), which could include measures imposed by the FDA such as programs to communicate risk outside of labeling, prescribing restrictions, or certain restrictions on distribution and use.

Under federal law, the submission of most NDAs is subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved NDA are also subject to annual Prescription Drug User Fee Act (“PDUFA”) program fees. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. Any resubmitted application is also subject to 60-day review before the FDA accepts it for filing.

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Once the submission has been accepted for filing, the FDA begins an in-depth review. Under the PDUFA, first the FDA agrees to specific performance goals for NDA review time through a two-tiered classification system, Standard Review and Priority Review. Standard Review for an NDA for a new molecular entity (“NME”) has a goal of being completed within a ten-month timeframe from FDA filing of the application. A Priority Review designation is given to products intended for serious conditions that provide a significant improvement in safety or effectiveness, such as providing a treatment where no adequate therapy exists. The goal for completing a Priority Review for an NME NDA is six months from filing.

The review process may be extended by the FDA by three months from the goal date to consider certain information or obtain clarification regarding information already provided in the submission. The FDA may refer applications for novel products or products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA may inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP. The FDA may also inspect one or more of the clinical sites where pivotal trials were conducted and the contract research organization facilities with oversight of the trial, in order to ensure compliance with GCP and the integrity of the study data.

After the FDA evaluates the NDA, it may issue an approval letter or a CRL, to indicate that the review cycle for an application is complete and that the application is not ready for approval. CRLs outline the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when the deficiencies have been addressed to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.

The FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems are identified after the product reaches the market. In addition, the FDA may require post-approval testing, including Phase 4 studies, and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. Products may be marketed only for the approved indications and in accordance with the provisions of the approved label and, even if the FDA approves a product, the FDA may limit the approved indications for use for the product or impose other conditions, including labeling or distribution restrictions or other risk- management mechanisms, such as a Boxed Warning, which highlights a serious safety concern that should be mitigated under a REMS program. Further, if there are any modifications to the product, including changes in indications, labeling, or manufacturing processes or facilities, a company is generally required to submit and obtain FDA approval of a supplemental NDA, which may require the company to develop additional data or conduct additional nonclinical studies and clinical trials.

Expedited Review and Approval

The FDA has various programs, including Fast Track, priority review, and accelerated approval, which are intended to expedite or simplify the process for reviewing drugs, and/or provide for approval on the basis of surrogate endpoints. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened. Drugs that may be eligible for these programs are those for serious or life-threatening conditions, generally those with the potential to address unmet medical needs, or that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development, and expedite the review, of drugs to treat serious diseases and fill an unmet medical need. Priority review, which is requested at the time of NDA submission, is designed to give drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists, an initial review within six months from the time of filing as compared to a standard review time of ten months. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the application for a drug designated for priority review. Accelerated approval provides an earlier approval of drugs to treat serious diseases, and that fill an unmet medical need based on a surrogate endpoint. As a condition of accelerated approval, the FDA will require that a sponsor of a drug receiving accelerated approval perform post-marketing clinical trials to confirm that the drug confers a clinical benefit for the patient.

Under the Food and Drug Administration Safety and Innovation Act (“FDASIA”), one of the expedited programs added is that for Breakthrough Therapy. A Breakthrough Therapy designation is designed to expedite the development and review of drugs that are intended to treat a serious condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). A drug that receives Breakthrough Therapy designation is eligible for all Fast Track designation features, intensive guidance on an efficient drug development program, beginning as early as Phase 1 and commitment from the FDA involving senior managers.

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Modernizing Trial Design

FDA sometimes initiates pilot programs to facilitate communication or other aspects of development to help advance approval of new drugs. In August 2018, the FDA announced the establishment of a Complex Innovative Trial Design (“CID”) Pilot Meeting Program (“CID pilot program”) to facilitate the use of CID approaches in late-stage drug development and promote innovation by allowing the FDA to publicly discuss the trial designs considered through the pilot program, including for medical products that have not yet been approved by the FDA. Under the CID pilot program, the FDA will accept two applicants per quarter. For each meeting request granted as part of the pilot, the FDA will conduct an initial meeting and a follow-up meeting on the same CID and medical product within a span of approximately 120 days. In January 2019, we announced that the planned Phase 2/3 clinical trial of suvodirsen for DMD was the first trial selected for the CID pilot program.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to continuing regulation by the FDA, including, among other things, requirements relating to safety surveillance and adverse event reporting, periodic reporting, continued cGMP compliance and quality oversight, compliance with post-marketing commitments, recordkeeping, advertising and promotion, and reporting manufacturing and labeling changes, as applicable.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and some state agencies and are subject to periodic unannounced inspections by the FDA for assessment of compliance with cGMPs. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction, and sometimes notification of, any deviations from cGMP. These regulations impose reporting and documentation requirements on the sponsor and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Discovery of previously unknown problems with a product, including adverse events of unlisted severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements such as noncompliance with cGMP or failure to correct previously identified inspection findings, may result in, among other things:

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. While physicians may generally prescribe a drug for off-label uses, manufacturers may only promote the drug in accordance with the data provided in the approved product label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have promoted false and misleading information about the product may be subject to significant liability, both at the federal and state levels.

The FDA has authority to require a REMS from manufacturers to ensure that the benefits of a drug or biological product outweigh its risks. In determining whether a REMS is necessary, the FDA may consider the size of the population likely to use the drug, the seriousness of the disease or condition to be treated, the expected benefit of the drug, the duration of treatment, the seriousness of known or potential adverse events, and whether the drug is an NME. If the FDA determines a REMS is necessary, the drug sponsor must agree to the REMS plan at the time of approval, or at a later date should significant new risk information come to light. A REMS may be required to include various elements, such as a medication guide, a communication plan to educate healthcare providers of the drug’s risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use that the FDA deems necessary to assure the benefits of use of the drug outweigh its risks. In addition, the REMS must include a timetable to assess the strategy, often at 18 months, 3 years, and 7 years after the strategy’s approval. The FDA may also impose a REMS requirement on a drug already on the market if the FDA determines, based on new safety information, that a REMS is necessary to ensure that the drug’s benefits outweigh its risks.

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Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is defined as one affecting fewer than 200,000 individuals in the United States or more than 200,000 individuals where there is no reasonable expectation that the product development cost will be recovered from product sales in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the drug and its potential orphan use will be disclosed publicly by the FDA; the posting will also indicate whether a drug is no longer designated as an orphan drug. More than one product candidate may receive an orphan drug designation for the same indication. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If an orphan drug-designated product subsequently receives FDA approval for the disease for which it was designed, the product will be entitled to seven years of product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. If a competitor obtains approval of the same drug, as defined by the FDA, or if our product candidate is determined to be the same drug as a competitor’s product for the same indication or disease, the competitor’s exclusivity could block the approval of our product candidate in the designated orphan indication for seven years, unless our product is demonstrated to be clinically superior to the competitor’s drug.

European Union Orphan Drug Designation

In the European Union (the “EU”), orphan drug designation by the European Commission (the “EC”) provides regulatory and financial incentives for companies to develop and market therapies that treat a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the EU, and where no satisfactory treatment is available, or if such treatment is available, there is the potential for the new drug to provide significant benefit. To be considered for orphan drug designation in the EU, companies must provide data that demonstrate the plausibility for use of the investigational therapy in the treatment of the disease and establish that the drug has the potential to provide relevant advantages or a major contribution to patient care over existing therapies. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the medicinal product.

Among the incentives available to medicines designated as orphan drugs by the EC are ten-year market exclusivity in the EU after product approval, eligibility for conditional marketing authorization, protocol assistance from the European Medicines Agency at reduced fees during the product development phase and direct access to centralized marketing authorization in the EU. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. In addition, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten-year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities of the product. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if the similar product is deemed safer, more effective or otherwise clinically superior to the original orphan medicinal product. Orphan drug designation must be requested before submitting an application for marketing authorization. Orphan drug designation does not, in itself, convey any advantage in, or shorten the duration of, the regulatory review and authorization process.

Pediatric Exclusivity and Pediatric Use

The Best Pharmaceuticals for Children Act (“BPCA”) provides NDA holders a six-month period of exclusivity attached to any other exclusivity listed with FDA—patent or non-patent—for a drug if certain conditions are met. Conditions for pediatric exclusivity include a determination by the FDA that information relating to the use of a new drug in the pediatric population may produce health benefits in that population; a written request by the FDA for pediatric studies; and agreement by the applicant to perform the requested studies and the submission to the FDA, completion of the studies in accordance with the written request, and the acceptance by the FDA, of the reports of the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications.

In addition, under the Pediatric Research Equity Act (“PREA”), NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective, unless the sponsor has received a deferral or waiver from the FDA. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.

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Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our therapeutic candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for extension must be made prior to the expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.

Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application (“ANDA”), or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

In Vitro Diagnostic Tests for Biomarkers

For some of our product candidates, we plan to work with collaborators to develop or obtain access to in vitro companion diagnostic tests to identify appropriate patients for these targeted therapies. If a sponsor or the FDA believes that a diagnostic test is essential for the safe and effective use of a corresponding therapeutic product, a sponsor will typically work with a collaborator to develop an in vitro diagnostic (“IVD”). IVDs are regulated by the FDA as medical devices, and it issued final and draft guidance documents that are intended to assist companies developing in vitro companion diagnostic devices and companies developing therapeutic products that depend on the use of a specific in vitro companion diagnostic for the safe and effective use of the product.

The two primary types of marketing pathways for medical devices are clearance of a premarket notification under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or 510(k), and approval of a premarket approval application, or PMA. If a company is required to perform clinical trials for the IVD diagnostic, and the IVD is viewed as a significant risk device, the sponsor will have to submit an investigational device exemption application, or IDE. If the diagnostic test and the therapeutic drug are studied together to support their respective approvals, the clinical trial must meet both the IDE and IND requirements.

The FDA expects that the therapeutic sponsor will address the need for an IVD companion diagnostic device in its therapeutic product development plan and that, in most cases, the therapeutic product and its corresponding IVD companion diagnostic device will be developed contemporaneously. If the companion diagnostic test will be used to make critical treatment decisions such as patient selection, treatment assignment, or treatment arm, it will likely be considered a significant risk device for which a clinical trial will be required. After approval, the use of an IVD companion diagnostic device with a therapeutic product will be stipulated in the instructions for use in the labeling of both the diagnostic device and the corresponding therapeutic product. In addition, a diagnostic test that was approved through the PMA process or one that was cleared through the 510(k) process and placed on the market will be subject to many of the same regulatory requirements that apply to approved drugs.

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Other Healthcare Laws

Although we currently do not have any products on the market, we will be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and other countries in which we conduct our business after a product is approved and commercialized. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician sunshine laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Healthcare Reform

Political, economic and regulatory influences are subjecting the healthcare industry in the United States to fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our future business. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively the “ACA”), substantially changed the way healthcare is financed by both governmental and private insurers. The ACA was designed to expand coverage for the uninsured while at the same time containing overall healthcare costs. With regard to pharmaceutical products, among other things, the ACA expanded and increased industry rebates for drugs covered under Medicaid programs and made changes to the coverage requirements under the Medicare prescription drug benefit. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA. Both Congress and President Trump have expressed their intention to repeal or repeal and replace the ACA, and as a result certain sections of the ACA have not been fully implemented or effectively repealed. The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels, may lead to uncertainty or delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales. If there are not adequate reimbursement levels, our business and results of operations could be adversely affected. We continue to evaluate the effect that the ACA has or any potential changes to the ACA could have on our business. We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that may be charged for any of our product candidates, if approved. These and other potential legislative and regulatory changes could be made to governmental health programs that could significantly impact pharmaceutical companies and the success of our product candidates. The ACA, as well as other federal, state and foreign healthcare reform measures that have been and may be adopted in the future, could harm our future revenues.

Pharmaceutical Coverage, Pricing, and Reimbursement

Sales of our products, when and if approved for marketing, will depend, in part, on the extent to which our products will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Limited third-party reimbursement for our product candidates or a decision by a third-party payor not to cover our product candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition.

Manufacturing Requirements

We and our third-party manufacturers must comply with applicable cGMP requirements. The cGMP requirements include requirements relating to, among other things, organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP requirements to the satisfaction of the FDA pursuant to a pre-approval inspection before we can use them to manufacture commercial products. We and our third-party manufacturers are also subject to periodic unannounced inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including, among other things, warning letters, voluntary corrective action, the seizure of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, disgorgement of profits, and other civil and criminal penalties.

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Other Regulatory Requirements

We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have an adverse effect on our ability to operate our business and generate revenues. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, operating results and financial condition.

Employees

As of December 31, 2018, we employed 250 full-time employees. A significant number of our management and professional employees have had prior experience with pharmaceutical, biotechnology or medical product companies. Management considers relations with our employees to be good.

Corporate Information

We were incorporated under the name Wave Life Sciences Pte. Ltd. (Registration No.: 201218209G) under the laws of Singapore on July 23, 2012. On November 16, 2015, we closed our initial public offering. In preparation for our initial public offering, on November 5, 2015, Wave Life Sciences Pte. Ltd. converted from a private limited company to a public limited company known as Wave Life Sciences Ltd. (“Wave”). Wave has four wholly-owned subsidiaries: Wave Life Sciences USA, Inc. (“Wave USA”), a Delaware corporation (formerly Ontorii, Inc.); Wave Life Sciences Japan, Inc. (“Wave Japan”), a company organized under the laws of Japan (formerly Chiralgen., Ltd.); Wave Life Sciences Ireland Limited (“Wave Ireland”), a company organized under the laws of Ireland; and Wave Life Sciences UK Limited (“Wave UK”), a company organized under the laws of the United Kingdom.

Our registered office is located at 7 Straits View #12-00, Marina One East Tower, Singapore 018936, and our telephone number at that address is +65 6236 3388. Our principal office for Wave USA is located at 733 Concord Avenue, Cambridge, MA 02138, and our telephone number at that address is +1-617-949-2900. Our registered office for Wave Japan is 2438 Miyanoura-cho, Kagoshima-shi, Kagoshima pref. 891-1394, Japan. Our registered office for Wave Ireland is One Spencer Dock, North Wall Quay, Dublin 1, Ireland. Our registered office for Wave UK is Hays Galleria, 1 Hays Lane, London, SE1 2RD, United Kingdom.

Information Available on the Internet

Our Internet website address is http://www.wavelifesciences.com. The information contained on, or that can be accessed through, our website is not a part of, or incorporated by, reference in this Annual Report on Form 10-K. We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference. We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. We make these reports available through the “For Investors & Media – Financial Information” section of our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission (“SEC”). We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% shareholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are filed with the SEC. You can review our electronically filed reports and other information that we file with the SEC on the SEC’s website at http://www.sec.gov.

In addition, we regularly use our website to post information regarding our business and governance, and we encourage investors to use our website, particularly the information in the section entitled “For Investors & Media,” as a source of information about us.

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You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this Annual Report on Form 10-K occurs, our business, operating results and financial condition could be seriously harmed and the trading price of our ordinary shares could decline. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Annual Report on Form 10-K.

Risks Related to Our Financial Results and Capital Requirements

We are a clinical-stage genetic medicines company with a history of losses, and we expect to continue to incur losses for the foreseeable future, and we may never achieve or maintain profitability.

We are a clinical-stage genetic medicines company and have incurred significant operating losses since our incorporation in 2012. Our net loss was $146.7 million, $102.0 million and $55.7 million for the fiscal years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018 and December 31, 2017, we had an accumulated deficit of $339.7 million and $192.7 million, respectively. To date, we have not generated any product revenue. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We currently have no products on the market and expect that it may be many years, if ever, before we have a product candidate ready for commercialization. We are conducting clinical trials of our lead program in Duchenne muscular dystrophy (“DMD”) targeting exon 51 and our two lead programs in Huntington’s disease (“HD”). We expect to deliver topline clinical data for our two lead HD programs in the first half of 2019 and interim dystrophin data for suvodirsen in the second half of 2019.

We have not generated, and do not expect to generate, any product revenue for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, manufacturing, preclinical studies and clinical trials and the regulatory review process for product candidates. The amount of future losses is uncertain. To achieve profitability, we must successfully develop product candidates, obtain regulatory approvals to market and commercialize product candidates, manufacture any approved product candidates on commercially reasonable terms, establish a sales and marketing organization or suitable third-party alternatives for any approved product and raise sufficient funds to finance our business activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause our shareholders to lose all or part of their investment.

We will require substantial additional funding, which may not be available on acceptable terms, or at all.

We have used substantial funds to develop our programs and PRISM, our proprietary discovery and drug development platform, and will require substantial funds to conduct further research and development, including preclinical studies and clinical trials of our product candidates, seek regulatory approvals for our product candidates and manufacture and market any products that are approved for commercial sale. We believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months.

Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. We do not expect to realize any appreciable revenue from product sales or royalties in the foreseeable future, if at all. Our revenue sources will remain extremely limited unless and until our product candidates complete clinical development and are approved for commercialization and successfully marketed. Because we cannot be certain of the length of time or activities associated with successful development and commercialization of our product candidates, we are unable to estimate the actual funds we will require to develop and commercialize them.

Our future capital requirements will depend on many factors, including, but not limited to, the following:

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To date, we have primarily financed our operations through sales of our securities and our collaborations with third parties. As a privately held company, we received an aggregate of $89.3 million from the sale of our securities. As a publicly traded company, through March 1, 2019, we have received an aggregate of $384.5 million in gross proceeds from public offerings of our securities, or approximately $355.5 million in net proceeds, including gross proceeds of $111.9 million from our November 2015 initial public offering, $100.0 million from our April 2017 follow-on public offering and $172.6 million from our January 2019 follow‑on public offering. In addition, we have received (or are due to receive) an aggregate of $270.0 million in equity investments, upfront and committed payments under our collaborations with Takeda and Pfizer, exclusive of any potential future milestone and royalty payments. We intend to seek additional funding in the future through collaborations, public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these financing sources. As of March 1, 2019, we have approximately $227.4 million of our securities registered and available for sale under our existing shelf registration statement that was declared effective by the SEC on February 6, 2017 and will remain in effect for three years from that date. In addition, for so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules, we may file an automatic shelf registration statement, which would become effective immediately upon filing and would provide us with immediate access to the capital markets to sell our securities from time to time.

Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional funds may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity or convertible debt securities, our shareholders will suffer dilution and the terms of any financing may adversely affect the rights of our shareholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing shareholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of equity securities received any distribution of corporate assets.

If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, limit or terminate our research and development programs and preclinical studies or clinical trials, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuring activities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our product candidates or technologies that we would otherwise pursue on our own.

Our management has broad discretion over the use of proceeds received from sales of our securities and our collaborations with third parties and the proceeds may not be used effectively.

Our management has broad discretion as to the use of proceeds we receive from conducting sales of our securities and our collaborations with third parties and could use the proceeds for purposes other than those contemplated at the time of such transactions. It is also possible that the proceeds we have received, or may receive, from securities sales and collaborations will be invested in a way that does not yield a favorable, or any, return for us.

Our short operating history may make it difficult for shareholders to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage genetic medicines company with a limited operating history. We commenced active operations in 2012. Our operations to date have been limited to organizing and staffing our company, research and development activities, manufacturing, preclinical and clinical development, patient advocacy activities, business planning and raising capital. Prior to 2017, all of our product candidates were in the preclinical development stage. We are conducting clinical trials of our lead program in DMD targeting exon 51 and our two lead programs in HD. We expect to deliver topline clinical data for our two lead HD programs in the first half of 2019 and interim dystrophin data for suvodirsen in the second half of 2019. We have not yet demonstrated our ability to successfully complete pivotal clinical trials, obtain marketing approvals, or conduct sales and marketing activities necessary for successful product commercialization. We have limited experience manufacturing our products at commercial scale or arranging for a third party to do so on our behalf. Typically, it takes many years to develop and commercialize a therapeutic from the time it is discovered to when it is available for treating patients. Further, drug development is a capital-intensive and highly speculative undertaking that involves a substantial degree of risk. You should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by biotechnology companies in the early stages of clinical development, such as ours. Any predictions about our future

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success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors, including risks and uncertainties associated with any of our current or future collaboration partners. We are transitioning from a company primarily with a research focus to a company capable of supporting multiple clinical trials and commercial preparation activities. We may not be successful in this transition.

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

The approach we are taking to discover and develop oligonucleotides is novel and may never lead to marketable products.

We have concentrated our efforts and research and development activities on oligonucleotides and enhancing PRISM. PRISM, our proprietary discovery and drug development platform, enables us to target genetically defined diseases with stereopure oligonucleotides across multiple therapeutic modalities. Our future success depends on the successful development of stereopure oligonucleotides and the effectiveness of PRISM. The scientific discoveries that form the basis for our efforts to discover and develop new product candidates, including our discoveries about the relationships between oligonucleotide stereochemistry and pharmacology, are relatively new. PRISM combines our unique ability to control backbone stereochemistry to create stereopure oligonucleotides and our deep knowledge of how the interplay among oligonucleotide sequence, chemistry and backbone stereochemistry impacts key properties. The scientific evidence to support the feasibility of developing medicines based on these discoveries is limited. Skepticism as to the feasibility of developing oligonucleotides generally has been, and may continue to be, expressed in scientific literature. In addition, decisions by other companies with respect to their oligonucleotide development efforts may increase skepticism in the marketplace regarding the potential for oligonucleotides.

Relatively few oligonucleotides have been tested in humans, and a number of clinical trials for such product candidates conducted by other companies have not been successful. Few oligonucleotides have received regulatory approval. The pharmacological properties ascribed to the investigational compounds we are testing in laboratory studies may not be positively demonstrated in clinical trials in patients, and they may interact with human biological systems in unforeseen, ineffective or harmful ways. If our product candidates prove to be ineffective, unsafe or commercially unviable, PRISM and our pipeline would have little, if any, value, which would substantially harm our business, financial condition, results of operations and prospects. In addition, our approach, which focuses on using oligonucleotides for drug development, as opposed to multiple or other, more advanced proven technologies, may expose us to additional financial risks and make it more difficult to raise additional capital if we are not successful in developing one or more oligonucleotides that receive regulatory approval.

Because we are developing oligonucleotides, which are considered a relatively new class of drugs, there is increased risk that the outcome of our clinical trials will not be sufficient to obtain regulatory approval.

The U.S. Food and Drug Administration (“FDA”) and other ex-U.S. regulatory agencies have relatively limited experience with oligonucleotides, which may increase the complexity, uncertainty and length of the regulatory review process for our product candidates. To date, the FDA has approved few oligonucleotides for marketing and commercialization, and the FDA and its foreign counterparts have not yet established any definitive policies, practices or guidelines specifically in relation to these drugs. The lack of policies, practices or guidelines specific to oligonucleotides may hinder or slow review by the FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the development of our product candidates. In addition, because there may be approved treatments for some of the diseases for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate through clinical trials that the product candidates we develop to treat these diseases, if any, are not only safe and effective, but safer or more effective than existing products. Furthermore, in recent years, there has been increased public and political pressure on the FDA with respect to the approval process for new drugs, and the FDA’s standards, especially regarding drug safety, appear to have become more stringent. As a result of the foregoing factors, we may never receive regulatory approval to market and commercialize any product candidate.

Even if we obtain regulatory approval, the approval may be for disease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We may be required to perform additional or unanticipated clinical trials to obtain regulatory approval or be subject to additional post-marketing studies or other requirements to maintain such approval. As a result, we may never succeed in developing a marketable product, we may not become profitable and the value of our ordinary shares could decline.

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Our preclinical studies and clinical trials may not be successful. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

Our product candidates are in the early stages of clinical development. We are conducting clinical trials of our lead program in DMD targeting exon 51 and our two lead programs in HD. We currently have no products on the market. We have invested a significant portion of our efforts and financial resources in the identification and preclinical and clinical development of our oligonucleotides, the development of PRISM, and the continued growth of our manufacturing capabilities. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates. Our success will depend on several factors, including the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

We may not be able to conduct clinical trials successfully due to various process-related factors that could negatively impact our business plans.

The successful initiation and completion of any of our clinical trials, within timeframes consistent with our business plans, is dependent on various factors, which include, but are not limited to, our ability to:

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If we are not able to manage the clinical trial process successfully, our business plans could be delayed or be rendered unfeasible for us to execute within our planned or required time frames, or at all.

If we cannot successfully manufacture our product candidates for our research and development and preclinical activities, or manufacture sufficient amounts of our product candidates to meet our clinical requirements and timelines, our business may be materially harmed.

In order to develop our product candidates, apply for regulatory approvals and commercialize our product candidates, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities. In September 2016, we entered into a lease for a multi-use facility of approximately 90,000 square feet in Lexington, Massachusetts to provide internal cGMP manufacturing capabilities and increase control and visibility of our drug substance supply chain, and we initiated the build out of manufacturing space and related capabilities. We began cGMP manufacturing in this facility at the beginning of 2018. This facility supplements our existing Cambridge, Massachusetts laboratory and office space headquarters, enhances our ability to secure drug substance for current and future development activities and may provide commercial-scale manufacturing capabilities. However, while we have established and continue to enhance our internal cGMP manufacturing capabilities, we have limited manufacturing experience as a company, particularly with manufacturing drug substance on a commercial scale, and we will incur significant costs to develop this expertise internally.

In addition to the oligonucleotides that we manufacture internally, we continue to rely on CMOs to manufacture the oligonucleotides required for our preclinical studies and clinical trials. There are a limited number of manufacturers that supply oligonucleotides. There are risks inherent in pharmaceutical manufacturing that could affect the ability of us or our CMOs to meet our delivery time requirements or provide adequate amounts of material to meet our needs. Included in these risks are potential synthesis and purification failures and/or contamination during the manufacturing process, as well as other issues with our facility or the CMOs’ facilities and ability to comply with the applicable manufacturing requirements, which could result in unusable product and cause delays in our manufacturing timelines and ultimately delay our clinical trials, as well as result in additional expense to us. To manufacture our oligonucleotides, we rely on third parties to supply the required raw materials. We will likely need to secure alternative suppliers for these raw materials, and such alternative suppliers are limited and may not be readily available, or we may be unable to enter into agreements with them on reasonable terms and in a timely manner. Additionally, our cost of goods development is at an early stage. The actual cost to manufacture and process our product candidates could be greater than we expect and could materially and adversely affect the commercial viability of our product candidates. There can be no assurance that we will be able to produce sufficient quantities of our oligonucleotides to meet our clinical trial demands on our projected timelines.

The process of manufacturing oligonucleotides is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-up of our manufacturing capabilities.

The process of manufacturing oligonucleotides is complex, highly-regulated and subject to multiple risks. The complex processes associated with the manufacture of our product candidates expose us to various manufacturing challenges and risks, which may include delays in manufacturing adequate supply of our product candidates, limits on our ability to increase manufacturing capacity, and the potential for product failure and product variation that may interfere with preclinical and clinical trials, along with additional costs. We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of current or future clinical trials, or the performance of the product, once commercialized. In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical trials or at earlier portions of a trial to the product used in later clinical trials or later portions of the trial. We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes. We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process. If clinical data are not ultimately comparable to that seen in the earlier trials in terms of safety or efficacy, we may be required to make further changes to our process and/or undertake additional clinical testing, either of which could significantly delay the clinical development or commercialization of the associated product candidate.

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We are conducting clinical trials of our lead program in DMD targeting exon 51 and our two lead programs in HD. Although we continue to build on our experience in manufacturing oligonucleotides, we have limited experience as a company manufacturing product candidates for use in clinical trials or for commercial supply. We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for commercial use. Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Furthermore, compliance with cGMP requirements and other quality issues may arise during our internal efforts to scale-up manufacturing, and with our current or any future CMOs. If contaminants are discovered in our supply of our product candidates or in our manufacturing facilities or those of our CMOs, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, we and our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If we or our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

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

Because we have limited financial resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms of both regulatory approval and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Any product candidates we develop may fail in development or be delayed to a point where they do not become commercially viable.

Before obtaining regulatory approval for the commercial distribution of any of our product candidates, we must conduct, at our own expense, extensive preclinical studies and clinical trials to demonstrate the safety and efficacy in humans of our product candidates. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome, and the historical failure rate for drugs in preclinical and clinical development is high. We currently have a number of therapeutic programs in the preclinical and clinical development stages. In addition, we, the FDA or comparable foreign regulatory authorities or an IRB, or similar foreign review board or ethics committee, may suspend clinical trials of a product candidate at any time for various reasons, including if we or they believe the healthy volunteer subjects or patients participating in such trials are being exposed to unacceptable health risks. Among other reasons, unacceptable side effects or other more serious adverse events of a product candidate in healthy volunteer subjects or patients in a clinical trial could result in the FDA or comparable foreign regulatory authorities suspending or terminating the trial and refusing to approve a particular product candidate for any or all indications of use.

Clinical trials also require the review, oversight and approval of IRBs, which review the clinical protocols for investigations that will be conducted at their institutions in order to protect the rights and welfare of human subjects. Inability to obtain or delay in obtaining IRB approval can prevent or delay the initiation and completion of clinical trials at particular sites. Furthermore, failure to provide information to the IRB as required throughout the study, such as emergent safety reports and annual updates, may result in suspension of the IRB’s approval of the trial. Our product candidates may encounter problems during clinical trials that will cause us or regulatory authorities to delay, suspend or terminate these trials, or that will delay or confound the analysis of data from these trials. If we experience any such problems, we may not have the financial resources to continue development of the product candidate that is affected or any of our other product candidates. We may also lose, or be unable to enter into, collaborative arrangements for the affected product candidate and for other product candidates we are developing. The development of one or more of our product candidates can fail at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent regulatory approval or our ability to commercialize our product candidates, including:

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If we do not successfully conduct clinical development, we will not be able to market and sell products derived from our product candidates and to generate product revenues. Even if we do successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before we can submit an application for regulatory approval to the FDA or foreign regulatory agencies. If the development of any of our product candidates fails or is delayed to a point where such product candidate is no longer commercially viable, our business may be materially harmed.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

The results from preclinical studies or early clinical trials of a product candidate may not predict the results that will be obtained in subsequent subjects or in subsequent clinical trials of that product candidate or any other product candidate. The design of a clinical trial can determine whether its results will support approval of a product candidate and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Although we have assembled a team of employees with experience designing clinical trials and obtaining regulatory approval to market therapeutics in neurology and in rare diseases, we have limited experience as a company in designing clinical trials for oligonucleotide therapeutics and we may be unable to design and execute appropriate clinical trials to support regulatory approval of our product candidates. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Product candidates that seemingly perform satisfactorily in preclinical studies may nonetheless fail to obtain regulatory approval. There is a high failure rate for drugs proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and any such setbacks in our clinical development could negatively affect our business and operating results.

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

Clinical trials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the product candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the size of the patient population, the age and condition of the patients, the stage and severity of disease, the nature and requirements of the protocol, the proximity of patients to clinical sites, the availability of effective treatments for the relevant disease, and the eligibility criteria for the clinical trial. Delays or difficulties in patient enrollment or difficulties retaining trial participants, including as a result of the availability of existing or other investigational treatments, can result in increased costs, longer development times or termination of a clinical trial.

In addition, our success may depend, in part, on our ability to identify patients who qualify for our clinical trials, or are likely to benefit from any medicines that we may develop, which will require those potential patients to undergo a screening assay, which we also refer to as a companion diagnostic test, for the presence or absence of a particular genetic sequence. For example, in HD, we are conducting clinical trials for WVE-120101 and WVE-120102, targeting SNPs associated with the mutant alleles of the HTT gene. Each SNP has a particular demographic distribution, and defines a subpopulation of patients suited for allele-specific interventions. Up to 70% of the HD patient population carry one of the two most common SNPs. We have developed a novel screening assay that is intended to identify whether a patient has the particular SNP that our product candidate is targeting; however, we have limited experience in developing screening assays to support patient identification for clinical trials. If we, or any third parties that we engage to assist us, are unable to successfully identify patients with the appropriate SNPs that we are targeting, or experience delays in doing so, then we may not realize the full commercial potential of any product candidates we develop.

If we are unable to successfully develop or obtain regulatory approval for companion diagnostic tests for our product candidates, or experience significant delays in doing so, our clinical trials may be delayed and our business could be materially harmed.

The development programs for some of our product candidates contemplate the development of companion diagnostic tests, which are assays or tests to identify an appropriate patient population. The success of certain of our product candidates will depend on several factors, including the successful development of, and ability to obtain regulatory approval for, companion diagnostic tests that will be used to screen and identify the right patients for our product candidates. Our goal is to develop and commercialize disease-modifying medicines for genetically defined diseases with a high degree of unmet medical need, and to become a fully integrated genetic medicines company. The target patient populations for several of our product candidates are relatively small, and it will be difficult to successfully identify the appropriate patients for whom our product candidates are being designed without reliable, accessible, relatively inexpensive, easy-to-use companion diagnostic tests.

Companion diagnostic tests are subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior to commercialization. We are not a medical device company, and we have limited experience developing medical devices. A more detailed description of the FDA approval process for companion diagnostic tests is included under “Business – In Vitro Diagnostic Tests for Biomarkers.” Given our limited experience in developing and commercializing companion diagnostic tests, we may seek to collaborate with third parties to assist us in the design, manufacture, regulatory approval and commercialization of the companion diagnostic tests for some of our product candidates. We and any potential collaborators may encounter difficulties in developing and obtaining approval for the companion diagnostic tests, including issues relating to selectivity/specificity, analytical validation, reproducibility, or clinical validation. Any delay or failure by us or any potential collaborators to develop or obtain regulatory approval of the companion diagnostic tests could delay or prevent approval of our product candidates. If we, or any third parties that we engage to assist us, are unable to successfully develop and commercialize companion diagnostic tests for our drug candidates, or experience delays in doing so, our clinical trials and our business could be materially harmed.

We may be unable to obtain regulatory approval in the United States or foreign jurisdictions and, as a result, be unable to commercialize our product candidates and our ability to generate revenue will be materially impaired.

Our product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, quality, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs. Rigorous preclinical studies and clinical trials and an extensive regulatory approval process are required to be successfully completed in the United States and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the product candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin selling them.

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We have limited experience as a company in conducting and managing the human clinical trials for oligonucleotide therapeutics that are necessary to obtain regulatory approvals, including approval by the FDA or other foreign agencies, or otherwise advancing product candidates through the regulatory approval process. The time required to obtain FDA and other approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity and novelty of the product candidate. The standards that the FDA and its foreign counterparts use when regulating companies such as ours are not always applied predictably or uniformly and can change. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation or administrative action, or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be.

Any delay or failure in obtaining required approvals could adversely affect our ability to generate revenues from the particular product candidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses for which we may market the product or the labeling or other restrictions. In addition, the FDA has the authority to require a Risk Evaluation and Mitigation Strategy (“REMS”), as a condition of approval, which may impose further requirements or restrictions on the distribution or safe use of an approved drug, such as limiting prescribing rights to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients as specially defined by the indication statement or who meet certain safe-use criteria, and requiring treated patients to enroll in a registry, among other requirements. These limitations and restrictions may limit the size of the market for the product and affect reimbursement by third-party payors.

We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and payment. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above, as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not ensure approval by comparable regulatory authorities outside of the United States and vice versa.

We have been granted orphan drug designations in the United States and in the European Union, for some of our product candidates, but there can be no guarantee that we will maintain orphan status for these product candidates or receive approval for any product candidate with an orphan drug designation.

In 2016 and 2017, we were granted orphan drug designation under the Orphan Drug Act by the FDA for our product candidates, WVE-120101 and WVE-120102, respectively, for the treatment of HD. In 2018, we were granted orphan drug designation by the FDA for our product candidate suvodirsen for the treatment of DMD. Subject to receiving approval from the FDA of an NDA, products granted orphan drug status are provided with seven years of marketing exclusivity in the U.S., meaning the FDA generally will not approve applications for other product candidates for the same orphan indication that contain the same active ingredient.

In 2018, the European Medicines Agency (“EMA”) Committee for Orphan Medical Products granted orphan drug designation for our product candidate suvodirsen for the treatment of DMD. Orphan drug designation by the EC provides regulatory and financial incentives for companies to develop and market therapies that treat a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the EU, and where no satisfactory treatment is available, or if such treatment is available, there is the potential for the new drug to provide significant benefit. Among the incentives available to medicines designated as orphan drugs by the EC are ten-year market exclusivity in the EU after product approval, eligibility for conditional marketing authorization, protocol assistance from the EMA at reduced fees during the product development phase and direct access to centralized marketing authorization in the EU.

We are not guaranteed to maintain or receive orphan status for our current or future product candidates, and if our product candidates that were granted orphan status were to lose their status as an orphan drug or the marketing exclusivity provided to it in the United States or the EU, our business and results of operations could be materially adversely affected. While orphan status for any of our products, if granted or maintained, would provide market exclusivity in the United States and the EU for the time periods specified above, we would not be able to exclude other companies from manufacturing and/or selling products using the same active ingredient for the same indication beyond the exclusivity period applicable to our product on the basis of orphan drug status. Even if we are the first to obtain approval of an orphan product candidate and are granted exclusivity in the United States or the EU, there are limited circumstances under which a later competitor product may be approved for the same indication during the period of marketing exclusivity, such as if the later product is shown to be clinically superior to our product or if we are not able to provide a sufficient quantity of the orphan drug.

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Even if we were to obtain approval for suvodirsen with the Rare Pediatric Disease Designation, the Rare Pediatric Disease Priority Review Voucher Program may no longer be in effect at the time of such approval.

In 2018, we were granted rare pediatric disease designation by the FDA for product candidate suvodirsen. Rare pediatric disease designation by the FDA is granted in the case of serious or life-threatening diseases affecting fewer than 200,000 people in the United States in which the serious or life-threatening manifestations are primarily in individuals 18 years of age and younger. The designation provides regulatory incentives for companies to develop and market therapies that treat these conditions. The sponsor of a drug for a rare pediatric disease may be eligible for a priority review voucher upon approval of the drug that can be used to obtain a priority review of a subsequent marketing application. The priority review voucher may be sold or transferred an unlimited number of times. Congress has extended the priority review voucher program until September 30, 2020 with new drug approvals that meet the voucher criteria grandfathered through 2022. This program has been subject to criticism, including by the FDA, and it is possible that even if we obtain approval for suvodirsen and qualify for such a priority review voucher, the program may no longer be in effect at the time of approval.

Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory oversight. If we fail to comply with continuing U.S. and foreign requirements, our approvals could be limited or withdrawn, we could be subject to other penalties, and our business would be seriously harmed.

Following any initial regulatory approval of any drugs we may develop, we will also be subject to continuing regulatory oversight, including the review of adverse drug experiences and safety data that are reported after our drug products are made commercially available. This would include results from any post-marketing studies or surveillance to monitor the safety and efficacy of the drug product required as a condition of approval or agreed to by us. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved uses for which the product may be marketed. Other ongoing regulatory requirements include, among other things, submissions of safety and other post-marketing information and reports, registration and listing, as well as continued maintenance of our marketing application, compliance with cGMP requirements and quality oversight, compliance with post-marketing commitments, and compliance with good clinical practice for any clinical trials that we conduct post-approval. Failure to comply with these requirements could result in criminal or civil penalties, recalls, or product withdrawals. In addition, we are conducting our clinical trials and we intend to seek approval to market our product candidates in jurisdictions outside of the United States, and therefore will be subject to, and must comply with, regulatory requirements in those jurisdictions.

The FDA has significant post-market authority, including, for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials for a variety of reasons. The FDA also has the authority to require a REMS plan after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug.

We, our CMOs, and the manufacturing facilities we use to make our product candidates will also be subject to ongoing assessment of product quality, compliance with cGMP, and periodic inspection by the FDA and potentially other regulatory agencies. The discovery of any new or previously unknown problems with us or our CMOs, or our or their manufacturing processes or facilities, including failure to maintain compliance with cGMP requirements, may result in the need for field alerts, product recalls, restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. We may not have the ability or capacity to manufacture material at a broader commercial scale in the future. We and our CMOs currently manufacture a limited supply of clinical trial materials. Reliance on CMOs entails risks to which we would not be subject if we manufactured all of our material ourselves, including reliance on the CMO for regulatory compliance. Our product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review.

If we or our collaborators, manufacturers or service providers fail to comply with applicable continuing regulatory requirements in the United States or foreign jurisdictions in which we may seek to market our products, we or they may be subject to, among other things, fines, warning letters, holds on clinical trials, refusal by the FDA or comparable foreign regulatory authorities to approve pending applications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, refusal to permit the import or export of products, operating restrictions, injunction, consent decree, civil penalties and criminal prosecution.

Even if we receive regulatory approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction, which will prevent us from becoming profitable.

Our product candidates are based upon new discoveries, technologies and therapeutic approaches. Key participants in pharmaceutical marketplaces, such as physicians, third-party payors and consumers, may not adopt a product intended to improve therapeutic results that is based on the technology employed by oligonucleotides. As a result, it may be more difficult for us to convince the medical community and third-party payors to accept and use our product, or to provide favorable reimbursement.

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Other factors that we believe will materially affect market acceptance of our product candidates include:

In addition, our estimates regarding the potential market size may be materially different from what we currently expect at the time we commence commercialization, which could result in significant changes in our business plan and may significantly harm our results of operations and financial condition.

The pharmaceutical market is intensely competitive. If we are unable to compete effectively with existing drugs, new treatment methods and new technologies, we may be unable to commercialize successfully any drugs that we develop.

The pharmaceutical market is intensely competitive and rapidly changing. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations are pursuing the development of novel drugs for the same diseases that we are targeting or expect to target. Many of our competitors have:

We will face intense competition from drugs that have already been approved and accepted by the medical community for the treatment of the conditions for which we may develop drugs. We also expect to face competition from new drugs that enter the market. We believe a significant number of drugs are currently under development, and may become commercially available in the future, for the treatment of conditions that our current or future product candidates are or may be designed to treat. These drugs may be more effective, safer, less expensive, or marketed and sold more effectively, than any products we develop.

Our competitors may develop or commercialize products with significant advantages over any products we are able to develop and commercialize based on many different factors, including:

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Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business. Competitive products may make any products we develop obsolete or noncompetitive before we can recover the expenses of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute on our business plan.

If we or our collaborators, manufacturers, service providers or other third parties fail to comply with applicable healthcare laws and regulations, we or they could be subject to enforcement actions, which could affect our ability to develop, market and sell our products and may harm our reputation.

We are currently, or may in the future, be subject to federal, state, local, and comparable foreign healthcare laws and regulations relating to areas such as fraud and abuse and patients’ rights. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our products for which we obtain marketing approval. These laws and regulations include:

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If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, criminal prosecution, monetary damages, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in federal healthcare programs including Medicare and Medicaid, the imposition of a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services, disgorgement, individual imprisonment, contractual damages, reputational harm, and diminished profits and future earnings, any of which could adversely affect our financial results and adversely affect our ability to operate our business. We intend to develop and implement a comprehensive corporate compliance program prior to the commercialization of our product candidates. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.

If we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our products successfully and could harm our reputation and lead to reduced acceptance of our products by the market. These enforcement actions include, among others:

Moreover, federal, state or foreign laws or regulations are subject to change, and while we, our collaborators, manufacturers and/or service providers currently may be compliant, that could change due to changes in interpretation, prevailing industry standards or other reasons.

Any drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business.

Because our product candidates represent new approaches to the treatment of genetic-based diseases, we cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, our product candidates or assure that coverage and reimbursement will be available for any product that we may develop. The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. We are monitoring these regulations as several of our programs move into later stages of development; however, many of our programs are currently in the earlier stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that could delay our commercial launch of the product and negatively impact any potential revenues we may be able to generate from the sale of the product in that country and potentially in other countries due to reference pricing.

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Our ability to commercialize any products successfully will also depend in part on the extent to which coverage and adequate reimbursement/payment for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Even if we succeed in bringing one or more products to the market, these products may not be considered medically necessary and/or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. At this time, we are unable to determine their cost effectiveness or the likely level or method of reimbursement for our product candidates. Increasingly, third-party payors, such as government and private insurance plans, are requiring that drug companies provide them with predetermined discounts from list prices, and are seeking to reduce the prices charged or the amounts paid for pharmaceutical products. If the price we are able to charge for any products we develop, or the payments provided for such products, is inadequate in light of our development and other costs, our return on investment could be adversely affected.

We currently expect that any drugs we develop may need to be administered under the supervision of a physician on an outpatient basis. Under currently applicable U.S. law, certain drugs that are not usually self-administered (such as most injectable drugs) may be eligible for coverage under the Medicare Part B program if:

There may be significant delays in obtaining coverage for newly-approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to pay all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and payment is adequate to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate payment is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Moreover, eligibility for coverage does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement may be based on payments allowed for lower-cost drugs that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. However, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for new drugs that we develop and for which we obtain regulatory approval could adversely affect our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the United States and other major healthcare markets have been proposed and/or adopted in recent years, and such efforts have expanded substantially in recent years. These developments have included prescription drug benefit legislation that was enacted in 2003 and took effect in January 2006, healthcare reform legislation enacted by certain states, and major healthcare reform legislation that was passed by Congress and enacted into law in the United States in 2010. These developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price.

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In particular, in March 2010, the Patient Protection and Affordable Care Act (the “ACA”), was signed into law. This legislation changed the system of healthcare insurance and benefits and was intended to broaden access to healthcare coverage, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the healthcare industry, impose health policy reforms, and control costs. This law also contains provisions that would affect companies in the pharmaceutical industry and other healthcare related industries by imposing additional costs and changes to business practices. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA. Both Congress and the Trump Administration have expressed their intention to repeal or repeal and replace the ACA, and as a result, certain sections of the ACA have not been fully implemented or effectively repealed. The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels, may lead to uncertainty or delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales. We continue to evaluate the effect that the ACA has or any potential changes to the ACA could have on our business. Additional federal and state legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing and reimbursement. Such reforms could have an adverse effect on anticipated revenues from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

Our ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.

Other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction (Joint Select Committee) to recommend to Congress proposals in spending reductions. The failure of Congress to enact deficit reduction measures of at least $1.2 trillion for the years 2013 through 2021 triggered the legislation’s automatic reduction to several government programs. These cuts included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013, and will stay in effect through 2024 unless additional Congressional action is taken. Additionally, under the American Taxpayer Relief Act of 2012, which was enacted on January 1, 2013, the imposition of these automatic cuts was delayed until March 1, 2013. As required by law, President Obama issued a sequestration order on March 1, 2013. Certain of these automatic cuts have been implemented resulting in reductions in Medicare payments to physicians, hospitals, and other healthcare providers, among other things. The full impact on our business of these automatic cuts is uncertain.

If other federal spending is reduced, any budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or National Institutes of Health to continue to function. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.

Changes in laws and regulations affecting the healthcare industry could adversely affect our business.

All aspects of our business, including research and development, manufacturing, marketing, pricing, sales, litigation, and intellectual property rights, are subject to extensive legislation and regulation. Changes in applicable federal and state laws and agency regulation could have a materially negative impact on our business. These include changes in the FDA and foreign regulatory processes for new therapeutics that may delay or prevent the approval of any of our current or future product candidates; new laws, regulations, or judicial decisions related to healthcare availability or the payment for healthcare products and services, including prescription drugs, that would make it more difficult for us to market and sell products once they are approved by the FDA or foreign regulatory agencies; changes in FDA and foreign regulations that may require additional safety monitoring prior to or after the introduction of new products to market, which could materially increase our costs of doing business; and changes in FDA and foreign cGMPs that may make it more difficult and costly for us to maintain regulatory compliance and/or manufacture our marketed product and product candidates in accordance with cGMPs.

The current U.S. administration and Congress could carry out significant changes in legislation, regulation, and government policy, as evidenced by statements and recent actions of the current president. While it is not possible to predict whether and when any such changes will occur, changes in the laws, regulations, and policies governing the development and approval of our product candidates and the commercialization, importation, and reimbursement of our products could adversely affect our business. The full effects of any U.S. healthcare reform legislation cannot be known until the law is fully implemented through regulations or guidance issued by the CMS and other federal and state healthcare agencies. The financial impact of the U.S. healthcare reform legislation over the next few years will depend on several factors, including, but not limited, to the policies reflected in implementing regulations and guidance, and changes in sales volumes for products affected by the new system of rebates, discounts and fees.

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Risks associated with our operations outside of the United States and developments in international trade by the U.S. and foreign governments could adversely affect our business.

We have operations and conduct business outside the United States and we plan to continue to expand these operations. Therefore, we are subject to risks related to operating in foreign countries, which include unfamiliar foreign laws or regulatory requirements or unexpected changes to those laws or requirements; other laws and regulatory requirements to which our business activities abroad are subject, such as the Foreign Corrupt Practices Act and the UK Bribery Act; changes in the political or economic condition of a specific country or region; fluctuations in the value of foreign currency versus the U.S. dollar; our ability to deploy overseas funds in an efficient manner; tariffs, trade protection measures, import or export licensing requirements, trade embargoes, and sanctions (including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury), and other trade barriers; difficulties in attracting and retaining qualified personnel; and cultural differences in the conduct of business. For example, given the recent developments related to international trade, unexpected changes in tariffs could adversely affect our cost of goods sold and/or the foreign sales of our product candidates. Further complicating potential uncertainties caused by conducting business outside the United States are recent political movements that are changing decades-old institutions, including, for example, in 2016, the United Kingdom held a referendum in which voters approved an exit from the EU, commonly referred to as “Brexit.” As a result of the referendum, the British government is negotiating the terms of the United Kingdom's future relationship with the EU. A substantial amount of uncertainty remains regarding the outcome of the ongoing negotiations, particularly in light of the near-term deadline. We do not know to what extent Brexit will impact the business and regulatory environment in the United Kingdom, the rest of the EU, or other countries. Changes impacting our ability to conduct business in the United Kingdom or other EU countries, or changes to the regulatory regime applicable to our operations in those countries (such as with respect to the approval of our product candidates), may materially and adversely impact our business, prospects, operating results, and financial condition. Given the lack of comparable precedent, it is unclear what financial, trade, regulatory and legal implications the withdrawal of the United Kingdom from the EU would have and how such withdrawal would affect us. Any of these effects of Brexit, among others, could adversely affect our business, financial condition and operating results.

There is a substantial risk of product liability claims in our business. If we are unable to obtain or maintain sufficient insurance, a product liability claim against us could adversely affect our business.

Our business exposes us to significant potential product liability risks that are inherent in the development, testing, manufacturing and marketing of human therapeutic products. Product liability claims could delay or prevent completion of our clinical development programs. In addition, if any of our collaboration partners face product liability claims, our programs could also be affected and our business could be harmed. If we succeed in marketing products, such claims could result in an FDA investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs, and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our share price. Any insurance we obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain or maintain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could adversely affect our business.

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research, development and manufacturing processes involve the use of hazardous materials, chemicals and various radioactive compounds. We maintain quantities of various flammable and toxic chemicals in our facilities that are required for our research, development and manufacturing activities. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe our procedures for storing, handling and disposing of these materials comply with the relevant guidelines and laws of the jurisdictions in which our facilities are located. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate any of, these laws or regulations.

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Risks Related to Our Dependence on Third Parties

We depend on collaborations with third parties for the development and commercialization of certain of our product candidates.

We depend on third-party collaborators for the co-development and co-commercialization of certain of our product candidates and we face significant competition to the extent we elect to collaborate with others. Our potential future collaborators include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. In April 2018, we commenced a collaboration with Takeda to discover, develop and commercialize nucleic acid therapies, or oligonucleotides, for disorders of the CNS. The collaboration provides Takeda with the option to globally co-develop and commercialize programs targeting HD, ALS, FTD, and SCA3, which we will have the right to co-commercialize in the United States. In addition, Takeda will have the right to exclusively license multiple preclinical programs for CNS disorders, including Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). In May 2016, we entered into a collaboration with Pfizer focused on the advancement of genetically defined targets for the treatment of metabolic diseases, bringing together PRISM, our proprietary discovery and drug development platform, across antisense and single-stranded RNAi modalities, along with GalNAc and Pfizer’s hepatic targeting technology for delivery to the liver. Under the terms of the agreement, Pfizer has selected five targets, including Apolipoprotein C-III (APOC3), which is the maximum number of targets that Pfizer may select under the terms of the agreement. We will advance five targets from discovery through the selection of clinical candidates, at which point Pfizer may elect to exclusively license the programs and undertake further development and potential commercialization. Collaborations are complex and time-consuming to negotiate and document. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. We may also be restricted under existing license or collaboration agreements from entering into agreements on certain terms with other potential collaborators. If we are unable to enter into collaborations with respect to a product candidate, we may have to curtail the development of such product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

Depending on the type of collaborations we enter into, we may have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates may pose the following risks to us:

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Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. Further, if a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.

We may not be able to execute our business strategy optimally if we are unable to maintain our existing collaborations or enter into new collaborations with partners that can provide sales, marketing and distribution capabilities and funds for the development and commercialization of our product candidates.

We do not currently have any sales and marketing or distribution capabilities. Accordingly, we have entered into a collaboration with Takeda in CNS, which we believe can assist us in building these capabilities. We may also enter into additional alliances in the future. We have selectively chosen to enter into a collaboration in the field of CNS with Takeda and for certain hepatic targets with Pfizer. We have chosen these two partners because we believe this is the optimal way for us to leverage our resources and create significant value for ourselves and our shareholders, as we advance oligonucleotide candidates for genetically defined diseases.

Depending on the collaborations that we enter into, we may expect our collaborators to provide assistance with development, regulatory affairs, marketing, sales and distribution, among other areas. Our future revenues may depend heavily on the success of the efforts of these third parties. For example, under our collaboration with Takeda, if Takeda exercises its option with respect to any of our programs in HD, ALS, FTD or SCA3, we will rely on Takeda for commercialization of such optioned programs outside of the United States. In addition, Takeda will be solely responsible for the potential commercialization of additional to-be-identified preclinical CNS programs globally based on targets that Takeda identifies.

We may not be successful in our collaborations due to various factors, including our ability to successfully demonstrate proof of mechanism in humans, our ability to demonstrate the safety and efficacy of our specific product candidates, our ability to manufacture or have third parties manufacture our product candidates, the strength of our intellectual property and/or concerns about potential challenges to or limitations of our intellectual property. To the extent we have entered into, or enter into new, collaborations, we may not be able to maintain them if, for example, development or approval of a product candidate is delayed, challenges are raised as to the validity or scope of our intellectual property or sales of an approved drug are lower than we or our collaboration partner expected.

For certain product candidates that we may develop, we have formed collaborations to fund all or part of the costs of drug development and commercialization, such as our collaboration with Takeda. We may not, however, be able to enter into additional collaborations for certain other programs, and the terms of any collaboration agreement we do secure may not be favorable to us. If we are not successful in our efforts to enter into future collaboration arrangements with respect to one or more of our product candidates, we may not have sufficient funds to develop that or any other product candidate internally, or to bring any product candidates to market. If we do not have sufficient funds to develop and bring our product candidates to market, we will not be able to generate sales revenues from these product candidates, and this will substantially harm our business.

We rely, and expect to continue to rely, on third parties to conduct some aspects of our compound formulation, research, preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such formulation, research or testing.

We do not independently conduct all aspects of our drug discovery activities, compound formulation research, preclinical studies, or clinical trials of product candidates. We currently rely, and expect to continue to rely, on third parties to conduct some aspects of our research and development and preclinical studies. Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, for product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our studies that support our clinical trial applications and our clinical trials are conducted in accordance with the study plan and protocols for the trial. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us or our strategic alliance partners to select viable product candidates for clinical trial application submissions and will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.

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If any of our research collaborators terminates or fails to perform its obligations under agreements with us, the development and commercialization of our product candidates could be delayed or our business could be otherwise adversely affected.

We are party to research collaboration agreements with certain academic partners, including Dr. Matthew J.A. Wood’s laboratory at the University of Oxford, the University of Dundee, and Dr. Robert H. Brown’s laboratory at the University of Massachusetts Medical School, among others. Our dependence on these research collaborators for select research capabilities means that our business could be adversely affected if any collaborator terminates its collaboration agreement with us or fails to perform its obligations under that agreement. Our current or future research collaborations, if any, may not be scientifically successful. Disputes may arise in the future with respect to the ownership of rights to technology or products developed with collaborators, which could have an adverse effect on our ability to develop and commercialize any affected product candidate.

Our current research collaborations allow, and we expect that any future research collaborations will allow, either party to terminate the collaboration for a material breach by the other party. In addition, our collaborators may have additional termination rights for convenience under certain circumstances. If we were to lose a collaborator, we would have to attract a new collaborator or develop internal research capabilities, which would require us to invest significant amounts of financial and management resources.

In addition, if we have a dispute with a collaborator over the ownership of technology or other matters, or if a collaborator terminates its collaboration with us, for breach or otherwise, or determines not to pursue the research that is the subject of the collaboration, it could delay or prevent the development of our product candidates, result in the need for additional company resources to develop product candidates, make it more difficult for us to attract new collaborators and could adversely affect how we are perceived in the business and financial communities.

We rely on third parties to design, conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.

We rely on third party clinical investigators, contract research organizations (“CROs”), clinical data management organizations and consultants to design, conduct, supervise and monitor preclinical studies and clinical trials of our product candidates. Because we rely on third parties and do not have the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality and other aspects of preclinical studies and clinical trials than we would if we conducted them on our own. These investigators, CROs and consultants are not our employees and we have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. Further, these third parties may not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. The FDA requires clinical trials to be conducted in accordance with good clinical practices, including conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. If we or our CROs fail to comply with these requirements, the data generated in our clinical trials may be deemed unreliable or uninterpretable and the FDA may require us to perform additional clinical trials. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Any such event could adversely affect our business, financial condition, results of operations and prospects.

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We rely on third parties to supply and manufacture our product candidates for our research, preclinical and clinical activities, and may do the same for commercial supplies of our product candidates.

While we are in the process of continuing to build and expand our own internal manufacturing capabilities, we have not yet manufactured our product candidates on a commercial scale, and may not be able to do so for any of our product candidates. We also have limited experience manufacturing any of our products for our preclinical studies and clinical trials. In addition, we currently rely on third parties to supply and manufacture the materials for our research, preclinical and clinical activities and may continue to do so for the foreseeable future. We may do the same for the commercial supply of our drug product. We use third parties to perform additional steps in the manufacturing process, such as the filling, finishing and labeling of vials and storage of our product candidates and we expect to do so for the foreseeable future. There can be no assurance that our supply of research and development, preclinical and clinical development drug candidates and other materials will not be limited, interrupted or restricted or will be of satisfactory quality or continue to be available at acceptable prices. Replacement of any of the third parties we may engage could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, raw materials, reagents, and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available, may not be suitable or acceptable for use due to material or component defects, or may introduce variability into the supply of our product candidates. Furthermore, with the increase of companies developing nucleic acid therapeutics, there may be increased competition for the supply of the raw materials that are necessary to make our oligonucleotides, which could severely impact the manufacturing of our product candidates.

We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and they must be acceptable to the FDA or approved by foreign regulatory authorities. Suppliers and manufacturers, including us, must meet applicable manufacturing requirements, including compliance with cGMP regulations, and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards. In the event that any of our suppliers or manufacturers fail to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, some of which may be out of their or our control, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to increase the manufacturing of the materials ourselves, for which we currently have limited capabilities and resources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. Any interruption of the development or operation of the manufacturing of our product candidates, such as order delays for equipment or materials, equipment malfunction, quality control and quality assurance issues, regulatory delays and possible negative effects of such delays on supply chains and expected timelines for product availability, production yield issues, shortages of qualified personnel, discontinuation of a facility or business or failure or damage to a facility resulting from natural disasters, could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available product candidates or materials. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

We may rely on third party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties which could have a material adverse effect on our business prior to or after commercialization of any of our product candidates. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully. Failure to execute on our manufacturing requirements, either by us or by one of our third-party vendors, could adversely affect our business in a number of ways, including:

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If any of our product candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution capabilities on our own, or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to commercialize successfully any such future products.

Although we are in the process of hiring employees with commercial experience, we currently have no sales, marketing or distribution capabilities. In addition, while our collaboration with Takeda will provide us with know-how and experience related to commercialization, we have limited experience of our own. If any of our product candidates is approved, we will need to develop internal sales, marketing and distribution capabilities to commercialize such products, which would be expensive and time-consuming, or rely on or enter into additional collaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities. If we rely on third parties with such capabilities to market our products or decide to co-promote products with collaborators, we will need to establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into such arrangements on acceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we may receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through third parties, our business, financial condition, results of operations and prospects would be adversely affected.

Risks Related to Managing Our Operations

If we are unable to attract and retain qualified key management and scientists, staff, consultants and advisors, our ability to implement our business plan may be adversely affected.

We are highly dependent upon our senior management and our scientific, clinical and medical staff and advisors. The loss of the service of any of the members of our senior management or other key employees could delay our research and development programs and materially harm our business, financial condition, results of operations and prospects. In addition, we expect that we will continue to have an increased need to recruit and hire qualified personnel as we advance our programs and expand operations. Failure to successfully recruit and retain personnel could impact our anticipated development plans and timelines. We are dependent on the continued service of our technical personnel because of the highly technical and novel nature of our product candidates, platform and technologies and the specialized nature of the regulatory approval process. Replacing such personnel may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully execute our business strategy. Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our management team members or key employees. Our future success will depend in large part on our continued ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in preclinical and clinical testing, manufacturing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. If we are unable to attract and retain qualified personnel, the rate and success at which we may be able to discover and develop our product candidates and implement our business plan will be limited.

As we continue our preclinical studies and clinical trials and advance to further clinical development, we may experience difficulties in managing our growth and expanding our operations.

Although we have assembled a team of employees with experience developing medicines and obtaining regulatory approval to market those medicines, we have limited experience as a company in drug development. Prior to 2017, all of our product candidates were in the preclinical development stage. We are conducting clinical trials of our lead program in DMD targeting exon 51 and our two lead programs in HD. We are advancing three additional development programs, targeting exon 53 in DMD and C9ORF72 in amyotrophic lateral sclerosis and frontotemporal dementia. In addition to neurology, we are advancing discovery research in ophthalmologic disorders, specifically inherited retinal diseases, and in hepatic diseases, and we expect to make continued investments in expanding the breadth of our portfolio. As we advance product candidates through preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these capabilities for us. In addition, we must manage our relationships with collaborators or partners, suppliers and other organizations, including our collaborations with Takeda and Pfizer. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. In addition, our future growth may require significant capital expenditures and may divert financial resources from other projects, such as the development of our product candidates. If we are unable to effectively manage our future growth, our expenses may increase and our ability to generate revenue could be reduced.

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Our employees, consultants and collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud or other misconduct by our employees, consultants and collaborators. Such misconduct could include intentional failures to comply with FDA and other foreign agency regulations, provide accurate information to the FDA, comply with manufacturing standards required by the FDA or that we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we, our CROs and other third parties on which we rely collect and store sensitive data, including legally protected patient health information, personally identifiable information about our employees, intellectual property, and proprietary business information. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business-critical information, including research and development information and business and financial information.

The secure processing, storage, maintenance and transmission of this critical information by us, or our CROs and other third parties, is vital to our operations and business strategy. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure, or that of our CROs or other third parties, may be vulnerable to attacks by hackers, viruses, breaches, interruptions due to employee error, malfeasance or other disruptions, lapses in compliance with privacy and security mandates, or damage from natural disasters, terrorism, war and telecommunication and electrical failures. Any such event could compromise our networks, or that of our CROs or other third parties, and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen.

We have measures in place that are designed to detect and respond to such security incidents and breaches of privacy and security mandates. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the HIPAA, government enforcement actions and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to conduct research and development activities, process and prepare company financial information, manage various general and administrative aspects of our business and damage our reputation, any of which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition, there can be no assurance that we, or our CROs and other third parties, will promptly detect any such disruption or security breach, if at all. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

Numerous federal, state and international laws address privacy, data protection and the collection, storing, sharing, use, disclosure and protection of personally identifiable information and other user data. Numerous states already have, and are looking to expand, data protection legislation. For example, in June 2018, California enacted the California Consumer Privacy Act, which takes effect on January 1, 2020, and will broadly define personal information, give California residents expanded privacy rights and protections and provide for civil penalties for violations and a private right of action for data breaches. Outside the United States, personally identifiable information and other user data is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of information that is collected, processed and transmitted in or from the governing jurisdiction. Foreign data protection, privacy, information security, user protection and other laws and regulations are often more restrictive than those in the United States. In particular, the EU and its member states traditionally have taken broader views as to types of data that are subject to privacy and data protection laws and regulations, and have imposed greater legal obligations on companies in this regard. For example, in April 2016, European legislative bodies adopted the General Data Protection Regulation (“GDPR”), which became effective May 25, 2018. The GDPR applies to any company established in the EU as well as to those outside the EU if they collect and use personal data of EU residents. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used,

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limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of annual worldwide revenue, whichever is higher. While we have taken steps to comply with the GDPR, including reviewing our security procedures, updating our website, revising our clinical trial informed consents, and entering into data processing agreements with relevant contractors, we cannot assure you that our efforts to remain in compliance will be fully successful. The GDPR and other changes in laws or regulations associated with the enhanced protection of personal data may increase our costs of compliance and result in greater legal risks.

Foreign currency exchange rates may adversely affect our results.

Due to our operations outside of the United States, we are exposed to market risk, related to changes in foreign currency exchange rates. Historically, we have not hedged our foreign currency exposure. Changes in the relative values of currencies occur regularly and, in some instances, could materially adversely affect our business, our financial condition, the results of our operations or our cash flows.

For the years ended December 31, 2018, 2017 and 2016, changes in foreign currency exchange rates did not have a material impact on our historical financial position, our business, our financial condition, the results of our operations or our cash flows. A hypothetical 10% change in foreign currency rates would not have a material impact on our historical financial position or results of operations. However, there can be no assurance that changes in foreign currency exchange rates will not have a material adverse impact on us in the future.

The effects of the enacted Tax Cuts and Jobs Act could adversely affect our business and financial conditions.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”) that significantly reforms the Internal Revenue Code of 1986, as amended. The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. These changes and other aspects of the Tax Act are still subject to interpretation and clarification. We cannot predict the timing or impacts of any future Tax Act modifications or changes in tax laws, including the effect of any subsequent technical corrections or clarifications. Increases in tax rates or modifications and changes in tax laws, including the Tax Act, could materially and adversely affect our business and financial conditions.

Inadequate funding for the FDA, the SEC and other government agencies, or a work slowdown or stoppage at those agencies as part of a broader federal government shutdown, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown recurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

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Risks Related to Our Intellectual Property

If we are not able to obtain and enforce market exclusivity for our technologies or product candidates, development and commercialization of our product candidates may be adversely affected.

In our industry, the majority of an innovative product’s commercial value is usually realized during the period in which it has market exclusivity. Market exclusivity is comprised of both patent and other intellectual property protection, as well as regulatory exclusivity. In the United States and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there usually are very substantial and rapid declines in the product’s sales. Accordingly, our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including trademarks, trade secrets and in-licenses of intellectual property rights of others, for our product candidates and platform technologies, methods used to manufacture our product candidates, methods of patient stratification and methods for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. We may not be able to apply for patents or obtain patent protection on certain aspects of our product candidates or our platform in a timely fashion or at all. Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that any of our issued or granted patents will not later be found to be invalid or unenforceable, or that any issued or granted patents will include claims that are sufficiently broad to cover our product candidates, our platform technologies, or any methods relating to them, or to provide meaningful protection from our competitors. Moreover, the patent position of biotechnology and pharmaceutical companies can be highly uncertain and involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely impact our position in the market.

Legal issues related to the patentability of biopharmaceuticals, and methods of their manufacture and use, are complex and uncertain in some countries. In some countries, applicants are not able to protect methods of treating human beings or medical treatment processes. Intellectual property protection varies throughout the world and is subject to change over time. Jurisdictions such as India, Mexico, China, Europe and others have enacted various rules and laws precluding issuance of patents encompassing any methods a doctor may practice on a human being or any other animal to treat a disease or condition. Further, many countries have enacted laws and regulatory regimes that do not allow patent protection for methods of use of known compounds. Particularly given that some of our product candidates may represent stereopure versions of previously described oligonucleotides, it may be difficult or impossible to obtain patent protection for them in relevant jurisdictions. Thus, in some countries and jurisdictions, it may not be possible to patent some of our product candidates at all. In some countries and jurisdictions, only composition claims may be obtained, and only when those compositions are or contain compounds that are new and/or novel. Also, patents issued with composition claims (i.e., covering product candidates) cannot always be enforced to protect methods of using those compositions to treat or diagnose diseases or medical conditions. In such countries or jurisdictions, enforcement of patents to protect our product candidates, or their uses, may be difficult or impossible. Lack of patent protection in such cases may have a materially adverse effect on our business and financial condition.

Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates, their manufacture or their use might expire before or shortly after those candidates receive regulatory approval and are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We expect to seek extensions of patent terms where these are available upon regulatory approval in those countries where we are prosecuting patents. This includes in the United States under the Drug Price Competition and Patent Term Restoration Act of 1984, which permits a patent term extension of up to five years beyond the expiration of the patent. However, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be possible.

The U.S. Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent prosecution process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, or loss of right to enforce patent claims, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not uniform, can vary substantially from country to country, and are not always applied predictably, requiring country-specific patent expertise in each jurisdiction in which patent protection is sought. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary products and technologies. While we will endeavor to try to protect our product candidates and platform technology with intellectual property rights such as patents, as appropriate, the process of filing and prosecuting patent applications, and obtaining, maintaining and defending patents is time-consuming, expensive, uncertain, and sometimes unpredictable.

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In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the America Invents Act, enacted within the last several years, involves significant changes in patent legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, some of which cases either narrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. The recent decision by the U.S. Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence which is identical to a sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because we are developing oligonucleotides which contain modifications that we believe are not found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannot make assurances that the interpretations of this decision or subsequent rulings will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims attacked or may lose the allowed or granted claims altogether. In addition, there can be no assurance that:

We license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected.

We license patent rights from third parties that we may use from time to time to protect certain aspects of our technology and programs. We may license additional third-party intellectual property in the future. To the extent that we use, and ultimately rely on, in-licensed technologies in our platform and our programs, our success will depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for those in-licensed technologies. Our licensors may not successfully prosecute the patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue litigation less aggressively than we would. Further, we may not obtain exclusive rights, which would allow for third parties to develop competing products. Without protection for, or exclusive right to, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, we may sublicense our rights under our third-party licenses to current or future collaborators or any future strategic partners. Any impairment of these sublicensed rights could result in reduced revenue under any future collaboration agreements we may enter into or result in termination of an agreement by one or more of our current or future collaborators or any future strategic partners.

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Certain third parties have rights in the patents related to single-stranded oligonucleotides that could allow them to develop, market and sell product candidates in competition with ours.

Our in-license of patent rights from Max Planck is one of two maximum allowable co-exclusive licenses for the patents that are the subject of the license, the other of which is currently held by Ionis Pharmaceuticals, Inc. (“Ionis”). We therefore do not have rights under this license to prevent Ionis from developing product candidates in competition with ours. In addition, the German and U.S. governments have certain rights to the inventions covered by the patent rights and Max Planck, as an academic research and medical center, has the right to practice the licensed patent rights for educational, research and clinical uses. If a third party develops, manufactures, markets and sells any product covered by the same patent rights and technologies that compete with ours, it could significantly undercut the value of any of our product candidates that rely on the patent rights under that license, which would materially adversely affect our revenue, financial condition and results of operations.

Other companies or organizations may challenge our or our licensors’ patent rights or may assert patent rights that prevent us from developing and commercializing our products.

Nucleic acid therapeutics is a relatively new scientific field, the commercial exploitation of which has resulted in many different patents and patent applications from organizations and individuals seeking to obtain patent protection in the field. We have obtained grants and issuances of patents in this field. The issued patents and pending patent applications in the U.S. and in key markets around the world that we own or license claim certain methods, compositions and processes relating to the discovery, development, manufacture and/or commercialization of oligonucleotides and/or our platform.

As the field of oligonucleotides matures, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents will issue, and, if they do, as to when, to whom, and with what claims. It is likely that there will be significant litigation in the courts and other proceedings, such as interference, reexamination and opposition proceedings, in various patent offices relating to patent rights in the oligonucleotides field. In many cases, the possibility of appeal or opposition exists for either us or our opponents, and it may be years before final, unappealable rulings are made with respect to these patents in certain jurisdictions. The timing and outcome of these and other proceedings is uncertain and may adversely affect our business, particularly if we are not successful in defending the patentability and scope of our pending and issued patent claims or if third parties are successful in obtaining claims that cover any of our product candidates or our platform. In addition, third parties may attempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, invalidated or circumvented, disputes could lead to the weakening of our intellectual property rights. Our defense against any attempt by third parties to challenge, invalidate, circumvent or weaken our intellectual property rights could be costly to us, could require significant time and attention of our management and could adversely affect our business and our ability to successfully compete in the field of oligonucleotides.

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

Obtaining a valid and enforceable issued or granted patent covering our technology in the United States and worldwide can be extremely costly. In jurisdictions where we have not obtained patent protection, competitors may use our technology to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where it is more difficult to enforce a patent as compared to the United States. Competitor products may compete with our future products in jurisdictions where we do not have issued or granted patents or where our issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularly relating to biopharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing products in violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

We generally file a provisional patent application first (a priority filing) at the USPTO. A Patent Cooperation Treaty (“PCT”) application is usually filed within 12 months after the priority filing. Regional and/or national patent applications may be pursued outside of the United States, either based on a PCT application or as a direct filing, in some cases claiming priority to a prior U.S. or PCT filing. Some of our cases have been filed in, for example, Argentina, Australia, Brazil, Canada, Chile, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Malaysia, New Zealand, South Korea, Mexico, Russia, Singapore, South Africa, Taiwan, United Arab Emirates, and Venezuela. We also commonly enter the national stage in the United States through a PCT filing. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities, while granted by others. It is also quite common that depending on the country, different scopes of patent protection may be granted on the same product or technology.

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The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties, allowing competitors to manufacture and sell their own versions of our product, thereby reducing our sales. In addition, many countries do not permit enforcement of patents, or limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such a patent. If we or any of our licensors, collaborators or present or future partners are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and results of operations may be adversely affected.

The requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States, there is no link between regulatory approval of a drug and its patent status. Furthermore, generic or biosimilar drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ or collaborators’ patents, requiring us or our licensors or collaborators to engage in complex, lengthy and costly litigation or other proceedings. Generic or biosimilar drug manufacturers may develop, seek approval for, and launch generic versions of our products. In addition to India, certain countries in Europe and developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors or collaborators may have limited remedies if patents are infringed or if we or our licensors or collaborators are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors’ and collaborators’ efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

We or our licensors, collaborators or any future strategic partners may become subject to third party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly and time consuming, or delay or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights at risk.

We or our licensors, collaborators or any future strategic partners may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors or collaborators for damages arising from intellectual property infringement by us. If we or our licensors, collaborators or any future strategic partners are found to infringe a third-party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our licensors, collaborators or any future strategic partners may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or our collaborator, or any future collaborator, may be unable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.

If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, lack of written disclosure, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal allegations of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platform technology. Such a loss of patent protection could negatively impact our business. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.

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Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.

Because the oligonucleotide intellectual property landscape is still evolving and our product candidates have not yet reached commercialization, it is difficult to conclusively assess our freedom to operate. There are numerous companies that have pending patent applications and issued patents directed to certain aspects of oligonucleotides. We are aware of third party competitors in the oligonucleotide therapeutics space, whose patent filings and/or issued patents may include claims directed to targets and/or products related to some of our programs. It is possible that at the time that we commercialize our products these third-party patent portfolios may include issued patent claims that cover our products or critical features of their production or use. Our competitive position may suffer if patents issued to third parties or other third party intellectual property rights cover, or may be alleged to cover, our products or elements thereof, or methods of manufacture or use relevant to our development plans. In such cases, we may not be in a position to develop or commercialize product candidates unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms.

It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. applications filed before November 29, 2000, and certain U.S. applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing date for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our products or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our products or the use of our products. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in marketing our products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might, if possible, also be forced to redesign product candidates so that we no longer infringe the third party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

If we fail to comply with our obligations under any license, collaboration or other agreement, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates, or we could lose certain rights to grant sublicenses.

There are many issued patents and/or pending patent applications that claim aspects of oligonucleotide compositions, chemistry and/or modifications that we may want or need to apply to our product candidates. There are also many issued patents and/or pending patent applications that claim targeted genes or portions of genes that may be relevant for the oligonucleotides we wish to develop. We are aware of third-party competitors in the oligonucleotide therapeutics space whose patent filings and/or issued patents may include claims directed to targets and/or product candidates related to some of our development programs. It is possible that these third-party patent portfolios may include issued patent claims that cover our product candidates or critical features of their production or use. Thus, it is possible that one or more organizations will hold patent rights to which we will need or want a license. If those organizations refuse to grant us a license to such patent rights on reasonable terms, or at all, we may not be able to market products or perform research and development or other activities covered by these patents.

Our technology licenses and any future licenses we enter into are likely to impose various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and/or other obligations on us. If we breach any of these imposed obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture and sell products that are covered by the licensed technology or enable a competitor to gain access to the licensed technology. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize products, we may be unable to achieve or maintain profitability.

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

In addition to seeking patent protection for certain aspects of our product candidates, we also consider trade secrets, including confidential and unpatented know-how, improvements and technological innovation important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, improvements and technological innovation, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.

Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent us from commercializing, our product candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our trademarks or trade names may be infringed, challenged, invalidated, circumvented, weakened or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Our Being a Singapore Company

We are a Singapore incorporated company and it may be difficult to enforce a judgment of U.S. courts for civil liabilities under U.S. federal securities laws against us, our directors or officers in Singapore.

We are incorporated under the laws of the Republic of Singapore, and certain of our directors are residents outside the United States. Moreover, a significant portion of our consolidated assets are located outside the United States. Although we are incorporated outside the United States, we have agreed to accept service of process in the United States through our agent designated for that purpose. Nevertheless, because a majority of the consolidated assets owned by us are located outside the United States, any judgment obtained in the United States against us may not be enforceable within the United States.

There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would, therefore, not be automatically enforceable in Singapore. There is uncertainty as to whether judgments of courts in the United States based upon the civil liability provisions of the federal securities laws of the United States would be recognized or enforceable in Singapore. In addition, holders of book-entry interests in our shares will be required to be registered shareholders as reflected in our shareholder register in order to have standing to bring a shareholder action and, if successful, to enforce a foreign judgment against us, our directors or our executive officers in the Singapore courts. The administrative process of becoming a registered holder could result in delays prejudicial to any legal proceedings or enforcement action. Consequently, it may be difficult for investors to enforce against us, our directors or our officers in Singapore judgments obtained in the United States which are predicated upon the civil liability provisions of the federal securities laws of the United States.

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We are incorporated in Singapore and our shareholders may have more difficulty in protecting their interests than they would as shareholders of a corporation incorporated in the United States.

Our corporate affairs are governed by our constitution and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of the members of our board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States. Principal shareholders of Singapore companies do not owe fiduciary duties to minority shareholders, as compared, for example, to controlling shareholders in corporations incorporated in Delaware. Our public shareholders may have more difficulty in protecting their interests in connection with actions taken by our management, members of our board of directors or our principal shareholders than they would as shareholders of a corporation incorporated in the United States.

In addition, only persons who are registered as shareholders in our shareholder register are recognized under Singapore law as shareholders of our company. Only registered shareholders have legal standing to institute shareholder actions against us or otherwise seek to enforce their rights as shareholders. Investors in our shares who are not specifically registered as shareholders in our shareholder register (for example, where such shareholders hold shares indirectly through the Depository Trust Company) are required to become registered as shareholders in our shareholder register in order to institute or enforce any legal proceedings or claims against us, our directors or our executive officers relating to shareholder rights. Holders of book-entry interests in our shares may become registered shareholders by exchanging their book-entry interests in our shares for certificated shares and being registered in our shareholder register. Such process could result in administrative delays which may be prejudicial to any legal proceeding or enforcement action.

We are subject to the laws of Singapore, which differ in certain material respects from the laws of the United States.

As a company incorporated under the laws of the Republic of Singapore, we are required to comply with the laws of Singapore, certain of which are capable of extra-territorial application, as well as our constitution. In particular, we are required to comply with certain provisions of the Securities and Futures Act of Singapore (Cap 289) (the “SFA”), which prohibit certain forms of market conduct and information disclosures, and impose criminal and civil penalties on corporations, directors and officers in respect of any breach of such provisions. We are also required to comply with the Singapore Code on Take-Overs and Mergers (the “Singapore Takeover Code”), which specifies, among other things, certain circumstances in which a general offer is to be made upon a change in effective control, and further specifies the manner and price at which voluntary and mandatory general offers are to be made.

The laws of Singapore and of the United States differ in certain significant respects. The rights of our shareholders and the obligations of our directors and officers under Singapore law (including under the Companies Act of Singapore (Cap 50) (the “Singapore Companies Act”) are different from those applicable to a company incorporated in the State of Delaware in material respects, and our shareholders may have more difficulty and less clarity in protecting their interests in connection with actions taken by our management, members of our board of directors or our controlling shareholders than would otherwise apply to a company incorporated in the State of Delaware.

The application of Singapore law, in particular, the Singapore Companies Act may, in certain circumstances, impose more restrictions on us and our shareholders, directors and officers than would otherwise be applicable to a company incorporated in the State of Delaware. For example, the Singapore Companies Act requires directors to act with a reasonable degree of diligence and, in certain circumstances, imposes criminal liability for specified contraventions of particular statutory requirements or prohibitions. In addition, pursuant to the provisions of the Singapore Companies Act, shareholders holding 10% or more of the total number of paid-up shares carrying the right of voting in general meetings may require the convening of an extraordinary general meeting of shareholders by our directors. If our directors fail to comply with such request within 21 days of the receipt thereof, the original requisitioning shareholders, or any of them holding more than 50% of the voting rights represented by the original requisitioning shareholders, may proceed to convene such meeting, and we will be liable for the reasonable expenses incurred by such requisitioning shareholders. We are also required by the Singapore Companies Act to deduct such corresponding amounts from fees or other remuneration payable by us to such non-complying directors.

We are subject to the Singapore Takeover Code, which requires a person acquiring 30% or more of our voting shares to conduct a takeover offer for all of our voting shares. This could have the effect of discouraging, delaying or preventing a merger or acquisition and limit the market price of our ordinary shares.

We are subject to the Singapore Takeover Code. The Singapore Takeover Code contains provisions that may delay, deter or prevent a future takeover or change in control of our company and limit the market price of our ordinary shares for so long as we remain a public company with more than 50 shareholders and net tangible assets of S$5 million (Singapore dollars) or more. For example, under the Singapore Takeover Code, any person acquiring, whether by a series of transactions over a period of time or not, either on such persons own or together with parties acting in concert with such person, 30% or more of our voting shares, or if such person holds, either on such person’s own or together with parties acting in concert with such person, between 30% and 50% (both inclusive)

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of our voting shares, and if such person (or parties acting in concert with such person) acquires additional voting shares representing more than 1% of our voting shares in any six-month period, must, except with the consent of Securities Industry Council in Singapore, extend a takeover offer for our remaining voting shares in accordance with the Singapore Takeover Code. Therefore, any investor seeking to acquire a significant stake in our company may be deterred from doing so if, as a result, such investor would be required to conduct a takeover offer for all of our voting shares.

These same provisions could discourage potential investors from acquiring a stake or making a significant investment in our company and may substantially impede the ability of our shareholders to benefit from a change of effective control and, as a result, may adversely affect the market price of our ordinary shares and the ability to realize any benefits from a potential change of control.

For a limited period of time, our directors have general authority to allot and issue new ordinary shares on terms and conditions and for such purposes as may be determined by our board of directors in its sole discretion.

Under Singapore law, we may only allot and issue new shares with the prior approval of our shareholders in a general meeting. At our most recent annual general meeting of shareholders, our shareholders provided our directors with a general authority, subject to the provisions of the Singapore Companies Act and our constitution, to allot and issue any number of new ordinary shares and/or make or grant offers, agreements, options or other instruments (including the grant of awards or options pursuant to our equity-based incentive plans and agreements in effect from time to time) that might or would require ordinary shares to be allotted and issued (collectively, the “Instruments”); and unless revoked or varied by the Company in a general meeting, such authority will continue in force until the earlier of (i) the conclusion of our next annual general meeting of shareholders, or (ii) the expiration of the period within which our next annual general meeting of shareholders is required by law to be held. Subject to the general requirements of the Singapore Companies Act and our constitution, the general authority given to our directors by our shareholders to allot and issue ordinary shares and/or make or grant the Instruments may be exercised by our directors on such terms and conditions, for such purposes and for consideration as they may in their sole discretion deem fit, and with such rights or restrictions as they may think fit to impose and as are set forth in our constitution. Any additional issuances of new ordinary shares and/or any grant of the Instruments by our directors may dilute our shareholders’ interests in our ordinary shares and/or adversely impact the market price of our ordinary shares.

We may be or become a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders.

The rules governing passive foreign investment companies (“PFICs”) can have adverse effects for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income. The determination of whether we are a PFIC depends on the particular facts and circumstances (such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected by the application of the PFIC rules, which are subject to differing interpretations. The fair market value of our assets is expected to relate, in part, to (a) the market price of our ordinary shares and (b) the composition of our income and assets, which will be affected by how, and how quickly, we spend any cash that is raised in any financing transaction. Moreover, our ability to earn specific types of income that we currently treat as non-passive for purposes of the PFIC rules is uncertain with respect to future years. Based on the current and anticipated value of our assets and the composition of our income and assets, we do not expect to be treated as a PFIC for our current taxable year ending December 31, 2019; however, there can be no assurance that we will not be considered a PFIC for any future taxable year.

If we are a PFIC, a U.S. Holder (defined below) would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. A U.S. Holder may in certain circumstances mitigate adverse tax consequences of the PFIC rules by filing an election to treat the PFIC as a qualified electing fund (“QEF”) or, if shares of the PFIC are “marketable stock” for purposes of the PFIC rules, by making a mark-to-market election with respect to the shares of the PFIC. We do not intend to comply with the reporting requirements necessary to permit U.S. Holders to elect to treat us as a QEF. If a U.S. Holder makes a mark-to-market election with respect to its ordinary shares, the U.S. Holder is required to include annually in its U.S. federal taxable income an amount reflecting any year end increase in the value of its ordinary shares. For purposes of this discussion, a “U.S. Holder” is a beneficial owner of ordinary shares that is for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust (a) if a court within the U.S. can exercise primary supervision over its administration, and one or more U.S. persons have the authority to control all of the substantial decisions of that trust, or (b) that was in existence on August 20, 1996, and validly elected under applicable Treasury Regulations to continue to be treated as a domestic trust.

Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to the ordinary shares.

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Singapore taxes may differ from the tax laws of other jurisdictions.

Prospective investors should consult their tax advisors concerning the overall tax consequences of purchasing, owning and disposing of our shares. Singapore tax law may differ from the tax laws of other jurisdictions, including the United States.

We may become subject to unanticipated tax liabilities.

We are incorporated under the laws of Singapore. We are, however, subject to income, withholding or other taxes in certain jurisdictions by reason of our activities and operations, and it is also possible that tax authorities in any such jurisdictions could assert that we are subject to greater taxation than we currently anticipate. Any such non-Singaporean tax liability could materially adversely affect our results of operations.

Tax authorities could challenge the allocation of income and deductions among our subsidiaries, which could increase our overall tax liability. We are organized in Singapore, and we currently have subsidiaries in the United States, Japan, the United Kingdom, and Ireland. As we grow our business, we expect to conduct increased operations through our subsidiaries in various jurisdictions. If two or more affiliated companies are located in different jurisdictions, the tax laws or regulations of each country generally will require transactions between those affiliated companies to be conducted on terms consistent with those between unrelated companies dealing at arms’ length, and appropriate documentation generally must be maintained to support the transfer prices. We maintain our transfer pricing policies to be compliant with applicable transfer pricing laws, but our transfer pricing procedures are not binding on applicable tax authorities.

If tax authorities were to successfully challenge our transfer pricing, there could be an increase in our overall tax liability, which could adversely affect our financial condition, results of operations and cash flows. In addition, the tax laws in the jurisdictions in which we operate are subject to differing interpretations. Tax authorities may challenge our tax positions, and if successful, such challenges could increase our overall tax liability. In addition, the tax laws in the jurisdictions in which we operate are subject to change. We cannot predict the timing or content of such potential changes, and such changes could increase our overall tax liability, which could adversely affect our financial condition, results of operations and cash flows.

Our financial results reflect the effect of certain tax credits and the operation of certain tax regimes within the United Kingdom. Should these cease to be available, our financial condition, results of operations and cash flows may be adversely impacted.

We benefit from the UK research and development tax credit regime for small and medium sized companies, whereby Wave UK is able to surrender the trading losses that arise from its research and development activities for a payable tax credit of up to approximately 33.4% of eligible research and development expenditures. Expenditures of staff supplied by unconnected third parties are eligible for a cash rebate of up to approximately 21.7%.

We may not be able to continue to claim a payable UK tax credit for research and development tax credits in the future due to changes in legislation or regulations, or if we increase our personnel and expand our business because we may no longer qualify as a small or medium-sized enterprise.

Risks Related to Our Ordinary Shares

The public market for our ordinary shares may not be liquid enough for our shareholders to sell their ordinary shares quickly or at market price, or at all.

Prior to the completion of our initial public offering, there was no public market for our ordinary shares. An active trading market for our shares may not develop or be maintained and our shareholders may not be able to sell their ordinary shares quickly or at the market price, or at all. Our executive officers, our directors and their respective affiliates, and our other significant shareholders beneficially own a significant portion of our outstanding ordinary shares, and therefore, liquidity in our ordinary shares is limited. Due to the limited liquidity in our ordinary shares, relatively small orders can have a disproportionate impact on the trading price of our shares. Further, the limited liquidity in our ordinary shares may also impair our ability to raise capital by conducting offerings of our ordinary shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our ordinary shares as consideration.

The market price of our ordinary shares is likely to be highly volatile, and our shareholders may lose some or all of their investment.

The market price of our ordinary shares is likely to be highly volatile, including in response to factors that are beyond our control. The stock market in general experiences extreme price and volume fluctuations. In particular, the market prices of securities of pharmaceutical and biotechnology companies are extremely volatile, and experience fluctuations that are often unrelated or disproportionate to the operating performance of these companies. These broad and sector-specific market fluctuations can result in extreme fluctuations in the price of our ordinary shares, regardless of our operating performance, and can cause our shareholders to lose some or all of their investment in the Company.

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Our principal shareholders and management own a significant percentage of our ordinary shares and will be able to exert significant control over matters subject to shareholder approval.

Based on information publicly available to us as of December 31, 2018, our executive officers, our directors and their respective affiliates, and our other significant shareholders beneficially own a significant portion of our outstanding ordinary shares. As a result, these shareholders, if acting together, will continue to have significant influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transaction. The interests of these shareholders may not be the same as or may even conflict with the interests of our other shareholders. For example, these shareholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other shareholders, which could deprive shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of our company or our assets and might affect the prevailing market price of our ordinary shares. The significant concentration of share ownership may adversely affect the trading price of our ordinary shares due to investors’ perception that conflicts of interest may exist or arise.

We incur significant costs due to operating as a public company, and our management is required to devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses. We are subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Protection Act, as well as rules subsequently adopted by the SEC and the Nasdaq Stock Market. These rules and regulations require, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition and establish and maintain effective disclosure and financial controls and corporate governance practices. We expect that compliance with these rules and regulations will continue to substantially increase our legal and financial compliance costs and will make some activities more time-consuming and costly, particularly as we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“the JOBS Act”). Our management and other personnel will devote a substantial amount of time to these compliance requirements.

As of December 31, 2018, we are no longer an emerging growth company, and we are no longer able to take advantage of the reduced disclosure requirements applicable to emerging growth companies.

As of June 30, 2018, the market value of our ordinary shares that were held by non-affiliates exceeded $700.0 million and therefore, as of December 31, 2018, we no longer qualified as an emerging growth company under the Jumpstart Our Business Startups Act of 2012. On December 31, 2018, we became a large accelerated filer and the reduced disclosure obligations of emerging growth companies are no longer available to us. As an emerging growth company, we had taken advantage of certain exemptions from various reporting requirements that are applicable to other public companies. As a result, we will need to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, beginning with this Annual Report on Form 10-K for the year ended December 31, 2018, will be required to hold a say-on-pay vote and a say-on-frequency vote at our 2019 annual general meeting of shareholders, and will no longer be entitled to provide the reduced executive compensation disclosures permitted by emerging growth companies in this Annual Report on Form 10-K for the year ended December 31, 2018 and our proxy statement for the 2019 annual general meeting of shareholders. We expect that our transition from “emerging growth company” to “large accelerated filer” will require additional attention from management and will result in increased costs to us, which could include higher legal fees, accounting fees and fees associated with investor relations activities, among others.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

We are required to comply with Section 404 of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies to maintain effective internal control over financial reporting. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. In addition, we are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting beginning with this Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. If we fail to maintain the effectiveness of our internal controls or fail to comply in a timely manner with the requirements of the Sarbanes-Oxley Act, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, this could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our ordinary shares and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

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The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure, however, that our estimates, or the assumptions underlying them, will not change over time or otherwise prove inaccurate. For example, our estimates as they relate to anticipated timelines and milestones for our clinical trials or preclinical development may prove to be inaccurate. If this is the case, we may be required to restate our consolidated financial statements, which could, in turn, subject us to securities class action litigation. Defending against such potential litigation relating to a restatement of our consolidated financial statements would be expensive and would require significant attention and resources of our management. Moreover, our insurance to cover our obligations with respect to the ultimate resolution of any such litigation may be inadequate. As a result of these factors, any such potential litigation could have a material adverse effect on our financial results, harm our business, and cause our share price to decline.

We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future.

We have never declared or paid cash dividends on our ordinary shares. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business, and we do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our ordinary shares will be our shareholders’ sole source of gain for the foreseeable future.

We may incur significant costs from class action litigation due to share volatility.

Our share price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our development efforts or the development efforts of our collaborators and/or competitors, the addition or departure of our key personnel, variations in our quarterly operating results and changes in market valuations of pharmaceutical and biotechnology companies. Holders of stock which has experienced significant price and trading volatility have occasionally brought securities class action litigation against the companies that issued the stock. If any of our shareholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management, which could harm our business.

Sales of additional ordinary shares could cause the price of our ordinary shares to decline.

Sales of substantial amounts of our ordinary shares in the public market, or the availability of such shares for sale, by us or others, including the issuance of ordinary shares upon exercise of outstanding options, or the perception that such sales could occur, could adversely affect the price of our ordinary shares. Certain of our shareholders have the right to require us to register the sales of their shares under the Securities Act of 1933, as amended, or the Securities Act, under agreements between us and such shareholders.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares may depend in part on the research and reports that securities or industry analysts publish about us or our business. If too few securities or industry analysts cover our company, the trading price for our ordinary shares would likely be negatively impacted. If one or more of the analysts who cover us downgrade our ordinary shares or publish inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

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None.

We maintain our U.S. corporate offices and research and development facilities in Cambridge, Massachusetts, where we lease approximately 33,750 square feet of office and laboratory space.

We lease approximately 90,000 square feet of space in Lexington, Massachusetts, which we use for our current good manufacturing practice (“cGMP”) manufacturing, as well as for additional laboratory and office space.

We also occupy laboratory and office space in Japan. We believe our existing facilities are adequate to meet our current needs.

We are not currently a party to any material legal proceedings.

Not applicable.

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PART II

Market Information

Our ordinary shares are traded on the Nasdaq Global Market under the symbol “WVE.”

Shareholders

As of February 26, 2019, there were approximately 12 shareholders of record of our ordinary shares.

Share Performance Graph

The following share performance graph compares our total share return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology Index for the period from November 11, 2015 (the date our ordinary shares commenced trading on the Nasdaq Global Market) through December 31, 2018. The figures represented below assume an investment of $100.00 in our ordinary shares at the closing price of $16.00 on November 11, 2015 and in the Nasdaq Composite Index and the Nasdaq Biotechnology Index on November 11, 2015 and the reinvestment of dividends, if any, into ordinary shares.

This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Unregistered Sales of Securities

Not applicable.

Issuer Purchases of Equity Securities

None.

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The following tables set forth our selected consolidated financial data for the periods and as of the dates indicated. The statement of operations and comprehensive loss data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations and comprehensive loss data for the years ended December 31, 2015 and 2014 and the balance sheet data as of December 31, 2016, 2015 and 2014 are mainly derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K, which financial statements have been audited by KPMG LLP, our independent registered accounting firm. Effective January 1, 2018, the Company adopted ASC 606 (as defined in Note 2 of our consolidated financial statements), using the full retrospective transition method. Under this method, the Company revised its consolidated financial statements for the years ended December 31, 2017 and 2016, and applicable interim periods within those years, as if ASC 606 had been effective for those periods. Therefore, select data for the years ended and as of December 31, 2017 and 2016 will differ from the audited consolidated financial statements that are not included in this Annual Report on Form 10-K, which were audited by KPMG LLP.

Our historical results are not necessarily indicative of the results to be expected in the future. You should read the selected financial data below in conjunction with the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a clinical-stage genetic medicines company committed to delivering life-changing treatments for people battling devastating diseases. Using PRISM, our proprietary discovery and drug development platform that enables the precise design, optimization and production of novel stereopure oligonucleotides, we aspire to develop best in class medicines across multiple therapeutic modalities.

Nucleic acid therapeutics, including oligonucleotides, are a growing and innovative class of drugs comprised of a sequence of nucleotides that are linked together by a backbone of chemical bonds. We are initially developing oligonucleotides that target the ribonucleic acid (“RNA”) to either reduce the expression of disease-promoting proteins or transform the production of dysfunctional mutant proteins into the production of functional proteins. RNA is a critical molecule that can adopt complex three-dimensional structures and affect various cellular functions. By intervening at the RNA level, we have the potential to address diseases that have historically been difficult to treat with small molecules or biologics. Oligonucleotides have additional advantages as a therapeutic class including the ability to target multiple tissue types, often without the need for a delivery vehicle, and the ability to modulate the frequency of dosing to ensure broad distribution within tissues and account for cell turnover. Oligonucleotides also have well-established manufacturing processes and validated test methods based on decades of improvements.

The oligonucleotides we are developing with PRISM are stereopure. A stereopure oligonucleotide is comprised of molecules with atoms precisely arranged in three-dimensional orientations at each linkage. We believe that controlling the position of the sulfur atom following phosphorothioate (“PS”) modification will optimize the pharmacological profile of our oligonucleotides by maximizing the potential therapeutic benefit while minimizing the potential for side effects and safety risks. The stereopure oligonucleotides we are developing differ from the mixture-based oligonucleotides currently on the market or in development by others. Our preclinical studies have demonstrated that our stereopure oligonucleotides may achieve superior pharmacological properties compared with mixture-based oligonucleotides. Through our work in developing stereopure oligonucleotides, we have created and continue to evolve PRISM, our proprietary discovery and drug development platform.

PRISM enables us to target genetically defined diseases with stereopure oligonucleotides across multiple therapeutic modalities. PRISM combines our unique ability to construct stereopure oligonucleotides with a deep understanding of how the interplay among oligonucleotide sequence, chemistry and backbone stereochemistry impacts key pharmacological properties. By exploring these interactions through iterative analysis of in vitro and in vivo outcomes and artificial intelligence-driven predictive modeling, we continue to define design principles that we deploy across programs to rapidly develop and manufacture clinical candidates that meet pre-defined product profiles.

Our goal is to develop and commercialize disease-modifying medicines for genetically defined diseases with a high degree of unmet medical need, and to become a fully integrated genetic medicines company. Our initial focus for our clinical development programs is in neurology, which we broadly define as genetic diseases within the neuromuscular system and central nervous system. We are conducting clinical trials of our lead program in Duchenne muscular dystrophy (“DMD”) targeting exon 51 and our two lead programs in Huntington’s disease (“HD”). We are advancing three additional development programs, targeting exon 53 in DMD and C9ORF72 in amyotrophic lateral sclerosis and frontotemporal dementia, and, subject to our submission of clinical trial applications and approval to proceed, we would expect topline clinical data readouts from these programs in the second half of 2020. In addition to neurology, we are advancing discovery research in ophthalmologic disorders, specifically inherited retinal diseases, and in hepatic diseases, and we expect to make continued investments in expanding the breadth of our portfolio. In further support of our pipeline, we continue to make substantial investments in, and leverage, PRISM to potentially develop the next generation of stereopure oligonucleotides. We have also established and continue to enhance our internal current good manufacturing practices (“cGMP”) manufacturing capabilities to increase control and visibility of our drug substance supply chain. These investments further improve our ability to secure drug substance for current and future development activities and may provide commercial-scale manufacturing capabilities.

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Our Current Programs

Neurology: Muscle

Neurology: Central Nervous System (“CNS”)

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Ophthalmology

Hepatic

Recent Developments

On January 28, 2019, we closed a follow-on underwritten public offering of 3,950,000 ordinary shares for gross proceeds of $150.1 million, and on February 26, 2019, we closed on the sale of an additional 592,500 ordinary shares pursuant to the underwriters’ option (on the same terms and conditions as the initial closing) for gross proceeds of an additional $22.5 million (collectively, the “January 2019 Offering”). Net proceeds to us from the January 2019 Offering are expected to be approximately $161.6 million, after deducting underwriting discounts and commissions and estimated offering expenses. We intend to use the net proceeds from the January 2019 Offering for clinical trial costs and other research and development expenses; continued growth of our manufacturing capabilities; initial investments in commercial and medical affairs infrastructure to support our transition to a fully integrated, commercial-stage genetic medicines company; continued investment in our proprietary discovery and drug development platform PRISM; and working capital, capital expenditures and general and administrative expenses.

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Financial Operations Overview

We have never been profitable, and since our inception, we have incurred significant operating losses. Our net losses were $146.7 million in 2018, $102.0 million in 2017, and $55.7 million in 2016. As of December 31, 2018 and 2017, we had an accumulated deficit of $339.7 million and $192.7 million, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future.

Revenue

We have not generated any product revenue since our inception and do not expect to generate any revenue from the sale of products for the foreseeable future. Our revenue during the year ended December 31, 2018 represented revenue earned under our revenue-generating two collaboration agreements: the Pfizer Collaboration Agreement (as defined in Note 5 in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K (“Note 5”)), which was entered into in May 2016, and the Takeda Collaboration Agreement (as defined in Note 5), which became effective in April 2018. Our revenue during the years ended December 31, 2017 and 2016 represents revenue earned under the Pfizer Collaboration Agreement only. The only revenue-generating license or collaboration agreements to which we are currently a party are the Pfizer Collaboration Agreement and the Takeda Collaboration Agreement.

Operating Expenses

Our operating expenses since inception have consisted primarily of research and development costs and general and administrative costs.

Research and Development Expenses

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

We recognize research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued expenses.

Our primary research and development focus since inception has been the development of our proprietary discovery and drug development platform, PRISM. We are using PRISM to design, develop and commercialize a broad pipeline of nucleic acid therapeutic candidates.

Our research and development expenses consist primarily of expenses related to our CROs, CMOs, consultants, other external vendors and fees paid to global regulatory agencies to conduct our clinical trials, in addition to compensation-related expenses, internal manufacturing expenses, facility-related expenses and other general operating expenses. These expenses are incurred in connection with research and development efforts and our preclinical studies and clinical trials. We track certain external expenses on a program-by-program basis. However, we do not allocate compensation-related expenses, internal manufacturing expenses, equipment repairs and maintenance expense, facility-related expenses or other operating expenses to specific programs. These expenses, which are not allocated on a program-by-program basis, are included in the “PRISM and other research and development expenses” category along

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with other external expenses related to our discovery and development programs, as well as platform development and identification of potential drug discovery candidates.

The table below summarizes our research and development expenses incurred for the years ended December 31, 2018, 2017 and 2016.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase in the foreseeable future as we continue to manage our existing clinical trials, initiate additional clinical trials for certain product candidates, pursue later stages of clinical development for certain product candidates, further expand our manufacturing capabilities and continue to discover and develop additional product candidates in therapeutic areas including neurology, ophthalmology and hepatic.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation-related expenses, including salaries, bonuses, share-based compensation and other related benefits costs for personnel in our executive, finance, corporate, legal and administrative functions, as well as compensation-related expenses for our board of directors. General and administrative expenses also include legal fees relating to intellectual property and general corporate matters; expenses associated with being a public company; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; other operating costs; and facility-related expenses.

We anticipate that our general and administrative expenses will increase in the future, primarily due to additional compensation-related expenses, as we increase our employee headcount to support the growth in our research and development activities and the potential commercialization of our product candidates.

Other Income (Expense), net

Other income (expense), net consists primarily of refundable tax credits from tax authorities and dividend and interest income earned on cash and cash equivalents balances for the years ended December 31, 2018, 2017 and 2016. We recognize refundable tax credits when there is reasonable assurance that we will comply with the requirements of the refundable tax credit and that the refundable tax credit will be received.

Income Taxes

We are a Singapore multi-national company subject to taxation in the United States and various other jurisdictions.

In 2018, 2017 and 2016, our provision for income taxes was $0.1 million, $0.8 million and $0.5 million, respectively, on pre-tax loss of $146.6 million, $101.1 million and $55.2 million, respectively. As of December 31, 2018 and 2017, we have recorded a full valuation allowance against our net operating loss carryforwards and federal and state tax credits in all jurisdictions due to uncertainty regarding future taxable income.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and includes significant changes to the U.S. corporate tax system. Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% and transitioned the U.S. federal tax system from a worldwide tax system to a territorial tax system. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) that provides additional guidance allowing companies to apply a measurement period of up to twelve months to account for the impacts of the Tax Act in our financial statements. As of December 31, 2018, we have finalized our accounting for the impacts of the Tax Act. In 2018, we recognized a $0.2 million benefit related to the remeasurement of our deferred

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tax assets and liabilities as a result of filing our 2017 U.S. tax return. This amount was included as a component of our provision for income taxes and was fully offset by a corresponding amount in our valuation allowance.

Comparison of the Year Ended December 31, 2018 to the Year Ended December 31, 2017

The following table summarizes our results of operations for 2018 and 2017:

Revenue

Revenue was $14.4 million and $3.9 million for the years ended December 31, 2018 and 2017, respectively. Revenue for 2017 was earned only under the Pfizer Collaboration Agreement. The increase of $10.5 million is due to revenue earned under the Takeda Collaboration Agreement, which became effective in April 2018, as well as an increase in research and development services under the Pfizer Agreement, which was entered into in May 2016. Revenue for both periods is presented under ASC 606 (as defined in Note 2 of our consolidated financial statements).

Research and Development Expenses

The following table summarizes our research and development expenses incurred for the years ended December 31, 2018 and 2017:

Research and development expenses were $134.4 million for the year ended December 31, 2018, compared to approximately $79.3 million for the year ended December 31, 2017. The increase of $55.1 million was due primarily to the following:

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General and Administrative Expenses

General and administrative expenses were $39.5 million for the year ended December 31, 2018 compared to $27.0 million for the year ended December 31, 2017. The increase of $12.5 million was primarily due to a $6.8 million increase in compensation-related costs resulting from an increase in employee headcount. Increased professional services expenses and other general and administrative operating expenses account for the remaining increase of approximately $5.7 million.

Other Income (Expense), Net

Other income (expense), net for the years ended December 31, 2018 and 2017 was $12.9 million and $1.3 million, respectively. The increase in other income (expense), net is primarily due to the $10.2 million increase related to our claim for refundable tax credits, the majority of which we claimed for the first time during the year ended December 31, 2018 and relates to the UK research and development tax credit regime for small and medium sized companies. Additionally, there was an increase of $1.8 million in dividend income earned on our cash equivalents during the year ended December 31, 2018.

Income Tax Benefit (Provision)

During the years ended December 31, 2018 and 2017, we recorded a tax provision of $0.1 million and $0.8 million, respectively. The 2018 tax provision was due to adjustments related to the filing of our 2017 tax returns with the relevant tax authorities. The 2017 tax provision was due to our establishment of a valuation allowance against our U.S. deferred tax assets, as well as income earned under research and management services arrangements between our U.S. and Singapore entities, which is taxed in the United States. During the years ended December 31, 2018 and 2017, we did not record any income tax benefit for the net operating losses incurred in Singapore due to uncertainty regarding future taxable income in that jurisdiction. During the year ended December 31, 2018, we did not record any income tax benefit for the net operating losses incurred in the United States and Japan due to uncertainty regarding future taxable income in those jurisdictions. In May 2016, we established a wholly-owned subsidiary in Ireland, however no income tax expense or benefit has been recorded during the years ended December 31, 2018 and 2017. In April 2017, we established a wholly-owned subsidiary in the United Kingdom and during the years ended December 31, 2018 and 2017, we did not record any income tax benefit for the net operating losses incurred in the United Kingdom due to uncertainty regarding future taxable income in that jurisdiction.

Comparison of the Year Ended December 31, 2017 to the Year Ended December 31, 2016

The following table summarizes our results of operations for 2017 and 2016:

Revenue

Revenue for 2017 and 2016 was earned under the Pfizer Collaboration Agreement, which was entered into in May 2016. There was $3.9 million in revenue for 2017, which represents an increase of $2.8 million in revenue over the $1.1 million in revenue for 2016. The increase in revenue was the result of Wave providing more research and development services to Pfizer in 2017. Revenue for both periods is presented under ASC 606.

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Research and Development Expenses

The following table summarizes our research and development expenses incurred by program and on our platform for 2017 and 2016:

Research and development expenses were $79.3 million for the year ended December 31, 2017, compared to $40.8 million for the year ended December 31, 2016. The increase of $38.5 million was due, in part, to the following:

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General and Administrative Expenses

General and administrative expenses were $27.0 million for the year ended December 31, 2017 compared to $16.0 million for the year ended December 31, 2016. The increase of $11.0 million was primarily due to the $4.9 million increase in compensation-related costs resulting from an increase in employee headcount. Increased professional services expenses and other general and administrative operating expenses account for the remaining increase of approximately $6.1 million.

Other Income (Expense), net

Other income (expense), net for the years ended December 31, 2017 and 2016 was $1.3 million and $0.5 million, respectively. The increase in other income (expense), net is primarily due to increased dividend income earned in 2017 on our cash equivalents.

Income Tax Benefit (Provision)

During the years ended December 31, 2017 and 2016, we recorded a tax provision of $0.8 million and $0.5 million, respectively. The 2017 tax provision was due to our establishment of a valuation allowance against our U.S. deferred tax assets, as well as income earned under research and management services arrangements between our U.S. and Singapore entities, which is taxed in the United States. The 2016 tax provision is a result of income earned under research and management services arrangements between our U.S. and Singapore entities, which is taxed in the United States. During the years ended December 31, 2017 and 2016, we did not record any income tax benefit for the net operating losses incurred in Singapore due to uncertainty regarding future taxable income in that jurisdiction. During the year ended December 31, 2016, the Company recorded no income tax benefit for the net operating losses incurred in Japan, due to uncertainty regarding future taxable income in that jurisdiction. In May 2016, we established a wholly-owned subsidiary in Ireland, however no income tax expense or benefit has been recorded during the years ended December 31, 2017 and 2016. In April 2017, we established a wholly-owned subsidiary in the United Kingdom and during the year ended December 31, 2017, we did not record any income tax benefit for the net operating losses incurred in the United Kingdom due to uncertainty regarding future taxable income in that jurisdiction.

Liquidity and Capital Resources

Since our inception, we have not generated any product revenue and have incurred recurring net losses. To date, we have primarily funded our operations through private placements of debt and equity securities, public offerings of our ordinary shares and collaborations with third parties. Through December 31, 2018, we have received an aggregate of approximately $493.2 million in net proceeds from these transactions. We received $89.3 million in net proceeds from private placements of our debt and equity securities, $100.4 million in net proceeds from our initial public offering, $40.0 million under the Pfizer Agreements (as defined in Note 5), including $10.0 million as an upfront payment under the Pfizer Collaboration Agreement and $30.0 million in the form of an equity investment, $93.5 million in net proceeds from our April 2017 follow-on underwritten public offering, and $170.0 million in upfront payments under the Takeda Agreements (as defined in Note 5), including $110.0 million as an upfront payment under the Takeda Collaboration Agreement (as defined in Note 5) and $60.0 million in the form of an equity investment.

As of December 31, 2018, we had cash and cash equivalents of $174.8 million, restricted cash of $3.6 million and an accumulated deficit of $339.7 million.

On January 28, 2019, we closed a follow-on public offering of 3,950,000 ordinary shares for gross proceeds of $150.1 million, and on February 26, 2019, we closed on the sale of an additional 592,500 ordinary shares pursuant to the underwriters’ option (on the same terms and conditions as the initial closing) for gross proceeds of an additional $22.5 million (collectively, the “January 2019 Offering”). Net proceeds to us from the January 2019 Offering are expected to be approximately $161.6 million, after deducting underwriting discounts and commissions and estimated offering expenses.

We expect that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months. We have based this expectation on assumptions that may prove to be incorrect, and we may use our available capital resources sooner than we currently expect. In addition, we may elect to raise additional funds before we need them if the conditions for raising capital are favorable due to market conditions or strategic considerations, even if we expect we have sufficient funds for our current or future operating plans.

Until we can generate significant revenue from product sales, if ever, we expect to continue to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. As of March 1, 2019, we have approximately $227.4 million of our securities registered and available for sale under our existing shelf registration statement that was declared effective by the SEC on February 6, 2017 and will remain in effect for three years from that date. In addition, for so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules, we may file an automatic shelf registration statement, which would become effective immediately upon filing and would provide us with

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immediate access to the capital markets to sell our securities from time to time.Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Operating Activities

During 2018, operating activities used $22.9 million of cash, due to our net loss of $146.7 million, which was offset by changes in our operating assets and liabilities of $102.4 million and non-cash charges of $21.4 million. The largest changes in operating assets and liabilities were an increase of $160.6 million in deferred revenue offset by an increase of $59.0 million in accounts receivable, which were primarily driven by the upfront consideration received and accounts receivable recorded upon entry into the Takeda Collaboration Agreement, as well as increases of $4.9 million in accounts payable and $5.9 million in accrued expenses and other liabilities. The non-cash charges for 2018 related mainly to share-based compensation expense of $15.6 million and $5.6 million of depreciation expense.

During 2017, operating activities used $83.7 million of cash, primarily resulting from our net loss of $102.0 million offset by non-cash charges of $18.8 million. The non-cash charges for 2017 related mainly to share-based compensation expense of $12.1 million, an increase in deferred rent of $3.6 million and $2.2 million of depreciation expense.

During 2016, operating activities used $31.9 million of cash, primarily resulting from our net loss of $55.7 million offset by non-cash charges of $7.2 million and by cash provided by changes in our operating assets and liabilities of $16.6 million. The non-cash charges for 2016 related primarily to share-based compensation expense of $6.8 million. Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2016 was primarily due to increases in deferred revenue, accounts payable and accrued expenses and other liabilities.

Investing Activities

During 2018, investing activities used $9.9 million of cash, consisting of purchases of property and equipment.

During 2017, investing activities used $18.9 million of cash, consisting of purchases of property and equipment.

During 2016, investing activities used $5.6 million of cash, consisting primarily of purchases of property and equipment. 

Financing Activities

During 2018, net cash provided by financing activities was $65.1 million, which was primarily due to the $60.0 million in proceeds from the issuance of 1,096,892 ordinary shares to Takeda, as well as the $5.1 million in proceeds from the exercise of share options.

During 2017, net cash provided by financing activities was $94.4 million, which was primarily due to the $93.5 million in net proceeds from the April 2017 follow-on underwritten public offering of 4,166,667 ordinary shares as well as the $0.9 million in proceeds from the exercise of share options.

During 2016, net cash provided by financing activities was $29.1 million, which was primarily due to the $30.0 million in proceeds from the issuance of 1,875,000 shares to an affiliate of Pfizer related to the Pfizer Equity Agreement.

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Funding Requirements

We expect our expenses will continue to increase in connection with our ongoing research and development activities and our internal cGMP manufacturing activities. Furthermore, we anticipate that our expenses will continue to increase if and as we:

We may experience delays or encounter issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

Because of the numerous risks and uncertainties associated with the development of our product candidates and because the extent to which we may enter into collaborations with third parties for development of product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development for our programs. Our future capital requirements for our programs will depend on many factors, including:

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

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Adequate additional funds may not be available to us on acceptable terms when we need them, or at all. We do not currently have any committed external source of funds, except for possible future payments from Pfizer if milestones under the Pfizer Collaboration Agreement are achieved and committed funds and possible future milestones and payments from our collaboration with Takeda under the Takeda Collaboration Agreement. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our shareholders. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute our shareholders’ ownership interests.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2018 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of December 31, 2018 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued and Adopted Accounting Pronouncements

For detailed information regarding recently issued and adopted accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2 “Significant Accounting Policies” in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that our revenue recognition policy, particularly (a) assessing the number of performance obligations; (b) determining the transaction price; (c) allocating the transaction price to the performance obligations in the contract; and (d) determining the pattern over which performance obligations are satisfied, including estimates to complete performance obligations, and the assumptions and estimates used in our analysis of contracts with CROs and CMOs to estimate the contract expense, involve a greater degree of judgement, and therefore we consider them to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

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Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the full retrospective transition method. Under this method, the Company revised its consolidated financial statements for the years ended December 31, 2017 and 2016, and applicable interim periods within those years, as if ASC 606 had been effective for those periods. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five-step analysis: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step analysis to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company has entered into collaboration agreements for research, development, and commercial services, under which the Company licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. Any variable consideration is constrained, and therefore, the cumulative revenue associated with this consideration is not recognized until it is deemed not to be at significant risk of reversal.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements for which the collaboration partner is also a customer, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the timing of satisfaction of performance obligations as a measure of progress in step (v) above. The Company uses significant judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below. The transaction price is allocated to the optional goods and services the Company expects to provide. The Company uses estimates to determine the timing of satisfaction of performance obligations.

Amounts received prior to being recognized as revenue are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

Licenses of intellectual property:  In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the customer and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

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Research and development services:  If an arrangement is determined to contain a promise or obligation for the Company to perform research and development services, the Company must determine whether these services are distinct from other promises in the arrangement. In assessing whether the services are distinct from the other promises, the Company considers the capabilities of the customer to perform these same services. In addition, the Company considers whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For research and development services that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Customer options:  If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, that is, the option to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the standalone selling price. As a practical alternative to estimating the standalone selling price when the goods or services are both (i) similar to the original goods and services in the contract and (ii) provided in accordance with the terms of the original contract, the Company allocates the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer. Amounts allocated to any material right are not recognized as revenue until the option is exercised and the performance obligation is satisfied.

Milestone payments:  At the inception of each arrangement that includes milestone payments, the Company evaluates whether a significant reversal of cumulative revenue provided in conjunction with achieving the milestones is probable, and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. For other milestones, the Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant reversal of cumulative revenue would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Royalties:  For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Contract costs:  The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered. As a practical expedient, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that it otherwise would have recognized is one year or less. To date, the Company has not incurred any incremental costs of obtaining a contract with a customer.

For additional discussion of accounting for collaboration revenues, see Note 5 of our consolidated financial statements.

Prepaid and Accrued Research and Development Expenses

As we prepare our financial statements, we are required to estimate our prepaid and accrued expenses. For certain contracts with our CROs and CMOs, if the billing terms do not align with the pattern in which the work is completed by the CRO or CMO as of the end of the period, we are required to perform an analysis to estimate the expense, for the period and to date for each contract.

Contracts that are subject to this analysis generally relate to the following services: research and development services, manufacturing services, toxicology studies and clinical trial services. Once we have completed our analysis, we will record the estimated expense in the period for each contract and, depending on the invoicing activity related to each contract, we either have a prepaid or accrual as of the end of the period. We base our estimates on communications with internal study managers, our knowledge of the ongoing and past work at the CROs and CMOs, communications and reporting from our CROs and CMOs, where applicable.

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Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign exchange rates as well as, to a lesser extent, inflation and capital market risk.

Interest Rate Risk

We are exposed to interest rate risk in the ordinary course of our business. Our cash and cash equivalents are held in readily available checking and money market accounts.

Foreign Currency Risk

Due to our operations outside of the Unites States, we are exposed to market risk related to changes in foreign currency exchange rates. Historically, we have not hedged our foreign currency exposure. Changes in the relative values of currencies occur regularly and, in some instances, could materially adversely affect our business, our financial condition, the results of our operations or our cash flows. For the years ended December 31, 2018, 2017 and 2016, changes in foreign currency exchange rates did not have a material impact on our historical financial position, our business, our financial condition, the results of our operations or our cash flows.

A hypothetical 10% change in foreign currency rates would not have a material impact on our historical financial position or results of operations. However, there can be no assurance that changes in foreign currency exchange rates will not have a material adverse impact on us in the future.

Inflation Risk

We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last three years.

Capital Market Risk

We currently have no product revenues and depend on funds raised through other sources. One possible source of funding is through further equity offerings. Our ability to raise funds in this manner depends upon capital market forces affecting our share price.

The information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning on page F-1.

Not applicable.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2018, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013).

Based on our assessment, management believes that, as of December 31, 2018, our internal control over financial reporting is effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Wave Life Sciences Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Wave Life Sciences Ltd. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, Series A preferred shares and shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2019 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Cambridge, Massachusetts
March 1, 2019

Not applicable.

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PART III

Information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission on Schedule 14A in connection with our 2019 Annual General Meeting of Shareholders, or the Proxy Statement, if the Proxy Statement is filed not later than 120 days after the end of our fiscal year ended December 31, 2018, in the sections titled “Management and Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Code of Business Conduct and Ethics,” and is incorporated herein by reference. If the Proxy Statement is not filed within such 120-day period, the information required by this item will be contained in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission, or the Form 10-K/A.

The information required by this item is incorporated by reference to the information set forth in the section titled “Executive Officer and Director Compensation,” “Compensation Discussion and Analysis,” “Management and Corporate Governance – Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Risks Related to Compensation Practices and Policies” in our Proxy Statement. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2018, the information required by this item will be contained in the Form 10-K/A.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2018, the information required by this item will be contained in the Form 10-K/A.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Certain Relationships and Related Person Transactions” and “Management and Corporate Governance – Board of Directors” in our Proxy Statement. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2018, the information required by this item will be contained in the Form 10-K/A.

The information required by this item regarding principal accountant fees and services is incorporated by reference to the information set forth in the sections titled “Principal Accounting Fees and Services” and “Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Public Accountant and Independent Singapore Auditor” in our Proxy Statement. If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2018, the information required by this item will be contained in the Form 10-K/A.

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PART IV

1. Financial Statements

See Index to Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K.

2. Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

3. Exhibits

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.