Rubius Therapeutics, Inc.

Table of Contents

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10‑K contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Annual Report on Form 10‑K, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” and include, among other things:

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

PART I

Except where the context otherwise requires or where otherwise indicated, the terms “Rubius,” “Rubius Therapeutics,” “we,” “us,” “our,” “our company,” “the company,” and “our business” refer to Rubius Therapeutics, Inc. and its consolidated subsidiary.

Solely for convenience, the trademarks, service marks and trade names referred to in this annual report are listed without the ®, (sm) and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

Item 1. Business

We areRubius Therapeutics is developing a new class of cellular medicines, called Red Cell Therapeutics,Therapeutics™, or RCTs. Based on our vision that human red blood cells are the foundation of the next significant innovation in medicine, we have designed a proprietary platform to genetically engineer and culture RCTs that are selective, potent and ready‑to‑use cellular therapies. We believe that our RCTs will provide life‑changing or life‑saving benefits for patients with severe diseases across multiple therapeutic areas.

We have generated hundreds of RCTs using our RED PLATFORM®, a highly versatile and proprietary cellular therapy platform. We are utilizing our universal engineering and manufacturing processes to advance a broad pipeline of RCT product candidates into clinical trials in rare diseases, cancer and autoimmune diseases. Common design and manufacturing elements of our RCTs should enable us to achieve significant advantages in product development. We are establishing end‑to‑end manufacturing capabilities and plan to develop commercial infrastructure to further establish Rubius Therapeutics as a leading, fully integrated cellular therapy company.

Our RED PLATFORM buildsBuilt upon the research and findings of Flagship Pioneering’s VentureLabs innovation team along with the discoveries of Professors Harvey Lodish and Hidde Ploegh of the Whitehead Institute for Biomedical Research at MIT. This work demonstratedMIT, we have developed the abilityRED PLATFORM®, a versatile and proprietary cellular therapy platform, which enables us to differentiate donor‑derived CD34+ hematopoietic precursor cells into enucleated red blood cells,engineer and culture cellular therapies that are designed to be selective, potent and ready‑to‑use. RCTs are engineered to express biotherapeutic proteins within or RBCs,on the cell surface and are designed to activate the immune system to attack tumors in cancer and regulate the immune system for the treatment of autoimmune diseases. We believe that the RED PLATFORM could provide beneficial treatments for our lead indications, many of which have few, if any, effective treatments.

We are developing RCT product candidates for patients with unprecedented efficiency at a small, laboratory scale. Basedcancer and autoimmune diseases based on this foundation, Flagship Pioneering’s VentureLabs innovation team recognizedtwo therapeutic modalities —potent cell‑cell interaction and tolerance induction.

Cancer:  We are developing RCTs to express combinations of co-stimulatory molecules and cytokines on the cell surface to activate and expand different components of the immune system, which we believe will offer the following advantages:

Broad immune stimulation via potent cell‑cell interaction: RCT product candidates are engineered tobroadly activate the adaptive and innate immune systems through potent cell-cell interaction to attack and kill tumors, replicating how the immune system naturally functions. Because RCTs are restricted to the vasculature, these product candidates may have limited side effects as observed in our preclinical studies. We believe RCTs have the potential to have broad therapeutic application across a range of solid tumors and hematologic cancers. Our lead

oncology program is RTX-240, which expresses both 4‑1BBL and IL‑15TP, a fusion of IL‑15 and IL‑15 receptor alpha. The Investigational New Drug (IND) application for RBCs asRTX-240 has been allowed to proceed by the U.S. Food and Drug Administration (FDA) and we plan to announce when the first patient is dosed.

Antigen-specific immune activation via cell surface antigen presentation: We are also developing RCT product candidates to express a tumor-associated antigen, a co-stimulatory signal and a cytokine at the same time on the surface of the same cell. These cells are designed to induce a tumor-specific immune response by expanding antigen-specific T cells. RTX-321, our lead artificial antigen presenting cell program (aAPC), expresses an optimal frameworkHPV peptide bound to MHC I, 4-1BBL and IL-12 on the cell surface to mimic human T cell-APC interactions. We plan to file an IND for cellular therapiesRTX-321 for the treatment of HPV 16-positive tumors by the end of 2020. We plan to follow RTX-321 with a range of programs that could target viral antigens, shared, or over-expressed cancer-associated antigens and invented methods topersonalized neoantigens.

Autoimmune Diseases: We engineer RCTs to express biotherapeutic proteinsspecific autoimmune disease-associated antigens within the cell or on the cell surface.surface to restore immune system function and retrain the body to no longer see these self-antigens as foreign. In addition, we believe our product candidates have the ability to express immune modulating cytokines, enzymes or inhibitory signals, which may have the potential to enhance the tolerogenic effects of RCTs. The resulting restoration or induction of immune tolerance may lead to more effective treatments—potentially even cures—for certain autoimmune diseases. Available therapies for autoimmune diseases have significant limitations because these therapies are required to be administered on a chronic, lifelong basis. Many treatments fail to provide adequate benefit to patients, and many patients’ diseases will eventually progress despite continued therapy. Furthermore, these existing treatments are associated with side effects that include opportunistic infections, lymphoma and, in some cases, severe and even fatal reactions. We believe RCTs can be designed to more specifically modulate complex counter‑regulatory immune responses and enable greater efficacy with lower toxicity, potentially providing treatments for a number of diseases with high unmet need. Specifically, RCTs may provide the following benefit to patients with autoimmune diseases:

Building upon these early discoveries,Induction of peripheral tolerance: Our preclinical data suggest that RBCs expressing surface-bound antigens may be capable of blocking immune responses to those antigens, potentially inducing tolerance (the ability to prevent responses without a need for ongoing immunotherapy). In preclinical studies in models of central nervous system inflammation and diabetes, we have developed the RED PLATFORM, which enables us to engineer and cultureachieved successful modulation of immune responses by expressing antigens on RCTs. We believe our antigen-specific autoimmune RCT product candidates withhave the potential to be curative therapies for many autoimmune diseases, such as Type 1 diabetes.

Broad and Diverse Pipeline

Rubius Therapeutics is advancing a wide arraybroad pipeline of biotherapeutic proteinsRCT™ product candidates. Our current programs are investigating applications across cancer and biological functions that enable their use across multiple therapeutic areas.autoimmune diseases. The IND application for RTX-240, our lead oncology program, has been allowed to proceed by the FDA and we plan to announce when the first patient has been dosed. Additionally, we plan to file an IND for our first aAPC program, RTX-321, by year-end.

Definitions: aAPC—artificial antigen presenting cell; AML—acute myeloid leukemia; HPV+—Human papilloma virus positive; R/R —relapsed/refractory; FPI—first patient in.

Until March 2020, we had been developing RTX-134 for the treatment of phenylketonuria, or PKU. We have also invested considerablydiscontinued the RTX-134 Phase 1b clinical trial and have deprioritized development of RTX-134 and our other rare disease programs, to scalefocus instead on the processdevelopment of RCT manufacturing by acquiringour oncology and autoimmunity pipeline. See “Business—Rare Diseases” for more information.

Manufacturing

Recognizing the importance of controlling our own manufacturing capabilities to produce consistent and reproducible product at greater scale, we acquired and began renovating a manufacturing facility whichin Smithfield, RI, in July 2018. As of January 2020, this manufacturing facility is operational. We plan to provide cGMP supply for our upcoming RTX-240 and RTX-321 cancer clinical trials from this site, and have the potential to significantly expand our manufacturing capabilities at this facility. We plan to stage additional investments at this site based on future supply needs.

Separately, in 2018, we believe will allowentered into a clinical supply agreement with a CMO located in the United States to produce cGMP grade RTX‑134 for our initial clinical trial in PKU. We experienced multiple manufacturing challenges with this CMO that contributed to delays in the RTX-134 Phase 1b clinical trial. Although we were able to manufacture clinical grade RTX-134 for the productionfirst time during the third quarter of large quantities2019, continued challenges contributed to further clinical trial delays following the dosing of reliablethe first patient in January 2020. In March 2020, we decided to discontinue the RTX-134 Phase1b clinical trial and reproducible RCT products fromdeprioritized RTX-134 and our other rare disease programs, to primarily focus on the initial stagesdevelopment of development throughour oncology and autoimmunity pipeline.

Seasoned Leadership Team

Since we commenced operations in 2013, we have attracted a talented group of seasoned leaders to commercial scale. execute our strategy. Over the course of 2019 and early 2020, we further strengthened our leadership team by hiring Christina Coughlin, M.D., Ph.D., as Chief Medical Officer, Laurence Turka, M.D., as Chief Scientific Officer, Kris Elverum as Senior Vice President of Business Development and Strategy, Maiken Keson-Brookes as Chief Legal Officer and Greg Whitehead as Chief Quality Officer. Our leadership team has extensive experience in oncology, immunology, and cell therapy drug discovery and development.

Patent Portfolio

We have and continue to build a broad portfolio of patent applications, know how, trade secrets, and other intellectual property that covers both our platform technologies as well as product discoveries, the breadth and depth of which is a strategic asset that could provide us with competitive advantages. As of February 28, 2019,2020, we own or have an exclusive license under more than 10012 issued U.S. patents. Our lead product candidates – RTX-240, RTX-321 and RTX-224 – are covered by three varieties of issued U.S. patent applications across 26 differentclaims: 1) composition of matter; 2) method of treatment; and 3) method of making. We have 32 patent families and we own one issued U.S. patent related to the treatment of phenylketonuria, or PKU.

Although our RCT product candidates are in early stages of development and will require substantial resources to demonstrate technical feasibility and to establish clinical and regulatory validation, we believe that our RED PLATFORM could provide beneficial treatments for our target indications, many of which have few, if any, effective treatments. Our initial focus will be advancing RCT product candidates with unique benefits for patients with rare diseases, cancer and autoimmune diseases based on three modalities — cellular shielding, potent cell‑cell interaction and tolerance induction. In March 2019, we announced that the FDA cleared our investigational new drug, or IND, application for our lead product candidate, RTX-134, an RCT with the phenylalanine ammonia lyase (PAL) enzyme expressed within the cell for the treatment of phenylketonuria.

•Rare Diseases:  We engineer RCTs that express potent enzymes within the cell for the treatment of patients suffering from rare enzyme deficiency diseases. As they are located within the RCT, these enzymes are shielded from being neutralized by the immune system, thereby allowing the enzymes to degrade and clear the pathogenic metabolites that build up in such diseases. We believe these RCTs may have a longer and sustained treatment duration and could avoid the immune‑driven reduction in efficacy and induction of adverse events associated with other therapies.

Our proprietary RED PLATFORM

We are pioneering the creation ofdeveloping a new, potentially transformative class of medicines that leverage the benefits of RBCs to provide cellular therapies to patients with severe diseases across multiple therapeutic areas.cancer and autoimmune diseases. As RBCs are enucleated, they have generally been considered simple oxygen delivery vehicles, rather than the backbone of a versatile cellular therapy platform. Past attempts at RBC‑based therapies, such as applying hypotonic loading or cell swelling to load an enzyme or protein into RBCs, have had limited therapeutic applications, proven difficult to scale and reduced the in vivo half‑life of the loaded RBCs.

Our discoveries and innovations in genetic engineering and cell culture processes have made it possible to now use RBCs as a foundation for the creation and development of a new class of cellular therapies. By modifying only one of our initial manufacturing steps in which we add a gene or genes thatto encode biotherapeutic proteins within the cell or on the cell surface of RCTs, we are able to rapidly develop new RCTs designed to treat different diseases. This approach allows for the consistent generation of product candidates and a preclinical evaluation process that we believe has the potential to create a broad range of therapeutics in an efficient manner — for example, RTX‑134 required only nine months from product design to identification as our lead RCT product candidate.manner. Our uniform approach should also enable us to leverage common chemistry, manufacturing and controls, or CMC, and toxicology data packages to shorten development timelines. While the initial focus of our RED PLATFORM will beis currently in rare diseases, cancer and autoimmune diseases, we believe the versatility of our platform will enable uscan be applied to expand into broaderother therapeutic areas in the future.areas.

The RED PLATFORM allows us to generate a wide variety of allogeneic, ready‑to‑use RCT product candidates with a universal and proprietary process through the following steps: (1) obtaining CD34+ hematopoietic precursor cells from the blood of O negative donors; (2) genetic engineering of the cells to express biotherapeutic proteins within the cell or on the cell surface of the RCTs; (3) expandingexposing the numbercells to media, or nutrients, in a bioreactor to promote further expansion and differentiation until the nucleus is ejected, resulting in a mature reticulocyte that has the characteristics of cells and differentiating them into reticulocytes, which are enucleated RBC precursors;a normal red blood cell with the biotherapeutic protein(s) of interest added inside or on the cell surface; and (4) formulating, characterizing and storing doses of the resulting RCT product candidate for later infusion intoadministration to patients.

A significant advantage of differentiating the cells into reticulocytes is the ability to separate the genetic modification from the final RCT product candidate through the biological process of enucleation, a property unique to reticulocytes. Enucleation involves the ejection of the nucleus from the cell, and with it, all the DNA it contains, leaving behind an RCT that expresses the protein or proteins that confer the intended therapeutic benefit. We believe this absence of genetic material may reduce the safety risks associated with RCTs as compared with current cellular therapies.

Limitations of previous and current cellular therapies

The field of tissue, cell and regenerative therapy has a long history, starting with blood transfusions in the early 1800s, followed by organ and bone marrow transplants in the middle of the 20th century and later the approval of cellular therapy products ranging from epidermal transplantation for wound care to mesenchymal stem cells for the treatment of graft versus host disease and dendritic cells for the treatment of prostate cancer.

Most recently, several biotechnology companies and academic groups have demonstrated that a type of regenerative cell therapy known as chimeric antigen receptor T cells, or CAR‑Ts, where a patient’s own T cells are genetically engineered to recognize and attack specific cancer cells, are capable of powerful and sometimes curative therapeutic effects. In addition, some groups are studying the adoptive transfer and activation of T cell receptor, or TCR, -engineered T cells, and natural killer cells, or NK cells, for treatment of solid and hematologic cancers, while others are attempting to expand and engineer regulatory T cells ex vivo for the treatment of autoimmune diseases.

A range of issues have historically limited the use of cellular therapies:

Advantages and versatility of our RED PLATFORM and RCTs

Our discoveries and innovations in genetic engineering and cell culture processes allows us to leverage the inherent benefits of RBCs. We believe our RED PLATFORM and RCTs represent a transformative step in the evolution of cellular therapies as they are designed to confer desirable attributes for a next‑next generation cellular therapy, including the following:

•Broad therapeutic applications:  We have engineered hundreds of RCTs to have therapeutic potential across many areas, such as rare diseases, cancer, autoimmune diseases, cardiovascular diseases, metabolic diseases and infectious diseases. These RCTs can be designed to express immune‑shielded enzymes or other proteins within the cell and

diverse proteins on the cell surface, including combinations of proteins for (1) potent cell‑cell interaction with T cells, NK cells or other cells; (2) tissue localization; and (3) induction of immune tolerance.

•Advantageous tolerability:  Since RCTs lack a nucleus, they possess no genetic material and do not divide following infusion into patients. As a result, we believe our RCT product candidates will pose less risk than those associated with other cellular therapies, which have caused cytokine release syndrome, neurotoxicity and death and carry the potential risk of inducing oncogenicity.

•Ready‑to‑use cellular therapies:  O negative donor blood is routinely used for blood transfusions and can be repeatedly transfused into approximately 95% of people. Similarly, RCTs are produced from O negative donor blood stem cells and are therefore allogeneic, ready‑to‑use cellular therapies that we believe will be tolerated by almost all patients.

•Defined life in circulation and convenient dosing:  RBCs have a circulating time of approximately 120 days. We expect our RCTs to benefit from this long circulation time, resulting in more consistent pharmacodynamics and convenient dosing regimens thereby improving compliance and real‑life efficacy. Furthermore, a single proposed RCT dose will constitute less than 1% of normal red cells in a patient’s circulation.

•Predictable biodistribution:  RBCs normally reside only in the vasculature, the spleen and the liver and do not otherwise extravasate into other healthy tissues. Biodistribution into the spleen allows for RCTs designed to stimulate the immune system to mount an attack against cancer, while biodistribution of RCTs expressing autoimmune disease‑causing antigens to specialized cells in the liver can induce tolerance and improve the signs and symptoms

Our strategy

Our vision is to pioneer the creation of life‑changing or life‑saving and ready‑to‑use RCTscreate life-changing, allogeneic cellular therapies for patients with severe diseases. To achieve our vision, we are executing a strategy with the following key elements:

Establish RCTs as a new class of cellular medicines, demonstrating their potential across threetwo initial product categories: rare diseases, cancer and autoimmune diseases. We apply a rigorous and capital‑efficient approach to prioritize our product candidate pipeline, focusing on unmet need, feasibility, speed to proof‑of‑concept, easy‑to‑measurecost to manufacture, validated endpoints and commercial potential. In March 2019,Our IND application for RTX-240 has been allowed to proceed by the FDA cleared our  IND for RTX‑134 for the treatment of PKU. We expect to begin enrolling patients for the Phase 1b clinical trial of RTX-134 during the second quarter of 2019, with initial data expected during the second half of 2019. In total,FDA. Additionally, we plan to file a total of four to five INDsan IND for RTX-321 by the end of 2020, with additional filings thereafter.year-end.

Efficiently advance multiple additional RCTs as product categories are validated following positive early proof‑of‑concept. We expect that early clinical success of our initial RCT product candidates could translate to other programs within the product category, validating our approach and enabling a rapid and efficient expansion of our rare disease, cancer and autoimmune disease product categories. For example, positive early clinical proof‑of‑concept for

RTX‑134 will validate the benefits of our approach for treating rare enzyme deficiency diseases using cellular shielding of potent enzymes and support our ability to successfully develop additional RCTs within this product category.

Pursue accelerated paths to marketing authorization. We are pursuing indications with high unmet medical needs that may allow us to pursue accelerated paths to product registration, such as breakthrough therapy designation or RMAT designation by the FDA. Similarly, we expect to pursue accelerated routes to marketing authorization in Europe and other regions.

Build a leading, fully integrated cellular therapy company. We are discovering, developing, manufacturing and may commercialize RCT products within certain product categories. Following potential approval of multiple RCT products in a particular category, we may leverage a dedicated commercial infrastructure to deliver our therapies to patients.

Further strengthen our position as the pioneer of RCTs through continuous platform expansion and improvement. Our proprietary RED PLATFORM allows us to rapidly identify new product candidates and includes a universal manufacturing process for all RCT product candidates. We will continue to invest in enhancing our platform and deepening our expertise in stem cell and red cell biology and optimizing the pharmacology of RCTs with the goal of delivering new therapies targeting additional indications. We plan to leverage our first‑mover advantage in manufacturing RCTs as we scale‑up our proprietary manufacturing platform. To fully support later‑stage clinical developmentplatform and commercial launch, we plan to ensure control over our supply chain. As an initial investment in this strategy, we purchased afully-owned, operational cGMP manufacturing facility and are in the process of renovating it to provide multi‑suite manufacturing capabilities.Smithfield, RI.

Expand patient access to RCTs through strategic partnerships. Given the breadth of the therapeutic opportunityopportunities for RCTs, we believe entering into select strategic partnerships in a subset of therapeutic areas may provide an attractive avenue for expanding patient access to RCTs. The global reach and operational expertise within certain pharmaceutical companies may complement our growing organization in areas such as clinical operationsdevelopment and commercialization.

Maintain a strong culture, continuously attract new talent and build the world’s leading center for red cell biology research and engineering. We are located in Cambridge, Massachusetts, one of the world’s leading hubs for biopharmaceutical innovation, which enables us access to world‑class talent, leading academic investigators and key opinion leaders. We have leveraged our location to attract scientific talent and experienced, innovative leaders and have built a strong culture that is committed to delivering on our vision. In addition, we have assembled a network of scientific advisors with deep expertise in red cell biology, process development and manufacturing as well as clinical experience across the therapeutic areas that we are initially targeting. We will continue to build a team of employees, advisors and collaborators with experience in the discovery, development, manufacture and commercialization of cellular therapies.

Initial therapeutic areas of focus

Based upon the totality of scientific and preclinical work to date, we believe that RCTs have broad potential therapeutic applications. Our initial focus will be advancing RCT product candidates with unique benefits for patients with rare diseases, cancer and autoimmune diseases based on three modalities — cellular shielding, potent cell‑cell interaction and tolerance induction.

Our lead oncology product candidates for the treatment of cancer are RTX-240 (formerly RTX-212) and RTX-224. candidate, RTX-240, is a RCT that co-expresses bothdesigned to broadly stimulate the immune system without antigen specificity. RTX-240 expresses hundreds of thousands of copies of 4‑1BBL and IL‑15TP, a fusion of IL‑15 and IL‑15 receptor alpha, which synergizes with 4‑1BBLon the cell surface. This combination is synergistic and designed to activate and expand both T cells and NK cells. Our IND application for RTX-240 has been allowed to proceed by the FDA and we plan to announce when the first patient is dosed.

Additionally, we are advancing RCTs that function as artificial antigen presenting cells, or aAPCs, that express a tumor-associated antigen, a co-stimulatory signal and a cytokine at the same time on the same cell. These cells are designed to induce a tumor-specific immune response by expanding antigen-specific T cells. RTX-321, our lead aAPC program, expresses an HPV peptide antigen bound to MHC I, 4-1BBL and IL-12 on the cell surface to mimic human T cell-APC interactions. We expectplan to file an IND for RTX-321 for the treatment of HPV-positive tumors by the end of 2020.

Broad Immune System Stimulation: RTX-240 by early 2020.and RTX-224 for the treatment of solid tumors

RTX-240 and RTX-224 are designed to broadly stimulate and expand the adaptive and innate immune systems through potent cell-cell interaction to attack and kill tumors, replicating how the immune system naturally functions.

RTX-240 is engineered to express hundreds of thousands of copies of 4‑1BBL and IL‑15TP, a fusion of IL‑15 and IL‑15 receptor alpha, on the cell surface. This combination is synergistic and designed to activate and expand both T cells and NK cells. RTX-224 is a combination RCT expressing bothengineered to expresses hundreds of thousands of copies of 4‑1BBL and IL‑12. IL-12 drives the activation and proliferation of CD8+ and CD4+ T cells, as well as NK cells. In addition, the IL-12 cytokine is known to drive antigen presentation and inhibit angiogenesis.

We believe that both product candidates provide potentially transformative and differentiated approaches to treating patients with solid or hematological tumors whose disease responds to immunotherapies, including CAR-T, as well as tumors that are or have become resistant or refractory to immunotherapies, including checkpoint inhibitors. We expect to initially study RTX-240 in patients whose disease has  progressed on checkpoint inhibitor therapy across a range of solid tumor types and in patients with acute myeloid leukemia following a hematopoietic stem cell transplant. We expect to study RTX-224 in patients with a range of both immunologically active and immunologically inactive solid tumors.

Additionally, we are advancing RCTs that function as artificial antigen presenting cells, or RTX-aAPCs. Our initial focus is on displaying tumor antigens fused to major histocompatibility complex class I, or MHC I, on the surface of RCTs that also express a costimulatory signal, such as 4‑1BBL and a cytokine such as IL-12 or IL-15. We expect to study one or more of these RTX‑aAPCs in patients with tumors that express these antigens. Our lead aAPC program targets HPV+ tumors, of which head and neck and cervical cancer are the most common.  Treatment options for HPV16+ refractory and relapsing disease, including head and neck, and cervical cancer are limited, and our goal is to be able to offer patients a potent and highly specific immune stimulation. 

We are also exploring tumor‑targeted RCTs that co‑express 4‑1BBL and single‑chain variable fragments, or scFvs, that bind to tumor antigens. We expect tumor‑targeted RTX‑4‑1BBL to provide a potent, selective and potentially safe treatment for hematological tumors either as a monotherapy or in combination with existing adoptive cell therapies or checkpoint inhibitors.

RTX-240 and RTX-224

Each of RTX-240 and RTX-224 have been engineered to act as combination therapies that stimulate both the adaptive and innate arms of the immune system. We believe this synergistic activity has the potential to provide the following therapeutic benefits:

•Improved anti‑tumor activity through broad and sustained activation of the immune system: Both RTX-240 and RTX-224 drive robust stimulation of both T cells and NK cells as 4‑1BBL and the cytokines (IL-15TP or IL-12)  are simultaneously presented in high copy numbers to these immune cells, thereby simulating a potent adaptive and innate immune response. We expect this to result in improved response rates, progression free survival, or PFS, and overall survival, either as monotherapy or in combination with existing immunomodulatory therapies, such as checkpoint inhibitors and CAR-T.

•Prevention of resistance to immunotherapy:  T cells recognize and kill cancer cells via MHC I. A recognized mechanism of tumor resistance to checkpoint inhibitors is loss of MHC I expression, which makes the cancer less

susceptible to T cell mediated killing. However, loss of MHC I makes the tumor susceptible to recognition and killing by the NK cells that have been expanded and activated by RTX-240. We, therefore, expect that RTX-240 used either alone or in combination with immunotherapies will prevent the emergence of resistance to T cell mediated killing through potent NK cell activation and expansion.

Current therapies and their limitations

Checkpoint inhibitors, such as anti‑programmed death receptor‑1 antibodies, or anti‑PD‑1 antibodies, act by inhibiting tumor suppression of the adaptive immune system in cancer patients and have significantly extended survival in multiple solid tumor types, particularly in patients with advanced cancers. The vast potential of checkpoint inhibitors is highlighted by market projections that estimate sales for this class of drugs could reach $50 billion in 2024. Despite the encouraging efficacy of checkpoint inhibition for some patients, overall response rates remain relatively low and range, on average, from 25% to 50%. Unfortunately, even when patients doa patient’s cancer does respond many still progressto treatment, the disease often progresses within six to 12 months, depending on the cancer and the therapeutic intervention. Clinicians and biopharmaceutical companies are increasingly evaluating combination therapies to improve response rates and to expand the size of the treatable population.

Preclinical data for RTX‑4‑1BBL

We have observed that RTX‑4‑1BBL, which expresses 4‑1BBL on the cell surface, drives potent T cell activation as measured by a standard in vitro assay in which intracellular signaling of NFkB, a protein complex that controls immune system responses, is measured using Jurkat cells, a human T cell line. As presented in the following chart, we observed activation up to 15‑fold more potent than the activation generated by the agonistic anti‑4‑1BB monoclonal antibody, utomilumab, which others have tested in cancer patients. We used RCT‑CTRL, a cultured red cell that does not express an active protein, as a negative control. Furthermore, we observed in this in vitro assay that increasing the copy number of the 4‑1BBL protein on RTX‑4‑1BBL results in a clear dose‑response for immune activation. We have therefore engineered the expression of 4‑1BBL on our RCT product candidates to maximize T cell activation.

NFkB Activation by RTX-240 in Jurkat Cells

Dugast, et. al., American Association for Cancer Research; Poster #3272, 2019.

Additionally, we have observedin preclinical studies, RTX-240 demonstrated synergistic and complementary effects of 4-1BBL and IL-15TP in promoting the expansion and activation of key cells driving innate (NK cells) and adaptive (CD8 memory T cells) immunity. RTX-240 induces potent effects associated with innate and adaptive immune responses in vitro that. In RTX-240, can potently expand CD8+ T cells, NK cells and key subsets of these cells to a substantially greater extent than RTX‑4‑1BBL or RTX‑IL‑15TP alone, as shown in the following charts. In the absence of T cell stimulation with an anti‑CD3 antibody, we observed a synergistic effect from the combination of 4-1BBL and IL15TP promotes better expansion of NK and CD8 memory cells than either agent alone, while 4-1BBL drives significant CD8 T cell proliferation, and IL-15TP drives significant NK cell cytotoxicity, as depicted below.

Preclinical Effects of 4-1BBL and IL-15TP in Promoting Expansion and Activation of Key Cells
Driving Innate and Adaptive Immunity

Dugast, et. al., American Association for Cancer Research; Poster #3272, 2019.

Used as a murine surrogate for RTX-240, mRBC-240 reduced lung metastases and increased terminally differentiated NKcell lung infiltration in vivo in a B16F10 model. mRBC-240 treatment significantly reduced the 4‑1BBLnumber of lung metastases and IL‑15TP co‑expressed on RTX-240increased the numbers of NK cells, including terminally differentiated NK cells, in expanding both the lungs of treated mice compared with control mice as depicted below.CD8+ memory (2.5 fold)

CD8 T Cell and NK cells by approximately 10-15 fold. This was substantially higher than utomilumab, rhIL‑15, and a combination of utomilumab and rhIL‑15.

In VitroCell Proliferation and ActivationFunctionality

In contrast to systemic treatment with a 4-1BB agonist antibody, mRBC‑240 results in no observed organ toxicity in vivo, likely due to restriction of CD8+ Memory Cells and NK Cells by RTX‑240

therapy to the vasculature.

In a mouse model of liver toxicity, we observed no evidence of toxicity with mRCT‑240. Levels of aspartate transaminase, or AST, and alanine transaminase, or ALT, were not significantly elevated following administration of mRCT‑mRBC‑240, as compared to administration of mRCT‑mRBC‑CTRL. In contrast, we observed significant transaminase elevations after administration of α4‑1BB mAb. Liver infiltration with macrophages and CD8+ T cells are considered to be critical topromote 4‑1BBL‑induced1BB agonist-induced liver toxicity. As expected, we observed increased liver infiltration with all of these cell

LiverLack of Organ Toxicity in Mice of mRCT‑240 Compared to α4‑1BB Agonist mAb

4‑1BB agonistic antibodies are believed to cause liver toxicity through a multi‑step process that begins with activation of bone marrow‑derived monocytes, which subsequently infiltrate the liver, activating Kupffer cells and then CD8+ cells.cells [Barthowiak, et. al., Clinical Cancer Research; 24(5) March 1, 2018]. Our data suggest that mRCT-240mRBC-240 does not stimulate the bone marrow derived monocytes, consistent with the hypothesis that activation occurs in the bone marrow, which has limited exposure to mRCT-240.mRBC-240.

Our in vivo studies of a murine surrogate of RTX-240, mRCT-240,mRBC-240, administered intravenously, or i.v., in a B16F10 lung metastasis mouse model provide further evidence in support of RTX-240. In this model, tumor cells were injected intravenously to establish metastases in the lung and then mice were treated with mRCT-240mRBC-240 alone or in combination with an anti‑PD‑1 antibody. mRCT-240mRBC-240 administered i.v. as a monotherapy reduced tumor burden in mice compared to those treated with mRCT‑mRBC‑CTRL, mRCT‑mRBC‑4‑1BBL and mRCT‑mRBC‑IL‑15TP (left chart below), thereby indicating the potential synergy that may be achieved by expressing both 4‑1‑BBL and IL‑15TP on the cell surface of mRCT-240.mRBC-240. The tumor burden reduction that was observed after administration of α4‑1BB mAb was not significantly different from mRCT-240.mRBC-240. However, the observed effect of α4‑1BB mAb was at the same dose level that generated hepatotoxicity in mice. As mRCT-240mRBC-240 did not generate liver toxicity in mice, we believe that mRCT-240, if successfully developed and approved, mayhas the potential to have an improved therapeutic index, or improved risk‑benefit, over agonistic 4‑1BB antibodies in cancer patients. In a separate study mRCT-240mRBC-240 administered i.v. in combination with the anti‑PD‑1 antibody significantly reduced tumor burden in mice compared to those treated with the negative control mRCT‑mRBC‑CTRL, as well as the anti‑PD‑1 antibody alone (right chart below).

Activity of mRCT-240 mRBC-240 as Monotherapy and in Combination with Anti-PD-1
in a B16F10 Lung Metastasis Mouse Model

Additionally, mRCT‑240 administered i.v. as a monotherapy or in combination with an anti‑PD‑1 antibody reduced tumor burden in a CT26 colon cancer mouse model. Treatment with the combination of mRCT‑240 plus anti‑PD‑1 resulted in a higher number of mice with stable disease or tumor regression compared to mRCT‑240 or anti‑PD‑1 treatment alone. The anti‑tumor activity that was observed after administration of α4‑1BB mAb at the same dose level that generated hepatotoxicity in mice was not significantly different from mRCT‑240. As mRCT‑240 did not generate liver toxicity in mice, we believe that mRCT‑240, if successfully developed and approved, may have an improved therapeutic index, or improved risk‑benefit, over agonistic 4‑1BB antibodies in cancer patients.

MHC expression making the cancer invisible to T cells but ascells. As a result, itthe cancer becomes susceptible to NK cell dependent killing. InitialFuture clinical development of RTX-240 willmay include patient populations which have progressed on checkpoint inhibitor therapy due to loss of MHC expression.

We are currently completing IND-enabling studies and plan to file an IND for RTX-240 for the treatment of solid tumors by early 2020.

We are planning to evaluate RTX-240 as monotherapy and in combination with an anti-PD1 antibody, including in patients whose disease has progressed on checkpoint inhibitor therapy.  We plan to identify and stratify patients whose disease has lost MHC expression.  Tumor types that may be included are melanoma, non‑small cell lung cancer, renal

224 alone, an anti-PD1 antibody in combination with mRBC-CTRL, or with mRCT-224mRBC-224 in combination with an anti‑PD‑1 antibody. mRCT-224mRBC-224 administered as a monotherapy reduced tumor burden in mice compared to those treated with mRBC‑CTRL with or without and anti-PD1 antibody. Tumor control was even more pronounced when mRCT-224 was combined with an anti-PD1 antibody. These studies support the potential of RTX-224 as a potent monotherapy or combination therapy.

body weight versus controls. mRBC-treated mice had no evidence of liver toxicity, which was observed based on no increase in serum alanine transaminase and liver weight, compared to mice treated with systemic recombinant IL-12. The charts below summarize these results.

LiverOrgan Toxicity in Mice of mRCT‑224 Compared to rhIL-12

Histopathological examination of liver sections from RTX-224 treated mice reveal no macrophage infiltration or tissue inflammation. This is in stark contrast to control mice treated with the murine 4-1BB antibody, 3H3, where significant macrophage infiltration and tissue damage is evident. This difference between the treated and control groups was evident both with and without the co-administration of an anti-PD-1 antibody.

Liver Macrophage Infiltration and Fibrosis in Mice Associated with mRCT‑224 as Compared to rhIL-12

In the future, we are planning to evaluate RX-224RTX-224 in solid tumors as monotherapy and in combination with an anti-PD-1 antibody.other anti-cancer agents. We also plan to study RTX-224 in patients whose disease has progressed on checkpoint inhibitor therapy. Success

Antigen-specific immune stimulation: Artificial antigen presenting Red Cell Therapeutic product candidates, RTX-321 for HPV-positive tumors

Current therapies and their limitations

Immuno-oncologists are pursuing multiple approaches to target antigens for the purpose of killing cancer cells. Previously mentioned CAR-T cell therapies are an autologous approach that engineers a patient’s own T cells ex vivo to target a specific antigen, but have thus far demonstrated limited benefit outside of certain hematological malignancies and have had challenges with manufacturing and scale. Other companies are using different therapeutic modalities to try to expand the number of T cells targeting a particular antigen in this population could leadvivo, such as BioNTech SE using RNA and Inovio Pharmaceuticals, Inc. using DNA-based therapy. However, to pivotal studiesdate, these approaches have had challenges generating sufficient quantity and development in earlier linesquality of therapy.immune responses against particular antigens, which has limited their efficacy. As a result, there remains a need for more effective therapies that target cancer, or cancer-associated antigens.

RCTs functioning asPreclinical data for artificial antigen presenting cells (aAPCs)Red Cell Therapeutics and RTX-321

We have created RCT product candidates that function as artificial APCs, or RTX‑aAPCs, with the potential to induce selective anti‑tumor killing by stimulating the immune system to target tumors in an antigen‑specific manner.

RCTs permitThe RED PLATFORM permits us to presentengineer a variety of proteins in their native state on the cell surface. For aAPCs, we can express signals 1, 2 and RTX‑aAPCs take advantage3, which are necessary for the expansion and activation of this as they co‑express anantigen-specific T cells. We can engineer MHC that presents a tumor‑specific peptide antigen, or signal 1, to the immune system together with a costimulatory protein, such as 4‑1BBL, or signal 2, that stimulates the adaptive immune system.and a cytokine, such as IL-12, or signal 3. When co-expressed and delivered simultaneously and proximately, signal 1+2 promotes T cell activation/initial proliferation and potentially memory. A third cytokinememory and signal 3 can also be added to increase T cell expansion further and support the maintenance of T cell memory.

The action of Additionally, the construct described mimics the normal T cell‑APC interaction via the T cell receptor, or TCR, and has shown high levels of T cell expansion and activation in preclinical studies, as well as very specific tumor killing. CD8+ cytotoxic T cells respond to antigens in association with MHC I molecules, and CD4+ helper T cells respond to antigens in association with MHC II molecules. MHC I and MHC II tumor antigen presentation combined with potent co‑stimulation has the potential to generate sustained tumor‑specific killing. Our lead aAPC program targets HPV+ tumors, of which head and neck and cervical cancer are the most common.  Treatment options for refractory and relapsing disease are limited, and we expect to be able to offer patients a potent and highly specific immune stimulation. 

RTX‑aAPCs Mimic the APC‑T Cell Interaction to Provide Antigen-Specific Cancer Therapies

The figure below schematically depicts the interaction between our artificial antigen-presenting cell (RTX-aAPC) and a T cell. The RTX-aAPC delivers all three signals required for optimal activation of the T cells. Signal 1 is an antigenic peptide presented by an MHC Class I molecule; signal 2 is a costimulatory signal (4-1BBL is used in the examples below); and signal 3 is a cytokine (IL-12 used in the studies below).

As a first step to examine the potential of RTX-aAPCs, we have constructed a murine surrogate, termed mRBC-aAPC which expresses signals 1 and 2(ovalbumin, or OVA; and 4-1BBL, respectively). We observed that an mRBC-aAPC expressing signals 1 and 2 activates ovalbumin‑specific T cells andpotently expands OVA-specific T cells (OT1 cells) with a memory phenotype (CD44+) in vitro compared with control cells expressing signal 1 alone or signal 2 alone.

Activation of Ovalbumin (OVA)‑Specific T Cells with mRBC‑aAPC (OVA)

Zhang, et. al., Society for Immunotherapy of Cancer; Poster #P233, 2019.

We have also observed that when ovalbumin‑specific transgenic T cells (OTI‑T cells) are expanded and activated by mRBC‑aAPC (expressing ovalbumin peptide – OVA – presented by MHC class I plus 4-1BBL) selectively kill ovalbumin‑expressing tumor cells (EG7.OVA cells), while the parental cells that do not express ovalbumin (EL4) are not eliminated.

Activity of OT1‑T Cells Expanded With mRBC‑aAPC (OVA)

Zhang, et. al., American Association for Cancer Research; Poster #3260, 2019.

Furthermore, we have observed in vivo in mice that mRBC‑aAPC (OVA + 4-1BBL) specifically expand and activate OT1 T cells in the spleen and lymph nodes (60- and 30-fold). Importantly, we find that the majority of the OT1 T cells display a central memory phenotype (not shown), which has been found to be a key population driving the effectiveness of T cell-based therapies. In addition, a large proportion of these cells are found to traffic to lymph nodes, which supports their potential to effectively mobilize within the body and to the tumor to support a robust anti‑tumor response. In contrast, the mRBC-CTRL (expressing 4-1BBL without antigen on the cell surface) did not expand or activate OTI‑T cells, thereby indicating that mRBC‑aAPCs mimic the function of antigen presenting cells in vivo. 

mRBC-aAPC (OVA) Increases CD8 OT1 T Cell Numbers in the Spleen and Lymph Nodes

Zhang, et. al., Society for Immunotherapy of Cancer; Poster #P233, 2019.

As noted above, OT1 T cells that are expanded and activated by mRBC‑aAPC (OVA) selectively kill ovalbumin‑expressing tumor cells, or EG7.OVA cells. In the experiment depicted below, mRBC-aAPC (OVA) treatment promoted regressions and increased survival in a mouse tumor model compared to controls. Additionally, the number of antigen-specific cells in tumors and tumor-draining lymph node also increased with mRBC-aAPC (OVA) treatment in this tumor model relative to controls.

mRBC‑aAPC (OVA) Promotes Substantial Regressions and Increases Survival
in an EG7.OVA Mouse Tumor Model

Zhang, et. al., Society for Immunotherapy of Cancer; Poster #P233, 2019.

As additional proof of concept, we engineered mouse red cells with hundreds of thousands of copies of MHC I loaded with the gp100 peptide, a melanoma antigen, 4-1BBL and IL-12 on the cell surface (i.e., signals 1+2+3) and tested these in a B16-F10 melanoma mouse model. These cells (mRBC-gp100-4-1BBL-IL-12)promoted the expansion and effector function of adoptively transferred antigen-specific Pmel T cells, and nearly eliminated lung metastases at the highest dose levels. Also, mRBC-gp100-4-1BBL-IL-12promoted gp100-specific T cell expansion (Pmel cells) in the circulation, secondary lymphoid organs and lungs. Importantly, mRBC-gp100-4-1BBL-IL-12 not only augmented the functional responses of adoptively transferred Pmel cells, but also induced effector responses in endogenous CD8 T cells, indicating that the mRBC was able to stimulate an immune response in pre-existing cells.

aAPC Targeted Against a Tumor-Associated Melanoma Antigen gp100

Zhang, et. al., Society for Immunotherapy of Cancer; Poster #P233, 2019.

Finally, we observed that our lead product candidate, RTX-321 (HPV+) can activate an HPV-specific TCR transduced T cell line as well as primary human T cells. In the experiment shown below, untransduced primary human T cells or T cells transduced with an HPV-specific T cell receptor were cultured with RCTs that expressed either nothing, signals 2+3 (i.e., no antigen), signals 1+2, or RTX-321. No cell expansion was observed in the absence of antigen. An RCT expressing HPV antigen plus 4-1BBL induced modest expansion of HPV-responsive T cells, but RTX-321 was at least 10-fold more potent.

Zhang, et. al., Society for Immunotherapy of Cancer; Poster #P233, 2019.

Collectively, we believe these preclinical data support the development of RTX-321 for the treatment of HPV 16-positive tumors, including head and neck and cervical cancer. We plan to file in IND for RTX-321 by the end of 2020.

The potential applications of RTX‑aAPCs span both solid and hematological cancers and there are many known tumor antigens common to certain cancers that can be targeted for development. Over the mid‑term, patient specific antigens can be sequenced to create personalized therapies. We believe that this may provide a more reliable and scalable approach to personalized cellular therapy. In addition to a program in HPV 16+ tumors, we are exploring the use of knownshared and personal tumor antigens, such as EBV, NY‑ESO‑1 and MAGE‑A peptides, as well as tumor neo-antigensneoantigens to deliver more accessible and effective treatments than standard vaccines or alternative neo‑antigenneoantigen approaches.

Cancer discovery research

Our RED PLATFORM provides significant potential to develop and advance a broad portfolio

Autoimmune diseases

RCT product candidates for the induction of antigen‑specific tolerance

We have generated RCT product candidates that express antigens within the cell, on the cell surface, or as presented by major histocompatibility complex II, and we believe that this represents a powerful antigen‑presenting platform for the potential treatment of autoimmune diseases, such as Type 1 diabetes. We are also exploring antigen independent approaches that holdIn addition, we have the ability to express immune-modulating cytokines, enzymes, or inhibitory signals, which may have the potential to simulate specific regulatory cells which then target a range of autoreactive T cells.induce tolerance. We believe that if successful, this approach will allow us to address a wide range of autoimmune diseases.

We are currently assessing several tolerance inducing RCT product candidates and expect to select our first clinical candidate for treatment of autoimmune diseases in 2019.candidates. We anticipate that suchour lead product candidate will focus on an indication such as pemphigus vulgaris, where treatment effects are easily measureablemeasurable and proof-of-concept can be demonstrated in an efficient manner.

mRBC‑MOG Effect on Mice with Moderate EAE (Left) and Paralyzed EAE Mice (Right)

Effect of mRCT‑mRBC‑MOG in Immunosuppressive on the Phenotype of APCs in EAE Mice

Beyond observations of therapeutic effects in this disease model, we have generated evidence of the development of immunologic memory following treatment with mRCT‑mRBC‑MOG, suggesting the possibility of a cure. Using the EAE animal model, mice were first treated with either mRCT‑mRBC‑MOG or control mouse RBCs on Days 5 and 17. Following a 40‑day washout period after which the administered mouse RBCs were no longer in circulation, the EAE mice were re‑challenged with MOG peptide to re‑stimulate an immune response. We observed a clear improvement in survival between the mRCT‑mRBC‑MOG treated group and the control group, indicating that RCT‑mRBC‑MOG treated animals maintained immunological memory which protected them from the re‑challenge.

Overall, we and our collaborators have generated compelling preclinical evidence in support of applying antigen‑expressing RCT product candidates to induce antigen‑specific tolerance for the treatment of a range of autoimmune diseases.

Autoimmune disease discovery research

Beyond developing RCTs that express one or more antigens for the treatment in antigen‑induced autoimmune diseases, we are exploring the potential to apply RCT product candidates to directly stimulate specific populations of regulatory T cells directlyor delete pathogenic CD4 cells and direct the immune system back to a more tolerogenic state. We have also created RCT constructs that clear lethal doses of TNF‑alpha and botulinum toxin from the bloodstream of mice, suggesting that RCTs may also provide therapeutic benefits to patients suffering from severe inflammatory diseases.

Rare Diseases

Until March 2020, we had been developing RTX-134 for the treatment of PKU. We had also been developing RCT product candidates for the treatment of other rare diseases such as chronic refractory gout and homocystinuria.

The IND for RTX-134 was allowed to proceed by the FDA in March 2019. The first patient was enrolled in the trial in January 2020. RTX-134 administration was well tolerated. While there were no reported adverse events, the results from the first patient were uninterpretable possibly due, in part, to the low dose of cells administered and the sensitivity of the flow cytometry assay used to evaluate cell circulation.

In March 2020, we decided to discontinue the RTX-134 Phase 1b clinical trial and deprioritized RTX-134 and our other rare disease programs, to primarily focus on the development of our oncology and autoimmunity pipeline. Multiple factors contributed to this decision, including unanticipated delays in the RTX-134 Phase 1b clinical trial, primarily due to continued manufacturing challenges at our CMO, the anticipated high cost associated with producing chronic, high-dose therapy for enzyme deficiencies and favorable preclinical data from our oncology pipeline. Future capital investments and improvements in manufacturing efficiency, together with enhancements to the RED PLATFORM®, may enable us to revisit chronic, high-dose rare diseases in the future.

Manufacturing

We have industrialized the production of RCTs by developing and scaling up a manufacturing process by which hematopoietic progenitor cells are expanded, then genetically engineered and subsequently differentiated and matured into fully enucleated RCTs that express biotherapeutic proteins within the cell or on the cell surface. Our standard RCT manufacturing process includes the following steps:

(1)Donors are screened for infectious diseases according to regulatory guidelines and are typed for major blood group antigens. O negative blood donors are selected and administered granulocyte colony stimulating factor to mobilize their bone marrow.

(2)CD34+ hematopoietic precursor cells are isolated from universal donor blood, collected by apheresis and purified.

A single donor willis expected to allow us to manufacture up to thousands of doses.doses when we reach full manufacturing capacity. With approximately 7% of the U.S. population having an O negative blood type, we believe that there is ample supply of CD34+ hematopoietic precursor cells needed to produce our RCTs. Additionally, due to the inherent properties

of RBCs, RCTSRCTs can be manufactured in large bioreactors using our proprietary cell culture processes, which could result in the cost of goods sold being significantly lower than other cellular therapies.

The FDA has reviewedapproved our RCTestablished and compliant manufacturing process including in‑process control parameters. Based on guidance fromcapable of producing product candidates for clinical use following the FDA, we have established a path to production of current good manufacturing practices, or cGMP grade product candidates for clinical use.operations. We expect to be able to use the same or similar manufacturing processes for all our future RCT product candidates, which would enable us to bring RCTs into clinical development in an accelerated manner.

Based on our expertise in red cell biology and advice from leading hematologists and blood transfusion experts, we have developed RCT product release criteria to determine the purity, viability, red cell identity and potency of each RCT batch. These release criteria have been reviewed and accepted for clinical use by the FDA.

We are manufacturingmanufacture RCTs in single use bioreactors, which enable us to control critical process parameters and thereby produce consistent RCTs that meet the established product release criteria. We are currently working to further increase yields and plan to scale into larger bioreactors for eventual commercialization. We currently use external suppliers for lentiviral vector production but have establisheddeveloped an internal lentiviral vector production process. We are currently working to further increase yields and to scale into larger bioreactors.process, which may be used in the future.

In addition to the standard RCT manufacturing process, we have developed alternative proprietary processes for engineering hematopoietic precursor cells and maturing these into RCTs. These processes may be utilized in the production of future RCTs.

Expanding our manufacturing capacity and supply chain

To enable us to produce consistent and reproducible product at greater scale, in July 2018, we acquired and began renovating a 135,000 square foot cGMP manufacturing facility in Smithfield, RI. As of January 2020, this manufacturing facility is operational and is expected to provide cGMP material for clinical supply and commercial product upon regulatory approval. We plan to provide clinical supply for our upcoming RTX-240 and RTX-321 cancer clinical trials from this site. In addition, we have the potential to significantly expand our manufacturing capabilities in Smithfield, RI and plan to stage additional investments based on future supply needs.

Suppliers and contract manufacturing organizations

We haveIn 2018, we entered into a clinical supply agreement with a contract manufacturing organization, or CMO located in the United States to produce cGMP grade RTX‑134 for our initial clinical trials and have successfully transferred ourtrial in PKU. We experienced multiple manufacturing processchallenges with this CMO that contributed to this CMO. We have secured optionsdelays in the RTX-134 Phase 1b clinical trial. Although we were able to manufacture clinical grade RTX-134 for additional manufacturing suites for cGMP productionthe first time during the third quarter of 2019, continued challenges contributed to further clinical trial delays following the dosing of the RCT product candidates that are projectedfirst patient in January 2020. In March 2020, we decided to begindiscontinue the RTX-134 Phase 1b clinical trials in 2020. We anticipate that these arrangements will be sufficient fortrial and deprioritized RTX-134 and our other rare disease programs, to primarily focus on the manufacturedevelopment of our product candidates until our planned manufacturing facility is establishedoncology and operational.autoimmunity pipeline.

We have also entered into agreements with a supplier of cGMP grade plasmids for lentiviral production as well as a supplier of lentiviral vector. We have secured cGMP lentiviral vector production slots that we believe will be sufficient toprovide the initial supply RTX‑134of RTX-240 drug product for the beginning of our planned Phase 1b trial in PKU patients,1 trials, and we are continually securing additional lentiviral production slots for the additional RCT product candidates that are projected to enter clinical trials.

Expanding our manufacturing capacity and supply chain

In 2018, we acquired a 135,000 square foot GMP manufacturing facility in Smithfield, Rhode Island. We are in the process of renovating and customizing this facility to contain multiple RCT GMP manufacturing suites and lentiviral vector GMP manufacturing suites. This will enable us to manufacture multiple RCTs as well as lentiviral vectors in a cGMP compliant manner for the clinical supply and, if approved, expand capacity for commercial supply of our RCT

know‑how relating to our proprietary technology and product candidates, continuing innovation and in‑licensing opportunities to develop, strengthen and maintain our proprietary position in the field of engineered red cell therapeutics. We additionally rely on data exclusivity, market exclusivity and patent term extensions when available and plan to seek and rely on regulatory protection afforded through orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.

We believe that we have a strong global intellectual property position and possess substantial know‑how and trade secrets relating to our proprietary product candidates, technology and platform, including related manufacturing processes and technology. As for our product candidates, platform, and the processes we develop and commercialize, in the normal course of business, we pursue, as appropriate, patent protection or trade secret protection relating to compositions, methods of use, treatment of indications, dosing, formulations and methods of manufacturing. As of February 28, 2019,29, 2020, our patent portfolio consists of 2632 patent families, including one owned12 issued U.S. issued patent, two allowed U.S. patent applications,  42patents, 46 owned or in‑licensed U.S. pending patent applications (including provisional applications), and 70109 owned or in‑licensed pending patent applications in jurisdictions outside of the United States (including Patent Cooperation Treaty, or PCT, applications) that, in many cases, are counterparts to the foregoing U.S. patents and patent applications. Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our product candidates and certain aspects of our RED PLATFORM and our manufacturing processes. Examples of the products and technology areas covered by our intellectual property portfolio are described below.

Disease‑related intellectual property

The disease‑related patent rights in our intellectual property portfolio relate to pathological conditions and disorders and provide coverage for RCT product candidates to specifically address those conditions and the associated disease states. The disease‑related patent applications for our lead programs include those described below. Each of the disease‑related patent rights and applications described below are owned by us and are not licensed from any third party:

RTX‑134 for phenylketonuria

Our RTX‑134 program targets phenylketonuria, for which we have developed an RCT product candidate that expresses phenylalanine ammonia lyase, or PAL, an enzyme that metabolizes phenylalanine.

•This aspect of our patent portfolio relates to RCTs that express PAL, methods of treating diseases (e.g., phenylketonuria) that involve accumulation of phenylalanine and methods of making of RCTs that express PAL.

•As of February 28, 2019, the patent rights relating to this technology include one issued U.S. patent related to methods of treating phenylketonuria with RTX‑134, one allowed U.S. patent application related to methods of decreasing blood phenylalanine levels with RTX-134, two pending U.S. patent applications and seven pending international patent applications that have entered the National Stage (or the Seven National Stage Applications) related to RCT compositions of matter, methods of treating elevated phenylalanine levels and method of making

RTX-321, an artificial antigen presenting cell for the treatment of HPV-positive tumors

We have developed RTX-321, an artificial antigen presenting cell RCT, that expresses an HPV peptide antigen bound to MHC I, 4-1BBL and IL-12 on the cell surface to mimic human T cell-APC interactions. RTX-321 is in development for the treatment of HPV-positive tumors.

Additional oncology intellectual property

We own disease‑related patent applications directed to RCTs for use in oncology, including immuno‑oncology. These patent applications relate to RCT compositions that comprise a variety of agents, including anti‑tumor antibodies, tumor starvation enzymes, pro‑apoptotic proteins, costimulatory molecules, immune checkpoint inhibitors, tumor antigens, MHC molecules and numerous combinations thereof. These patent applications also cover the use of RCTs to treat cancer, including lung cancer, melanoma, renal cancer, bladder cancer, gastric cancer, squamous cell carcinoma, Hodgkin lymphoma, hepatocellular carcinoma, Merkel cell carcinoma, colorectal cancer, and acute myeloid leukemia, as well as various relapsed or refractory cancers.

These disease‑related patent applications include patent applications directed to RCTs that function as artificial antigen‑presenting cells. These applications cover RCTs expressing combinations of MHC, antigen and a costimulatory molecule, methods of activating an antigen‑specific T cell and methods of treating cancer by inducing a tumor‑specific immune response.

We expect the patent applications in this portfolio, if issued, to expire between 2034 and 2038, without taking into account any patent term adjustments or extensions we may obtain.

Autoimmune disease intellectual property

We own disease‑related patent applications directed to RCTs for use in treating autoimmune diseases. These patent applications relate to RCT compositions having autoimmune antigens, anti‑cytokine antibodies, agents for cleaving autoimmune antibodies and numerous combinations thereof. The RCTs covered by these patent applications operate through various mechanisms, including through induction of tolerance to self‑antigens, clearance of autoimmune antibodies from the bloodstream, clearance of cytokines from the bloodstream and inactivation of autoimmune antibodies. The patent applications also cover the use of these RCTs to treat a number of diseases, such as pemphigus vulgaris, Type 1 diabetes, membranous nephropathy, autoimmune hepatitis, myasthenia gravis, celiac disease and neuromyelitis optica.

We expect the patent applications in this portfolio, if issued, to expire between 2035 and 2038, without taking into account any patent term adjustments or extensions we may obtain.

Cardio‑metabolic disorders intellectual property

We own a disease‑related PCT applicationpatent applications directed to RCT compositions and their use in treating cardiac disorders and metabolic disorders, including diabetes, obesity heart failure, atherosclerosis and hemophilia. We expect that any national phasethe patent applications filed in connection with this PCT application,portfolio, if issued, to expire in 2037, without taking into account any patent term adjustments or extensions we may obtain.

applications in this portfolio, if issued, to expire between 2037 and 2039 without taking into account any patent term adjustments or extensions we may obtain.

Platform‑related intellectual property

In addition to the disease‑related intellectual property, our intellectual property portfolio also includes know‑how and patent applications directed to the RED PLATFORM and other technologies developed internally and exclusively in‑licensed from the Whitehead Institute for Biomedical Research, or WIBR, that relate to the engineering and culturing of RCTs. Exemplary platform technologies that are the subject of such patent applications include:

These platform technologies, and our intellectual property protection related thereto, are broadly applicable to our RCT product candidates.

We continually assess and refine our intellectual property strategy as we develop new platform technologies and product candidates. To that end, we are prepared to file additional patent applications if our intellectual property strategy requires such filings, or where we seek to adapt to competition or seize business opportunities. Further, we are prepared to file patent applications, as we consider appropriate under the circumstances, relating to the new technologies that we develop. In addition to filing and prosecuting patent applications in the United States, we often file counterpart patent applications in additional countries where we believe such foreign filing is likely to be beneficial, including but not limited to Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, and Japan.

Individual patentspatent terms extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued forfrom applications filed in the United States are effective for 20 years from the earliest effective filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. However, the actual protection afforded by a patent varies on a product‑by‑product basis, from country‑to‑country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory‑related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Trademark protection

As of February 28, 2019,29, 2020, our trademark portfolio contains approximately 3852 registrations and pending applications. For the RUBIUS THERAPEUTICS mark, we have pending applications in the United States, Argentina, and Canada, registrations in Brazil and Brazil, as well asHong Kong, and an International Registration designating Australia, China, the E.U., India, Indonesia, Israel, Japan, Mexico, New Zealand, Norway, the Philippines, Russia, Singapore, S. Korea, and Russia.Switzerland. Under this International Registration, the mark is pending in the E.U., Indonesia, Israel, Mexico, Norway, the Philippines, S. Korea, and India,Switzerland, and registered in Australia, China, India, Japan, New Zealand, Russia, and Russia.Singapore. In addition, we have a U.S. trademark registration and a pending U.S. application for the RUBIUS mark. For

the RCT mark, we have a pending U.S. application as well as an International Registration designating China, the E.U., India, and Japan. Under this

between WIBR and a global biopharmaceutical company, the biopharmaceutical company funded research resulting in one of the licensed patent families and WIBR granted the right to retain a worldwide, irrevocable, non‑exclusive, royalty‑free right to use this patent family for research and development purposes. In addition, under the

ThereFinally, many companies are a number of gene therapy companies,developing therapies to generate antigen-specific immune responses against HPV positive cancers, such as BioMarin Pharmaceutical,BioNTech SE using RNA and Inovio Pharmaceuticals, Inc., which has active gene therapy programs that include a preclinical PKU product candidate, and Homology Medicines, Inc., which recently declared that it is in IND‑enabling studies with a gene therapy product candidate and expects to initiate a clinical trial in PKU in the first quarter of 2019. Moderna, Inc. is in early preclinical work with an mRNA approach to addressing PKU. using DNA-based therapy.

In addition Synlogic, Inc. is one of severalto the companies developing engineered probiotic therapeutics to treat inborn errors of metabolism and has a product candidate in a Phase 1 trial for the treatment of urea cycle disorders, as well as a Phase 1/2 program for the treatment of PKU. Finally, Agios Pharmaceuticals, Inc. declared that they are in the early discovery stage with a small molecule approach to PKU treatment. In addition,described above, we anticipate competing with the largest biopharmaceutical companies in the world, such as Novartis AG, Gilead Sciences, Inc., Amgen, Inc., F. Hoffman‑La Roche AG (Roche), Johnson & Johnson, and Pfizer, Inc., which are all currently conducting research in cellular therapies.

Government regulation

Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record‑keeping, promotion, advertising, distribution, post‑approval monitoring and reporting, marketing and export and import of drug and biological products, such as RTX‑134240 and RTX-240,RTX-321, and any future product candidates. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. biological product development

In the United States, the FDA regulates biological products under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act, or PHSA, and regulations thereunder. Biologics are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post‑market may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

The FDA categorizes human cell‑ or tissue‑based products as either minimally manipulated or more than minimally manipulated, and has determined that more than minimally manipulated products must be approved by the FDA through the biologics license application, or BLA, process before they may be legally marketed in the United States. The process required by the FDA before a biologic may be marketed in the United States generally involves the following:

•completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice, or GLP, requirements;

•submission to the FDA of an IND, which must become effective before human clinical trials may begin;

•approval by an institutional review board, or IRB, or independent ethics committee at each clinical trial site before each trial may be initiated;

•performance of adequate and well‑controlled human clinical trials in accordance with applicable IND regulations, good clinical practice, or GCP, requirements and other clinical trial‑related regulations to establish the safety and efficacy of the investigational product for each proposed indication;

•submission to the FDA of a BLA;

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for RTX‑134RTX-240 and RTX-240RTX-321 and any future product candidates will be granted on a timely basis, or at all.

Preclinical studies and IND

Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess safety and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies.

An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold before such time. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. If the FDA’s concerns are not resolved, submission of an IND may not result in the FDA allowing clinical trials to commence. With gene therapy protocols, if the FDA allows the IND to proceed, but a RAC decides that full public review of the protocol is warranted, the FDA will request at the completion of its IND review that sponsors delay initiation of the protocol until after completion of the RAC review process.

In addition to the IND submission process, sponsors of certain clinical studies of cells containing recombinant or synthetic nucleic acid molecules, including human gene transfer studies, must comply with the NIH’s Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. The NIH Guidelines set forth the principles and requirements for NIH and institutional oversight of research with recombinant or synthetic nucleic acid molecules, including the standards for investigators and institutions to follow to ensure the safe handling and containment of such molecules. In April 2016, modifications to the NIH Guidelines went into effect, pursuant to which only a subset of human gene transfer protocols are subject to review by the RAC. Specifically, under the modified NIH Guidelines, RAC review of the protocol will be required only in exceptional cases where an oversight body such as an Institutional Biosafety Committee, or IBC, which provides local review and oversight of research utilizing recombinant or synthetic nucleic acid molecules, or an IRB determines that the protocol would significantly benefit from RAC review, and the protocol (a) uses a new vector, genetic material, or delivery methodology that represents a first‑in‑human experience and thus presents an unknown risk, and/or (b) relies on preclinical safety data that were obtained using a new preclinical model system of unknown and unconfirmed value, and/or (c) involves a proposed vector, gene construct, or method of delivery associated with possible toxicities that are not widely known and that may render it difficult for oversight bodies to evaluate the protocol rigorously. The RAC review proceedings are public, and reports are posted publicly to the website for the NIH’s Office of Biotechnology Activities. Although compliance with the NIH Guidelines is mandatory for research conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Independent of RAC review, the NIH Guidelines also require all human gene transfer protocols subject to the NIH Guidelines to be registered with NIH, with limited exemptions. A study subject to the NIH Guidelines may not begin until the IBC approves the protocol, and the IBC cannot approve the

well‑designed and well‑conducted foreign clinical trial not conducted under an IND if the trial was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.

Post‑approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or

as positive findings. Data may come from company‑sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the United States.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s fee schedule, effective through December 31, 2018,2020, the user fee for an application requiring clinical data, such as a BLA or NDA, is $2,421,495.$2,942,965. The sponsor of an approved BLA is also subject to an annual prescription drug program fee, which for fiscal year 20182020 is $304,162.$332,424. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non‑orphan indication.

The FDA reviews all submitted BLAs before it accepts them for filing, and may request additional information rather than accepting the BLA for filing. The FDA must make a decision on accepting a BLA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in‑depth review of the BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months, from the filing date, in which to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process is often extended by the FDA requests for additional information or clarification.

Before approving a BLA, the FDA will conduct a pre‑approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements and, if applicable, cGTP requirements. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the cGTP requirements is to ensure that cell and tissue basedtissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their products with the FDA and, when applicable, to evaluate donors through screening and testing. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP and cGTP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel products or products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as

REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre‑ and post‑marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post‑market studies or surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post‑marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product.

Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances. A product will not be considered the “same drug” if it is clinically superior to a product that has orphan drug exclusivity. Moreover, competitors may receive approval of either a different product for the same indication or the same product for a different indication, but which could be used off‑label in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if our product is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity.

endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well‑controlled post‑marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it will require such post‑marketing restrictions, as it deems necessary to assure safe use of the product.

Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life‑threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive interaction and guidance from the FDA. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, but these can also be granted to the same product candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy. All requests for breakthrough therapy designation will be reviewed within 60 days of receipt, and the FDA will either grant or deny the request.

Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.

Regenerative medicine advanced therapy designation

As part of the 21st Century Cures Act, Congress recently amended the FDCA to create an accelerated approval pathway for certain regenerative medicine therapies, which include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Regenerative medicine therapies do not include those human cells, tissues and cellular and tissue basedtissue-based products regulated solely under section 361 of the Public Health Service Act and 21 CFR Part 1271. The new program is intended to facilitate efficient development and expedite review of RMATs, which are intended to treat, modify, reverse, or cure a serious or life‑threatening disease or condition.

A sponsor may request that the FDA designate a drug as an RMAT concurrently with or at any time after submission of an IND. The FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is preliminary clinical evidence indicating that the product has the potential to address unmet medical needs for a serious or life‑threatening disease or condition. The FDA generally expects preliminary clinical evidence to be obtained from clinical investigations specifically conducted to assess the effects of the therapy on a serious condition, which could

•The collection of larger confirmatory data sets; or

Pediatric information

Under the Pediatric Research Equity Act, or PREA, certain BLAs and certain supplements to a BLA must contain data to assess the safety and efficacy 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 product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. The Food and Drug Administration Safety and Innovation Act amended the FDCA to require that a sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within 60 days of an end‑of‑Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 trial. The initial PSP must include an outline of the pediatric trial or trials that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed‑upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early‑phase clinical trials and/or other clinical development programs.

Post‑marketing requirements

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record‑keeping activities, reporting of adverse experiences, complying with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (known as “off‑label use”) and limitations on industry‑sponsored scientific and educational activities. Although physicians may prescribe legally available drugs for off‑label uses, manufacturers may not market or promote such uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the drug or biologic, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require the development of additional data or preclinical studies and clinical trials.

The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve the BLA without an approved REMS, if required. A

potency, purity and overall safety of a distributed product, record‑keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.

After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.

To help reduce the increased risk of the introduction of adventitious agents, the PHS Act emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHS Act also provides authority to the FDA to immediately suspend biologics licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States.

Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and, if applicable, cGTP requirements and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

An abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA‑licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009 as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA. This amendment to the PHSA, in part, attempts to minimize duplicative testing. Bio similarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch. Complexities associated with the larger, and often more complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

A reference biological product is granted fourfour- and twelve yeartwelve-year exclusivity periods from the time of first licensure of the product. The FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product, and the FDA will not approve an application for a biosimilar or interchangeable product based on the reference biological product until twelve years after the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency. Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed product that results in a change in safety, purity or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case‑by‑case basis with data submitted by the sponsor.

Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing regulatory exclusivity periods. This six‑month exclusivity may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA‑issued “Written Request” for such a trial.

clinical trials and increasing their transparency. Recently enacted Clinical Trials Regulation E.U. No 536/2014 ensures that the rules for conducting clinical trials in the E.U. will be identical.

European Union drug marketing

Much like the Anti‑Kickback Statute prohibition in the United States discussed below, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the European Union. The provision of benefits or advantages to physicians is governed by the national anti‑bribery laws of E.U. Member States, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain E.U. Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and the regulatory authorities of the individual E.U. Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the E.U. Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

European Union drug review and approval

In the European Economic Area, or EEA, which is comprised of all 28 E.U. Member States (except Croatia) and also Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations.

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk‑benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

European Union new chemical entity exclusivity

In the E.U., new chemical entities, sometimes referred to as new active substances, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents regulatory authorities in the E.U. from referencing the innovator’s data to assess a generic application for eight years, after which generic marketing authorization can be submitted, and the innovator’s data may be referenced, but not approved for two years. The overall ten‑year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies.

European Union orphan drug designation and exclusivity

In the E.U., the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life‑threatening or chronically debilitating conditions affecting not more than 5 in 10,000 persons in the E.U. community (or where it is unlikely that the development of the medicine would generate sufficient return to justify the investment) and for which no satisfactory method of diagnosis, prevention or treatment has been authorized (or, if a method exists, the product would be a significant benefit to those affected).

In the E.U., orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity is granted following medicinal product approval. 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. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

European data collection

The collection and, use, storage, disclosure, transfer, or other processing of personal data, including personal health data, in the E.U. is governed by, the provisions of the Data Protection Directive, and as of May 2018, the General Data Protection Regulation, or the GDPR. This directiveThe GDPR imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The Data Protection Directive and the GDPR also impose strict rules on the transfer of personal data out of the E.U. European Economic Area, or the EEA, to the United States. Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the E.U. Member States may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the E.U. and substantial fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous and adversely affect our business, financial

Additional laws and regulations governing international operations

If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non‑U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

Coverage and reimbursement

Successful commercialization of new drug and biologic products depends in part on the extent to which reimbursement for those drug and biologic products will be available from government health administration authorities, private health insurers and other organizations. These bodies decide which drug and biologic products they will pay for and establish reimbursement levels. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford a drug or biologic product. Sales of drug and biologic products depend substantially, both domestically and abroad, on the extent to which the costs of these products are paid for by health maintenance,

category and class of covered Part D drugs, though not necessarily all the drugs and biologics in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs and biologics may increase demand for products for which we obtain marketing approval. Any negotiated prices for any of our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non‑governmental payors.

For a drug or biologic product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the average manufacturer price, or AMP, and Medicaid rebate amounts reported by the manufacturer. As of 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although under the current state of the law these newly eligible entities (with the exception of children’s hospitals) will not be eligible to receive discounted 340B pricing on orphan drugs. As 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase. Further, on December 27, 2018, the District Court for the District of Columbia invalidated a recent reimbursement formula change instituted by CMS under the 340B program. ItThe HHS appealed the lower court’s decision to the D.C. Circuit Court of Appeals on July 15, 2019. Pending review, it is unclear how this decision could affect covered hospitals who might purchase our products in the future, and affect the rates we may charge such facilities for our approved products. The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012 by HHS, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures are made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of our product candidates. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s drug could adversely affect the sales of our product candidates. If third‑party payors do not consider our products to be cost‑effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our drugs on a profitable basis.

These current laws and state and federal healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Other healthcare laws

Healthcare providers, physicians and third partythird-party payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Arrangements with third party payors, healthcare providers and physicians may expose a pharmaceutical or biologics manufacturer to broadly applicable fraud and abuse and other healthcare laws and regulations. In the United States, these laws include, without limitation, state and federal anti‑kickback, false claims, physician transparency and patient data privacy and security laws and regulations, including but not limited to those described below:

•the federal Anti‑Kickback Statute makes it illegal for any person, including a prescription drug or biologic manufacturer (or a party acting on its behalf) to knowingly and willfully solicit receive, offer or pay any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, that is intended to induce or reward referrals including the purchase, recommendation, order or prescription of a particular drug for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. Violation of the statute does not require actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim, including items or services resulting from a violation of the federal Anti‑Kickback Statute, constitutes a false or fraudulent claim for purposes of the False Claims Act;

•the federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other federal healthcare programs that are false or fraudulent; knowingly making or causing a false statement material to a false or fraudulent claim or an obligation to pay money to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing such an obligation. Similar to the federal Anti‑Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation;

•the federal  anti-inducement law, prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;

•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information;

•

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Efforts to ensure that business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and 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 civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, integrity and oversight agreements to resolve allegations of non‑compliance, contractual damages, reputational harm, individual imprisonment, diminished profits and future earnings, and curtailment of operations, any of which could adversely affect our ability to operate our business. In addition, commercialization of any of our products outside the United States will also likely be subject to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Current and future healthcare reform legislation

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system. In particular, in 2010 the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research.

ThereSince its enactment, there have been a number of significant changesnumerous judicial, administrative, executive, and legislative challenges to the ACA and its implementation. The Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision effective January 1, 2019 repealing the tax‑based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable featureaspects of the ACA, and therefore becausewe expect there will be additional challenges and amendments to the mandate was repealed as part ofACA in the Tax Cuts and Jobs Act, the remaining provisionsfuture. Various portions of the ACA are invalid as well. Thecurrently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court; the Trump administrationAdministration has issued various Executive Orders which eliminated cost sharing subsidies and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal. It is unclear how

The Bipartisan Budget Act of 2018 also amends the ACA, effective January 1, 2019, by increasing the point‑of‑sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole,” which will shift costs for name brand drugs away from Part D participants back to the manufacturers, which could have a negative effect on our profits in the event any of our products receive FDA approval and CMS reimbursement. Similarly, CMS recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. On November 30, 2018,Additionally, CMS announcedhas finalized a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposed rule changes would allow Medicare Advantage plans to use pre-authorization, or PA, and step therapy, or ST, for six protected classes of drugs, with certain exceptions, permit plans to implement PA and ST in Medicare Part B drugs, change the definition of "negotiated prices," and add a definition of "price concession" to the regulations. It is unclear whether these proposed changes we be accepted, and if so, what effect such changes will have on our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and, due to subsequent legislative amendments, will remain in effect through 20272029 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Legislative and regulatory proposals, and enactment of laws, at the foreign, federal and state levels, directed at containing or lowering the cost of healthcare, will continue into the future.

Corporate Information

Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In January 2015, the Company changed its name to Rubius Therapeutics, Inc. Our principal executive office is located at 399 Binney Street, 3rd Floor, Cambridge, Massachusetts, and our telephone number is (617) 679-9600. Our website address is www.rubiustx.com. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. You should not rely on any such information in making your decision whether to purchase our common stock.

On July 20, 2018, we completed our initial public offering, or IPO,, pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. We received proceeds of $254.3 million after deducting underwriting discounts and commissions and other offering costs.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Item 1A. Risk Factors

Our business is subject to numerous risks. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s discussion and analysis of financial condition and results of operations,” and in our other filings with the Securities and Exchange Commission. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks related to our business, technology and industry

We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.

We are a preclinical-stageclinical-stage biopharmaceutical company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products in clinical development or approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. For the years ended December 31, 2019, 2018 2017 and 2016,2017, we reported net losses of $163.5 million, $89.2 million $43.8 million and $11.0$43.8 million, respectively. As December 31, 2018,2019, we had an accumulated deficit of $150.1$312.7 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. We anticipate that our expenses will increase substantially if, and as, we:

conduct clinical trials for our product candidates;