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

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

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

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

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

As of November 1, ~~2021,~~2022, the registrant had ~~24,923,363~~24,964,502 shares of common stock, $0.001 par value per share, outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factor Summary” below and in Part II, Item 1A. “Risk Factors,” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties as well as our own estimates of potential market opportunities. The market data used in this Quarterly Report on Form 10-Q involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Although we are responsible for the disclosure contained in this Quarterly Report on Form 10-Q and we believe the information from industry publications and other third-party sources included in this Quarterly Report on Form 10-Q is reliable, such information is inherently imprecise. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

Our business is subject to a number of risks of which you should be aware before making an investment decision. Below we summarize what we believe to be the principal risks facing our business, in addition to the risks described more fully in Part II, Item ~~1A,~~1A. “Risk Factors” ~~of Part II~~ of this Quarterly Report on Form 10-Q and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks ~~occurs,~~occur, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.


	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	51,413		$	27,742		$	36,682		$	36,455
Available-for-sale securities		92,477			26,568			75,264			112,292
Accounts receivable from related party		3,142			1,237			10,000			11,402
Prepaid expenses and other current assets		2,835			2,281			4,340			4,042
Total current assets		149,867			57,828			126,286			164,191
Available-for-sale securities, long-term		28,494			—			—			13,547
Property and equipment, net		5,798			6,337			4,553			5,611
Right-of-use asset, operating								10,290			—
Right-of-use asset, finance								84			—
Other assets		1,128			3,120			1,060			1,128
Total assets	$	185,287		$	67,285		$	142,273		$	184,477
Liabilities, Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,814		$	2,131		$	3,031		$	4,012
Accrued expenses and other current liabilities		7,552			5,665			8,371			7,712
Deferred collaboration liability, current		6,459			10,968			8,353			8,118
Deferred rent and lease incentive obligation, current		674			610			—			696
Operating lease liability, current								3,545			—
Finance lease liability, current								74			—
Total current liabilities		16,499			19,374			23,374			20,538
Long-term liabilities:
Deferred collaboration liability, long term		8,459			4,177
Deferred rent and lease incentive obligation, long term		4,389			4,901
Deferred collaboration liability, long-term								9,220			16,431
Deferred rent and lease incentive obligation, long-term								—			4,208
Operating lease liability, long-term								11,104			—
Other long-term liabilities		1,785			523			1,761			1,611
Total liabilities		31,132			28,975			45,459			42,788
Commitments and contingencies (Note 6)
Series A convertible preferred stock, $0.001 par value; 0 shares authorized, issued and outstanding at September 30, 2021; 57,758,734 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $40,284 at December 31, 2020		—			16,176
Series B convertible preferred stock, $0.001 par value; 0 shares authorized, issued and outstanding at September 30, 2021; 12,500,000 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $16,334 at December 31, 2020		—			5,700
Series C convertible preferred stock, $0.001 par value; 0 shares authorized, issued and outstanding at September 30, 2021; 37,528,581 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $45,457 at December 31, 2020		—			16,759
Series D convertible preferred stock, $0.001 par value; 0 shares authorized, issued and outstanding at September 30, 2021; 47,610,763 shares authorized, 31,740,554 shares issued and outstanding at December 31, 2020; aggregate liquidation preference of $55,509 at December 31, 2020		—			54,456
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2021; 0 shares authorized, issued and outstanding at December 31, 2020		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized, 24,920,599 shares issued and 24,899,200 outstanding at September 30, 2021; 115,000,000 shares authorized, 573,793 shares issued and 521,052 shares outstanding at December 31, 2020		25			1
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2022 and December 31, 2021								—			—
Common stock, $0.001 par value; 200,000,000 shares authorized, 24,964,502 shares issued and 24,962,875 shares outstanding at September 30, 2022; 200,000,000 shares authorized, 24,964,520 shares issued and 24,951,983 shares outstanding at December 31, 2021								25			25
Additional paid-in capital		355,731			107,908			358,871			356,308
Accumulated other comprehensive income (loss)		8			(1	)
Accumulated other comprehensive loss								(503	)		(132	)
Accumulated deficit		(201,609	)		(162,689	)		(261,579	)		(214,512	)
Total stockholders’ equity (deficit)		154,155			(54,781	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	185,287		$	67,285
Total stockholders’ equity								96,814			141,689
Total liabilities and stockholders’ equity							$	142,273		$	184,477

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Operating expenses:
Research and development	$	9,020		$	4,691		$	21,867		$	17,426		$	10,030		$	9,020		$	28,737		$	21,867
General and administrative		5,680			2,397			15,462			9,130			6,319			5,680			18,734			15,462
Total operating expenses		14,700			7,088			37,329			26,556			16,349			14,700			47,471			37,329
Loss from operations		(14,700	)		(7,088	)		(37,329	)		(26,556	)		(16,349	)		(14,700	)		(47,471	)		(37,329	)
Other income:
Interest income		33			2			141			103			374			33			532			141
Other income, net		—			(25	)		—			—
Total other income, net		33			(23	)		141			103			374			33			532			141
Net loss before provision for income taxes		(14,667	)		(7,111	)		(37,188	)		(26,453	)		(15,975	)		(14,667	)		(46,939	)		(37,188	)
Provision for income taxes		(1,732	)		—			(1,732	)		—			(30	)		(1,732	)		(128	)		(1,732	)
Net loss	$	(16,399	)	$	(7,111	)	$	(38,920	)	$	(26,453	)	$	(16,005	)	$	(16,399	)	$	(47,067	)	$	(38,920	)
Cumulative dividends on convertible preferred stock		—			(2,779	)		(2,309	)		(8,277	)		—			—			—			(2,309	)
Net loss attributable to common stockholders	$	(16,399	)	$	(9,890	)	$	(41,229	)	$	(34,730	)	$	(16,005	)	$	(16,399	)	$	(47,067	)	$	(41,229	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.66	)	$	(20.28	)	$	(2.00	)	$	(74.11	)	$	(0.64	)	$	(0.66	)	$	(1.89	)	$	(2.00	)
Weighted average shares of common stock outstanding, basic and diluted		24,874,738			487,658			20,661,879			468,641			24,961,873			24,874,738			24,958,597			20,661,879

Comprehensive loss:
Net loss	$	(16,399	)	$	(7,111	)	$	(38,920	)	$	(26,453	)	$	(16,005	)	$	(16,399	)	$	(47,067	)	$	(38,920	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of tax of $0		3			—			9			(10	)		85			3			(371	)		9
Total other comprehensive income (loss)		3			—			9			(10	)		85			3			(371	)		9
Comprehensive loss	$	(16,396	)	$	(7,111	)	$	(38,911	)	$	(26,463	)	$	(15,920	)	$	(16,396	)	$	(47,438	)	$	(38,911	)

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

CONDENSED CONSOLIDATED Statements of CONVERTIBLE PREFERRED STOCK AND Stockholders’ (Deficit) EQUITY

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


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2022			2021
Operating activities
Net loss	$	(38,920	)	$	(26,453	)	$	(47,067	)	$	(38,920	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		2,446			589			2,563			2,446
Depreciation		1,104			1,297			1,088			1,104
Amortization (accretion) of available-for-sale securities		659			(26	)
Non-cash lease expense								1,347			—
Amortization of available-for-sale securities								488			659
Changes in operating assets and liabilities:
Accounts receivable from related party		(1,905	)		—			1,402			(1,905	)
Prepaid expenses and other current assets		(554	)		(257	)		(298	)		(554	)
Other assets		—			(37	)
Accounts payable		(317	)		186			(981	)		(317	)
Accrued expenses and other current liabilities		3,137			(424	)		872			3,137
Deferred collaboration liability								(6,976	)		(227	)
Deferred rent and lease incentive		(448	)		(381	)		—			(448	)
Deferred collaboration liability		(227	)		(2,397	)
Operating lease liability								(1,740	)		—
Other long-term liabilities		1,420			391			170			1,420
Net cash used in operating activities		(33,605	)		(27,512	)		(49,132	)		(33,605	)
Investing activities
Purchases of available-for-sale securities		(165,721	)		—			(71,858	)		(165,721	)
Proceeds from maturities and redemptions of available-for-sale securities		70,668			13,750			121,573			70,668
Proceeds from sale of property and equipment		42			92			—			42
Purchases of property and equipment		(420	)		(161	)		(266	)		(420	)
Net cash (used in) provided by investing activities		(95,431	)		13,681
Net cash provided by (used in) investing activities								49,449			(95,431	)
Financing activities
Proceeds from the issuance of Series D convertible preferred stock		27,400			—			—			27,400
Proceeds from issuance of common stock upon completion of initial public offering net of commissions and underwriting discounts		128,240			—			—			128,240
Payment of initial public offering costs		(3,255	)		—			—			(3,255	)
Proceeds from the exercise of stock options		118			—			—			118
Proceeds from equipment financing		—			499
Principal payments on equipment financing		(143	)		(30	)
Repurchases of unvested restricted stock		(1	)		(3	)
Net cash provided by financing activities		152,359			466
Net increase (decrease) in cash, cash equivalents and restricted cash		23,323			(13,365	)
Principal payments on finance lease liability								(158	)		(143	)
Repurchases of early exercised restricted stock								—			(1	)
Net cash (used in) provided by financing activities								(158	)		152,359
Net increase in cash, cash equivalents and restricted cash								159			23,323
Cash, cash equivalents and restricted cash at beginning of period		29,218			20,039			37,583			29,218
Cash, cash equivalents and restricted cash at end of period	$	52,541		$	6,674		$	37,742		$	52,541
Supplemental disclosure of non-cash activities:
Operating lease right-of-use asset recognized upon adoption of ASC 842							$	11,485		$	—
Fixed asset purchases in accrued expenses	$	187		$	—		$	—		$	187
Vesting of early exercised restricted stock	$	(13	)	$	(32	)	$	—		$	(13	)
Deferred issuance costs for Series D convertible preferred stock in accrued expenses	$	—		$	(60	)

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

1. Nature of the Business

Decibel Therapeutics, Inc. (the “Company”) was formed on November 26, 2013. The Company is a clinical-stage biotechnology company dedicated to discovering and developing transformative treatments for hearing and balance disorders, one of the largest areas of unmet need in medicine. The Company aims to restore and improve hearing and balance through the restoration and regeneration of functional hair cells and non-sensory support cells within the inner ear.

On ~~October 30, 2020, the Company’s board of directors approved a 1-for-~~10 ~~reverse stock split of the Company’s common stock, par value $0.001~~ ~~per share. On~~ February 5, 2021, the Company’s board of directors approved a ~~1-for-5.3~~1-for-5.3 reverse stock split of the Company’s common stock. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to ~~both~~the reverse stock ~~splits.~~

~~Initial Public Offering~~split.

On February 17, 2021, the Company completed an initial public offering ~~(the “IPO”~~(“IPO”), issuing and selling 7,062,000 shares of common stock at a public offering price of $18.00 per share, and on February 24, 2021, the Company issued and sold an additional 600,000 shares pursuant to the underwriters’ partial exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the offering were ~~approximately~~ $~~124.8~~125.0 million. Upon closing of the Company’s IPO, all outstanding shares of convertible preferred stock automatically converted into shares of common stock.

In March 2022, the Company filed a universal shelf registration statement on Form S-3 to register for sale from time to time up to $200.0 million of common stock, preferred stock, debt securities, warrants and/or units in one or more offerings. Further, in March 2022, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which, from time to time, the Company may offer and sell shares of its common stock. Sales of common stock through Jefferies may be made by any method that is deemed an “at-the-market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. Jefferies is entitled to compensation at a rate equal to 3.0% of the gross proceeds from any shares of common stock sold under the Sales Agreement. In August 2022, the Company filed a prospectus supplement under its universal shelf registration for the offer and sale of shares of its common stock having an aggregate offering price up to $50.0 million pursuant to the Sales Agreement. As of September 30, 2022, the Company had not sold any shares of common stock pursuant to the Sales Agreement.

Liquidity

Since its inception, the Company’s operations have been focused on organizing and staffing, business planning, raising capital, establishing the Company’s intellectual property portfolio and performing research and development of its product candidates, programs and platform.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, obtaining regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. ~~Our current programs~~Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and will need to obtain regulatory approval prior to commercialization.These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

As of September 30, ~~2021,~~2022, the Company had cash, cash equivalents and available-for-sale securities of $~~172.4~~111.9 million. The Company has determined that its existing capital resources will be sufficient to meet its projected operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these condensed consolidated financial statements. The Company expects to experience negative cash flows from operations and net losses for the foreseeable future as it continues to invest significantly in research and development of its product candidates, preclinical and clinical development and platform. Management’s conclusion with respect to its ability to fund its operations is based on estimates that are subject to risks and uncertainties that may prove to be incorrect. If actual results differ from management’s estimates, the Company may be required to seek additional funding or curtail planned activities to reduce operating expenses, which may have an adverse impact on the Company’s ability to achieve its business objectives.

Impact of the COVID-19 Pandemic

The worldwide COVID-19 pandemic has affected and may affect in the future the Company’s ability to initiate and complete preclinical studies, delay the initiation and completion of the Company’s current and planned clinical trials, disrupt regulatory activities or have other adverse effects on the Company’s business, results of operations, financial condition and prospects. In addition, the pandemic has caused substantial disruption to global supply chains and may adversely impact economies worldwide, both of which could adversely affect the Company’s business, operations and ability to raise funds to support its operations.

The Company is following, and plans to continue to follow, recommendations from federal, state and local governments regarding workplace policies, practices and procedures. In response to the COVID-19 pandemic and in accordance with direction from state and local governmental authorities, the Company previously restricted access to its facility to those individuals who must perform critical research, translational medicine and laboratory support activities that must be completed on site, limited the number of such people that can be present at its facility at any one time, and required that most of its employees work remotely. In February 2022, the Company re-opened its facility to all of its employees. Screening and enrollment in the Company’s ongoing Phase 1b clinical trial of DB-020 in Australia and the United States ~~have~~had been adversely impacted by the COVID-19 pandemic. Patient screening and enrollment were paused in the second quarter of 2020 in both Australia and the United States, and screening for enrollment did not resume until early in the third quarter of 2020 in Australia and early in the fourth quarter of 2020 in the United States. The Company ~~has also~~ experienced delays in site start-up and the withdrawal of some sites in the United States. In addition, the Company and the third-party manufacturers, contract research organizations (“CROs”), and academic collaborators that ~~the Company~~it engages have faced in the past and may face in the future disruptions that could affect its ability to initiate and complete preclinical studies or clinical ~~trials, including~~trials. This includes disruptions in procuring items and providing adequate resources that are essential for its research and development activities, such as, for example, raw materials used in the manufacture of its product candidates, laboratory supplies for its preclinical studies and clinical trials, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic, including supply chain disruptions. For example, due to increased quarantine mandates in China, the receipt of shipments and ~~the impact~~data from some of the ~~COVID-19 pandemic.~~Company's vendors and CROs were more difficult and unpredictable during the first half of 2022. This caused some delays in preclinical studies for the Company's gene therapy programs.

The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business. The extent of the impact of COVID-19 on ~~the Company’s~~its business will depend on the length and severity of ~~this~~the pandemic, including the extent there is any resurgence of the COVID-19 virus or any variant strains of the virus, the availability and effectiveness of vaccines and the impact of the foregoing on ~~the Company’s~~its preclinical studies, current and planned clinical trials, employees and vendors, which is uncertain and cannot be predicted. The pandemic has the potential to adversely affect ~~the Company’s~~its business, financial condition, results of operations and prospects.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Decibel Securities Corporation and Decibel Therapeutics Australia Pty. All intercompany balances and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission ~~(“SEC”)~~ for interim consolidated financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated balance sheet as of September 30, ~~2021,~~2022, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the condensed consolidated statements of convertible preferred stock and stockholders’ (deficit) equity for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and the condensed consolidated statements of cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are unaudited. The financial data and other information contained in the notes thereto as of and for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are also unaudited. The condensed consolidated balance sheet data as of December 31, ~~2020 was~~2021 were derived from the Company’s audited consolidated financial statements for the year ended December 31, ~~2020.~~2021.

~~The~~11

With the exception of the adoption of FASB ASU No. 2016-02, Leases (“ASC 842”), the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, ~~2021,~~2022, the results of its operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, ~~2020,~~2021 and the notes thereto.

The results for the three and nine months ended September 30, ~~2021~~2022 are not necessarily indicative of results to be expected for the year ending December 31, ~~2021,~~2022, or any other interim periods, or any future year or period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must

apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to the ~~valuation of common stock awards prior to the IPO, the~~ estimated cost to perform research which is an input into the measurement of research and development expenses recognized under the Company’s license and collaboration agreement (the “Regeneron Agreement”) with Regeneron Pharmaceuticals, Inc. (“Regeneron”), as described below, ~~and~~ the accrual of research and development ~~expenses.~~expenses, stock-based compensation expenses, leases and income taxes. Estimates are periodically reviewed considering changes in circumstances, facts and historical experience. Actual results may differ from the Company’s estimates.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with original maturities of three months or less. Cash equivalents are mainly comprised of ~~corporate debt securities and~~ money market accounts invested in U.S. Treasury securities.

Restricted cash is comprised of deposits with a financial institution used to collateralize letters of credit related to the Company’s lease arrangements. Restricted cash is presented as a component of other assets on the condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash consisted of the following (in thousands):


	September 30,				September 30,
	2021		2020		2022		2021
Cash and cash equivalents	$	51,413	$	5,198	$	36,682	$	51,413
Restricted cash		1,128		1,476		1,060		1,128
Total cash, cash equivalents and restricted cash as shown on the statement of cash flows	$	52,541	$	6,674	$	37,742	$	52,541

~~Restricted cash decreased by $0.3~~ million during the nine months ended September 30, 2021 due to a reduction in deposits with a financial institution used to collateralize letters of credit related to the Company’s lease arrangements.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. The fair values of the Company’s financial assets and liabilities reflect the Company’s estimate of the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the condensed consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these

assets and liabilities. Items measured at fair value on a recurring basis include cash equivalents and available-for-sales securities as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

~~Deferred Offering Costs~~Stock-Based Compensation

The Company ~~capitalizes certain legal, professional, accounting~~issues stock-based awards to employees, directors and ~~other third-party fees that are directly~~non-employee consultants, generally in the form of stock options, restricted stock and restricted stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires stock-based payments to employees, qualifying directors and non-employees to be recognized as expense based on the fair value determined on the date of grant.

The Company issues equity awards with service-based and performance-based vesting conditions. Compensation expense related to awards to employees, directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated ~~with in-process equity financings as deferred offering costs until the related financings are consummated. After consummation~~requisite service period of the ~~equity financing, such costs are reclassified~~award, which is generally the vesting term. Compensation expense related to awards to employees, directors and non-employees with performance-based vesting conditions is recognized when it becomes probable that the performance conditions will be met using the accelerated attribution method. The Company has no awards with market-based conditions. The Company recognizes forfeitures as a reduction to additional paid-in capital generated as a result of the related financing. Should an in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expensesthey occur.

The Company classifies stock-based compensation expense in the condensed consolidated statements of operations and comprehensive ~~loss. Deferred offering~~loss in the same manner in which the award recipient’s salary and related costs are ~~presented~~classified or in which the award recipient’s service payments are classified, as applicable.

The Company determines the fair value of restricted stock in reference to the fair value of its common stock less any applicable purchase price. The Company estimates the fair value of its stock options using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including: (i) the expected volatility of its common stock, (ii) the expected term of the award, (iii) the risk-free interest rate, (iv) expected dividends and (v) the fair value of its common stock. Due to the lack of a ~~component~~public market for the trading of ~~other assets~~its common stock prior to the completion of its IPO and a lack of company-specific historical and implied volatility data, the Company bases the estimate of expected volatility on the ~~condensed consolidated balance sheets.~~historical volatilities of a representative group of publicly traded companies. For these analyses, the Company selects companies with comparable characteristics and with historical share price information that approximates the expected term of the stock-based awards. The Company ~~had~~ 0 ~~deferred offering costs~~computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period that approximates the calculated expected term of its stock options. The Company will continue to apply this method until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. The Company estimates the expected term of its stock options granted to employees and directors using the simplified method, whereby the expected term equals the average of the vesting term and the original contractual term of the option. The Company utilizes this method as ~~of September 30, 2021. As of December 31, 2020,~~it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected dividend yield is assumed to be zero, as the Company ~~capitalized $~~has no current plans to pay any dividends on its common stock. The Company has elected to use the expected term for stock options granted to non-employees, using the simplified method, as the basis for the expected term assumption. However, the Company may elect to use either the contractual term or the expected term for stock options granted to non-employees on an award-by-award basis.~~1.6~~

~~million~~The fair value of ~~deferred offering costs related to~~ the ~~IPO.~~Company’s common stock in connection with its accounting for granted stock options, restricted stock and restricted stock units, is based on the trading price of its common stock on the Nasdaq Global Select Market.

~~Income Taxes~~Leases

The Company adopted ASC 842 effective January 1, 2022 using the required modified retrospective approach and utilizing the effective date as its date of initial application. Prior periods are presented in accordance with previous guidance in FASB ASC Topic 840, Leases.

The Company ~~applies~~evaluates whether an arrangement is or contains a ~~two-step process to determine~~lease at contract inception. If a contract is or contains a lease, lease classification is determined at lease commencement, which represents the ~~amount of tax benefit to be recognized, if any. First,~~date at which the ~~tax position must be evaluated to determine the likelihood that it will be sustained upon external examination~~underlying asset is made available for use by the ~~taxing authorities. If~~Company. The Company’s lease terms are generally measured as the ~~tax position~~respective lease’s noncancelable term and exclude any optional extension terms as the Company is ~~deemed more likely than~~ not reasonably certain to ~~be sustained,~~exercise such options. The Company elected the ~~tax position is then assessed~~short-term lease exemption and therefore does not recognize lease liabilities and right-of-use assets for lease arrangements with original lease terms of twelve months or less.

Lease liabilities represent the Company’s obligation to ~~determine~~make lease payments under a lease arrangement. Lease liabilities are measured as the ~~amount~~present value of ~~benefit to recognize~~fixed lease payments, discounted using an incremental borrowing rate, as interest rates implicit in the ~~condensed consolidated financial statements.~~Company’s lease arrangements are generally not readily determinable. The ~~amount of~~Company elected the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Derecognition of a tax position that was previously recognized occurs when a company subsequently determines that a tax position no longer meets the more likely thanpractical expedient to not ~~threshold. To the extent an income tax provision is necessary, the provision~~separate lease and non-lease components for ~~income taxes would include the effects of any resulting tax reserves, or unrecognized tax benefits, that~~its real estate leases and therefore both are considered ~~appropriate~~when determining the lease payments in a lease arrangement. Variable lease costs are expensed as incurred.

The incremental borrowing rate represents the interest rate at which the Company could borrow a fully collateralized amount equal to the lease payments, over a similar term, in a similar economic environment. The Company determines the incremental borrowing rate at lease commencement, generally using a synthetic credit rating based on the Company’s financial position and negative cash flows, factoring in adjustments for additional risks based on the Company’s economic condition, a survey of comparable companies with similar credit and financial profiles, as well as additional market risks, as may be applicable.

Right-of-use assets represent the ~~related net interest~~Company’s right to use an underlying asset over its lease term. Right-of-use assets are initially measured as the associated lease liability, adjusted for prepaid rent and ~~penalties.~~tenant incentives. The Company remeasures right-of-use assets and lease liabilities when a lease is modified, and the modification is not accounted for as a separate contract. A modification is accounted for as a separate contract if the modification grants the Company an additional right of use not included in the original lease agreement and the increase in lease payments is commensurate with the additional right of use. The Company assesses its right-of-use assets for impairment consistent with its policy for impairment of long-lived assets held and used in operations.

Recently ~~Issued~~Adopted Accounting Pronouncements

In February 2016, the FASB issued ~~ASU No. 2016-02,~~ ~~Leases~~ (~~Topic~~ASC 842,), ~~Amendments to the FASB Accounting Standards Codification (“ASU 2016-02”),~~ which replaces the existing guidance for leases. ~~ASU 2016-02~~ASC 842 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ~~ASU 2016-02,~~ASC 842, a right-of-use asset and a lease liability will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ~~ASU 2016-02~~ASC 842 must be calculated using the applicable incremental borrowing rate at the date of adoption. The guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures. While the Company continues to evaluate the impact of adopting the new standard, the Company currently anticipates applyingadopted ASC 842 using the modified retrospective approach effective January 1, ~~2022.~~2022. The Company ~~currently expects to elect~~elected the package of practical expedients which allows entities to not reassess (i) whether an arrangement is or contains a lease, (ii) the classification of its leases, and (iii) the accounting for initial direct costs. Further, the Company ~~currently anticipates electing,~~elected, by class of underlying asset, the short-term lease exception for leases with terms of twelve months or less. In doing so, the Company will not recognize a lease liability or right-of-use asset on its balance sheets for such short-term leases. Finally, the Company ~~currently expects to elect,~~elected, by class of underlying asset, the practical expedient to not separate lease and non-lease components. The ~~Company expects the~~ impact of adoption to include: (i) the recognition of right-of-use assets and lease liabilities arising from its leases of office and laboratory space; (ii) the derecognition of deferred rent and unamortized tenant incentives; and (iii) new and expanded disclosure requirements.is summarized as follows (in thousands):


	As Reported December 31, 2021		Impact of Adoption			As Adopted January 1, 2022
Operating lease right-of-use assets		—		11,485			11,485
Finance lease right-of-use assets		—		235			235
Property and equipment, net		5,611		(235	)		5,376
Accrued expenses and other current liabilities		7,712		(213	)		7,499
Deferred rent and lease incentive obligation, current		696		(696	)		—
Operating lease liabilities, current		—		3,484			3,484
Finance lease liabilities, current		—		213			213
Deferred rent and lease incentive obligation, long-term		4,208		(4,208	)		—
Operating lease liabilities, long-term		—		12,905			12,905
Finance lease liabilities, long-term		—		19			19
Other long-term liabilities		1,611		(19	)		1,592

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions related to the ~~general principles~~approach for intra-period tax allocation, the methodology for calculating income taxes in ~~Topic 740~~an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and ~~amends existing guidance to improve consistent application. The new standard will be effective~~simplifies other aspects of accounting for ~~annual reporting periods beginning after December 15, 2021.~~income taxes. The Company ~~does not expect that the adoption of~~adopted ASU 2019-12 ~~will~~on January 1, 2022. The adoption did not have a material effect on the Company’s condensed consolidated financial statements and related disclosures.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity-classified after modification or exchange. ASU 2021-04 requires an entity to treat a modification or an exchange of a freestanding equity-classified written call option that remains equity-classified after the modification or exchange as an exchange of the original instrument for a new instrument and provides guidance on measuring and recognizing the effect of a modification or an exchange. The Company adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact on ~~its~~the Company’s condensed consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”). ASU 2021-10 increases the transparency of transactions with the government that are accounted for by applying a grant or contribution accounting model, and it aims to reduce diversity that currently exists in the recognition, measurement, presentation, and disclosure of government assistance received by business entities due to the lack of specific authoritative guidance in GAAP. ASU 2021-10 requires an entity to provide information regarding the nature of the transaction with a government and the related accounting policy used to account for this transaction, the line item on the condensed consolidated balance sheet and condensed consolidated statement of operations and comprehensive loss that are affected by the transaction and the amounts applicable to each financial statement line item, and the significant terms and conditions of the transaction, including commitments and contingencies. The Company adopted ASU 2021-10 on January 1, 2022 using the prospective approach. The adoption did not have a material effect on the Company’s condensed consolidated financial statements and related disclosures.

Refer to Note 2 of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 for the Company’s summary of recently issued accounting pronouncements that have not yet been adopted.

3. Fair Value Measurements

The Company measures the following financial assets at fair value on a recurring basis. The fair value of these assets was determined as follows (in thousands):


	Balance at September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market mutual funds	$	32,944	$	32,944	$	—	$	—
U.S. Agency discount notes		3,483		—		3,483		—
Total cash equivalents	$	36,427	$	32,944	$	3,483	$	—
Available-for-sale securities:
U.S. Treasury securities	$	67,349	$	—	$	67,349	$	—
U.S. Agency bonds		7,915		—		7,915		—
Total available-for-sale securities	$	75,264	$	—	$	75,264	$	—

Balance at September 30, 2021

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Cash equivalents:

Money market mutual funds

$
47,518

$
47,518

$
—

$
—

Total cash equivalents

$
47,518

$
47,518

$
—

$
—

Available-for-sale securities:

Corporate debt securities

$
36,569

$
—

$
36,569

$
—

Commercial paper

24,895

—

24,895

—

US Treasury securities

15,866

—

15,866

—

Agency bonds

15,148

—

15,148

—

Total available-for-sale securities

$
92,477

$
—

$
92,477

$
—

Available-for-sale securities, long-term:

US Treasury securities

$
28,494

$
—

$
28,494

$
—

Total available-for-sale securities, long-term

$
28,494

$
—

$
28,494

$
—

Balance at
December 31,
2020

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Cash equivalents:

Money market mutual funds

$
7,962

$
7,962

$
—

$
—

Corporate debt securities

4,001

—

4,001

—

Commercial paper

12,499

—

12,499

—

Total cash equivalents

$
24,462

$
7,962

$
16,500

$
—

Available-for-sale securities:

Corporate debt securities

$
1,286

$
—

$
1,286

$
—

Commercial paper

19,481

—

19,481

—

US Treasury securities

3,027

—

3,027

—

Certificates of deposit

2,774

—

2,774

—

Total available-for-sale securities

$
26,568

$
—

$
26,568

$
—


	Balance at December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market mutual funds	$	31,726	$	31,726	$	—	$	—
Total cash equivalents	$	31,726	$	31,726	$	—	$	—
Available-for-sale securities:
U.S. Treasury securities	$	61,373	$	—	$	61,373	$	—
Corporate debt securities		33,806		—		33,806		—
U.S. Agency bonds		15,114		—		15,114		—
Commercial paper		1,999		—		1,999		—
Total available-for-sale securities	$	112,292	$	—	$	112,292	$	—
Available-for-sale securities, long-term:
U.S. Treasury securities	$	13,547	$	—	$	13,547	$	—
Total available-for-sale securities, long-term	$	13,547	$	—	$	13,547	$	—

Money market funds were valued by the Company using quoted prices in active markets for identical securities, which represent a Level 1 measurement within the fair value hierarchy. During the three and nine months ended September ~~30, 2021~~30, 2022 and the year ended December 31, ~~2020~~2021 there were 0no transfers between Level 1, Level 2 and Level 3.

4. Available-For-Sale Securities

The following table summarizes the Company’s available-for-sale securities (in thousands):

September 30, 2021

Amortized
Cost

Gross
Unrealized
Gain

Gross
Unrealized
Loss

Fair Value

Available-for-sale securities:

Corporate debt securities

$
36,570

$
—

$
(1
)

$
36,569

Commercial paper

24,890

5

—

24,895

US Treasury securities

15,863

3

—

15,866

Agency bonds

15,142

6

—

15,148

Total available-for-sale securities

$
92,465

$
13

$
(1
)

$
92,477

Available-for-sale securities, long-term:

US Treasury securities

$
28,498

$
1

$
(5
)

$
28,494

Total available-for-sale securities, long-term

$
28,498

$
1

$
(5
)

$
28,494


	September 30, 2022
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Available-for-sale securities:
U.S. Treasury securities	$	67,850	$	—	$	(501	)	$	67,349
U.S. Agency bonds		7,917		—		(2	)		7,915
Total available-for-sale securities	$	75,767	$	—	$	(503	)	$	75,264


	December 31, 2020									December 31, 2021
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value

Available-for-sale securities:
U.S. Treasury securities										$	61,450	$	—	$	(77	)	$	61,373
Corporate debt securities	$	1,286	$	—	$	—		$	1,286		33,814		—		(8	)		33,806
U.S. Agency bonds											15,123		—		(9	)		15,114
Commercial paper		19,481		1		(1	)		19,481		1,999		—		—			1,999
US Treasury securities		3,027		—		—			3,027
Certificates of deposit		2,775		—		(1	)		2,774
Total available-for-sale securities	$	26,569	$	1	$	(2	)	$	26,568	$	112,386	$	—	$	(94	)	$	112,292
Available-for-sale securities, long-term:
U.S. Treasury securities										$	13,585	$	—	$	(38	)	$	13,547
Total available-for-sale securities										$	13,585	$	—	$	(38	)	$	13,547

The Company had 1734 investments in available-for-sale securities in an unrealized loss position as of September 30, ~~2021~~2022 with a fair value of $~~57.3~~73.3 million. The Company had 843 investments in available-for-sale securities in an unrealized loss position as of December 31, ~~2020~~2021 with a fair value of $~~17.1~~120.3 million. These investments were in a loss position for less than 12 months and the Company considered the loss to be temporary in nature. The Company considered the decline in market value for these securities to be primarily attributable to economic and market conditions. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company did not intend to sell, and it was not more likely than not that the Company would be required to sell the investments that were in an unrealized loss position before recovery of their amortized cost basis. Accordingly, the Company did 0not recognize any

other-than-temporary impairments related to its available-for-sale securities in an unrealized loss position. ~~As of September 30, 2021, the Company did not hold any investments that matured beyond~~ ~~five years~~. During the three and nine months ended September 30, ~~2021~~2022 and the year ended December 31, ~~2020,~~2021, the Company did 0not sell any available-for-sale securities and therefore did 0not recognize any realized gains or losses.

6. Leases

Operating Leases

In July 2016, the Company entered into an operating lease for its facility in Boston, Massachusetts. Under the terms of the lease agreement, rent payments commenced in June 2017 with base rent in the first lease year of $2.1 million, subject to annual increases of 3.0% over the lease term through June 2027. The Company is also obligated to pay its ratable portion of operating expenses and taxes. The Company has the right to extend the lease for one additional five-year period at a market rental rate as determined by the landlord and agreed to by the Company. The lease is secured by a letter of credit in the amount of $0.5 million. In conjunction with the lease, the landlord provided the Company with a $5.3 million tenant improvement allowance.

In September 2019, the Company entered into an operating lease under which the Company leased additional office space from a third-party tenant under a sublease agreement at its existing facility. Under the terms of the lease agreement, rent payments commenced in December 2019 with base rent in the first lease year of $1.2 million, subject to annual rent escalation over the lease term through January 2027. The sublease is secured by a letter of credit in the amount of $0.4 million.

In January 2020, the Company entered into a sublease agreement to sublease a portion of its existing office and laboratory space to a third-party. The lease term commenced in March 2020 with an original term of 24 months. Annual base rent was $1.1 million for each year during the sublease term. The sublessee is obligated to pay its ratable portion of operating expenses during the sublease term. Subject to the Company’s consent, the sublease provided the sublessee one option to extend for up to one year, subject to a 3.0% rent increase. In May 2021, the sublessee exercised its right to extend the sublease term through October 31, 2022. Pursuant to the extension, base rent is $1.7 million for each year during the extension. The sublessee provided a security deposit of $0.2 million in cash which is presented as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheet. Payments received under the sublease are recorded as a reduction to rent expense in the condensed consolidated statements of operations and comprehensive loss.

In January 2022, the Company entered into a sublease agreement to sublease an additional portion of its existing office space to a third-party. The lease term commenced in February 2022 with an original term of six months. Base rent over the term amounted to $0.5 million. The sublease granted the sublessee the right to extend for two terms of three months each at the same base rent per month for an additional $0.3 million for each term. The sublessee prepaid the last month’s rent of $0.1 million, which is presented as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheet. In June 2022, the subtenant exercised its first right to extend the sublease term and in September 2022, the subtenant exercised its second right to extend the sublease term. The extended sublease term expires in January 2023. Payments received under the sublease are recorded as a reduction to rent expense in the condensed consolidated statements of operations and comprehensive loss.

Finance Leases

In July 2020, the Company entered into a financing transaction with a third-party leasing company. Pursuant to the transaction, the Company transferred title and interest in certain laboratory equipment to the third party in exchange for a one-time cash payment of $0.5 million and agreed to lease the laboratory equipment back from the third party for $0.2 million per year for 2.5 years. The Company concluded the lease was a capital lease under ASC 840 and a finance lease after the Company’s adoption of ASC 842.

The components of lease cost for the nine months ended September 30, 2022 were as follows (in thousands):


Operating lease cost	$	2,187
Variable lease cost		586
Short-term lease cost		13
Finance lease cost:
Amortization of right-of-use assets		151
Interest expense on lease liabilities		12
Sublease income		(2,078	)
Total lease cost	$	871

Supplemental cash flow information related to operating leases for the nine months ended September 30, 2022 were as follow (in thousands):


Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases			2,704
Operating cash flows from finance leases			12
Financing cash flows from finance leases			158

Future minimum lease payments under the Company’s noncancelable leases as of September 30, 2022 were as follows (in thousands):


	Operating Leases			Finance Leases
2022 (excluding the nine months ended September 30, 2022)	$	912		$	57
2023		3,705			19
2024		3,796			—
2025		3,889			—
2026		3,984			—
2027		1,350			—
Total lease payments		17,636			76
Present value adjustment		(2,987	)		(2	)
Present value of lease payments	$	14,649		$	74

As of September 30, 2022, the Company’s operating leases had a weighted-average remaining lease term of 4.6 years and weighted average incremental borrowing rate of 8.7%. As of September 30, 2022, the Company’s finance lease had a weighted average remaining lease term of 0.3 years and weighted average incremental borrowing rate of 10.0%.

~~7. Restructuring~~

~~In January and May 2020, the Company conducted a reduction in force that resulted in the termination of~~ 45 ~~full-time employees. Accordingly, during the nine months ended September 30, 2020, the Company recorded restructuring charges of $3.5~~ ~~million, which were comprised of termination benefits including severance, benefits and other payroll-related charges. The Company did~~ 0~~t record any restructuring charges during the three months ended September 30, 2020.~~

~~The following table summarizes the restructuring activity during the three and nine months ended September 30, 2020 and the three months ended March 31, 2021 (in thousands):~~

Accrued
Restructuring
Costs

Balance at December 31, 2019

$
—

Restructuring costs incurred

2,919

Termination benefits paid

(1,496
)
Balance at March 31, 2020

$
1,423

Restructuring costs incurred

554

Termination benefits paid

(920
)
Balance at June 30, 2020

$
1,057

Restructuring costs incurred

—

Termination benefits paid

(863
)
Balance at September 30, 2020

$
194

Balance at December 31, 2020

$
8

Restructuring costs incurred

—

Termination benefits paid

(8
)
Balance at March 31, 2021

$
—

~~There were~~ 0 ~~additional restructuring costs incurred or termination benefits paid after March 31,~~ 2021.

~~The following table summarizes the classification of restructuring expense in the condensed consolidated statements of operations and comprehensive loss (in thousands):~~Legal Proceedings

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Research and development

$
—

$
—

$
—

$
2,723

General and administrative

—

—

—

750

Total restructuring expense

$
—

$
—

$
—

$
3,473

~~During the first quarter of 2020,~~From time to time, the Company ~~entered into retention agreements with certain key employees. Under the terms~~may become party to litigation or other legal proceedings as part of ~~these agreements,~~its ordinary course of business. As of September 30, 2022, the Company ~~agreed to make three retention payments to each key employee totaling $1.6~~ ~~million in the aggregate if they remained employed at the Company through specified milestones. The first payments of $0.7~~ ~~million in the aggregate were paid upon execution of the retention agreements. The second payments of $0.4~~ ~~million in the aggregate were paid to the key employees upon the closing of the Series D convertible preferred stock financing in November 2020. The third payments of $0.5~~ ~~million in the aggregate were paid to employees in January 2021,~~including payments to certain employees who are required to remain employed through January 1, 2022 in order to retain the first and third payments. These prepayments are being amortized over the remaining employee service terms under the retention agreements.

~~During the second quarter of 2020, the Company established additional employee bonuses in the aggregate amount of $0.4~~ ~~million for the majority of employees who were~~was not party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a ~~retention agreement. The bonuses became due upon~~potential loss amount or a potential range of losses is probable and reasonably estimable under the ~~closing~~provisions of ~~the Series D financing in November 2020. All amounts owed related to the additional employee bonuses were paid prior to December 31, 2020.~~FASB ASC Topic 450, Contingencies.

8. Stockholders’ Equity

As of September 30, 2022 and December 31, 2021, the ~~Company's~~Company’s Certificate of Incorporation ~~(the “Certificate of Incorporation”)~~ authorized the Company to issue 200,000,000 shares of common stock, $0.001 par value per share and 5,000,000 shares of undesignated preferred stock, $0.001 par value per share. As

Each share of ~~December 31, 2020,~~common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s ~~Fourth Amended and Restated Certificate~~stockholders. The holders of ~~Incorporation authorized the Company to issue~~ ~~115,000,000~~ shares of common stock $are not entitled to receive dividends, unless declared by the Company’s board of directors. ~~0.001~~No ~~par value per share.~~dividends have been declared or paid by the Company since its inception.

Common Stock Reserved

The Company had the following shares of common stock reserved for future issuance:

September 30,
2021

December 31,
2020

Series A convertible preferred stock

—

3,719,410

Series B convertible preferred stock

—

989,299

Series C convertible preferred stock

—

2,970,149

Series D convertible preferred stock

—

5,988,773

Shares reserved for exercise of outstanding stock options under the 2015 Stock
Incentive Plan

2,588,796

2,686,120

Shares reserved for exercise of outstanding stock options under the 2021 Stock
Incentive Plan

414,200

—

Shares reserved for future awards under the 2015 Stock Incentive Plan

—

790,596

Shares reserved for future awards under the 2021 Stock Incentive Plan

1,300,649

—

Shares reserved for future awards under the 2021 Employee Stock Purchase Plan

566,037

—

Total common stock reserved

4,869,682

17,144,347


	September 30, 2022		December 31, 2021
Shares reserved for exercise of outstanding stock options under the 2015 Stock Incentive Plan		2,410,425		2,540,963
Shares reserved for exercise of outstanding stock options under the 2021 Stock Incentive Plan		1,418,375		496,500
Shares reserved for vesting of restricted stock units granted under the 2021 Stock Incentive Plan		286,409		—
Shares reserved for future awards under the 2021 Stock Incentive Plan		1,141,944		1,221,593
Shares reserved for issuance under the 2021 Employee Stock Purchase Plan		815,556		566,037
Total shares of common stock reserved		6,072,709		4,825,093

9. Convertible Preferred Stock

Immediately prior to the closing of ~~the~~its IPO, the Company had an aggregate of 155,398,078 shares of convertible preferred stock issued and outstanding which automatically converted into 16,662,011 shares of common stock upon the closing of ~~the~~its IPO. ~~Subsequent to the closing of the IPO,~~ 0 ~~shares of convertible preferred stock were authorized, issued or outstanding.~~

As of December 31, 2020, the Company’s Series A convertible preferred stock (“Series A Preferred Stock”), Series B convertible preferred stock (“Series B Preferred Stock”), Series C convertible preferred stock (“Series C Preferred Stock”) and Series D convertible preferred stock (“Series D Preferred Stock,” and collectively with the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the “Convertible Preferred Stock”) consisted of the following (in thousands, except share data):

December 31, 2020

Preferred
Stock
Authorized

Preferred
Stock Issued
and
Outstanding

Carrying
Value

Liquidation
Preference

Common Stock
Issuable Upon
Conversion

Series A Preferred Stock

57,758,734

57,758,734

$
16,176

$
40,284

3,719,410

Series B Preferred Stock

12,500,000

12,500,000

5,700

16,334

989,299

Series C Preferred Stock

37,528,581

37,528,581

16,759

45,457

2,970,149

Series D Preferred Stock

47,610,763

31,740,554

54,456

55,509

5,988,773

155,398,078

139,527,869

$
93,091

$
157,584

13,667,631

~~Cumulative accrued dividends on the Company’s Convertible Preferred Stock consisted of the following (in thousands):~~

December 31,
2020

Series A Preferred Stock

$
10,399

Series B Preferred Stock

3,398

Series C Preferred Stock

6,623

Series D Preferred Stock

709

$
21,129

During the nine months ended September 30, 2021, in the period prior to the Company’s IPO, $2.3 million of cumulative dividends were accrued ~~prior to completion of~~and unpaid on the ~~IPO. Subsequent to~~Company’s convertible preferred stock. In connection with the completion of the Company’s IPO and the conversion of the outstanding convertible preferred stock into common stock, the $2.3 million of accrued and unpaid dividends were

eliminated. Subsequent to the closing of the Company’s IPO, 0no shares of ~~Convertible Preferred Stock~~convertible preferred stock were issued or outstanding, and ~~therefore~~ 0no dividends were accrued.

10. Stock-Based Compensation

2015 Stock Incentive Plan

~~As of December 31, 2020, there were~~ ~~3,930,701~~ shares of common stock authorized for issuance under the 2015 Stock Incentive Plan (the “2015 Plan”) under which the Company could grant equity awards to eligible employees, officers, directors, consultants and advisors. SubsequentPrior to the pricing of the Company’s IPO on February 11, 2021, the Company granted equity awards to eligible employees, officers, directors, consultants and advisors under the 2015 Stock Incentive Plan (the “2015 Plan”). Subsequent to the pricing of the Company’s IPO, no further awards ~~were to~~can be made under the 2015 Plan; however, awards outstanding under the 2015 Plan continue to be governed by the 2015 Plan.

2021 Stock Incentive Plan

In connection with ~~the~~its IPO, the Company adopted the 2021 Stock Incentive Plan (the “2021 Plan”)~~. The~~, which became effective on February 11, 2021. As of December 31, 2021, ~~Plan provides~~there were 1,718,093 shares of common stock authorized for issuance under the ~~grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The~~2021 Plan. On January 1, 2022, the number of shares of ~~our~~ common stock ~~reserved~~authorized for issuance under the 2021 Plan ~~is the sum of (1)~~automatically increased by ~~849,056; plus (2) the number of shares (up to a maximum of~~ ~~3,529,250~~998,079 shares) as is equal to the sum of (x) the number of shares of our common stock reserved for issuance under the 2015 Plan that remained available for grant under the 2015 Plan immediately prior to the effectiveness of the registration statement for the IPO, which occurred on February 11, 2021, and (y) the number of shares of our common stock subject to outstanding awards granted under the 2015 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, commencing on January 1, 2022 and continuing for each fiscal year until, and including, January 1, 2031, equal to the least of (i) 4~~% of the number of shares of our common stock outstanding on such date, and (ii) an amount determined by the Company’s board of directors.~~shares. As of September 30, ~~2021,~~2022, ~~414,200~~1,704,784 shares were reserved for outstanding awards granted under the 2021 Plan and ~~1,300,649~~1,141,944 shares remained available for issuance.

2021 Employee Stock Purchase Plan

~~In connection with the IPO, the Company adopted~~As of December 31, 2021, there were 566,037 shares of common stock authorized for issuance under the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). Under the 2021 ESPP, ~~the Company is authorized to issue~~ ~~566,037~~ ~~shares of our common stock, subject to annual increases, and~~ eligible employees

are able to purchase shares of common stock at a specified discount. On January 1, 2022, the number of shares of common stock authorized for issuance under the 2021 ESPP automatically increased by 249,519 shares. As of September 30, ~~2021,~~2022, 0no shares have been issued under the 2021 ESPP and as such, ~~566,037~~815,556 shares remained available for issuance under the 2021 ESPP.

Restricted Stock Awards

A summary of the Company’s restricted stock activity and related information is as follows:

Number of
Shares of
Restricted
Stock

Weighted
Average
Grant Date
Fair Value

Unvested as of December 31, 2020

52,741

$
19.10

Vested

(27,745
)

16.34

Repurchased

(777
)

0.53

Canceled/Forfeited

(3,488
)

19.57

Unvested as of September 30, 2021

20,731

$
23.40


	Number of Shares of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2021		12,537		$	24.79
Vested		(10,892	)		24.12
Canceled/Forfeited		(18	)		15.37
Unvested as of September 30, 2022		1,627		$	25.97

The aggregate fair value of restricted stock awards that vested during the nine months ended September 30, 2022 and 2021 was less than $0.1 million and $0.3 ~~million.The aggregate fair value of restricted stock awards that vested during the nine months ended September 30, 2020 was $1.3~~ ~~million.~~million, respectively. As of September 30, ~~2021,~~2022, total unrecognized compensation cost related to unvested restricted stock awards was ~~approximately~~less than $~~0.5~~0.1 million, which is expected to be recognized over a weighted-average period of ~~0.9~~0.1 years.

Restricted Stock Units

A summary of the Company’s restricted stock unit activity and related information is as follows:


	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2021		—		$	—
Granted		313,185			3.50
Vested		—			—
Canceled/Forfeited		(26,776	)		3.50
Unvested as of September 30, 2022		286,409		$	3.50

The Company has granted restricted stock units (“RSUs”) to certain of its employees under the 2021 Plan, as part of its equity compensation program. Pursuant to the terms of the applicable award agreements, each RSU represents the right to receive one share

of the Company’s common stock. All restricted stock units outstanding as of September 30, 2022 will vest, if at all, upon the achievement of specified development milestones associated with the Company’s DB-OTO program, provided the applicable employee remains continuously employed with the Company on the vesting date. Upon vesting, shares of the Company’s common stock will be delivered to the employee, subject to the payment of applicable withholding taxes. As of September 30, 2022, total unrecognized compensation cost related to the unvested restricted stock units was approximately $1.0 million, which will not be recognized until it becomes probable that the performance conditions will be met.

Stock Options

A summary of the Company’s stock option activity and related information is as follows:

Number of
Stock Options

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

(In years)

(In thousands)

Outstanding as of December 31, 2020

2,686,120

$
4.53

9.9

$
3,781

Granted

568,700

9.83

Exercised

(26,392
)

4.40

Cancelled/forfeited

(225,432
)

6.43

Outstanding as of September 30, 2021

3,002,996

$
5.39

9.2

$
8,499

Exercisable as of September 30, 2021

1,053,711

$
4.86

9.2

$
3,323

Vested and expected to vest as of September 30, 2021

3,002,996

$
5.39

9.2

$
8,499


	Number of Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(In years)		(In thousands)
Outstanding as of December 31, 2021		3,037,463		$	5.34		8.9	$	629
Granted		1,016,450			3.46
Exercised		—			—
Cancelled/forfeited		(225,113	)		6.90
Outstanding as of September 30, 2022		3,828,800		$	4.75		8.5	$	148
Exercisable as of September 30, 2022		1,581,699		$	5.06		8.2	$	—
Vested and expected to vest as of September 30, 2022		3,828,800		$	4.75		8.5	$	148

As of September 30, ~~2021,~~2022, total unrecognized compensation cost related to unvested stock options was approximately $~~8.0~~6.8 million, which is expected to be recognized over a weighted-average period of ~~2.9~~2.5 years. The weighted-average grant-date fair value per share of stock options granted during the nine months ended September 30, 2022 and 2021 was $2.58 and $5.99., respectively.

Stock-Based Compensation Expense

The following table presents the components and classification of stock-based compensation expense (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Research and development	$	586	$	117	$	1,169	$	352	$	495	$	586	$	1,155	$	1,169
General and administrative		450		68		1,277		237		381		450		1,408		1,277
Total stock-based compensation expense	$	1,036	$	185	$	2,446	$	589	$	876	$	1,036	$	2,563	$	2,446

11. Net Loss per Share

The following table sets forth the outstanding shares of common stock equivalents, presented based on amounts outstanding at each period end, that were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have been anti-dilutive:

Three Months Ended September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Series A Preferred Stock

—

1,089,785

—

1,089,785

Series B Preferred Stock

—

235,849

—

235,849

Series C Preferred Stock

—

519,396

—

519,396

Outstanding stock options

3,002,996

15,767

3,002,996

15,767

Unvested restricted stock

20,731

65,480

20,731

65,480

3,023,727

1,926,277

3,023,727

1,926,277


	Three and Nine Months Ended September 30,
	2022		2021
Outstanding stock options		3,828,800		3,002,996
Unvested restricted stock units		286,409		—
Unvested restricted stock awards		1,627		20,731
		4,116,836		3,023,727

12. License and Collaboration Agreement with Regeneron

Agreement Overview

In November 2017, the Company entered into ~~a license and collaboration agreement~~the Regeneron Agreement with Regeneron ~~(the “Regeneron Agreement”)~~ under which Regeneron made an upfront, nonrefundable $25.0 million payment to the Company. The parties were to undertake specified activities with respect to the discovery or development of new potential therapies directed to a set of defined collaboration targets. Each party was responsible for its own respective costs and agreed to use commercially reasonable efforts to complete the activities as designated in the agreed-upon research plan. The Company was primarily responsible for the direction and conduct of the research program whereas Regeneron was primarily responsible for the contribution of various technologies and expertise of its own as well as contribution of employees and research services.

In October 2020, the parties amended the Regeneron Agreement ~~(the “Amended Agreement”)~~ pursuant to which, among other things, ATOH1, the target of the DB-ATO program, was removed as a collaboration target and the terms and plans for the DB-OTO and AAV.103 programs were modified. The primary responsibilities of each party ~~remain~~remained consistent with those ~~under~~prior to the ~~Regeneron Agreement.~~amendment. In connection with the amendment, the Company issued 10,000,000 shares of Series C ~~Preferred Stock~~ convertible preferred stockto Regeneron in consideration for its entry into the amendment. Pursuant to the ~~Amended Agreement,~~amendment, Regeneron agreed to pay the Company $0.3 million to fund the Company’s ongoing research plan and $0.5 million to help secure the services of a contract development and manufacturing ~~organization (the “CDMO Initiation Fee”).~~organization. The $0.5 million payment was creditable against the milestone associated with the initiation of manufacturing to support ~~GLP~~Good Laboratory Practices toxicology studies of DB-OTO. Additionally, Regeneron agreed to reimburse the Company for up to $10.5 million of third-party costs related to ~~investigational new drug (“IND”) enabling~~IND-enabling studies for DB-OTO as such costs are incurred. The Company achieved its first pre-IND milestone of $4.4 million and its second pre-IND milestone of $1.1 million in November 2020 and October 2021, respectively.

The Regeneron Agreement had an original research term of five years and granted Regeneron the right to extend the research term for up to two years in one-year intervals. In November 2021, Regeneron elected to extend the research term of the collaboration. The research term was extended to November 15, 2023 and Regeneron is obligated to pay the Company an extension fee of $10.0 million in the fourth quarter of 2022. As of September 30, 2022 and December 31, 2021, the Company had unbilled receivables of $10.0 million and $11.4 million, respectively, due from Regeneron. Through September 30, 2022, the Company had received an aggregate of $5.5 million in milestone payments from Regeneron pursuant to the collaboration. As of September 30, 2022, the next milestone that the Company was eligible to receive was in relation to the initiation of manufacturing for its AAV.103 program, or the initiation of dosing in the Company's planned clinical trial of DB-OTO.

Accounting Analysis

The Company ~~accounted~~accounts for ~~the~~its collaboration with Regeneron ~~Agreement~~ in accordance with FASB ASC Topic ASC 808, Collaborative Arrangements ~~(“ASC 808”)~~, and ~~applied~~applies FASB ASC Topic 606, Revenue from Contracts with Customers ~~(“ASC 606”)~~, by ~~analogy.~~analogy to determine the measurement and recognition of the consideration received from Regeneron. All preclinical research activities under the ~~Regeneron Agreement were~~collaboration are considered a single performance ~~obligation and the~~obligation. The transaction price ~~consisted~~ of ~~the~~ $~~25.0~~46.9 million upfront payment. Future milestones were considered variable consideration and fully constrained until such time as the achievement of such milestone was considered probable. The Company satisfied its promises under the agreement over time as Regeneron received the benefit of the research services as the services were performed and measured progress towards completion of the performance obligation using an input method that was based on costs incurred.

~~The Amended Agreement increased the transaction price to $35.8~~ ~~million consisting~~consists of (i) $25.0 million received ~~pursuant to the Regeneron Agreement,~~upfront, (ii) $0.3 million received to fund the ongoing research plan, (iii) $~~4.4~~ ~~million for the first pre-IND milestone achieved in November 2020, $0.5~~5.5 million of ~~which was received as the CDMO Initiation Fee in October 2020, and~~aggregate milestones achieved, (iv) $10.5 million in reimbursements for third-party costs related to IND-enabling studies for DB-OTO, and (v) $10.0 million as consideration for Regeneron’s election to extend the research term, partially offset by the fair value of the Series C ~~Preferred Stock~~convertible preferred stock issued to Regeneron of approximately $4.4 million. Future milestones ~~continue to be~~are considered variable consideration and are fully constrained ~~with the exception of the second pre-IND milestone of $1.1~~ ~~million.~~until such time as achievement is considered probable. The Company ~~continues to satisfy~~satisfies its ~~single~~ performance obligation over time and measures progress towards completion using an input method based on costs incurred.

There are significant judgments and estimates inherent in the determination of the costs to be incurred for the research and development activities related to the collaboration with Regeneron. These estimates and assumptions include a number of objective and subjective factors, including the likelihood that a target will be successfully developed through its IND filing and the estimated costs associated with such development, including the potential third-party costs related to each target’s IND-enabling study.

The Company concluded the consideration received ~~under the~~from Regeneron ~~Agreement and the Amended Agreement represented~~represents reimbursements of the Company’s cost incurred and should therefore be accounted for as contra-research and development in the

Company’s condensed consolidated statements of operations and comprehensive ~~income (loss).~~loss. Deferred collaboration liability is classified in the condensed consolidated balance sheets based on the expected timing of when the costs will be recognized in the future.

The Company recognized $~~2.4~~ ~~million and $0.5~~ ~~million as contra-research and development expenses for the three months ended September 30, 2021 and 2020, respectively. The Company recognized $8.1~~1.8 million and $2.4 million as contra-research and development expenses for the three months ended September 30, 2022 and 2021, respectively. The Company recognized $7.0 million and $8.1 million as contra-research and development expenses for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there was deferred collaboration liability classified in current liabilities of $~~6.5~~8.4 million and $~~11.0~~8.1 million, respectively, and classified in ~~long term~~long-term liabilities of $~~8.5~~9.2 million and $~~4.2~~16.4 million, respectively. As of September 30, ~~2021,~~2022 and

December 31, ~~2020,~~2021, the Company had $~~3.1~~10.0 million and $~~1.2~~11.4 million of unbilled accounts receivable due from Regeneron, ~~respectively. Unbilled and billed accounts receivable~~respectively, which are classified in accounts receivable from related ~~party on the condensed consolidated balance sheets and relate to reimbursements of third-party costs incurred related to the Company’s IND-enabling study for DB-OTO.~~party.

20no expenses and $0.1 million of expenses, respectively, relating to consulting services provided by an entity affiliated with a stockholder of the Company and a member of the Company’s board of directors. For the nine months ended September 30, 2022 and 2021, the Company recorded no expenses and $0.2 million of expenses, respectively, relating to consulting services provided by an entity affiliated with a stockholder of the Company and a member of the Company’s board of directors. The Company terminated this arrangement effective December 31, 2021. As of September 30, 2022, the Company had no further amounts due to this entity. As of December 31, 2021, the Company had $0.1 million due to this entity, which was subsequently paid during the three months ended March 31, 2022.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and our audited financial statements and related notes for the year ended December 31, ~~2020~~2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March ~~29, 2021,~~18, 2022, which we refer to as the ~~2020~~2021 Annual Report on Form 10-K. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” of this Quarterly Report.

We are a clinical-stage biotechnology company dedicated to discovering and developing transformative treatments for hearing and balance disorders, one of the largest areas of unmet need in medicine. We aim to restore and improve hearing and balance through the restoration and regeneration of functional hair cells and non-sensory support cells within the inner ear. We have built a proprietary platform that integrates single-cell genomics and bioinformatics analyses, precision gene therapy technologies and our expertise in inner ear biology. We are leveraging our platform to advance our pipeline of clinical and preclinical gene therapy product candidates and programs that are designed to selectively replace genes for the treatment of congenital, monogenic hearing loss and to regenerate inner ear hair cells for the treatment of acquired hearing and balance disorders. We are developing our lead gene therapy product candidate, DB-OTO, to provide hearing to individuals born with profound hearing loss due to mutation of the otoferlin, or OTOF, gene. In addition to DB-OTO, we are advancing AAV.103 to restore hearing in individuals with mutations in the gap junction beta-2, or GJB2, gene and AAV.104 to restore hearing in individuals with mutations in the stereocilin, or STRC, gene. We ~~are~~ also ~~advancing our~~have additional gene therapy programs ~~designed~~to convert supporting cells, the cells adjacent to hair cells, into either cochlear or vestibular hair cells in order to restore hearing or balance ~~in patients with bilateral vestibulopathy, or BVP, by regenerating lost hair cells within the inner ear.~~function. In addition to our gene therapy programs, we are developing DB-020 for the prevention of cisplatin-induced hearing loss, which we are currently evaluating in patients in a Phase 1b clinical trial.

We are developing our lead gene therapy product candidate, DB-OTO, to provide hearing to individuals born with profound hearing loss due to an OTOF deficiency. OTOF is a protein expressed in the inner hair cells of the cochlea that enables communication between sensory cells of the inner ear and the auditory nerve by regulating synaptic transmission. We have designed DB-OTO utilizing a proprietary, cell-selective promoter to provide expression of OTOF that is limited to hair cells. In our preclinical studies, the hair cell-selective expression of OTOF provided by DB-OTO enabled restoration of hearing in mice that was more durable than when OTOF was expressed under the control of a ubiquitous promoter, which is designed to drive expression in all cells. In addition to the loss of durability, we observed that use of a ubiquitous promoter in mice resulted in the loss of inner hair cells throughout the cochlea. DB-OTO is an ~~AAV-based~~adeno-associated virus, or AAV, based gene therapy intended to be delivered to patients using the surgical approach employed by neurotologists and pediatric otolaryngologists during a standard cochlear implantation procedure. We believe the cell-selective expression of DB-OTO and its delivery by this established surgical procedure will provide a core competitive advantage important to the success of DB-OTO. ~~Based on feedback~~In October 2022, we received clearance from the U.S. Food and Drug Administration, or the FDA, ~~we are currently conducting preclinical studies of DB-OTO to support~~for our ~~planned submission of an investigational new drug application,~~Investigational New Drug, or IND, to the FDA. We have solicited feedback from European regulatory authorities to support our planned submission of a CTA within the European Union. We plan to submit an IND or CTA in 2022. Subject to the acceptance of our IND or CTA, we expectapplication to initiate a Phase 1/2 dose escalation clinical trial in ~~2022.~~pediatric patients. The Phase 1/2 clinical trial is designed to evaluate the safety, tolerability and efficacy of DB-OTO in pediatric patients with congenital hearing loss due to an otoferlin deficiency. In addition to safety and tolerability endpoints, established, clinically relevant, objective and behavioral measurements of hearing will be used as efficacy endpoints in the clinical trial. The auditory brainstem response, which was used to characterize dose-response of DB-OTO after intra-cochlear delivery in translational studies, will serve as an early, objective, clinically accepted readout of hearing thresholds in the clinical trial. Based on discussions with the FDA during the IND review period, we expect the first two participants in the U.S. portion of the Phase 1/2 clinical trial will be as young as seven years of age and that subsequent participants will include children as young as two years of age and infants younger than two years of age. The DB-OTO IND is part of a global regulatory strategy for development of DB-OTO, and based on feedback from scientific advice meetings with European regulatory authorities, we have also completed submission of Clinical Trial Applications, or CTAs, to the Medicines and Healthcare Products Regulatory Agency, or MHRA, in the United Kingdom and the Spanish Agency of Medicines and Medical Devices, or AEMPS. We have commenced trial site startup activities and expect to initiate the Phase 1/2 clinical trial of DB-OTO in the first half of 2023. The FDA has granted orphan drug designation and rare pediatric disease designation for DB-OTO for the treatment of OTOF-related, congenital hearing loss. In addition to DB-OTO, we are advancing AAV.103 and AAV.104, ~~additional~~ gene therapy programs targeting hearing loss resulting from other single gene mutations, or monogenic forms of hearing loss. AAV.103 aims to restore hearing in individuals with mutations in the ~~gap junction beta-2, or~~ GJB2 gene and AAV.104 aims to restore hearing in individuals with mutations in the ~~stereocilin, or~~ STRC gene. We anticipate that we will identify a product candidate for our AAV.103 program in ~~2022 and share preclinical data on our AAV.104 program at an upcoming scientific meeting.~~the fourth quarter of 2022.

We are also using our platform to design and develop a pipeline of gene therapies for hair cell regeneration within the inner ear. We are engineering gene therapies to convert supporting cells, the cells adjacent to hair cells, into ~~both~~either cochlear ~~and~~or vestibular hair cells in order to restore hearing ~~and~~or balance function. These gene ~~therapies~~therapy programs are designed to express the developmental or reprogramming factors that regulate cell fate and use our proprietary, cell-selective promoters to control expression spatially and temporally. Our DB-ATO and AAV.201 gene therapy programs aim to restore balance by promoting regeneration of hair cells in the vestibular system, the sensory system responsible for balance. ~~They~~In these programs, we are ~~being developed~~focused on the development of a treatment for ~~the treatment of~~bilateral vestibulopathy, or BVP, a debilitating, acquired condition that significantly impairs balance, mobility and stability of vision. DB-ATO is an AAV-based gene therapy that utilizes a proprietary, supporting cell-selective promoter to express ATOH1, a transcription factor required for hair cell formation during ear development. In preclinical studies, selective expression of ATOH1 in vestibular supporting cells following treatment with DB-ATO led to conversion of supporting cells into vestibular hair cell-like cells but did not result in significant functional recovery in the in vivo behavioral assays employed in in our preclinical studies.differentiation. We are ~~continuing to evaluate whether ATOH1 expression alone might be sufficient to restore lost vestibular function. In parallel, we are~~also developing AAV.201, which combines ATOH1 ~~with another~~

and an inhibitor of Sox2, a reprogramming factor, designed to promote further differentiation of the regenerated cells. ~~We intend to announce the program target for AAV.201 in 2022.~~ In addition, we are advancing our cochlear hair cell regeneration program to treat acquired hearing loss by regenerating cochlear outer hair cells. We plan to ~~announce the targets for~~provide an update on our ~~cochlear hair cell~~vestibular regeneration program in ~~2022.~~2023.

In addition to our gene therapy product ~~candidate~~candidates and programs, we are developing a clinical-stage product candidate, DB-020, for the prevention of cisplatin-induced hearing loss. DB-020 is a novel formulation of sodium thiosulfate, or STS, that we have optimized for local delivery to the ear. STS inactivates cisplatin, a widely used chemotherapy that often leads to hearing loss and related complications in patients being treated for cancer. We are developing DB-020 to prevent cisplatin-induced hearing loss without impacting the beneficial, anti-tumor effect of cisplatin. In 2019, we completed a randomized, double-blind, placebo-controlled Phase 1 clinical trial of DB-020 in healthy volunteers, in which DB-020 was well tolerated. Following the Phase 1 clinical trial, we initiated a randomized, double-blind, placebo-controlled, multicenter Phase 1b clinical trial in 2020 to evaluate the safety and efficacy of DB-020 for the prevention of cisplatin-induced hearing loss. The report of an interim analysis of our Phase 1b clinical trial of DB-020 was previously delayed due to the impact of the COVID-19 pandemic on the pace of patient screening and enrollment, including delays in site start-up and withdrawal of some sites in the United States. We expect to report resultsIn June 2022, we reported topline data from an interim analysis of the ongoing Phase 1b clinical trial.

Patients enrolled in the Phase 1b clinical trial were randomized to receive one of two doses of DB-020 in one ear while the contralateral ear received placebo, enabling each patient to serve as their own control. Patients were administered DB-020 and placebo up to three hours prior to each cisplatin infusion. Consistent with the results of the Phase 1 clinical trial, data from the interim analysis demonstrated that DB-020 was well tolerated, with mostly mild to moderate adverse events and no significant safety issues observed. In the data from the interim analysis, 88% of patients experienced ototoxicity in their placebo-treated ear, and of these patients, 87% were partially or completely protected from ototoxicity in their DB-020-treated ears. The interim analysis included data collected as of February 4, 2022 from 19 cisplatin-naïve cancer patients being treated with high doses of cisplatin every 21 or 28 days. Of the 19 patients in the interim analysis, 17 patients had evaluable audiograms at baseline and after being dosed with DB-020 in one ear and placebo in the contralateral ear in conjunction with their prescribed infusion of cisplatin chemotherapy. Ototoxicity was defined according to the American Speech-Language-Hearing-Association criteria for significant ototoxic change.

We have ceased enrolling patients in the clinical trial in response to the positive interim analysis results from the first ~~half~~19 patients enrolled. We plan to report additional data from the interim analysis in 2023 and we are working with key opinion leaders to integrate learnings from the interim analysis into an updated clinical development plan and may consult with regulatory agencies as part of ~~2022. All remaining sites in~~that planning. We are considering a range of potential approaches by which to advance DB-020, including entering into strategic collaborations for the ~~United States~~further development and ~~Australia are now open.~~commercialization of DB-020. The FDA has granted fast track designation for DB-020 for the prevention of cisplatin-related ototoxicity.

Since inception, we have devoted substantially all of our resources on organizing and staffing, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product candidates, programs and platform. On February 5, 2021, we issued and sold 15,870,209 shares of our Series D convertible preferred stock for $27.4 million of aggregate cash proceeds, net of issuance costs. On February 17, 2021, we completed an initial public offering, or IPO, of our common stock in which we issued and sold 7,062,000 shares of our common stock at a public offering price of $18.00 per share, and on February 24, 2021, we issued and sold an additional 600,000 shares of common stock pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock, for aggregate net proceeds of ~~$124.8~~$125.0 million. Upon the closing of our IPO, all of our outstanding shares of convertible preferred stock automatically converted into 16,662,011 shares of common stock. Subsequent to the closing of our IPO, there were no shares of preferred stock outstanding. To date, we have financed our operations primarily with proceeds from sales of our convertible preferred stock (including borrowings under convertible promissory notes, which converted into convertible preferred stock in 2015), payments under our license and collaboration agreement with Regeneron Pharmaceuticals, Inc., or Regeneron, and, most recently, from the sale of common stock in our IPO.

We have not generated any revenue from product sales, and do not expect to generate any revenue from product sales for at least the next several years. All of our programs are still in preclinical and early-stage clinical development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. Since inception, we have incurred significant operating losses. Our net losses were ~~$38.9~~$47.1 million for the nine months ended September 30, ~~2021,~~2022, and ~~$39.3~~$51.8 million and ~~$42.7~~$39.3 million for the years ended December 31,

2021 and 2020, ~~and 2019,~~ respectively. As of September 30, ~~2021,~~2022, we had an accumulated deficit of ~~$201.6~~$261.6 million. We expect to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

In addition, as we progress toward marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and other sources of capital, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into other collaborations, strategic alliances or licensing arrangements with third parties when needed or on favorable terms, or at all. If we are unable to raise additional funds through equity or debt financings or enter into such other agreements when needed, we may have to significantly delay, reduce or eliminate some or all of our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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

As of September 30, ~~2021,~~2022, we had cash, cash equivalents and available-for-sale securities of ~~$172.4~~$111.9 million. We believe that our cash, cash equivalents and available-for-sale securities as of September 30, ~~2021~~2022 will enable us to fund our operating expenses and capital expenditure requirements into 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we anticipate.

The worldwide COVID-19 pandemic has affected and may affect in the future our ability to initiate and complete preclinical studies, delay the initiation and completion of our current and planned clinical trials, disrupt regulatory activities or have other adverse effects on our business, results of operations, financial condition and prospects. In addition, the pandemic has caused substantial disruption to global supply chains and may adversely impact economies worldwide, both of which could adversely affect our business, operations and ability to raise funds to support our operations.

local governmental authorities, we previously restricted access to our facility to those individuals who must perform critical research, translational medicine and laboratory support activities that must be completed on site, limited the number of such people that can be present at our facility at any one time, and required that most of our employees work remotely. In February 2022 we re-opened our facility to all of our employees. Screening and enrollment in our ~~ongoing~~ Phase 1b clinical trial of DB-020 in Australia and the United States ~~have~~had been adversely impacted by the COVID-19 pandemic. Patient screening and enrollment were paused in the second quarter of 2020 in both Australia and the United States, and screening for enrollment did not resume until early in the third quarter of 2020 in Australia and early in the fourth quarter of 2020 in the United States. We have also experienced delays in site start-up and the withdrawal of some sites in the United States. In addition, we and the third-party manufacturers, contract research organizations, or CROs, and academic collaborators that we engage have faced in the past and may face in the future disruptions that could affect our ability to initiate and complete preclinical studies or clinical ~~trials, including~~trials. This includes disruptions in procuring items and providing adequate resources that are essential for our research and development activities, such as, for example, raw materials used in the manufacture of our product candidates, laboratory supplies for our preclinical studies and clinical trials, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic, ~~and~~including supply chain disruptions. For example, due to increased quarantine mandates in China, the receipt of shipments and data from some of our vendors and CROs were more difficult and unpredictable during the first half of 2022. This caused some delays in preclinical studies for our gene therapy programs.

We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business. The extent of the impact of COVID-19 on our business will depend on the length and severity of ~~this~~the pandemic, including the extent there is any resurgence of the COVID-19 virus or any variant strains of the virus, the availability and effectiveness of vaccines and the impact of the foregoing on our preclinical studies, current and planned clinical trials, employees and vendors, which is uncertain and cannot be predicted. The pandemic has the potential to adversely affect our business, financial condition, results of operations and prospects.

In November 2017, we entered into a license and collaboration agreement with Regeneron, or the Regeneron Agreement. The Regeneron Agreement ~~has a~~had an original research term of five years and granted Regeneron ~~has~~ the right to extend the research term for up to two years in one-year intervals. In November 2021, Regeneron exercised its right to extend the research term and extended the research term by one year to November 2023.The Regeneron Agreement is focused on the discovery and development of new potential therapies directed to a set of defined collaboration targets. We are currently developing DB-OTO, AAV.103 and AAV.104 in collaboration with Regeneron under the Regeneron Agreement. In October 2020, we entered into an amendment to the Regeneron Agreement pursuant to which,

among other things, ATOH1, the target of our DB-ATO program, was removed as a collaboration target and the terms and plans for the DB-OTO and AAV.103 programs were modified. We issued 10,000,000 shares of our Series C convertible preferred stock to Regeneron in consideration for its entry into the amendment.

Pursuant to the Regeneron Agreement, Regeneron paid us an upfront fee of $25.0 million and purchased 12,500,000 shares of our Series B convertible preferred stock at a price per share of $2.00. If Regeneron ~~elects~~is provided two options to extend the research term ~~of the research program, it will be~~for a one-year period each and is obligated to pay us $10.0 million for each extension. The first option to extend the research term was exercised by Regeneron in November 2021. The $10.0 million fee is payable in the fourth quarter of ~~up to two one-year extensions.~~2022. On a collaboration-product-by-collaboration-product basis, upon achievement of pre-defined milestones which began at initiation of manufacturing to support Good Laboratory Practices, or GLP, toxicology studies and conclude at initiation of a Phase 2 clinical trial, Regeneron is obligated to pay us milestone payments of up to $35.5 million in aggregate if the collaboration product is a biologic or up to $33.5 million in aggregate if the collaboration product is a small molecule, which is intended to reflect approximately half of the total cost needed to achieve the next milestone. From and after the initiation of a registration-enabling trial, unless Regeneron decides to opt-out, we have agreed to split development and regulatory costs with Regeneron on an equal basis through the registration-enabling trials. Through September 30, 2022, we had received an aggregate of $5.5 million in milestone payments from Regeneron pursuant to the collaboration.

Under the Regeneron Agreement, we are required to pay Regeneron tiered royalties on the worldwide net sales of collaboration products at percentages which range from mid-single digit to mid-thirties, with the exact royalty rate depending on the extent to which Regeneron shared in the funding of the collaboration product, the level of net sales of the collaboration product, the nature of any intellectual property contributed by Regeneron included in the collaboration product and whether the product is sold inside or outside the field. In the case of collaboration products for which Regeneron does not opt-out, our obligation to pay tiered royalties on the worldwide net sales ranges from percentages in the mid-twenties to mid-thirties. In the case of collaboration products for which Regeneron opts-out, our obligation to pay tiered royalties on the worldwide net sales ranges from percentages in the mid-single digits to mid-twenties. Our obligation to make royalty payments to Regeneron on account of worldwide net sales of collaboration products continues so long as we, our affiliates, licensees or sublicensees sell collaboration products. To date, we have not made any royalty or other payments to Regeneron under the Regeneron Agreement.

Pursuant to the amendment to the Regeneron Agreement, Regeneron agreed to pay us $0.3 million to fund our ongoing research program and $0.5 million to help secure the services of a contract development and manufacturing ~~organization.~~organization, or CDMO. The $0.5 million payment iswas creditable against the milestone associated with the initiation of manufacturing to support GLP toxicology studies of DB-OTO. Additionally, Regeneron agreed to reimburse us for up to $10.5 million of third-party costs related to the GLP toxicology studies of DB-OTO as such costs are incurred, and we agreed that the aggregate potential milestone payments for DB-OTO would be reduced by $15.0 million. In addition, notwithstanding its removal from the collaboration, for DB-ATO, we agreed to pay to Regeneron a royalty calculated as a low-to mid-single digit percentage of net sales of DB-ATO, on a country-by-country basis, until the latest of the expiration of the last patent covering DB-ATO in such country, the expiration of all applicable regulatory exclusivities for DB-ATO in such country and the tenth anniversary of the first commercial sale of DB-ATO in such country.

InAs of September 30, 2022, we had unbilled receivables of $10.0 million due from Regeneron, relating to Regeneron exercising its right to extend the research term by one year to November 2020 and October 2021, we achieved our first pre-IND milestone of $4.4 million and our second pre-IND milestone of $1.1 million, respectively. For a more detailed description of the Regeneron Agreement and the amendment, see “Business – License and Collaboration Agreements – License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc.” in our Annual Report on Form 10-K as filed with the SEC on March 29, 2021.2023.

Because we consider Regeneron a collaborative partner that is subject to the significant risks and rewards under the Regeneron Agreement, we have accounted for the Regeneron Agreement under FASB ASC Topic 808, Collaborative Arrangements, or ASC 808. Under ASC 808, we view ~~the $25.0 million upfront payment and any milestone payments~~all consideration received from Regeneron as reimbursement of our costs under the Regeneron Agreement. These costs are accounted for as research and development expenses in our condensed consolidated statements of operations and comprehensive loss. As such, we are recognizing total consideration of $46.9 million, comprised of the $25.0 million upfront payment, the additional payment of $0.3 million received from Regeneron pursuant to the amendment, the ~~expected~~ reimbursement of $10.5 million of third-party costs related to the GLP toxicology studies of DB-OTO, the $5.5 million of cumulative milestone payments received, and the ~~$4.4~~$10.0 million ~~milestone~~extension payment ~~received,~~due in the fourth quarter of 2022, net of the $4.4 million in fair value of the Series C convertible preferred stock issued to Regeneron, over the research term as a reduction to research and development expenses (contra-research and development expense) in our condensed consolidated statements of operations and comprehensive loss based on our progress toward completion of our research activities under the research plan. Any future milestone payments will be included in the measurement of contra-research and development expense if and when achieved. ~~We recognized $2.4 million and $0.5 million as contra-research and development expenses during~~For the three months ended September 30, 2022 and 2021, we recognized contra-research and ~~2020, respectively.~~development expense of approximately $1.8 million and $2.4 million, respectively, related to consideration received from Regeneron. We recognized ~~$8.1~~$7.0 million and ~~$2.4~~$8.1 million as contra-research and development expenses during the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of September 30, ~~2021 and December 31, 2020,~~2022, we had ~~$3.1~~unbilled receivables of $10.0 million ~~and $1.2 million of accounts receivable~~ due from Regeneron, ~~respectively.~~relating to Regeneron exercising its right to extend the research term by one year to November 2023. As of September 30, ~~2021,~~2022, we had deferred collaboration liabilities of ~~$14.9~~$17.6 million on our condensed consolidated balance sheet, which consisted of ~~$6.5~~$8.4 million classified as current deferred collaboration liabilities and ~~$8.5~~$9.2 million classified as long-term collaboration liabilities. See Note 12 to our condensed consolidated financial statements appearing elsewhere in this Quarterly ~~Report on Form 10-Q.~~Report.

We have not generated any revenue since inception and do not expect to generate any revenue from the sale of products for at least the next several years. If our development efforts for our current or future product candidates are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales or payments from third-party collaborators or licensors.

Research and development expenses consist primarily of costs incurred for our research activities and development of our programs and product candidates. These expenses include:

We use our employee and infrastructure resources for the advancement of our platform and for discovering and developing programs and product candidates. We track direct research and development costs, consisting primarily of external costs, such as fees paid to CDMOs, CROs, and consultants in connection with our preclinical studies, clinical trials and experiments by program after a development candidate has been identified. Due to the number of ongoing programs and our ability to use resources across several projects, personnel-related expenses and indirect or shared operating costs incurred for our research and development programs are not recorded or maintained on a program-by-program basis, nor are our external program costs incurred for our programs prior to the identification of a development candidate for such program.

Additionally, consideration we receive under our license and collaboration agreement with Regeneron is being recognized as a reduction to research and development expense (contra-research and development expense) in our condensed consolidated statements of operations and comprehensive income (loss) based on our progress towards completion of our research activities under the research plan for the collaboration. The following table ~~reflects~~sets forth our research and development expense, including direct program-specific expense summarized by program, personnel-related expenses and indirect or shared operating costs recognized during each period presented (in thousands):

Consideration we receive under the Regeneron Agreement is being recognized as a reduction to research and development expense (contra-research and development expense) in our condensed consolidated statements of operations and comprehensive loss based on our progress towards completion of our research activities under the research plan for the collaboration. For purposes of the table above, recognition of consideration received from Regeneron is included as a reduction of other indirect research and development expenses. For the three months ended September 30, 2022 and 2021, we recognized contra-research and development expense of approximately $1.8 million and $2.4 million, respectively, related to consideration received from Regeneron. For the nine months ended September 30, 2022 and 2021, we recognized contra-research and development expense of approximately $7.0 million and $8.1 million, respectively, related to consideration received from Regeneron.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we advance our programs and product candidates into and through the development phase, and as we continue to develop additional product candidates. We also expect our discovery research efforts and our related personnel costs will increase and,

as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above historical levels. In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates or programs. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

A change in any of these variables with respect to the progress of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidate we may develop.

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for personnel in our executive, finance, legal, business development, human resources and administrative functions. General and administrative expenses also include legal fees relating to corporate matters and costs to secure and defend our intellectual property; professional fees for accounting, auditing, tax, human resources and administrative consulting services; insurance costs; administrative travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs. These costs relate to the operation of the business, unrelated to the research and development function, or any individual program.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to continue to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs and investor and public relations costs. We also expect to incur additional intellectual property-related expenses as we file patent applications to protect innovations arising from our research and development activities.

Interest income consists of interest income earned from our cash, cash equivalents and available-for-sale securities.

Since our inception, we have not recorded any U.S. federal, foreign, or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits as it is ~~not~~ more likely-than-not that these benefits will not be realized. We have U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards to offset future taxable income. We have recognized a reserve for a foreign uncertain tax position and recorded a foreign tax provision.

Income taxes are determined at the applicable ~~statutory~~ tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates.

In January and May 2020, we had a reduction in force that included 45 full-time employees, which represented approximately 52% of our full-time employee workforce. The reduction in force was primarily comprised of positions related to research and general and administrative services and was implemented in connection with our determination to focus and reprioritize our resources on gene therapy programs for hearing and balance disorders and to eliminate our research efforts on other discovery programs for hearing loss. As a result of the reduction, we incurred expenses of approximately $2.9 million during the first quarter of 2020 and $0.6 million during the second quarter of 2020, comprised of termination benefits including severance, benefits and other payroll-related charges. During the first quarter of 2020, we established retention agreements with certain key employees, including one of our executive officers. Under the terms of these agreements, we agreed to make three retention payments to each key employee totaling $1.6 million in the aggregate if they remained employed at the Company through specified milestones. The first payments of $0.7 million in the aggregate were paid upon execution of the retention agreements. The second payments of $0.4 million in the aggregate were paid to the key employees upon the closing of the Series D financing in November 2020. ~~The third payments of $0.5 million in the aggregate were paid in January 2021,~~including payments to certain employees who are required to remain employed through January 1, 2022 in order to retain the first and third payments. These prepayments are being amortized over the remaining employee service terms under the retention agreements.

During the second quarter of 2020, we established additional employee bonuses in the aggregate amount of $0.4 million for the majority of employees who were not party to a retention agreement. The bonuses became due upon the closing of the Series D financing in November 2020. All amounts owed related to the additional employee bonuses were paid prior to December 31, 2020.

Restructuring expenses are classified as research and development expenses or general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss in the manner in which the respective employee’s salary and related costs were classified.

Comparison of the ~~Three Months Ended~~three months ended September 30, ~~2021~~2022 and ~~2020~~2021

The following tables summarizes our results of operations for each period presented (in thousands):


	Three Months Ended September 30,									Three Months Ended September 30,
	2021			2020			Change			2022			2021			Change
Operating expenses:
Research and development	$	9,020		$	4,691		$	4,329		$	10,030		$	9,020		$	1,010
General and administrative		5,680			2,397			3,283			6,319			5,680			639
Total operating expenses		14,700			7,088			7,612			16,349			14,700			1,649
Loss from operations		(14,700	)		(7,088	)		(7,612	)		(16,349	)		(14,700	)		(1,649	)
Other income:
Interest income		33			2			31			374			33			341
Other income, net		—			(25	)		25
Total other income, net		33			(23	)		56			374			33			341
Net loss before provision for income taxes		(14,667	)		(7,111	)		(7,556	)		(15,975	)		(14,667	)		(1,308	)
Provision for income taxes		(1,732	)		—			(1,732	)		(30	)		(1,732	)		1,702
Net loss	$	(16,399	)	$	(7,111	)	$	(9,288	)	$	(16,005	)	$	(16,399	)	$	394

The following tables summarizes our research and development expenses for each period presented (in thousands):

Research and development expenses for the three months ended September 30, ~~2021~~2022 were ~~$9.0~~$10.0 million, compared to ~~$4.7~~$9.0 million for the three months ended September 30, ~~2020.~~2021. The increase of ~~$4.3~~$1.0 million was primarily attributable to the following:

General and administrative expenses for the three months ended September 30, ~~2021~~2022 were ~~$5.7~~$6.3 million, compared to ~~$2.4~~$5.7 million for the three months ended September 30, ~~2020.~~2021. The increase of ~~$3.3~~$0.6 million was primarily attributable to ~~the following:~~a $0.6 million

The increase in interest income infor the three months ended September 30, ~~2021~~2022 was primarily ~~due~~attributable to an increase in ~~our holdings following receipt of the proceeds from the issuance~~interest rates and ~~sale of our Series D convertible preferred stock and~~higher yields from our ~~IPO.~~investments in cash equivalents and available-for-sale securities.

The provision for income taxes infor the three months ended September 30, 2022 was due to the recognition of an insignificant amount related to a foreign tax provision and interest expense related to a previously established foreign uncertain tax position. The provision for income taxes for the three months ended September 30, 2021 was due to the recognition of an income tax expense of $1.7 million related to a foreign uncertain tax position and a foreign tax provision.

Comparison of the ~~Nine Months Ended~~nine months ended September 30, ~~2021~~2022 and ~~2020~~2021

The following tables ~~summarizes~~summarize our results of operations for each period presented (in thousands):

The following tables ~~summarizes~~summarize our research and development expenses for each period presented (in thousands):

Research and development expenses for the nine months ended September 30, ~~2021~~2022 were ~~$21.9~~$28.7 million, compared to ~~$17.4~~$21.9 million for the nine months ended September 30, ~~2020.~~2021. The increase of ~~$4.4~~$6.9 million was primarily attributable to the following:

General and administrative expenses for the nine months ended September 30, ~~2021~~2022 were ~~$15.5~~$18.7 million, compared to ~~$9.1~~$15.5 million for the nine months ended September 30, ~~2020.~~2021. The increase of ~~$6.3~~$3.2 million was primarily attributable to the following:

The increase in interest income infor the nine months ended September 30, ~~2021 was~~2022 primarily ~~due~~attributable to an increase in ~~our holdings following receipt of the proceeds from the issuance~~interest rates and ~~sale of our Series D convertible preferred stock and~~higher yields from our ~~IPO.~~investments in cash equivalents and available-for-sale securities.

The provision for income taxes infor the nine months ended September 30, 2022 was due to the recognition of $0.1 million related to a foreign tax provision and interest expense related to a previously established foreign uncertain tax position. The provision for income taxes for the nine months ended September 30, 2021 was due to the recognition of an income tax expense of $1.7 million related to a foreign uncertain tax position and a foreign tax provision.

Since our inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. Through September 30, ~~2021,~~2022, we funded our operations primarily from net proceeds of $219.5 million from the issuance and sale of our convertible preferred stock, ~~$35.6~~$41.3 million from ~~our collaboration agreement with~~the Regeneron Agreement and ~~$124.8~~$125.0 million from the issuance and sale of our common stock in our IPO.

In March 2022, we filed a universal shelf registration statement on Form S-3 to register for sale from time to time up to $200.0 million of common stock, preferred stock, debt securities, warrants and/or units in one or more offerings. Further, in March 2022, we entered into an Open Market Sale AgreementSM, or the Sales Agreement, with Jefferies LLC, or Jefferies, pursuant to which, from time to time, we may offer and sell shares of our common stock. Sales of common stock through Jefferies may be made by any method that is deemed an “at-the-market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. Jefferies is entitled to compensation at a rate equal to 3.0% of the gross proceeds from any shares of common stock sold under the Sales Agreement. In August 2022, we filed a prospectus supplement under our universal shelf registration for the offer and sale of shares of our common stock having an aggregate offering price up to $50.0 million pursuant to the Sales Agreement. As of September 30, 2022, we had not sold any shares of common stock pursuant to the Sales Agreement.

The following table provides information regarding our cash flows for each period presented (in thousands):

Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we invested in developing our pipeline, platform, drug discovery efforts and related infrastructure. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally attributable to stock-based compensation, depreciation and amortization and accretion of discounts on available-for-sale securities, as well as changes in components of operating assets and liabilities, which are generally attributable to increased expenses, timing of vendor payments and performance under the Regeneron Agreement.

During the nine months ended September 30, 2022, net cash used in operating activities of $49.1 million was primarily due to our ~~collaboration agreement.~~net loss of $47.1 million as well as changes in operating assets and liabilities of $7.5 million, partially offset by net non-cash expenses of $5.5 million.

During the nine months ended September 30, 2021, net cash used in operating activities of $33.6 million was primarily due to our net loss of $38.9 million, partially offset by net non-cash expenses of $4.2 million and changes in operating assets and liabilities of $1.1 million.

During the nine months ended September 30, ~~2020,~~2022, net cash ~~used in operating~~provided by investing activities of ~~$27.5~~$49.4 million was primarily due to ~~our net loss~~maturities and redemptions of ~~$26.5 million and changes in operating assets and liabilities~~available for sale securities of ~~$2.9~~$121.6 million, partially offset by ~~net non-cash expenses~~purchases of ~~$1.9~~available-for-sale securities of $71.9 million and purchases of property and equipment of $0.3 million.

During the nine months ended September 30, 2021, net cash used in investing activities of $95.4 million was primarily due to purchases of available-for-sale securities of $165.7 million and purchases of property and equipment of $0.4 million, partially offset by maturities of available-for-sale securities of $70.7 million.

During the nine months ended September 30, ~~2020,~~2022, net cash ~~provided by investing~~used in financing activities of ~~$13.7~~$0.2 million ~~was primarily due to maturities~~consisted of ~~available-for-sale securities of $13.8 million and proceeds from the sale of property and equipment of $0.1 million, partially offset by purchases of property and equipment of $0.2 million.~~

During the nine months ended September 30, 2021, net cash provided by financing activities of $152.4 million consisted primarily of proceeds from the issuance and sale of common stock, net of cash paid for offering costs, in connection with our IPO of $125.0 million and proceeds from the issuance and sale of our Series D convertible preferred stock of $27.4 million, net of cash paid for offering costs.

~~During the nine months ended September 30, 2020, net cash provided by financing activities of $0.5 million consisted primarily of proceeds from equipment financing.~~

We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, we expect to continue to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

As of September 30, ~~2021, our~~2022, we had cash, cash equivalents and available-for-sale securities ~~totaled $172.4~~of $111.9 million. We believe that our cash, cash equivalents and available-for-sale securities ~~as of September 30, 2021~~ will enable us to fund our operating expenses and capital expenditure

requirements into 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we anticipate.

Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may enter into collaborations with third parties for the development of our product candidates is unknown, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

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

Our expectation with respect to our ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, and we may need to seek additional funds sooner than planned.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not ~~currently~~ have any committed external source of funds, other than ~~the reimbursements to which~~amounts we are entitled to under the Regeneron ~~Agreement for up to $1.5~~Agreement. As of September 30, 2022, we had $10.0 million of ~~third-party costs related to~~unbilled receivables from Regeneron, reflecting the ~~GLP toxicology studies~~amount owed for Regeneron’s one-year extension of ~~DB-OTO.~~the research term under the Regeneron Agreement. Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take

specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interests of holders of our common stock.

We may be unable to raise additional funds or enter into other collaborations, strategic alliances or licensing arrangements with third parties when needed on favorable terms, or at all. If we are unable to raise additional funds through equity or debt financings or enter into such agreements when needed, we may have to significantly delay, reduce or eliminate some or all of our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves or on terms that may not be favorable to us.

~~We did not~~There have ~~during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined~~been no material changes to our material cash requirements described in ~~the rules and regulations of the U.S. Securities and Exchange Commission.~~our 2021 Annual Report on Form 10-K.

Critical Accounting ~~Policies~~Estimates and Significant ~~Judgement and Estimates~~Judgments

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with ~~GAAP.~~accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that are most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements. While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements in our 2020 Annual Report on Form 10-K, we believe that our most critical accounting policies are those relating to Collaboration Agreements, Research and Development Expenses and Related Accruals and Stock-Based Compensation, which are described under the heading

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgement and Estimates” in our 2020 Annual Report on Form 10-K.

There have been no material changes to our critical accounting ~~policies~~estimates from those described in our ~~2020~~2021 Annual Report on Form 10-K.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012. As a result, we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. In particular, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company.

We are also a “smaller reporting company” as defined in Rule 12b-2 under the Securities and Exchange ~~Act.~~Act of 1934, as amended. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

We have reviewed all recently issued accounting pronouncements and have determined that, other than as disclosed in Note 2 to our consolidated financial statements included in our 2021 Annual Report on Form 10-K, ~~for the fiscal year ended December 31, 2020 as filed with the SEC on March 29, 2021,~~ such standards will not have a material impact on our financial statements or do not otherwise apply to our current operations. ~~For further details over upcoming standards to be adopted by the Company, please refer to Note 2 in our consolidated financial statements above.~~

We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because as of September 30, 2022 our cash equivalents ~~are invested~~and available-for-sale securities consisted of cash and investments in ~~short-term~~money market funds, U.S. Agency discount notes, U.S. Treasury ~~obligations~~securities and ~~our available-for-sale securities are invested in corporate obligations.~~U.S. Agency bonds. However, because of the short-term nature of the instruments in our portfolio, an immediate change in market interest rates of 100 basis points would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

~~Inflation generally affects us by increasing our cost of labor.~~ We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Inflation generally affects us by increasing our cost of labor and external manufacturing and clinical trial costs. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.

We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under ~~the Securities Exchange Act of 1934, as amended, or~~ the Exchange Act that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that

information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our management, with the participation of our chief executive officer and chief financial officer, who serve as our principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2021.~~2022. Based on such evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, ~~2021.~~2022.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently subject to any material legal proceedings.

Our business is subject to a number of risks. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Quarterly Report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations section and the condensed consolidated financial statements and the related notes thereto in evaluating our company. The risks described below are not the only risks facing us. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, results of operations and financial condition to suffer materially.

We have incurred significant losses since our inception, have no products approved for sale and we expect to incur substantial losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net losses were ~~$38.9~~$47.1 million for the nine months ended September 30, ~~2021,~~2022, and ~~$39.3~~$51.8 million and ~~$42.7~~$39.3 million for the years ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. As of September 30, ~~2021,~~2022, we had an accumulated deficit of ~~$201.6~~$261.6 million. To date, we have financed our operations primarily with proceeds from sales of preferred stock (including borrowings under convertible promissory notes, which converted into preferred stock in 2015), payments under the license and collaboration agreement, or the Regeneron Agreement, to which we are a party with Regeneron Pharmaceuticals, Inc., or Regeneron, and, most recently, from the sale of common stock in our initial public offering, or IPO. Since inception, we have devoted substantially all of our resources on organizing and staffing, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product candidates, programs and platform. We are still in the early stages of development of our product candidates, and we have not completed development of any product candidates. We expect to continue to incur significant expenses and operating losses over the next several years. Our operating expenses and net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses and capital expenditures will increase substantially if and as we:

We have no products for which we have obtained marketing approval and have not generated any revenue from product sales. Even if we obtain marketing approval of and are successful in commercializing one or more of our product candidates, we expect to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

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

We have never generated revenue from product sales and our most advanced product candidate is in early clinical trials. We expect that it will be many years, if ever, before we have a product candidate ready for commercialization. To become and remain profitable, we must succeed in developing, and eventually commercializing, a product or products that generate significant revenue. The ability to achieve this success will require us to be effective in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining marketing approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain marketing approval. We are only in the preliminary stages of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately estimate or know the nature, timing or costs of the efforts that will be necessary to complete the preclinical and clinical development and commercialization of our product candidates or when, or if, we will be able to generate revenues or achieve profitability.

Our ability to generate revenue from product sales and achieve profitability depends on our ability to successfully develop and obtain the marketing approvals necessary to commercialize our product candidates. We do not have any products approved for sale and do not anticipate generating revenue from product sales for the next several years, if ever. Our ability to generate future revenue from product sales depends heavily on our success in:

Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs in commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, EMA or other regulatory agencies to perform clinical trials or studies in addition to those that we currently anticipate. Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis as we expect to continue to engage in substantial research and development activities and to incur substantial expenses to develop and commercialize product candidates.

Our failure to become and remain profitable would depress our market value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or even continue our operations. A decline in the value of our company could also cause our stockholders to lose all or part of their investment.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts.

Since inception, we have used substantial amounts of cash. The development of biopharmaceutical product candidates is capital intensive and we expect that we will continue to expend substantial resources for the foreseeable future in connection with our ongoing activities. In particular, substantial resources will be required as we continue to conduct additional preclinical studies and prepare for and initiate our planned Phase 1/2 clinical trial of DB-OTO, continue research and development ~~initiate preclinical testing and clinical trials~~ of AAV.103, AAV.104, AAV.201, DB-ATO and any product candidates that may arise from our current or future research programs, advance our platform and if and as we continue ~~our~~the clinical development of ~~DB-020, including our ongoing Phase 1b clinical trial, and advance our platform.~~DB-020. Identifying potential product candidates, conducting preclinical testing and clinical trials and potentially submitting approvals of our product candidates is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we have incurred and expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We believe that our cash, cash equivalents and available-for-sale securities as of September 30, ~~2021~~2022 will enable us to fund our operating expenses and capital expenditure requirements into 2024. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. As a result, we could deplete our capital resources sooner than we currently expect.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not have any committed external source of funds, other than the ~~reimbursements~~funds to which we are entitled under the Regeneron ~~Agreement for up to $1.5~~Agreement. As of September 30, 2022 we had $10.0 million of ~~third-party costs related to GLP toxicology studies~~unbilled receivables from Regeneron, reflecting the amount owed for Regeneron’s one-year extension of ~~DB-OTO.~~the research term under the Regeneron Agreement. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect their rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making capital expenditures or declaring dividends. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

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

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

We commenced operations in 2013, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, conducting research and development activities, identifying potential product candidates, soliciting input from regulators regarding development of these product candidates, securing intellectual property rights and undertaking preclinical studies and clinical trials. ~~All~~Other than DB-OTO, which received clearance from the FDA to initiate a Phase 1/2 clinical trial, all of our gene therapy product candidates are still in the research or preclinical ~~stage.~~stage of development. We have not yet demonstrated our ability to successfully develop any product candidate, obtain marketing approvals, manufacture a commercial scale product, arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products.

In addition, as our business grows, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, stockholders should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Our ability to use our NOLs and research and development tax credit carryforwards to offset future taxable income may be subject to certain limitations.

As of December 31, ~~2020,~~2021, we had U.S. federal net operating loss carryforwards of approximately ~~$148.7~~$196.3 million to offset future federal taxable income. Federal net operating losses, or NOLs, of $41.7 million will expire beginning in 2033. As of December 31, ~~2020,~~2021, we had NOLs of ~~$107.0~~$154.6 million which had an indefinite life. As of December 31, ~~2020,~~2021, we had state net operating loss carryforwards of ~~$146.0~~$187.9 million to offset future state taxable income, which will begin to expire in 2035. As of December 31, ~~2020,~~2021, we had foreign net operating loss carryforwards of approximately $3.0 million to offset future foreign taxable income, which do not expire. As of December 31, ~~2020,~~2021, we had federal research and development tax credit carryforwards of ~~$0.8~~$1.2 million, which expire beginning in 2033, and state research and development tax credit carryforwards of ~~$0.5~~$0.8 million, which expire beginning in 2032. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

We have a history of cumulative losses and anticipate that we will continue to incur significant losses in the foreseeable future; thus, we do not know whether or when we will generate taxable income necessary to utilize our NOLs or research and development tax credit carryforwards.

In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and research and development tax credit carryforwards to offset future taxable income. We have not conducted a study to assess whether any such ownership changes have occurred. We may have experienced such ownership changes in the past and may experience such ownership changes in the future as a result of subsequent changes in our stock ownership (which may be outside our control). As a result, if, and to the extent that, we earn net taxable income, our ability to use our pre-change NOLs and research and development tax credit carryforwards to offset such taxable income may be subject to limitations. Our NOLs or credits may also be impaired under state law.

There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities. As described ~~above~~below in “Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition,” the Tax Cuts and Jobs Act of 2017, or TCJA, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards that may significantly impact our ability to utilize our NOLs to offset taxable income in the future. For these reasons, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.

We are ~~very~~ early in our development efforts. Our business is dependent on our ability to advance our lead gene therapy product candidate, DB-OTO, and our other current and future product candidates through preclinical studies and clinical trials, obtain marketing approval and ultimately commercialize them. If we are unable to complete clinical development, obtain regulatory approval for or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

We are ~~very~~ early in our development efforts. We have advanced only one product candidate, DB-020, into clinical trials, and it is still in early clinical trials. In addition, we have identified only one gene therapy product candidate, DB-OTO. DB-OTO ~~which is in preclinical development. We expect to submit an IND to~~has been cleared by the FDA orto be evaluated in humans, but we have not yet initiated a ~~CTA within the European Union with respect to DB-OTO in 2022.~~clinical trial of DB-OTO. Additionally, we have a portfolio of programs that are in earlier stages of preclinical development and may never identify another gene therapy product candidate or advance aanother gene therapy product candidate to clinical-stage development. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development, marketing approval and eventual commercialization of our product candidates, which may never occur. We have not sought regulatory approval for DB-OTO or any other product candidate and do not expect to be in a position to do so for the foreseeable future. We currently generate no revenue from sales of any product, and we may never be able to develop or commercialize a marketable product.

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

Many of these factors are beyond our control, including preclinical and clinical outcomes, the regulatory review process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any collaborator. If we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop and commercialize our product candidates, which would materially harm our business. If we are unable to advance our gene therapy product candidates to clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed. Our limited experience in conducting clinical development activities, including with respect to gene therapies, may adversely impact the likelihood that we will be successful in advancing our product candidates or programs.

We are heavily dependent on the success of our lead gene therapy product candidate, DB-OTO.

We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures for the foreseeable future will be devoted to DB-OTO. Accordingly, our business currently depends heavily on the successful development, regulatory approval and commercialization of DB-OTO. We cannot be certain that DB-OTO will receive regulatory approval or be successfully commercialized even if we receive regulatory approval. If we were required to discontinue development of DB-OTO, or if DB-OTO does not receive regulatory approval, fails to achieve significant market acceptance or fails to receive reimbursement, we would be delayed ~~by many years~~ in our ability to achieve profitability, if ~~ever, and may not be able to generate sufficient revenue to continue our business.~~ever.

Clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.

All of our product candidates are in preclinical development or early clinical trials and their risk of failure is high. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. We cannot guarantee that any of our clinical trials will be conducted as planned or completed on schedule, or at all. A failure of one or more clinical trials can occur at any stage of testing, which may result from a multitude of factors, including, but not limited to, flaws in trial design, dose selection issues, participant enrollment criteria and failure to demonstrate favorable safety or efficacy traits.

~~Before~~Our preclinical programs are in the early stage, and we may not identify development candidates for IND-enabling studies or product candidates for clinical development when anticipated or at all. In addition, even if we identify a product candidate for a program, before we can commence clinical trials for asuch product candidate, we must complete extensive preclinical testing and

studies that support our ~~planned~~ INDs and other regulatory filings in the United States and abroad. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if regulatory authorities will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further advancement of any product candidates. Our preclinical studies, particularly in our regeneration programs, are in the early stage, and we may not identify development candidates for IND-enabling studies or product candidates for clinical development when anticipated or at all. As a result, weWe cannot be sure that we will be able to submit INDs, CTAs, or ~~corresponding~~other regulatory filings for our preclinical ~~programs~~product candidates on the timelines we expect, if at all,

and we cannot be sure that submission of INDs ~~or these regulatory filings~~ will result in the FDA or other regulatory authorities allowing clinical trials to ~~begin.~~begin or to continue once commenced. Furthermore, product candidates are subject to continued preclinical safety studies and testing with respect to chemistry, manufacturing and controls data, which may be conducted concurrently with our clinical testing. The outcomes of these safety studies and other testing may delay the launch of or enrollment in future clinical trials and could impact our ability to continue to conduct our clinical trials.

The time required to obtain approval from the FDA, EMA or other comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of regulatory authorities. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. We have not yet completed a clinical trial of any of our product candidates other than the Phase 1 clinical trial of DB-020 in healthy volunteers. Clinical trials may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. Even if the clinical trials are successful, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application.

Furthermore, product candidates are subject to continued preclinical safety studies, which may be conducted concurrently with our clinical testing. The outcomes of these safety studies may delay the launch of or enrollment in future clinical trials and could impact our ability to continue to conduct our clinical trials.

Other events that may prevent successful or timely completion of clinical development include:

Any inability to successfully complete preclinical studies and clinical trials could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional preclinical studies or clinical trials to bridge our modified product candidates to earlier versions. Clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations and prospects.

Gene therapy is an emerging field of drug development that poses many risks. We have only limited prior experience in gene therapy research and no prior experience in gene therapy clinical development. Our lack of experience and the limited patient populations for our gene therapy programs may limit our ability to be successful or may delay our development efforts.

Gene therapy is an emerging field of drug development with a limited number of gene therapies having received regulatory approval to date. Our gene therapy programs are at an early stage and there remain several areas of drug development risk, which pose particular uncertainty for our programs given the relatively limited development history of, and our limited prior experience with, gene therapies. Translational science, manufacturing materials and processes, safety concerns, regulatory pathway and clinical trial design and execution all pose particular risk to our drug development activities. Furthermore, the medical community’s understanding of the genetic causes of many diseases continues to evolve and further research may change the medical community’s views on what therapies and approaches are most effective for addressing certain diseases.

As an organization, we have not previously conducted any clinical trials of gene therapies. We have begun to establish our own gene therapy technical capabilities, but we will need to continue to expand those capabilities by either hiring internally or seeking assistance from outside service providers. Gene therapy is an area of significant investment by biotechnology and pharmaceutical companies and there may be a scarcity of talent available to us in these areas. If we are not able to expand our gene therapy capabilities, we may not be able to develop in the way we intend or desire any promising product candidates that emerge from our program or our other collaborative gene therapy sponsored research programs, which would limit our prospects for future growth. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of gene therapy product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trial or future clinical trials of gene therapy product candidates could prevent us from or delay us in commercializing our gene therapy product candidates.

As we prepare for the ~~potential~~ initiation of our first gene therapy clinical trial, we will need to build our internal and external capabilities in designing and executing a gene therapy clinical trial. There are many known and unknown risks involved in translating preclinical development of gene therapies to clinical development, including selecting appropriate endpoints and dosage levels for dosing humans based on preclinical data. If we are unable to initiate and conduct our gene therapy clinical trials in a manner that satisfies our expectations or regulatory requirements, the value of our gene therapy programs may be diminished.

Our gene therapy product candidates and programs are based on a relatively novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.

We are concentrating our therapeutic product research and development efforts primarily on our gene therapy programs. Our future success is almost entirely dependent on this therapeutic approach. Because our gene therapy product candidates are based on relatively novel technology, development problems we experience in the future related to our gene therapy platform may be difficult to solve and may cause delays and unanticipated costs. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from initiating or conducting clinical trials or commercializing our products on a timely or profitable basis, if at all.

Our gene therapy product candidates will need to meet purity, potency and safety standards applicable to any new biologic under the regulatory framework administered by the FDA. In addition to FDA oversight and oversight by IRBs, under guidelines

promulgated by the U.S. National Institutes of Health, or NIH, gene therapy clinical trials may also be subject to review and oversight by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. Although the FDA decides whether individual gene therapy protocols may proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation of a clinical trial, even if the FDA has reviewed the trial and approved its initiation.

In the European Union, the EMA’s Committee for Advanced Therapies, or CAT, is responsible for assessing the quality, safety and efficacy of advanced-therapy medicinal products. Advanced-therapy medicinal products include gene therapy medicines, somatic-cell therapy medicines and tissue-engineered medicines. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for a gene therapy medicinal candidate that is submitted to the EMA. In the European Union, the development and evaluation of a gene therapy product must be considered in the context of the relevant European Union guidelines. The EMA may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines. As a result, the procedures and standards applied to gene therapy products and cell therapy products may be applied to any gene therapy product candidate we may develop, but that remains uncertain at this point.

Adverse developments in preclinical studies or clinical trials of gene therapies conducted by others may cause the FDA, the EMA and other regulatory bodies to revise the requirements for approval of any gene therapy product candidates we may develop or limit the use of products utilizing gene regulation technologies, either of which could harm our business. The regulatory approval process for gene therapy product candidates such as ours can be more expensive and take longer than for other, better known, or more extensively studied pharmaceutical or other product candidates. Further, as we are developing novel potential treatments for diseases in which, in some cases, there is little clinical experience with potential new endpoints and methodologies, there is heightened risk that the FDA, the EMA or other regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. Any natural history studies that we may conduct or rely upon in our clinical development may not be accepted by the FDA, EMA or other regulatory authorities. Regulatory agencies administering existing or future regulations or legislation may not allow production and marketing of gene therapy products in a timely manner or under technically or commercially feasible conditions. In addition, regulatory action or private litigation could result in expenses, delays, or other impediments to our research programs or the commercialization of resulting products. Further, approvals by one regulatory agency may not be indicative of what other regulatory agencies may require for approval.

The regulatory review committees and advisory groups described above and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates, or lead to significant post-approval limitations or restrictions. As we advance our research programs and develop future product candidates, we will be required to consult with these regulatory and advisory groups and to comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of any product candidates we identify and develop. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all. The first approvals of gene therapy products by the FDA only occurred in 2017. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or the European Union, or how long it will take to commercialize any product candidate that receives marketing approval.

The outcome of preclinical studies and earlier-stage clinical trials may not be predictive of future results or the success of later-stage clinical trials.

The results of preclinical studies may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials may not be predictive of the results of the later-stage clinical trials or from clinical trials of the same product candidates in other indications. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed. For example, the results of the Phase 1 clinical trial of DB-020 in healthy volunteers may not be indicative of the results of the ~~ongoing~~ Phase 1b clinical trial. In addition, if successful, the results of our planned Phase 1/2 clinical trial of DB-OTO may not be predictive of the results of further clinical trials of this product candidate or any other gene therapy product candidates. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Our future clinical trials may not ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for product candidates proceeding through clinical trials, and because our gene therapy product candidates are based on a relatively novel technology, the likelihood of success is harder to determine. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving

encouraging results in earlier studies. Any such setbacks in our clinical development could materially harm our business, financial condition, results of operations and prospects.

Interim and preliminary results from our clinical trials that we announce or publish from time to time may change as more participant data become available and are subject to audit and verification procedures, which could result in material changes in the final data.

From time to time, we may publish interim or preliminary results from our clinical ~~trials.~~trials, such as the data from the interim analysis of our Phase 1b clinical trial of DB-020 that we announced in June 2022. Interim results from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as ~~participant enrollment continues and~~ more participant data become available. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Additionally, preliminary data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. As a result, interim and preliminary data should be viewed with caution until the final data are available. Differences between preliminary or interim data and final data could be material and could significantly harm our reputation and business prospects and may cause the trading price of our common stock to fluctuate significantly.

If we experience delays or difficulties in participant enrollment for clinical trials, our research and development efforts and the receipt of necessary regulatory approvals could be significantly delayed or prevented.

Identifying and qualifying individuals to participate in clinical trials of is critical to our success. We may not be able to identify, recruit and enroll a sufficient number of participants, or those with required or desired characteristics, to complete our clinical trials in a timely manner. Any delay or difficulty in participant enrollment could significantly delay or otherwise hinder our research and development efforts and delay or prevent receipt of necessary regulatory approvals.

For example, due to the continued impact of the COVID-19 pandemic on the pace of patient screening and enrollment and the closure of trial sites in the United States that we had expected to re-open, we ~~have~~previously experienced a delay in when we ~~expect~~expected to report results from an interim analysis of our ~~ongoing~~ Phase 1b clinical trial of DB-020.

Our gene therapy programs are initially targeting orphan diseases with relatively small populations, which limits the pool of potential participants for our gene therapy clinical trials. Because gene therapy trials generally require participants who have not previously received any other gene therapy or potentially other pharmacological therapeutics for the same indication or treatment with

medical devices (for example, cochlear implants), we will also need to compete with others who are also developing gene therapies or pharmacologic therapeutics for these same indications for the same group of potential clinical trial participants. This competition could reduce the number and types of potential participants available to us, as some potential participants who might have opted to enroll in our clinical trials may instead opt to enroll in one being conducted by one of our competitors. In addition, individuals may also be unwilling to participate in our clinical trials because of negative publicity from adverse events in the biotechnology or biopharmaceutical industries, particularly to the extent that such negative publicity is related to gene therapy. Challenges in recruiting and enrolling sufficient numbers of suitable participants in clinical trials could increase costs, affect the timing and outcome of our planned clinical trial or future clinical trials and result in delays to our current development plan for our product candidates. If we have difficulty enrolling a sufficient number of individuals to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would harm our business, financial condition, results of operations and prospects.

Our product candidates or the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.

We have only conducted a clinical trial of DB-020 and have not conducted clinical trials in any of our gene therapy programs.

In past clinical trials that were conducted by others with non-AAV vectors, several significant side effects were caused by gene therapy product candidates, including reported cases of leukemia and death. Other potential side effects associated with both AAV and non-AAV vectors could include immunologic reactions or insertional oncogenesis, which is the process whereby the insertion of a functional gene near a gene that is important in cell growth or division results in uncontrolled cell division, which could potentially enhance the risk of malignant transformation. If our gene therapy product candidates demonstrate a similar adverse effect, or other adverse events, we may be required to halt or delay further clinical development of our gene therapy product candidates.

In addition to side effects caused by the product candidate itself, the administration process also can cause side effects. Although the procedure we have developed to deliver our gene therapy product candidate is based on the surgical approach employed by ~~otologists~~neurotologists and pediatric otolaryngologists during a standard cochlear implantation procedure, any surgical procedure runs risks related to infection and damage to parts of the body adjacent to the treated area. In addition, until we are able to test the procedure on humans, we cannot be certain that our delivery mechanism will be successful. If side effects were to occur in connection with the surgical procedure during our planned clinical trials or if we fail to successfully apply our delivery approach in humans, our clinical trials could be suspended or terminated.

If, in the future, we are unable to demonstrate that trial side effects were not caused by our product candidates or the related procedures, the FDA, the EMA or other regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that any future serious adverse events are not product-related, and regulatory authorities do not order us to cease further development of our product candidates, such occurrences could cause our reputation to suffer and affect patient recruitment or the ability of enrolled participants to complete the trial. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may harm our business, financial condition, results of operations and prospects significantly.

Regulatory approval of and/or demand for our potential products will depend in part on public acceptance of the use of gene therapies for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that gene therapies are unsafe, unethical or immoral and, consequently, our products may not gain the acceptance of the public or the medical community. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop. In 1999, there was public backlash against the field of gene therapy following the death of a participant in a clinical trial, which utilized a different type of gene therapy product candidate vector, from an extreme type of immune response that can be life-threatening. Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could significantly harm our business, financial condition, results of operations and prospects.

We may not be successful in our efforts to identify or discover additional potential product candidates.

A key element of our strategy is to apply our proprietary platform to expand our pipeline of gene therapies for the treatment of acquired hearing and balance disorders. The discovery activities that we are conducting may not be successful in identifying product

candidates that are useful in restoring or improving hearing or balance. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

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

Because we have limited financial and managerial resources, we focus on research programs and expect to focus on product candidates that we identify for specific indications among many potential options. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential, or we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable medicines. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Any such event could have a material adverse effect on our business, financial condition, results of operations and prospects.

Clinical trial and product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization of our product candidates.

We face an inherent risk of clinical trial and product liability exposure related to the testing of product candidates in clinical trials, and we will face an even greater risk if we commercially sell any products that we may develop. While we currently have no products that have been approved for commercial sale, the current and future use of product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies or others selling such products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

We will need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of any product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If a successful clinical trial or product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

The manufacture of gene therapy products is complex and difficult and is subject to a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others of which are unique to the manufacture of gene therapies. We could experience manufacturing problems that result in delays in our gene therapy development or commercialization programs.

Gene therapy drug products are complex and difficult to manufacture. For our IND-enabling studies of DB-OTO and our planned Phase 1/2 clinical trial of DB-OTO, we ~~intend to rely~~are relying on the manufacturing facility of Catalent Maryland, Inc., or Catalent, for supply of the product candidate. In addition to Catalent, we also rely upon other CROs and CDMOs for providing certain materials for the manufacturing process.

We believe that the high demand for clinical gene therapy material and a scarcity of potential contract manufacturers may cause long lead times for establishing manufacturing capabilities for gene therapy drug development activities. Even after a manufacturer is engaged, any problems that arise during manufacturing process development may result in unanticipated delays to our timelines, including delays attributable to securing additional manufacturing slots. There may also be long lead times to manufacture or procure starting materials such as plasmids and cell lines, especially for high-quality starting materials that are current good manufacturing process, or cGMP, compliant. In particular, plasmids, cell lines and other starting materials for gene therapy manufacture are usually sole sourced, as there are a limited number of qualified suppliers. The progress of our gene therapy programs is highly dependent on these suppliers providing us or our contract manufacturers with the necessary starting materials that meet our requirements in a timely manner. A failure to procure or a shortage of necessary starting materials likely would delay our manufacturing and development timelines.

Problems with the manufacturing process, including even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims and insufficient inventory. If we successfully develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA or other applicable standards or specifications with consistent and acceptable production yields and costs.

A number of factors common to the manufacturing of biologics and small molecules could also cause production issues or interruptions for gene therapies, including raw material or starting material variability in terms of quality, cell line viability, productivity or stability issues, shortages of any kind, shipping, distribution, storage and supply chain failures, growth media contamination, equipment malfunctions, operator errors, facility contamination, labor problems, natural disasters, public health epidemics, disruption in utility services, terrorist activities or ~~acts~~“acts of ~~god~~God” that are beyond our or our contract manufacturers’ control. It is often the case that early-stage process development is conducted with materials that are not manufactured using cGMP starting materials, techniques or processes and which are not subject to the same level of analysis that would be required for clinical grade material. We may encounter difficulties in translating the manufacturing processes used to produce research grade materials to cGMP compliant processes, and any changes in the manufacturing process may affect the safety and efficacy profile of our product candidates.

In addition, the FDA and comparable regulatory authorities in other jurisdictions may require us to submit samples of any lot of any approved biological product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA or comparable regulatory authorities in other jurisdictions may prohibit the distribution of a lot until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures and product recalls.

Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm our ability to produce product candidates on schedule and could harm our results of operations and cause reputational damage. Some of the raw materials that we anticipate will be required in our manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of any product candidates we may develop could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially harm our development timelines and our business, financial condition, results of operations and prospects.

An important part of manufacturing drug products is performing analytical testing. Analytical testing of gene therapies involves tests that are more numerous, more complex in scope and take a longer time to develop and to conduct as compared to traditional drugs. We and our contract manufacturers need to expend considerable time and resources to develop assays and other analytical tests for our gene therapy product candidates, including assays to assess the titer and potency of our gene therapy product candidates. Some assays need to be outsourced to specialized testing laboratories. Even when assays are developed, they need to be further tested, qualified or validated depending on the nature of the assay and the stage of product candidate development, which may take substantial time and resources. Because of the lagging nature of analytical testing, we may proceed with additional manufacturing and other development activities without having first fully characterized our manufactured materials. If the results of the testing fail to meet our expectations, we may need to delay or repeat certain manufacturing and development activities.

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

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

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

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

We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.

All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of a new drug application, or NDA, or biologics license application, or BLA, on a timely basis and must adhere to the FDA’s GLP and cGMP regulations enforced by the FDA through its facilities inspection program. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted.

The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a

violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. As a result, our business, financial condition, results of operations and prospects may be materially harmed.

Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in supply. An alternative manufacturer would need to be qualified through an NDA or BLA supplement, which could result in further delay. The regulatory agencies may also require additional studies or trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.

We rely, and expect to continue to rely, on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.

We rely, and expect to continue to rely, on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on time and we expect to have limited influence over their actual performance. We control only certain aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces these GCPs through periodic inspections of sponsors, principal investigators and clinical sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our clinical trials will require a sufficient number of participants to evaluate the safety and effectiveness of our product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of participants, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, impose obligations on “covered entities,” including certain healthcare providers, health plans and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. Such obligations may require us to pass certain obligations on to our CROs or other third parties with whom we do business, including transferal of personal information or individually identifiable health information.

We depend on single-source suppliers for some of the components and materials used in our product candidates.

We depend on single-source suppliers for some of the components and materials used in our product candidates. We cannot ensure that these suppliers or service providers will remain in business, have sufficient capacity or supply to meet our needs or that they will not be purchased by one of our competitors or another company that is not interested in continuing to work with us. Our use of single-source suppliers of raw materials, components, key processes and finished goods exposes us to several risks, including disruptions in supply, price increases or late deliveries. There are, in general, relatively few alternative sources of supply for substitute components. These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or replacement suppliers for these components, materials and processes could take a substantial amount of time and it may be difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from any single-source supplier or service provider could lead to supply delays or interruptions, which would damage our business, financial condition, results of operations and prospects.

If we have to switch to a replacement supplier, the manufacture and delivery of any product candidates we may develop could be interrupted for an extended period, which could adversely affect our business. Establishing additional or replacement suppliers, if required, may not be accomplished quickly. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. While we seek to maintain adequate inventory of the single source components and materials used in our products, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand for our product candidates.

We expect to depend on collaborations with third parties for the research, development, manufacture and commercialization of programs or product candidates. If these collaborations are not successful, our business could be adversely affected.

As part of our strategy, we intend to maximize the value of our pipeline and our platform by exploring strategic collaborations. If we enter into such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of any product candidates we develop or commercialize with them. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. For instance, under the Regeneron Agreement, we are dependent on Regeneron to contribute various technologies, employees and research services.

Collaborations that we enter into may not be successful, and any success will depend heavily on the efforts and activities of our collaborators. For example, in September 2018, we entered into a collaboration and license agreement with Oricula Therapeutics, LLC, but in September 2019, we terminated the agreement. Collaborations pose a number of risks, including the following:

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If any collaborations that we enter into do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of our product candidates could be delayed and we may need additional resources to develop our product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this Quarterly Report on Form 10-Q also apply to the activities of our collaborators.

Additionally, subject to its contractual obligations to us, if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected.

If conflicts arise between us and our current or future collaborators, these parties may act in a manner adverse to us and could limit our ability to implement our strategies.

If conflicts arise between us and Regeneron or any future collaborators, the other party may act in a manner adverse to us and could limit our ability to implement our strategies. Our collaborators may develop, either alone or with others, products in related fields that are competitive with our product candidates that are the subject of these collaborations with us. Competing products, either developed by the collaborators or to which the collaborators have rights, may result in the withdrawal of support for our product candidates.

Some of our future collaborators could also become our competitors. Our collaborators could develop competing products, preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely, fail to devote sufficient resources to the development and commercialization of products, or merge with or be acquired by a third party who may do any of these things. Any of these factors could harm our product development efforts.

If we are not able to establish or maintain collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans and our business could be adversely affected.

We face significant competition in attracting appropriate collaborators, and a number of more established companies may also be pursuing strategies to license or acquire third-party intellectual property rights that we consider attractive. These established companies may have a competitive advantage over us due to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the

collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA or other regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, the terms of any existing collaboration agreements, and industry and market conditions generally. The collaborator may also have the opportunity to collaborate on other product candidates or technologies for similar indications and will have to evaluate whether such a collaboration could be more attractive than the one with us for our product candidate.

Collaborations are complex and time-consuming to negotiate, document and execute. In addition, consolidation among large pharmaceutical and biotechnology companies has reduced the number of potential future collaborators.

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

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of many of the disorders for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

We expect to face competition from existing products and product candidates in development for each of our programs. There are currently no approved drugs for the treatment of hearing loss or balance disorders.

We expect that our product candidates and programs for congenital, monogenic hearing loss and for acquired hearing loss will compete with product candidates and programs being advanced by:

We are aware of ~~product candidates in development to protect against chemotherapy-induced ototoxicity, including~~ PEDMARK, a formulation of ~~STS~~sodium thiosulfate delivered via systemic injection, ~~being~~ developed by Fennec Pharmaceuticals, Inc., or Fennec, that in September 2022 received FDA approval for use to reduce the ~~prevention~~risk of ~~platinum-induced~~ ototoxicity associated with cisplatin in pediatric ~~cancer~~ patients one month of age and older with localized, non-metastatic solid tumors. In August 2020, Fennec received a complete response letter from the FDA for its NDA for PEDMARK. Fennec resubmitted its NDA in May 2021 and announced a prescription drug user fee act (PDUFA) target action date of November 27, 2021. We are also aware of

product candidates in development, including SENS-401, a small molecule being developed by Sensorion that is in Phase 2 clinical trials for prevention of chemotherapy related hearing loss, D-methionine, an amino acid that has been shown to protect against hearing loss in experimental settings, and SPI-3005, an oral agent primarily being developed by Sound Pharmaceuticals, Inc. for noise and age-related hearing loss that is in Phase 2 clinical trials for ~~chemotherapy-related~~chemotherapy related hearing loss. We are also aware of additional therapeutic approaches in preclinical development that may target prevention of hearing loss in patients receiving cisplatin chemotherapy.

We are also aware ~~of another company developing product candidates for balance disorders,~~that Sound Pharmaceuticals, ~~which~~Inc. is pursuing treatments for Meniere’s ~~Disease.~~Disease, a balance disorder.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our product candidates, or that would render any product candidates that we may develop obsolete or non-competitive. Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for ours, or may obtain regulatory exclusivity, any of which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, technologies developed by our competitors may render our product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Furthermore, mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

The market opportunities for our product candidates may be smaller than we anticipated or may be limited to those patients who are ineligible for or have failed prior treatments. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Our current and future target patient populations are based on our beliefs and estimates regarding the incidence or prevalence of certain types of the indications that may be addressable by our product candidates, which is derived from a variety of sources, including scientific literature and surveys of clinics. Our projections may prove to be incorrect and the number of potential patients may turn out to be lower than expected. The total addressable market opportunity for our product candidates will ultimately depend upon a number of factors including the diagnosis and treatment criteria included in the final label, if approved for sale in specified indications, acceptance by the medical community, patient access and product pricing and reimbursement. Even if we obtain significant market share for our product candidates, because the potential target populations could be small, we may never achieve profitability without obtaining regulatory approval for additional indications.

Negative public opinion of gene therapy and increased regulatory scrutiny of gene therapy and genetic research may adversely impact the development or commercial success of our current and future product candidates.

Our potential therapeutic products involve introducing genetic material into a patient’s cells. The clinical and commercial success of our potential products will depend in part on public acceptance of the use of gene therapy and gene regulation for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that gene therapy and gene regulation are unsafe, unethical or immoral, and consequently, our products may not gain the acceptance of the public or the medical community. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which greater clinical data may be available.

More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products once approved. For example, in 2003, trials using early versions of murine gamma-retroviral vectors, which integrate with, and thereby alter, the host cell’s DNA, have led to several well-publicized adverse events, including reported cases of leukemia. Although none of our current product candidates utilizes murine gamma-retroviral vectors, our product candidates use AAV viral vectors. Among the risks in any gene therapy product based on viral vectors are the risks of immunogenicity, elevated liver enzymes and insertional oncogenesis. If any of our vectors demonstrate a similar effect, we may decide or be required to halt or delay further clinical development of any product candidates that utilize that vector. Adverse events in our or others’ clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates. The risk of cancer remains a concern

for gene therapy and we cannot assure that it will not occur in any of our planned or future clinical trials or in any clinical trials conducted by other companies. In addition, there is the potential risk of delayed adverse events following exposure to gene therapy

products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

Even if any product candidate we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, patient advocacy groups, third-party payors and others in the medical community necessary for commercial success.

If any product candidate we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, patient advocacy groups, third-party payors and others in the medical community. Sales of medical products depend in part on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost-effective. In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment. We cannot predict whether physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that our product is safe, therapeutically effective and cost-effective as compared with competing treatments. Efforts to educate those in the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing our product candidates if and when they are approved.

We currently have no sales, marketing or commercial product distribution capabilities and have no experience in commercializing products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales, marketing and distribution organization, either ourselves or through collaborations or other arrangements with third parties.

In the future, we expect to build a sales and marketing infrastructure to market some of our product candidates. There are costs and risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. We must also compete with other biotechnology and biopharmaceutical companies to recruit, hire, train and retain marketing and sales personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

If we are unable to establish our own sales, marketing and distribution capabilities and we enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. There can be no assurance that we will be able to develop in-house sales, marketing and distribution capacities or establish or maintain relationships with third parties to perform these services. As a result, we may not successfully commercialize any product in any jurisdiction.

If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability to market the drug could be compromised.

Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If one or more of our product candidates receives regulatory approval, and we, or others, later discover that they are less effective or less durable than previously believed, or cause undesirable side effects, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of a particular product candidate, if approved, and could significantly harm our business, financial condition, and results of operations.

Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties that, if they materialize, could harm our business.

Our future profitability will depend, in part, on our ability to commercialize our product candidates in markets outside of the United States. If we commercialize our product candidates in foreign markets, we will be subject to additional risks and uncertainties, including:

If risks related to any of these uncertainties materializes, it could have a material adverse effect on our business.

Our rights to develop and commercialize any product candidates are subject and may in the future be subject, in part, to the terms and conditions of licenses granted to us by third parties. If we fail to comply with our obligations under our current or future intellectual property license agreements or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

We are and expect to continue to be reliant upon third-party licensors for certain patent and other intellectual property rights that are important or necessary to the development of our technology and product candidates. For example, we rely on licenses from the University of California, San Francisco, the University of Florida and the University of Missouri to certain patent rights. These license agreements impose, and we expect that any future license agreement will impose, specified diligence, milestone payment, royalty, commercialization, development and other obligations on us and require us to meet development timelines, or to exercise diligent or commercially reasonable efforts to develop and commercialize licensed products, in order to maintain the licenses.

Furthermore, our licensors have, or may in the future have, the right to terminate a license if we materially breach the agreement and fail to cure such breach within a specified period or in the event we undergo certain bankruptcy events. For example, such a termination may occur if we fail to meet specified development, regulatory and commercialization milestones by specified dates under our license agreements with the University of California, San Francisco, the University of Florida and the University of Missouri. In spite of our best efforts, our current or any future licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements. If our license agreements are terminated, we may lose our rights to develop and commercialize product candidates and technology, lose patent protection, experience significant delays in the development and commercialization of our product candidates and technology, and incur liability for damages. If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, our competitors or other third parties could have the freedom to seek regulatory approval of, and to market, products and technologies identical or competitive to ours and we may be required to cease our development and commercialization of certain of our product candidates and technology. In addition, we may

seek to obtain additional licenses from our licensors and, in connection with obtaining such licenses, we may agree to amend our existing licenses in a manner that may be more favorable to the licensors, including by agreeing to terms that could enable third parties, including our competitors,

to receive licenses to a portion of the intellectual property that is subject to our existing licenses and to compete with any product candidates we may develop and our technology. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

In addition, our license agreements are, and future license agreements are likely to be, complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our diligence, development, regulatory, commercialization, financial or other obligations under the relevant agreement. In addition, if disputes over intellectual property that we have licensed or any other dispute related to our license agreements prevent or impair our ability to maintain our current license agreements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates and technology. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

License agreements we may enter into in the future may be non-exclusive. Accordingly, third parties may also obtain non-exclusive licenses from such licensors with respect to the intellectual property licensed to us under such license agreements. Accordingly, these license agreements may not provide us with exclusive rights to use such licensed patent and other intellectual property rights, or may not provide us with exclusive rights to use such patent and other intellectual property rights in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and any product candidates we may develop in the future.

Moreover, some of our in-licensed patent and other intellectual property rights may in the future be subject to third-party interests such as co-ownership. If we are unable to obtain an exclusive license to such third-party co-owners’ interest, in such patent and other intellectual property rights, such third-party co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. We or our licensors may need the cooperation of any such co-owners of our licensed patent and other intellectual property rights in order to enforce them against third parties, and such cooperation may not be provided to us or our licensors.

Additionally, we may not have complete control over the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patent applications that we license from third parties. It is possible that our licensors’ filing, prosecution and maintenance of the licensed patents and patent applications, enforcement of patents against infringers or defense of such patents against challenges of validity or claims of enforceability may be less vigorous than if we had conducted them ourselves, and accordingly, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced and defended in a manner consistent with the best interests of our business. If our licensors fail to file, prosecute, maintain, enforce and defend such patents and patent applications, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, our right to develop and commercialize any of our technology and any product candidates we may develop that are the subject of such licensed rights could be adversely affected and we may not be able to prevent competitors or other third parties from making, using and selling competing products.

Furthermore, our owned and in-licensed patent rights may be subject to a reservation of rights by one or more third parties. When new technologies are developed with government funding, in order to secure ownership of patent rights related to the technologies, the recipient of such funding is required to comply with certain government regulations, including timely disclosing the inventions claimed in such patent rights to the U.S. government and timely electing title to such inventions. A failure to meet these

obligations may lead to a loss of rights or the unenforceability of relevant patents or patent applications. In addition, the U.S. government may have certain rights in such patent rights, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf. If the U.S. government decides to exercise these rights, it is not required to engage us as its contractor in connection with doing so. The U.S. government’s rights may also permit it to disclose the funded inventions and technology, which may include our confidential information, to third parties and to exercise march-in rights to use or allow third parties to use the technology that was developed using U.S. government funding. The U.S. government may exercise its march-in rights if it determines that action is necessary because we or our licensors failed to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. These march-in rights would be applicable to our in-licensed patent rights relating to DB-OTO and potentially applicable to our in-licensed patent rights relating to AAV.104. In addition, our rights in such U.S. government-funded inventions may be subject to certain requirements to manufacture any product candidates we may develop embodying such inventions in the United States. Any of the foregoing could harm our business, financial condition, results of operations and prospects significantly.

If we are unable to obtain, maintain and defend adequate intellectual property protection and regulatory exclusivity for our products and technology, or if the scope of the intellectual property protection and regulatory exclusivity obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to ultimately successfully commercialize our products and technology may be adversely affected.

Our success depends, in large part, on our and our licensors’ ability to obtain and maintain intellectual property protection in the United States and other countries with respect to our proprietary technology and product candidates. We and our licensors have sought, and we intend to continue to seek, to protect our proprietary position by filing patent and trademark applications in the United States and abroad related to many of our novel technologies and product candidates that are important to our business.

The patent prosecution process is expensive, time-consuming and complex, and we and our licensors may not be able to file, prosecute, maintain, defend, enforce or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. For example, in some cases, the work of certain academic researchers has entered the public domain, which may compromise our ability to obtain patent protection for certain inventions related to or building upon such prior work. Consequently, we may not be able to obtain any patents to prevent others from using such technology for, and developing and marketing competing products to treat, certain indications. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach these agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. Consequently, we would not be able to prevent any third party from using any of our technology that is in the public domain to compete with any product candidates we may develop.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future owned and licensed patent applications may not result in patents being issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive technologies and product candidates. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Third parties have developed technologies that may be related or competitive to our own technologies and product candidates and may have filed or may file patent applications, or may have obtained issued patents, claiming inventions that may overlap or conflict with those claimed in our owned or licensed patent applications or issued patents. We may not be aware of all third-party intellectual property rights potentially relating to our product candidates and technology. Publications of discoveries in the scientific literature often lag the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot be certain whether the inventors of our owned or licensed patents and patent applications were the first to make the inventions claimed in any owned or any licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. If a third party can establish that we or our licensors were not the first to make or the first to file for patent protection of such inventions, our owned or licensed patent applications may not issue as patents and even if issued, may be challenged and invalidated or ruled unenforceable.

Even if the patent applications we license or may own in the future do issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of patent rights, exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidates.

In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

We also rely on regulatory exclusivity for protection of our products. Implementation and enforcement of regulatory exclusivity, which may consist of regulatory data protection and market protection, varies widely from country to country. Failure to qualify for regulatory exclusivity, or failure to obtain or maintain the extent or duration of such protections that we expect in each of the markets for our products due to challenges, changes or interpretations in the law or otherwise, could ultimately adversely affect our ability to successfully commercialize any products and technology.

We may not be successful in obtaining necessary rights to our product candidates through acquisitions and in-licenses. In addition, if we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed.

We currently have rights to certain intellectual property, through licenses from third parties, to develop and commercialize our product candidates. Because our programs may require the use of additional intellectual property rights held by third parties, the growth of our business likely will depend, in part, on our ability to acquire, in-license or use these intellectual property rights. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for our product candidates.

The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

We sometimes collaborate with non-profit and academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program and develop and commercialize our product candidates.

If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may be required to expend significant time and resources to redesign our product candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business significantly.

If we are unable to license such intellectual property, or if we are forced to license such intellectual property on unfavorable terms, our business could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales or an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access

to the same intellectual property licensed to us, and the applicable licensors could require us to make substantial licensing and royalty payments.

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

Filing, prosecuting, maintaining, enforcing and defending patents and other intellectual property rights on our technology and any product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

Consequently, we and our licensors may not be able to obtain issued patents or other intellectual property rights covering our product candidates and our technology in all countries outside the United States and, as a result, may not be able to prevent third parties from practicing our and our licensors’ inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we and our licensors have not obtained patent or other protection to develop their own products and, further, may export otherwise infringing, misappropriating or violating products to territories where we have patent or other intellectual property protection, but enforcement is not as strong as that in the United States. These products may compete with our products or technology and our or our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Additionally, many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement, misappropriation or other violation of our patent and other intellectual property rights or marketing of competing products in violation of our proprietary rights generally.

Proceedings to enforce our or our licensors’ patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patent and other intellectual property rights at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We or our licensors may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. We may choose not to initiate proceedings in certain cases or we may not have the resources to do so. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

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

Depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. In the United States, a patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs. The rules and requirements for obtaining a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date but cannot extend the remaining term of a patent beyond a total of fifteen years from the marketing approval. Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union. However, we may not be granted an extension because of lack of availability of extension or, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.

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

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or patent applications will be due to be paid to the United States Patent and Trademark Office, or USPTO, and various government patent agencies outside of the United States over the lifetime of our owned or licensed patents and/or patent applications and any patent rights we may own in the future. We rely on our outside counsel and other professionals or our licensing partners to pay these fees due to the USPTO and non-U.S. government patent agencies. The USPTO and various non-U.S. government patent agencies also require compliance with several procedural, documentary and other similar provisions during the patent application process. We rely on our outside counsel and other professionals to help us comply and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment, loss of priority or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could harm our competitive positions, business, financial condition, results of operations and prospects.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged. We may not be able to protect our trade secrets in court.

If we or one of our licensors initiates legal proceedings against a third party to enforce a patent covering one of our product candidates or our technology, the defendant could counterclaim that the patent covering our product candidate or technology is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of written description or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, interference proceedings, post grant review, inter partes review and equivalent proceedings such as opposition, invalidation and revocation proceedings in foreign jurisdictions. Such proceedings could result in the revocation or cancellation of or amendment to our patents in such a way that they no longer cover our product candidates or our technology. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensing partners were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our product candidates or technology. Such a loss of patent protection could harm our business, financial condition, results of operations and prospects.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. However, trade secrets can be difficult to protect, and some courts inside and outside the United States are less willing or unwilling to protect trade secrets. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, contractors and other parties who have access to such technology and processes. However, we may not be able to prevent the unauthorized disclosure or use of our technical know-how or other trade secrets by the parties to these agreements. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the collaborators, scientific advisors, employees and consultants who are parties to these agreements breach or violate the terms of any of these agreements, we may not have adequate remedies for any such breach or violation. As a result, we could lose our trade secrets and third parties could use our trade secrets to compete with any product candidates we may develop and our technology. Additionally, we cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems; however, such systems and security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered.

Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could harm our business.

Our commercial success depends upon our ability and the ability of our collaborators to research, develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights.

It is possible that we have failed to identify relevant third-party patents or applications that our product candidates and programs may infringe. Because patent applications can take many years to issue, may be confidential for 18 months or more after filing and can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use, sale or importation of any product candidates we may develop or our technology, and we may not be aware of such patents. Furthermore, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States may remain confidential until a patent issues. Moreover, it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to any product candidates we may develop and our technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology. In addition, we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, any product candidates we may develop or the use of any product candidates we may develop.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. ~~There~~For example, we are aware of an allowed third-party US patent application relating to certain otoferlin dual vector constructs and the uses thereof, which, if issued as a patent and the patent is in force at the time of DB-OTO’s commercialization, may be asserted by the patent owner to cover DB-OTO. We believe that we would have valid defenses to any such claims; however, if any such claims were ultimately successful, we might require a license to continue to use and sell DB-OTO. Such licenses may not be available on commercially reasonable terms, or at all. Moreover, there is a risk that such third ~~parties~~party or others may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could adversely affect our ability to commercialize our product candidates or any other of our product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe, misappropriate or otherwise violate a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and marketing our product candidates and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product candidates. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right and may be required to indemnify our customers or collaborators. A finding of infringement could prevent us from manufacturing and commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

Intellectual property litigation or other proceedings relating to intellectual property could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Competitors may challenge the validity and enforceability of our patent rights or those of our licensing partners, infringe, misappropriate or otherwise violate our or our licensors’ patent and other intellectual property rights, or we may be required to defend against claims of infringement, misappropriation or other violation. Litigation and other proceedings in connection with any of the foregoing claims can be unpredictable, expensive and time-consuming. Even if resolved in our favor, litigation or other proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating

losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of intellectual

property litigation or other proceedings could adversely affect our ability to compete in the marketplace and could have a material adverse effect on our business, financial condition, results of operations and prospects.

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

Many of our employees, consultants or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or be required to obtain licenses to such intellectual property rights, which may not be available on commercially reasonable terms or at all. An inability to incorporate such intellectual property rights would harm our business and may prevent us from successfully commercializing any product candidates we may develop or at all. In addition, we may lose personnel as a result of such claims and any such litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent contractors. A loss of key personnel or their work product could hamper or prevent our ability to commercialize any product candidates we may develop and our technology, which would have a material adverse effect on our business, results of operations, financial condition and prospects. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

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

In addition, we or our licensors may in the future be subject to claims by former employees, consultants or other third parties asserting an ownership right in our owned or licensed patent rights. An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar technology and therapeutics, without payment to us, or could limit the duration of the patent protection covering our technology and any product candidates we may develop. Such challenges may also result in our inability to develop, manufacture or commercialize our technology and product candidates without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our owned or licensed patent rights are threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future technology and product candidates. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Changes in patent law in the United States or worldwide could diminish the value of patents in general, thereby impairing our ability to protect our products.

Changes in either the patent laws or interpretation of patent laws in the United States and worldwide, including patent reform legislation such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase the uncertainties and costs surrounding the prosecution of our owned and in-licensed patent applications and the maintenance, enforcement or defense of our owned and in-licensed issued patents. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs

surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing any product candidates or technology. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our competitive business position and prospects. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products, which license may not be available on commercially reasonable terms, or at all, or such license may be non-exclusive. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

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

Any registered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our business, financial condition, results of operations or prospects.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we currently rely on certain third parties to manufacture all or part of our product candidates and to perform quality testing, and because we collaborate with various organizations and academic institutions for the advancement of our product engine and pipeline, we must, at times, share our proprietary technology and confidential information, including any trade secrets we have, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements and, if applicable, material transfer agreements, sponsored research agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors or other third parties, are inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and any trade secrets we have, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may harm our business, financial condition, results of operations and prospects.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets by third parties. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of any product candidates we develop. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, product candidates we develop, and our ability to generate revenue will be materially impaired.

Any product candidates we develop and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States, and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not received approval to market any product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs to assist us in this process. Securing regulatory approval requires the submission of extensive

preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the biologic product candidate’s safety, purity and potency or the drug product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any product candidates we develop may not be effective, may be only moderately

effective, or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and outside the United States, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved medicine not commercially viable.

If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we develop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired.

Failure to obtain marketing approval in foreign jurisdictions would prevent any product candidates we develop from being marketed in such jurisdictions, which, in turn, would materially impair our ability to generate revenue.

In order to market and sell any product candidates we develop in the European Union and many other foreign jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our medicines in any jurisdiction, which would materially impair our ability to generate revenue.

Additionally, we could face heightened risks with respect to seeking marketing approval in the United Kingdom as a result of the ~~recent~~ withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit. The United Kingdom is no longer part of the European Single Market and European Union ~~entered~~Customs Union. As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain, comprising of England, Scotland and Wales, under domestic law, whereas Northern Ireland will continue to be subject to European Union rules under the Northern Ireland Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR has incorporated into ~~a Trade and Cooperation Agreement in connection with Brexit~~the domestic law of the body of European Union law instruments governing medicinal products that ~~sets out certain procedures for approval and recognition of medical products in each jurisdiction. Since the regulatory framework for pharmaceutical products in~~pre-existed prior to the United ~~Kingdom covering~~Kingdom’s withdrawal from the ~~quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from~~ European ~~Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.~~Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of ~~the Trade and Cooperation Agreement could prevent~~Brexit or otherwise, may force us from commercializing any product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom ~~and/or European Union~~ for ~~any~~our product candidates, which could significantly and materially harm our business.

Regulatory requirements governing gene therapy products are periodically updated and may continue to change in the future.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. For example, the FDA has established the Office of Tissues and Advanced Therapies (formerly the Office of Cellular, Tissue and Gene Therapies) within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Additionally, gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from ~~the U.S. National Institutes of Health, or the~~ NIH also are potentially subject to oversight by a committee within the NIH’s Office of Science Policy called the Novel and Exceptional Technology and Research Advisory Committee; however, as of 2019, the charter of this review group has evolved to focus public review on clinical trials that cannot be evaluated by standard oversight bodies and pose unusual risks.

These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval

limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.

The FDA decides whether individual gene therapy protocols may proceed and it can put an IND on a clinical hold. If we were to engage an NIH-funded institution to conduct a clinical trial, that institution’s IRB would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of our product candidates. Similarly, the EMA may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines.

In addition, ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed their intentions to further regulate biotechnology. More restrictive regulations or claims that our product candidates are unsafe or pose a hazard could prevent us from commercializing any products. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.

As we advance our product candidates through clinical development, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. These regulatory review committees and advisory groups and any new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue.

We may seek fast track, breakthrough therapy, and/or regenerative medicine advanced therapy designations ~~and/~~or priority review for one or more of our product candidates, but we might not receive such designation or priority review, and even if we do, such designation or priority review may not lead to a faster development or regulatory review or approval process, and does not assure FDA approval of our product candidates.

The FDA has several designations that have the potential to accelerate the regulatory review and approval process, including the fast track, breakthrough therapy and regenerative medicine advanced therapy designations. Each of these designations has specific requirements and, if granted, has the potential for a non-conventional FDA review process. The FDA has granted fast track designation for DB-020 for the prevention of cisplatin-related ototoxicity. In addition, if the FDA determines that a product candidate offers major advances in treatment or provides a treatment where no adequate therapy exists, the FDA may designate the product candidate for priority review. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months. Any such designation or priority review status does not ensure that the product candidate will receive marketing approval or that approval will be granted within any particular timeframe. As a result, while we may seek and receive one or more of these designation for our product candidates, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. The FDA has broad discretion with respect to whether or not to grant such designations or priority review status to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. In addition, the FDA may withdraw a designation if it believes that the designation is no longer supported by data from our clinical development program. Moreover, fast track, breakthrough therapy, or regenerative medicine advanced therapy designations alone do not guarantee qualification for the FDA’s priority review procedures. Nor do they assure approval of any of our candidate products.

We may seek PRIME Designation in the European Union for one or more of our product candidates but we might not receive such designations and, even if we do, such designations may not lead to a faster development or regulatory review or approval process.

In the European Union, we may seek PRIME designation for our product candidates in the future. PRIME is a voluntary program aimed at enhancing the EMA’s role to reinforce scientific and regulatory support in order to optimize development and enable accelerated assessment of new medicines that are of major public health interest with the potential to address unmet medical needs. The program focuses on medicines that target conditions for which there exists no satisfactory method of treatment in the

European Union or even if such a method exists, it may offer a major therapeutic advantage over existing treatments. PRIME is limited to medicines under development and not authorized in the European Union and the applicant intends to apply for an initial marketing authorization application through the centralized procedure. To be accepted for PRIME, a product candidate must meet the eligibility criteria in respect of its major public health interest and therapeutic innovation based on information that is capable of substantiating the claims.

The benefits of a PRIME designation include the appointment of a Committee for Human Medicinal Products rapporteur to provide continued support and help to build knowledge ahead of a marketing authorization application, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier in the application process. PRIME enables an applicant to request parallel EMA scientific advice and health technology assessment advice to facilitate timely market access. Even if we receive PRIME designation for any of our product candidates, the designation may not result in a materially faster development process, review or approval compared to conventional EMA procedures. Further, obtaining PRIME designation does not assure or increase the likelihood of EMA’s grant of a marketing authorization.

We have been granted rare pediatric disease designation for our lead gene therapy product candidate, DB-OTO, and we may seek a rare pediatric disease designation for one or more of our other product candidates. However, DB-OTO and any of our other product candidate that is granted a rare pediatric disease designation may not meet the eligibility criteria for a priority review voucher upon approval.

With enactment of the Food and Drug Administration Safety and Innovation Act in 2012, Congress authorized the FDA to award priority review vouchers to sponsors of certain rare pediatric disease product applications that meet the criteria specified in the law. This provision is designed to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases.

Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application. A priority review voucher for priority review authorizes review of a marketing application in six months, compared to the standard timeframe of approximately 10 months.

For the purposes of this program, a “rare pediatric disease” is a (i) serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents; and (ii) rare disease or conditions within the meaning of the Orphan Drug Act. The FDA may determine that an application for one or more of our product candidates does not meet the eligibility criteria for a priority review voucher upon approval.

Moreover, while the opportunity to receive a priority review voucher was meant to expire for those companies that had not received a designation by September 30, 2020, Congress authorized an extension of the program in late 2020. Specifically, on December 27, 2020, the Rare Pediatric Disease Priority Review Voucher Program was extended. Under the current statutory sunset provisions, after September 30, 2024, the FDA may only award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the drug or biologic that is the subject of such application, and that designation was granted by September 30, 2024. After September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers.

The FDA has granted rare pediatric disease designation for DB-OTO for the treatment of OTOF-related, congenital hearing loss. We cannot be certain that we will receive approval for this product candidate or any other of our rare pediatric disease designated product candidates prior to the statutory sunset date, if ever. Moreover, even if we believe that our marketing application meets the other requirements to be eligible to receive a priority review voucher upon approval, the FDA may disagree. Further, if we do not obtain approval of our application for DB-OTO for of OTOF-related, congenital hearing loss by the applicable dates, and if the Priority Review Voucher Program is not further extended by congressional action, we may not receive a priority review voucher.

We have been granted orphan drug designation for our lead gene therapy product candidate, DB-OTO. We may not be able to obtain orphan drug exclusivity for one or more of our other product candidates, and even if we do, that exclusivity may not prevent the FDA or the EMA from approving other competing products.

We received orphan drug designation for DB-OTO in the United States. We may seek orphan drug designation in other indications or for any other product candidates we develop. Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug or biologic intended to treat a rare disease or condition. A similar regulatory scheme governs approval of orphan products by the EMA in the European Union. Generally, if a product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same product for the same therapeutic indication for that time period. The applicable period is seven years in the United States and ten years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is no longer justified.

In order for the FDA to grant orphan drug exclusivity to one of our products, the ~~agency~~FDA must find that the product is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually in the United States. The FDA may conclude that the condition or disease for which we seek orphan drug exclusivity does not meet this standard. ~~In addition, even~~Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition. In particular, with respect to the concept of what constitutes the “same drug” for purposes of orphan drug exclusivity ~~remains in flux~~ in the context of gene therapies, ~~and~~ the FDA ~~has~~ issued ~~draft~~final guidance in September 2021 suggesting that it would not consider two gene therapy products to be different drugs solely based on minor differences in the transgenes or vectors within a given vector ~~class; however this is a draft guidance, and no examples exist to understand whether such criteria will be utilized to define sameness for gene therapies.~~class.

In addition, even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity may also be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of the patients with the rare disease or condition. ~~Last,~~Further, if our gene therapy product candidate is considered the ~~"same"~~“same” as another ~~approved~~ product ~~that was~~for the same indication, and the other product is designated as an orphan drug ~~for the same indication,~~and receives approval first, our product would be blocked from approval by the orphan drug exclusivity afforded to the other product unless it qualifies for an exception to that exclusivity.

In 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. Moreover, in the Consolidated Appropriations Act of 2021, Congress did not further change this interpretation when it clarified that the interpretation codified in FDARA would apply in cases where the FDA issued an orphan designation before the enactment of FDARA but where product approval came after the enactment of FDARA.

The FDA and Congress may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” We do not know if, when, or how the FDA may change the orphan drug regulations and

policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

We are conducting, and intend in the future to conduct, clinical trials for certain of our product candidates at sites outside the United States. The FDA may not accept data from trials conducted in such locations and the conduct of trials outside the United States could subject us to additional delays and expense.

We are conducting, and intend in the future to conduct, one or more of our clinical trials with trial sites that are located outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with good clinical practice. The FDA must be able to validate the data from the trial through an onsite inspection if necessary. The trial population must also have a similar profile to the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful, except to the

extent the disease being studied does not typically occur in the United States. In addition, while these clinical trials are subject to the applicable local laws, the FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from clinical trials conducted outside of the United States. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and delay our development of our product candidates.

In addition, the conduct of clinical trials outside the United States could have a significant adverse impact on us or the trial results. Risks inherent in conducting international clinical trials include:

Even if we complete the necessary preclinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a narrower indication than we expect.

We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing commitments. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates. For example, the development of our product candidates for pediatric use is an important part of our current business strategy, and if we are unable to obtain regulatory approval for the desired age ranges, our business may suffer.

Even if we, or any collaborators we may have, obtain marketing approvals for any product candidates we develop, the terms of approvals and ongoing regulation of our products could require the substantial expenditure of resources and may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such medicine, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. For example, the holder of an approved application is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. For gene therapies that use AAV vectors as a delivery system, the FDA typically advises that individuals receiving AAV vectors undergo follow-up observations for potential adverse events for up to a five-year period. The holder of an approved application must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine.

Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more product candidates we develop, we, and such collaborators, and our and their contract manufacturers will continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, and quality control. If we and such collaborators are not able to comply with post-approval regulatory requirements, we and such collaborators could have the marketing approvals for our products withdrawn by regulatory authorities and our, or such collaborators’, ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our business, results of operations, financial condition and prospects.

If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenues.

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

The FDA and other regulatory agencies closely regulate the post-approval marketing and promotion of medicines to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other regulatory agencies impose stringent restrictions on manufacturers’ communications regarding off-label use, and if we do not market our medicines for their approved indications, we may be subject to enforcement action for off-label marketing by the FDA and other federal and state enforcement agencies, including the Department of Justice. Violation of the Federal Food, Product, and Cosmetic Act and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription products may also lead to investigations or allegations of violations of federal and state healthcare fraud and abuse laws and state consumer protection laws. In September 2021, the FDA published final regulations which describe the types of evidence that the FDA will consider in determining the intended use of a drug product.

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

commercialize any product candidates we develop and adversely affect our business, financial condition, results of operations, and prospects.

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

71In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug manufacturers or quality assurance standards applicable to medical device manufacturers, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, any contract manufacturers we may engage in the future, our future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to clinicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a REMS.

Similar restrictions apply to the approval of our products in the European Union. The holder of a marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. These include: compliance with the European Union’s stringent pharmacovigilance or safety reporting rules, which can impose post-authorization studies and additional monitoring obligations; the manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory; and the marketing and promotion of authorized drugs, which are strictly regulated in the European Union and are also subject to European Union Member State laws. The failure to comply with these and other European Union requirements can also lead to significant penalties and sanctions.

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

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

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 prohibited in the European ~~Union.~~Union and the United Kingdom. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member States ~~such as~~and the United Kingdom Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain European Union 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/or the regulatory authorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, disgorgement, exclusion from government

funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our business, financial condition, results of operations, and prospects. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to significant criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs. Liabilities they incur pursuant to these laws could result in significant costs or an interruption in operations, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the PPACA, which became law in 2010, contains the following provisions of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any of our product candidates that are approved for sale:

In addition, other legislative changes have been proposed and adopted since the PPACA 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. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2029 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and executive and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the ~~Tax Cuts and Jobs Act of 2017,~~TCJA, which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, among other things, amended the PPACA, effective January 1, 2019, to increase from

50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” More recently, the CARES Act, which was signed into law on March 27, 2020 and designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester ~~from~~until 2031.Medicare sequester reductions were suspended and reduced between May 1, 2020 ~~to December 31, 2020 and~~until June 30, 2022, but the full 2% cut resumed thereafter. With passage of the Inflation Reduction Act in August 2022, Congress extended the ~~sequester by one year,~~expansion of PPACA premium tax credits through ~~2030, in order to offset~~2025. Those subsidies were originally extended through 2022 under the ~~added expense~~American Rescue Plan Act of ~~the 2020 cancellation.~~2021.

~~In addition, the~~The Trump Administration also took executive actions to undermine or delay implementation of the PPACA, including directing federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28, 2021, however, President Biden ~~revoked those orders and~~ issued a new Executive Order which directs federal agencies to reconsider rules and other policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access. Under this ~~order,~~Executive Order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid and the PPACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine the Health Insurance Marketplace or other markets for health insurance; policies that

make it more difficult to enroll in Medicaid and the PPACA; and policies that reduce affordability of coverage or financial assistance, including for dependents.

Current and future legislative efforts may limit the costs for our products, if and when they are licensed for marketing, and that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case backcould materially impact our ability to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review this case, and it heard oral argument in the case on November 10, 2020. On June 17, 2021, the Supreme Court rejected this challenge to the PPACA after finding that plaintiffs do not have standing to challenge the constitutionality of the statute. It is unclear how such litigation and other efforts to repeal and replace the PPACA will impact the PPACA.generate revenues.

The ~~costs~~prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United ~~States, and members of Congress and the executive branch have stated that they will address such costs through new legislative and administrative measures. To date, there~~States. There have been several recent U.S. congressional inquiries, ~~and~~as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to ~~drug~~pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of ~~drugs~~pharmaceuticals under Medicare and reform government program reimbursement methodologies for drug products. For example, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

Medicaid. In ~~addition,~~2020, President Trump issued several executive orders intended to lower the costs of prescription ~~drug products. Certain of~~products and certain provisions in these orders ~~are reflected in recently promulgated~~have been incorporated into regulations. These regulations ~~including~~include an interim final rule implementing ~~President Trump’s~~a most favored nation model ~~but such final~~for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021. That rule, ~~is currently~~however, has been subject to a nationwide preliminary ~~injunction.~~injunction and, on December 29, 2021, Centers for Medicare & Medicaid Services, or CMS, issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries’ access to evidence-based care.

In addition, in October 2020, the HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. The ~~Biden Administration has frozen certain~~final rule is currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New Mexico and New Hampshire) have passed laws allowing for the importation of drugs from Canada with the intent of developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the previous administration’s measures to reform drug prices, pending further review. It remains to be seen how the Biden Administration will address this issue but, under Medicare Part D, the new administration may seek to establish a ceiling for the launch prices of all branded, biologic, and certain generic drugsrule has been delayed by referencing the average price of these drugs in other developed countries. At the same time, the administration may seek to limit Medicare Part D and public option drug prices through a tax penalty on manufacturers for increases in the cost of drugs and biologics above the general inflation rate. The American Rescue Plan Act of 2021, comprehensive COVID-19 relief legislation recently enacted under the Biden administration ~~includes~~from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which has been delayed until January 1, 2026 by the Infrastructure Investment and Jobs Act. Congress continues to consider various legislative measures to limit the costs of prescription drugs, including authorizing Medicare to negotiate the prices of certain pharmaceuticals with manufacturers each year, capping beneficiary out-of-pocket Part D drug costs at $2,000 a year, and penalizing drug manufacturers for price hikes that outpace inflation.

More recently, with passage of the Inflation Reduction Act in August 2022, Congress authorized Medicare beginning in 2026 to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars. This provision is limited in terms of the number of ~~healthcare-related provisions, such as support~~pharmaceuticals whose prices can be negotiated in any given year and it only applies to ~~rural health care providers, increased tax subsidies~~drug products that have been approved for ~~health insurance purchased through insurance exchange marketplaces, financial incentives~~at least nine years and biologics that have been licensed for 13 years. Drugs and biologics that have been approved for a single rare disease or condition are categorically excluded from Medicare price negotiations. Further, the new legislation provides that if pharmaceutical companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to ~~states to expand Medicaid programs~~the government for the difference. The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, ~~elimination of the Medicaid drug rebate cap effective~~thereafter beginning in ~~2024.~~2025, at $2,000 a year.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

74Outside the United States, in some countries, including those of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.

We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market. Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our potential products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The commercial success of our products depends on the availability and sufficiency of third-party payor coverage and reimbursement.

Our ability to commercialize any products successfully will depend in part on the extent to which coverage and adequate reimbursement for such products will be available from third-party payors. Even if we succeed in bringing one or more products to the market, these products may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost-effectiveness or the likely level or method of coverage and reimbursement.

Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As such, one third-party payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Additionally, we may develop companion diagnostic tests for use with our product candidates. If we do, we will be required to obtain coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates, once approved. While we have not yet developed any companion diagnostic test for our product candidates, if we do, there is significant uncertainty regarding our ability to obtain coverage and adequate reimbursement for the same reasons applicable to our product candidates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for our products and/or any companion diagnostics could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

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

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

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain product candidates outside of the United States and require us to develop and implement costly compliance programs.

We are subject to numerous laws and regulations in each jurisdiction outside the United States in which we operate. The creation, implementation and maintenance of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

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. The anti-bribery provisions of the FCPA are enforced primarily by the Department of Justice. The Securities and Exchange Commission, or SEC, is involved with enforcement of the books and records provisions of the FCPA.

Compliance with the FCPA and other anti-corruption laws potentially applicable to our business is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the compliance with the FCPA and other anti-corruption laws 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.

We are also subject to other laws and regulations governing our international operations, including applicable export control laws, economic sanctions on countries and persons, and customs requirements. In addition, 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. Our expansion outside of the United States has required, and will continue to require, us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain drugs and drug candidates outside of the United States, which could limit our growth potential and increase our development costs.

There is no assurance that we will be completely effective in ensuring our compliance with the FCPA and other applicable anti-corruption, export, sanctions, and customs laws. The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment from government contracting. Violations of these laws, including the FCPA, can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the EUEuropean Union General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or EEA, in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR increases our obligations with respect to clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information and or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

Similar actions are either in place or under way in the United States. There are a broad variety of data protection laws that are applicable to our activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns based on general consumer protection laws. The Federal Trade Commission and state Attorneys

General all are aggressive in reviewing privacy and data security protections for consumers. New laws also are being considered at both the state and federal levels. For example, the California Consumer Privacy Act—which went into effect on January 1, 2020—is creating similar risks and obligations as those created by GDPR, though the Act does exempt certain information collected as part of a clinical trial subject to the Federal Policy for the Protection of Human Subjects (the Common Rule). Many other states are considering similar legislation. A broad range of legislative measures also have been introduced at the federal level. Accordingly, failure to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and security of personal information could expose us to fines and penalties under such laws. There also is the threat of consumer class actions related to these laws and the overall protection of personal data. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices and put in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

If approved, our product candidates that are licensed and regulated as biologics may face competition from biosimilars approved through an abbreviated regulatory pathway.

The Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of PPACA, to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, a reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and 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 In addition, the licensure of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still develop and receive approval of a competing biologic, so long as its BLA does not reply on the reference product, sponsor’s data or submit the application as a biosimilar application. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty, and any new policies or processes adopted by the FDA could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of the product candidates we develop as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products will depend on a number of marketplace and regulatory factors that are still developing. Nonetheless, the approval of a biosimilar to our product candidates would have a material adverse impact on our business due to increased competition and pricing pressure.

Risks Related to Employee Matters, Managing Growth and General Business Operations

The COVID-19 pandemic, which began in late 2019 and has spread worldwide, ~~has~~ disrupted our ongoing Phase 1b clinical trial of DB-020 and has affected and may in the future affect our ability to initiate and complete preclinical studies, delay the initiation of our planned clinical trials or future clinical trials, disrupt regulatory activities, disrupt our manufacturing and supply chain or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption to global supply chains and may adversely impact economies worldwide, both of which could result in adverse effects on our business, operations and ability to raise capital.

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of COVID-19 through quarantines, travel restrictions, heightened border scrutiny and other measures. The COVID-19 pandemic and government measures taken in response have also had a significant impact, both directly and indirectly, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the COVID-19 pandemic and its effects on our business and operations are uncertain.

The extent to which COVID-19 impacts our operations or those of the third parties on which we rely will depend on many factors, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19, and the actions to contain the COVID-19 pandemic or address its impact in the short and ~~long term.~~long-term. Additionally, the conduct of our clinical trials, preclinical studies and manufacturing activities is dependent upon the availability of clinical trial sites, CROs, CDMOs, researchers and investigators, regulatory agency personnel and logistics providers, all of which may be adversely affected by the COVID-19 pandemic.

Any negative impact that the COVID-19 pandemic has on recruiting or retaining patients in our clinical trials, the ability of our suppliers to provide materials for our product candidates, or the regulatory review process could cause delays with respect to product development activities, which could materially and adversely affect our ability to obtain marketing approval for and to commercialize our product candidates, increase our operating expenses, affect our ability to raise additional capital, and have a material adverse effect on our financial results.

Screening and enrollment in our ~~ongoing~~ Phase 1b clinical trial of DB-020 in Australia and the United States ~~have been~~was adversely impacted by the COVID-19 pandemic. Patient screening and enrollment were paused in the second quarter of 2020 in both Australia and the United States, and screening for enrollment did not resume until early in the third quarter of 2020 in Australia and early in the fourth quarter of 2020 in the United States. We have also experienced delays in site start-up and the withdrawal of some sites in the United States. We cannot provide assurance that some factors from the COVID-19 pandemic will not further delay or otherwise adversely affect our clinical development, research, manufacturing and business operations activities, as well as our business generally, in the future.

We and the third-party manufacturers, CROs and academic collaborators that we engage have faced in the past and may face in the future disruptions that could affect our ability to initiate and complete preclinical studies or clinical ~~trials, including~~trials. This includes disruptions in procuring items and providing adequate resources that are essential for our research and development activities, such as, for example, raw materials used in the manufacture of our product candidates, laboratory supplies for our preclinical studies and clinical trials, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 ~~pandemic.~~ pandemic, including supply chain disruptions. For example, due to increased quarantine mandates in China, the receipt of shipments and data from some of our vendors and CROs were more difficult and unpredictable during the first half of 2022. This caused some delays in preclinical studies for our gene therapy programs.

Three vaccines for COVID-19 were granted ~~Emergency Use Authorization~~authorization for public use by the FDA in ~~late 2020 and early 2021, and more are likely to be authorized in the coming months.~~2021. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials. The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to pursue marketing approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and potential approvals due to measures intended to limit in-person interactions.

We are following, and plan to continue to follow recommendations from federal, state and local governments regarding workplace policies, practices and procedures. In response to the COVID-19 pandemic and in accordance with direction from state and local governmental authorities, we previously restricted access to our facility to those individuals who must perform critical research, translational medicine and laboratory support activities that must be completed on site, limited the number of such people that can be

present at our facility at any one time, and required that most of our employees work remotely. In February 2022 we re-opened our facility to all of our employees. In the event that governmental authorities were to keep these restrictions in place for an extended period or impose further restrictions, our employees conducting research and development activities may not be able to access our laboratory space, and our core research activities may be significantly limited or curtailed, possibly for an extended period of time.

The COVID-19 pandemic continues to rapidly evolve, and its ultimate scope, duration and effects are unknown. The extent of the impact of the disruptions to our business, preclinical studies and clinical trials as a result of the COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the COVID-19 pandemic, travel restrictions and actions to contain the COVID-19 pandemic, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The pandemic has already caused significant disruptions to global supply chains, and may continue to cause such disruptions, which may adversely impact economies worldwide and disrupt financial markets, which could adversely impact our ability to raise additional funds through public offerings or private placements and may also impact the volatility of our stock price and trading in our stock. Moreover, it is possible the pandemic will significantly impact economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to adversely affect our business, financial condition, results of operations, and prospects.

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

We are highly dependent on the research and development, clinical, financial, operational and other business expertise of our executive officers, as well as the other principal members of our management, scientific and clinical teams. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal and sales and marketing personnel will also be critical to our success.

The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain marketing approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. Our success as a public company also depends on implementing and maintaining internal controls and the accuracy and timeliness of our financial reporting. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities. We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, clinical, regulatory affairs and, if any product candidate receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our

operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

If we fail to achieve the expected financial and operational benefits of our corporate restructuring, our business and financial results may be harmed.

In January and May 2020, we conducted a reduction in force that included 45 full-time employees, which represented approximately 52% of our full-time employee workforce. The reduction in force was primarily comprised of positions related to research and general and administrative services and was implemented in connection with our determination to focus and reprioritize our resources on gene therapy programs for hearing and balance disorders and eliminate our research efforts on other discovery programs for hearing loss. As a result of the reduction in force, we incurred expenses of approximately $3.5 million, comprised of termination benefits including severance, benefits and other payroll-related charges. The expected cost savings and operational efficiencies from the restructuring activities were based on assumptions and expectations, which were reasonable in our judgment but may not be achieved due to unforeseen difficulties and challenges that are beyond our control. If these assumptions and expectations are incorrect, our business operations and financial results may be harmed.

Our internal computer systems, or those used by our CROs, CDMOs or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our current and any future CROs, CDMOs ~~and~~or other contractors ~~and~~or consultants, including any collaborator, are vulnerable to damage from cyber-attacks, computer viruses, worms and other destructive or disruptive software, unauthorized ~~access. While we have not experienced any such material system failure~~access, natural disasters, terrorism, war and telecommunication and electrical failures. Cyber incidents or attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, unauthorized access to or deletion of files, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient. System failures, accidents, cyberattacks or security ~~breach to date, if such an event were to occur and~~breaches could cause interruptions in our operations, it could result in a material disruption of our development programs and our business ~~operations. For example, the~~operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of preclinical ~~data and~~or clinical trial data from completed or future preclinical studies or clinical trials could result in delays in ~~our~~ regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

Likewise, we currently rely on third parties for the manufacture of our product candidates and rely on third parties to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential, personal or proprietary information, we could incur liability, including civil fines and penalties under relevant state and federal privacy laws in the United States and abroad, our competitive position could be harmed and the further development ~~and commercialization~~ of our product candidates and programs could be delayed. In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

While we have not experienced any material losses relating to cyber-attacks, we have been the subject of a successful phishing attempt. We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company, including personal information of our employees. In addition, outside parties may attempt to penetrate our systems or those of our CROs, CDMOs or other contractors or consultants or fraudulently induce our employees or employees of our CROs, CDMOs or other contractors or consultants to disclose sensitive information in order to gain access to our data. Like other companies, we may experience threats to our data and systems, including malicious codes and viruses and other cyber-attacks. The number and complexity of these threats continue to increase over time. If a material breach of our security or that of our CROs, CDMOs or other contractors or consultants occurs, the market perception of the effectiveness of our security measures could be harmed, and our reputation and credibility could be damaged. We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

Our operations or those of the third parties upon whom we depend might be affected by the occurrence of a natural disaster, pandemic or other catastrophic event.

We depend on our employees, consultants, CDMOs and CROs, as well as regulatory agencies and other parties, for the continued operation of our business. While we maintain disaster recovery plans, they might not adequately protect us. Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attack, pandemics, hurricanes, fire, floods and ice and snowstorms, could result in significant disruptions to our research and development, preclinical studies, clinical trials, and, ultimately, commercialization of our products. Long-term disruptions in the infrastructure caused by events, such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism or other “acts of God,” particularly involving cities in which we have offices, manufacturing or clinical trial sites, could adversely affect our businesses. Although we carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain events, our coverage might not respond or be adequate to compensate us for all losses that may occur. Any natural disaster or catastrophic event affecting us, our CDMOs or CROs, regulatory agencies or other parties with which we are engaged could have a significant negative impact on our operations and financial performance.

Risks Related to Ownership of Our Common Stock and Our Status as a Public Company

Although our common stock is listed on the Nasdaq Global Select Market, an active trading market for our shares may never develop or be sustained. As a result, it may be difficult for our stockholders to sell their shares without depressing the market price for the shares or at all.

If securities analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about our business or if they publish negative evaluations of our stock, the price and trading volume of our stock could decline.

The trading market for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not have control over these analysts. There can be no assurance that existing analysts will continue to

cover us or that new analysts will begin to cover us. There is also no assurance that any covering analyst will provide favorable coverage. Although we have obtained analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, or provide more favorable relative recommendations about our competitors, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.

The price of our common stock is likely to be volatile and fluctuate substantially, which could result in substantial losses for our stockholders.

Our stock price has been, and is likely to continue to be, volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, our stockholders may not be able to sell their common stock at or above the price they paid for their shares. The market price for our common stock may be influenced by many factors, including:

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices.

Such litigation may also cause us to incur other substantial costs to defend such claims and divert management’s attention and resources.

Our executive officers and directors, and their affiliates, if they choose to act together, have the ability to significantly influence all matters submitted to stockholders for approval.

As of November 1, ~~2021,~~2022, our executive officers and directors and their affiliates, in the aggregate, beneficially owned shares of common stock representing approximately ~~39.1%~~35.3% of our common stock. As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, would significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.

We have broad discretion in the use of our cash, cash equivalents and available-for-sale securities and may not use them effectively.

Our management has broad discretion in the application of cash, cash equivalents and available-for-sale securities and could spend them in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the advancement of our product candidates. Pending their use, we may invest these funds in a manner that does not produce income or that loses value.

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

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of November 1, ~~2021,~~2022, we had ~~24,923,363~~24,964,502 shares of common stock outstanding. All of our outstanding shares of common stock are available for sale in the public market, subject only to the restrictions of Rule 144 under the Securities Act of 1933, as amended, or Securities Act, in the case of our affiliates.

Moreover, holders of an aggregate of ~~16,709,180~~6,418,211 shares of our common stock have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also registered all shares of common stock that we may issue under our equity compensation plans.

These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

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

We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may remain an EGC until December 31, 2026, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have annual gross revenues of ~~$1.07~~$1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1 billion of non-convertible debt over a three-year period. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:

Even after we no longer qualify as an emerging growth company, we may continue to qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation. In addition, if we are a smaller reporting company with less than $100 million in annual revenue, we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.

We may choose to take advantage of some, but not all, of the available exemptions.

In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either irrevocably elect to “opt out” of such extended transition period or no longer qualify as an EGC. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We have incurred and will continue to incur increased costs as a result of operating as a newly public company, and our management has devoted and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an EGC or a smaller reporting company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not previously incur as a private company. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote and will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs, particularly as we hire additional financial and accounting employees to meet public company internal control and financial reporting requirements, and will make some activities more time-consuming and costly compared to when we were a private company.

We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404, ~~beginning with our filing with the SEC of our Annual Report on Form 10-K for the fiscal year ending December 31, 2021,~~ we ~~will be~~are required to furnish a report by our management on our internal control over financial ~~reporting.~~reporting on an annual basis. However, while we remain an EGC or a smaller reporting company with less than $100 million in annual revenue, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, including through hiring additional financial and accounting personnel, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. ~~Despite~~During our ~~efforts, there is a risk that~~evaluation of our internal control, if we identify one or more material weaknesses in our internal control over financial reporting, we will ~~not~~ be ~~able~~unable to ~~conclude, within the prescribed timeframe or at all,~~assert that our internal control over financial reporting is ~~effective as required by Section 404.~~effective. If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

We previously identified a material weakness in our disclosure controls and procedures and our internal controls, which we believe has been fully remediated. If we have inadequately remediated this material weakness or if we otherwise fail to develop, implement

~~and maintain appropriate internal controls in future periods, our ability to report our financial condition and results of operations accurately and on a timely basis could be adversely affected.~~

We previously identified a material weakness in our internal control over financial reporting. The specific material weakness and our remediation efforts are described in Item 9A, “Controls and Procedures” in our Annual Report on Form 10-K as filed with the SEC on March 29, 2021. A “material weakness” is a deficiency, or a combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected. We cannot assure you that additional material weaknesses in our internal controls will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, or could result in material misstatements in our financial statements. These misstatements could result in restatements of our financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information.

We have developed certain remediation steps to address the material weakness discussed above and to improve our internal controls. We believe the material weakness discussed above has been fully remediated. If we have inadequately remediated this material weakness, there will continue to be an increased risk that our future financial statements could contain errors that will be undetected. Further and continued determinations that there are material weaknesses in the effectiveness of our internal controls could reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures of resources to comply with applicable requirements. For more information relating to our internal controls and disclosure controls and procedures, and the remediation plan undertaken by us, see Item 9A, “Controls and Procedures” in our Annual Report on Form 10-K as filed with the SEC on March 29, 2021.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could harm our business and have a negative effect on the trading price of our stock.

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an EGC under the JOBS Act or a smaller reporting company with less than $100 million in annual revenue, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We ~~could be~~may remain an EGC ~~for up to five years.~~until December 31, 2026. Our assessment of internal controls and procedures may not detect material weaknesses in our internal control over financial reporting. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation, which could have a negative effect on the trading price of our stock.

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

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

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

Our certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers and employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claims arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees. If a court were to find either exclusive forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could materially adversely affect our business, financial condition and results of operations.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to certain reporting requirements of ~~the Securities Exchange Act of 1934, as amended, or~~ the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.

~~Recent changes~~Changes in tax law may adversely affect our business or financial condition. ~~On December 22, 2017,~~The TCJA, as amended by the ~~U.S. government enacted the Tax Cuts~~Coronavirus Aid, Relief, and ~~Jobs~~Economic Security Act, or ~~TCJA, which~~CARES Act significantly ~~reformed~~revised the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, ~~contains~~contained significant changes to corporate taxation, including reducing the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limiting the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), limiting the deduction for NOLs ~~arising in taxable years beginning after December 31, 2017~~ to 80% of current year taxable income and elimination of NOL carrybacks, in each case, for losses arising in taxable years ~~ending~~beginning after December 31, 2017 (though any such NOLs may be carried forward ~~indefinitely)~~indefinitely and such NOLs arising in taxable years beginning before January 1, 2021 are generally eligible to be carried back up to five years), imposing a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, eliminating U.S. tax on foreign earnings (subject to certain important exceptions), allowing immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits.

AsIn addition to the CARES Act, as part of Congress’ response to the COVID-19 pandemic, ~~the Families First Coronavirus Response Act, or FFCR Act,~~economic relief legislation was enacted ~~on March 18,~~in 2020 and ~~the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020. Both contain numerous~~2021 containing tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of NOLs, which was enacted as part of the TCJA. It also provides that NOLs arising in any taxable year beginning after December 31, 2017, and before January 1, 2021 are generally eligible to be carried back up to five years. The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30% to 50% of adjusted taxable income.

Regulatory guidance under the TCJA ~~the FFCR Act~~ and ~~the CARES Act~~such additional legislation is and continues to be forthcoming, and such guidance could ultimately increase or lessen their impact on our business and financial condition. ~~It is~~Additional tax legislation may also ~~likely that Congress will enact additional~~be enacted, and any such legislation ~~in connection with the COVID-19 pandemic, some of which~~ could have an impact on ~~us.~~our company. In addition, it is uncertain if and to what extent various states will conform to the TCJA ~~the FFCR Act or the CARES Act. We urge investors in our common stock to consult with their legal~~ and such other additional tax ~~advisors with respect to any recently enacted tax legislation, or proposed changes in law, and the potential tax consequences of investing in or holding our common stock.~~legislation.

On February 17, 2021, we closed our initial public offering, or IPO, in which we issued and sold 7,062,000 shares of our common stock at a public offering price of $18.00 per share, and on February 24, 2021, we issued and sold an additional 600,000 shares pursuant to the underwriters’ partial exercise of their option to purchase additional shares, for aggregate gross proceeds of $137.9 million. ~~Upon the closing of the IPO, all shares of Convertible Preferred Stock then outstanding converted into 16,662,011 shares of common stock.~~ All of the shares of common stock issued and sold in our initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (Registration No. 333-252347), which was declared effective by the SEC on February 11, 2021.

The aggregate net proceeds to us from the public offering, inclusive of the proceeds from the underwriters' partial exercise of their option to purchase additional shares, was ~~approximately $124.8~~$125.0 million, after deducting underwriting discounts and commissions and other offering expenses payable by us of approximately $13.1 million. As of September 30, ~~2021,~~2022, we have used approximately ~~$33.5~~$99.6 million of the net proceeds from the IPO. There has been no material change in the planned use of IPO proceeds from that described in the final prospectus related to our IPO filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on February 12, 2021.

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


Delaware	46-4198709
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1325 Boylston Street, Suite 500 Boston, Massachusetts	02215
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	DBTX	The Nasdaq Stock Market LLC


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity	7
	Condensed Consolidated Statements of Cash Flows	89
	Notes to Unaudited Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3437
Item 4.	Controls and Procedures	3437

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3638
Item 1A.	Risk Factors	3638
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8691
Item 3.	Defaults Upon Senior Securities	8691
Item 4.	Mine Safety Disclosures	8691
Item 5.	Other Information	8691
Item 6.	Exhibits	8692
Signatures		8793


	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021


Accrued payroll and related expenses					$	3,383	$	2,932
Accrued research and development expense	$	3,689	$	680		3,059		3,152
Accrued payroll and related expenses		2,171		2,381
Accrued professional fees						1,261		380
Accrued other and other current liabilities		836		557		668		1,035
Accrued professional fees		648		1,854
Equipment financing, current		208		193		—		213
	$	7,552	$	5,665	$	8,371	$	7,712


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021
DB-OTO	$	2,861	$	5,649		$	13,055	$	13,647
DB-020		622		922			1,563		2,257
Personnel-related (including stock-based compensation)		3,952		2,703			10,703		7,249
Other indirect research and development expenses		2,595		(254	)		3,416		(1,286	)
Total research and development expenses	$	10,030	$	9,020		$	28,737	$	21,867


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


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


	Series A Convertible Preferred Stock						Series B Convertible Preferred Stock						Series C Convertible Preferred Stock						Series D Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ (Deficit)
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount		Capital		(Loss) Income			Deficit			Equity
Balance at December 31, 2020		57,758,734		$	16,176			12,500,000		$	5,700			37,528,581		$	16,759			31,740,554		$	54,456			521,052	$	1	$	107,908	$	(1	)	$	(162,689	)	$	(54,781	)
Issuance of common stock upon exercise of stock options		—			—			—			—			—			—			—			—			3,773		—		17		—			—			17
Vesting of restricted common stock		—			—			—			—			—			—			—			—			10,202		—		4		—			—			4
Stock-based compensation expense		—			—			—			—			—			—			—			—			—		—		646		—			—			646
Issuance of Series D convertible preferred stock		—			—			—			—			—			—			15,870,209			27,400			—		—		—		—			—			—
Conversion of convertible preferred stock into common stock upon completion of initial public offering		(57,758,734	)		(16,176	)		(12,500,000	)		(5,700	)		(37,528,581	)		(16,759	)		(47,610,763	)		(81,856	)		16,662,011		17		120,474		—			—			120,491
Issuance of common stock upon completion of initial public offering, net of commissions, underwriting discounts and offering costs of $13,137		—			—			—			—			—			—			—			—			7,662,000		7		124,772		—			—			124,779
Unrealized loss on available-for-sale securities		—			—			—			—			—			—			—			—			—		—		—		(20	)		—			(20	)
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(10,870	)		(10,870	)
Balance at March 31, 2021		—		$	—			—		$	—			—		$	—			—		$	—			24,859,038	$	25	$	353,821	$	(21	)	$	(173,559	)	$	180,266
Issuance of common stock upon exercise of stock options		—			—			—			—			—			—			—			—			354		—		1		—			—			1
Vesting of restricted common stock		—			—			—			—			—			—			—			—			9,425		—		5		—			—			5
Stock-based compensation expense		—			—			—			—			—			—			—			—			—		—		764		—			—			764
Unrealized gain on available-for-sale securities		—			—			—			—			—			—			—			—			—		—		—		26			—			26
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(11,651	)		(11,651	)
Balance at June 30, 2021		—		$	—			—		$	—			—		$	—			—		$	—			24,868,817	$	25	$	354,591	$	5		$	(185,210	)	$	169,411
Issuance of common stock upon exercise of stock options		—			—			—			—			—			—			—			—			22,265		—		100		—			—			100
Vesting of restricted common stock		—			—			—			—			—			—			—			—			8,118		—		4		—			—			4
Stock-based compensation expense		—			—			—			—			—			—			—			—			—		—		1,036		—			—			1,036
Unrealized gain on available-for-sale securities		—			—			—			—			—			—			—			—			—		—		—		3			—			3
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(16,399	)		(16,399	)
Balance at September 30, 2021		—		$	—			—		$	—			—		$	—			—		$	—			24,899,200	$	25	$	355,731	$	8		$	(201,609	)	$	154,155


	Balance at December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market mutual funds	$	7,962	$	7,962	$	—	$	—
Corporate debt securities		4,001		—		4,001		—
Commercial paper		12,499		—		12,499		—
Total cash equivalents	$	24,462	$	7,962	$	16,500	$	—
Available-for-sale securities:
Corporate debt securities	$	1,286	$	—	$	1,286	$	—
Commercial paper		19,481		—		19,481		—
US Treasury securities		3,027		—		3,027		—
Certificates of deposit		2,774		—		2,774		—
Total available-for-sale securities	$	26,568	$	—	$	26,568	$	—


	September 30, 2021
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Available-for-sale securities:
Corporate debt securities	$	36,570	$	—	$	(1	)	$	36,569
Commercial paper		24,890		5		—			24,895
US Treasury securities		15,863		3		—			15,866
Agency bonds		15,142		6		—			15,148
Total available-for-sale securities	$	92,465	$	13	$	(1	)	$	92,477
Available-for-sale securities, long-term:
US Treasury securities	$	28,498	$	1	$	(5	)	$	28,494
Total available-for-sale securities, long-term	$	28,498	$	1	$	(5	)	$	28,494


	Accrued Restructuring Costs
Balance at December 31, 2019	$	—
Restructuring costs incurred		2,919
Termination benefits paid		(1,496	)
Balance at March 31, 2020	$	1,423
Restructuring costs incurred		554
Termination benefits paid		(920	)
Balance at June 30, 2020	$	1,057
Restructuring costs incurred		—
Termination benefits paid		(863	)
Balance at September 30, 2020	$	194
Balance at December 31, 2020	$	8
Restructuring costs incurred		—
Termination benefits paid		(8	)
Balance at March 31, 2021	$	—


	September 30, 2021		December 31, 2020
Series A convertible preferred stock		—		3,719,410
Series B convertible preferred stock		—		989,299
Series C convertible preferred stock		—		2,970,149
Series D convertible preferred stock		—		5,988,773
Shares reserved for exercise of outstanding stock options under the 2015 Stock Incentive Plan		2,588,796		2,686,120
Shares reserved for exercise of outstanding stock options under the 2021 Stock Incentive Plan		414,200		—
Shares reserved for future awards under the 2015 Stock Incentive Plan		—		790,596
Shares reserved for future awards under the 2021 Stock Incentive Plan		1,300,649		—
Shares reserved for future awards under the 2021 Employee Stock Purchase Plan		566,037		—
Total common stock reserved		4,869,682		17,144,347


	December 31, 2020
	Preferred Stock Authorized		Preferred Stock Issued and Outstanding		Carrying Value		Liquidation Preference		Common Stock Issuable Upon Conversion
Series A Preferred Stock		57,758,734		57,758,734	$	16,176	$	40,284		3,719,410
Series B Preferred Stock		12,500,000		12,500,000		5,700		16,334		989,299
Series C Preferred Stock		37,528,581		37,528,581		16,759		45,457		2,970,149
Series D Preferred Stock		47,610,763		31,740,554		54,456		55,509		5,988,773
		155,398,078		139,527,869	$	93,091	$	157,584		13,667,631


	December 31, 2020
Series A Preferred Stock	$	10,399
Series B Preferred Stock		3,398
Series C Preferred Stock		6,623
Series D Preferred Stock		709
	$	21,129


	Number of Shares of Restricted Stock			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2020		52,741		$	19.10
Vested		(27,745	)		16.34
Repurchased		(777	)		0.53
Canceled/Forfeited		(3,488	)		19.57
Unvested as of September 30, 2021		20,731		$	23.40


	For the year ended December 31,
	2021		2020
Unrecognized tax benefits at the beginning of the period	$	—	$	—
Increases for current tax positions		—		—
Increases for previous tax positions		2,084		—
Decreases for previous tax positions		—		—
Unrecognized tax benefits at the end of the period	$	2,084	$	—


	Nine Months Ended September 30,
	2021			2020			Change
Operating expenses:
Research and development	$	21,867		$	17,426		$	4,441
General and administrative		15,462			9,130			6,332
Total operating expenses		37,329			26,556			10,773
Loss from operations		(37,329	)		(26,556	)		(10,773	)
Other income:
Interest income		141			103			38
Total other income, net		141			103			38
Net loss before provision for income taxes		(37,188	)		(26,453	)		(10,735	)
Provision for income taxes		(1,732	)		—			(1,732	)
Net loss	$	(38,920	)	$	(26,453	)	$	(12,467	)


Exhibit Number		Description

10.1*		Letter Agreement, dated September 9, 2022, by and between the Registrant and Elisabeth Leiderman.

10.2*		Amended and Restated 2021 Employee Stock Purchase Plan.

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	DECIBEL THERAPEUTICS, INC.

Date: November ~~10, 2021~~9, 2022	By:	/s/ Laurence Reid
		Laurence Reid, Ph.D.
		President and Chief Executive Officer (Principal Executive Officer)

Date: November ~~10, 2021~~9, 2022	By:	/s/ ~~Elisabeth Leiderman~~James Murphy
		~~Elisabeth Leiderman, M.D.~~James Murphy
		Interim Chief Financial Officer ~~and Head of Corporate Development~~ (Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company