UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

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

For the quarterly period ended ~~June~~September 30, ~~2018~~2021

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

For the transition period fromto

Commission File Number:001-38537

AVROBIO, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware


~~Delaware~~		81-0710585
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Kendall Square Building 300, Suite 201 Cambridge, MA		02139
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:(617) 914-8420

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.0001 par value per share

AVRO

Nasdaq Global Select Market

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.


Large accelerated filer	☐	☐	Accelerated filer	☐
Non-accelerated filer	☒
~~Non-accelerated~~ ~~filer~~		~~☒ (Do not check if a smaller reporting company)~~	Smaller reporting company	☐ ☒

			Emerging growth company	☒

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 Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 31, 2018,~~October 29, 2021, the registrant had ~~23,936,838~~43,652,470 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


				Page
PART I.	FINANCIAL INFORMATION	~~FINANCIAL INFORMATION~~1
Item 1.		Condensed Consolidated Financial Statements (Unaudited)				1
		~~Condensed Consolidated~~ Balance Sheets			1
		~~Condensed Consolidated~~ Statements of Operations and Comprehensive Loss			2
		~~Condensed Consolidated~~ Statements of Stockholders’ Equity	3
	Statements of Cash Flows			3	5
		Notes to ~~Unaudited Condensed~~ Consolidated Financial Statements			4	6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22	18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			32	27
Item 4.		Controls and Procedures			32	28
PART II.	OTHER INFORMATION	~~OTHER INFORMATION~~29
Item 1.		Legal Proceedings			34	29
Item 1A.		Risk Factors			34	29
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			69	74
Item 3.		Defaults Upon Senior Securities			69	74
Item 4.		Mine Safety Disclosures			69	74
Item 5.		Other Information			69	74
Item 6.		Exhibits			69	76
	Signatures			70	77

Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

•

We have incurred net losses since inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability.

•

We will need additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

•

Our term loan agreement contains restrictions that potentially limit our flexibility in operating our business. In addition, we may be required to make a prepayment or repay our outstanding indebtedness earlier than we expect.

•

Business interruptions resulting from the ongoing coronavirus disease (COVID-19) pandemic or similar public health crises have caused and may continue to cause a disruption of the development of our product candidates and adversely impact our business.

•

Our lentiviral-based gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and of subsequently obtaining regulatory approval.

•

Our product candidates and 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.

•

Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials.

•

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.

•

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

•

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

•

Our regulatory approach for AVR-RD-01 for the treatment of Fabry disease recently changed, and there can be no assurance that any new regulatory pathway we propose to regulatory agencies will be accepted.

•

Only certain of our clinical trials, including the Phase 2 clinical trial of AVR-RD-01 for Fabry disease and the Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease type 1, utilize our commercial-scale plato^® platform.

•

We face significant competition in our industry and there can be no assurance that our product candidates, if approved, will achieve acceptance in the market over existing established therapies. In addition, our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our product candidates.

•

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

•

We expect to rely on third parties to conduct some or all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.

•

We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates.

•

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

•

Our rights to develop and commercialize our product candidates are subject, in part, to the terms and conditions of licenses granted to us by others. In particular, we have in-licensed certain intellectual property rights and know-how relevant to AVR-RD-01 for our Fabry program, AVR-RD-02 for our Gaucher type 1 program and AVR-RD-05 for our Hunter program, but do not own any patents or patent applications covering these product candidates.

•

If we experience material weaknesses or deficiencies in the future or otherwise fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.

The summary risk factors described above should be read together with the text of the full risk factors below, in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission (the “SEC”). The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

iii

Note Regarding Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “aims,” “anticipates,” “believes,” “continue,” “could,” “designed to,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “strives,” “should,” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
•
the impact of the ongoing COVID-19 pandemic on our clinical trial programs, clinical supply and business generally, as well as our plans and expectations with respect to the timing and resumption of any development activities that were or may be temporarily paused as a result of the COVID-19 pandemic;
•
the timing, progress and results of preclinical studies and clinical trials for our programs and product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
•
the existence or absence of side effects or other properties relating to our product candidates which could delay or prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences following any potential marketing approval;
•
the durability of effects from our product candidates;
•
the timing, scope or likelihood of regulatory filings and approvals;
•
the anticipated regulatory pathway for our product candidates and planned interactions with regulatory agencies;
•
our ability to develop and advance product candidates into, and successfully complete, clinical studies;
•
our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use;
•
the implementation of our business model and our strategic plans for our business, product candidates, technology and plato platform;
•
our commercialization, marketing and manufacturing capabilities and strategy;
•
the pricing and reimbursement of our product candidates, if approved;
•
the scalability and commercial viability of our manufacturing methods and processes, including our move to a closed, automated system;
•
the rate and degree of market acceptance and clinical utility of our product candidates, in particular, and gene therapy, in general;
•
our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;
•
our competitive position;
•
the scope of protection we and/or our licensors are able to establish and maintain for intellectual property rights covering our current and future product candidates, as well as any statements as to whether we do or do not infringe, misappropriate or otherwise violate any third-party intellectual property rights;
•
our financial performance;
•
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
•
developments and projections relating to our competitors and our industry, including other lentiviral-based gene therapy companies;
•
our expectations related to the use of our cash reserves;
•
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
•
our ability to comply with the terms of our term loan agreement;
iv
•
our ability to avoid any findings of material weaknesses or significant deficiencies in the future;
•
the impact of laws and regulations, including without limitation recently enacted tax reform legislation;
•
our expectations regarding the time during which we are an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or JOBS Act; and
•
other risks and uncertainties, including those listed under the caption “Risk Factors.”
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
Note Regarding Trademarks
All brand names or trademarks appearing in this Quarterly Report are the property of their respective holders. Unless the context requires otherwise, references in this Quarterly Report to the “Company,” “we,” “us,” and “our” refer to AVROBIO, Inc.
v

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

~~AVROBIO, INC.~~

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(~~amounts~~ in thousands, except ~~share and~~ per share data)


	June 30, 2018			December 31, 2017			September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	155,015		$	5,963		$	201,369		$	259,682
Prepaid expenses and other current assets		1,132			345			10,289			7,560

Total current assets		156,147			6,308			211,658			267,242
Property and equipment, net		2,050			349			4,219			3,064
Restricted cash								492			492
Other assets		533			365			84			436

Total assets	$	158,730		$	7,022		$	216,453		$	271,234

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,193		$	527		$	2,966		$	2,682
Accrued expenses and other current liabilities		5,438			2,098			19,562			13,693

Deferred rent								266			239
Total current liabilities		9,631			2,625			22,794			16,614
Warrant to purchase redeemable convertible preferred stock		—			35
Derivative liability		—			371
Deferred rent, net of current portion		781			126			90			276
Other long-term liability		—			500

Total liabilities		10,412			3,657			22,884			16,890

Commitments and contingencies (Note 13)
Redeemable convertible preferred stock (Note 8)		—			26,500
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 150,000,000 and 51,000,000 shares authorized as of June 30, 2018 and December 31, 2017, respectively; 23,936,838 and 2,581,474 shares issued as of June 30, 2018 and December 31, 2017, respectively; 23,722,049 and 2,305,173 shares outstanding as of June 30, 2018 and December 31, 2017, respectively		2			—
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized; 0 shares issued or outstanding								—			—
Common stock, $0.0001 par value; 150,000 shares authorized; 43,632 and 41,569 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively								4			4
Additionalpaid-in capital		192,443			339			548,880			518,756
Accumulated deficit		(44,127	)		(23,474	)		(355,315	)		(264,416	)

Total stockholders’ equity (deficit)		148,318			(23,135	)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	158,730		$	7,022

Total stockholders’ equity								193,569			254,344
Total liabilities and stockholders’ equity							$	216,453		$	271,234

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

~~AVROBIO, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(~~amounts~~ in thousands, except ~~share and~~ per share data)

   Three Months Ended June 30, Six Months Ended June 30,
   2018 2017 2018 2017
Operating expenses:

Research and development
   $ 7,407 $ 1,881 $ 13,054 $ 3,315
General and administrative
   2,140 661 4,281 1,271


Total operating expenses
   9,547 2,542 17,335 4,586


Loss from operations
   (9,547 ) (2,542 ) (17,335 ) (4,586 )


Other income (expense):

Interest income
   234 11 392 15
Change in fair value of preferred stock warrant liability
   (150 ) —   (162 ) —
Change in fair value of derivative liability
   (1,042 ) (3 ) (1,629 ) (35 )
Other expense
   (2 ) —   (15 ) (5 )


Total other income (expense), net
   (960 ) 8 (1,414 ) (25 )


Net loss
   $ (10,507 ) $ (2,534 ) $ (18,749 ) $ (4,611 )


Comprehensive loss
   $ (10,507 ) $ (2,534 ) $ (18,749 ) $ (4,611 )


Reconciliation of net loss to net loss attributable to common stockholders:

Net loss
   $ (10,507 ) $ (2,534 ) $ (18,749 ) $ (4,611 )
Accretion of issuance costs on redeemable convertible preferred stock
   —   —   (2,243 ) (47 )


Net loss attributable to common stockholders—basic and diluted
   $ (10,507 ) $ (2,534 ) $ (20,992 ) $ (4,658 )


Net loss per share attributable to common stockholders — basic and diluted (Note 12)
   $ (2.98 ) $ (1.15 ) $ (7.16 ) $ (2.12 )


Weighted-average number of common shares used in computing net loss per share attributable to common stockholders—basic and diluted
   3,529,269 2,202,735 2,930,358 2,192,283

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	23,043		$	28,509		$	64,114		$	67,649
General and administrative		9,577			8,209			26,765			24,515
Total operating expenses		32,620			36,718			90,879			92,164
Loss from operations		(32,620	)		(36,718	)		(90,879	)		(92,164	)
Other (expense) income:
Interest income		2			12			21			706
Other income (expense)		5			(74	)		(41	)		(123	)
Total other (expense) income, net		7			(62)			(20	)		583
Net loss	$	(32,613	)	$	(36,780	)	$	(90,899	)	$	(91,581	)
Comprehensive loss	$	(32,613	)	$	(36,780	)	$	(90,899	)	$	(91,581	)
Net loss per share — basic and diluted	$	(0.75	)	$	(1.01	)	$	(2.13	)	$	(2.59	)
Weighted-average number of common shares outstanding — basic and diluted		43,623			36,444			42,588			35,409

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

~~AVROBIO, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(unaudited)

(~~amounts~~ in thousands)

   Six Months Ended
June 30,
   2018 2017
Cash flows from operating activities:

Net loss
   $ (18,749 ) $ (4,611 )
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense
   566 64
Depreciation and amortization expense
   66 15
Impairment loss of property and equipment
   235 —
Amortization of deferred offering costs
   22 2
Deferred rent expense
   (23 ) 135
Change in fair value of preferred stock warrant liability
   162 —
Change in fair value of derivative liability
   1,629 35
Changes in operating assets and liabilities:

Prepaid expenses and other current assets
   (768 ) (176 )
Other assets
   (300 ) (3 )
Accounts payable
   3,029 (545 )
Accrued expenses and other current liabilities
   (98 ) 626


Net cash used in operating activities
   (14,229 ) (4,458 )


Cash flows from investing activities:

Change in restricted cash
   24 —
Purchases of property and equipment
   (424 ) (62 )


Net cash used in investing activities
   (400 ) (62 )


Cash flows from financing activities:

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
   58,258 3,468
Payments of issuance costs on debt facility
   —   (32 )
Proceeds from issuance of common shares upon completion of initial public offering, net of offering costs
   105,423 —


Net cash provided by financing activities
   163,681 3,436


Net increase (decrease) in cash and cash equivalents
   149,052 (1,084 )
Cash and cash equivalents at beginning of period
   5,963 5,357


Cash and cash equivalents at end of period
   $ 155,015 $ 4,273


Supplemental disclosure ofnon-cash investing and financing activities:

Purchases of property and equipment included in accounts payable
   $ 756 $ 240
Purchases of property and equipment paid for by landlord
   $ 842 $ —
Deferred offering costs included in accrued expenses
   $ 1,241 $ 11
Accretion of issuance costs related to redeemable convertible preferred stock
   $ 2,240 $ 47
Issuance of warrants associated with debt facility
   $ —   $ 18
Property and equipment held for sale
   $ 19 $ —

	Three Months Ended September 30, 2020
	Common Stock				Additional		Accumulated			Total Stockholders’
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance as of June 30, 2020		36,432	$	4	$	439,288	$	(199,505	)	$	239,787
Stock-based compensation expense		—		—		4,805		—			4,805
Exercise of stock options		7		—		60		—			60
Vesting of restricted stock awards and units		10		—		—		—			—
Net loss		—		—		—		(36,780	)		(36,780	)
Balance as of September 30, 2020		36,449	$	4	$	444,153	$	(236,285	)	$	207,872

	Nine Months Ended September 30, 2020
	Common Stock				Additional		Accumulated			Total Stockholders’
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance as of December 31, 2019		31,643	$	3	$	330,714	$	(144,704	)	$	186,013
Stock-based compensation expense		—		—		11,526		—			11,526
Exercise of stock options		39		—		156		—			156
Vesting of restricted stock awards and units		31		—		—		—			—
Issuance of common stock upon public offering, net of offering costs of $419		4,350		1		93,627		—			93,628
Issuance of common stock under ATM facility, net of offering costs of $67		384		—		8,130		—			8,130
Issuance of common stock under the 2018 employee stock purchase plan		2		—		—		—			—
Net loss		—		—		—		(91,581	)		(91,581	)
Balance as of September 30, 2020		36,449	$	4	$	444,153	$	(236,285	)	$	207,872

	Three Months Ended September 30, 2021
	Common Stock				Additional		Accumulated			Total Stockholders’
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance as of June 30, 2021		43,623	$	4	$	543,690	$	(322,702	)	$	220,992
Stock-based compensation expense		—		—		5,168		—			5,168
Exercise of stock options		9		—		22		—			22
Net loss								(32,613	)		(32,613	)
Balance as of September 30, 2021		43,632	$	4	$	548,880	$	(355,315	)	$	193,569

	Nine Months Ended September 30, 2021
	Common Stock				Additional		Accumulated			Total Stockholders’
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance as of December 31, 2020		41,569	$	4	$	518,756	$	(264,416	)	$	254,344
Stock-based compensation expense		—		—		14,494		—			14,494
Exercise of stock options		206		—		872		—			872
Issuance of common stock under ATM facility, net of offering costs of $67		1,829		—		14,550		—			14,550
Issuance of common stock under the 2018 employee stock purchase plan		28		—		208		—			208
Net loss		—		—		—		(90,899	)		(90,899	)
Balance as of September 30, 2021		43,632	$	4	$	548,880	$	(355,315	)	$	193,569

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net loss

$
(90,899
)

$
(91,581
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

963

898

Stock-based compensation expense

14,494

11,526

Deferred rent expense

(159
)

(151
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(2,729
)

(782)

Other assets

352

160

Accounts payable

284

(1,263
)
Accrued expenses and other current liabilities

5,566

12,878

Net cash used in operating activities

(72,128
)

(68,315
)
Cash flows from investing activities:

Purchases of property and equipment

(1,611
)

(1,096
)
Net cash used in investing activities

(1,611
)

(1,096
)
Cash flows from financing activities:

Proceeds from exercise of stock options

872

156

Proceeds from issuance of common shares upon completion of public offering,
net of offering costs

—

93,628

Proceeds from issuance of common shares under ATM facility, net of offering costs paid

14,550

8,130

Payment of offering costs

(204
)

—

Proceeds from issuance of ESPP shares

208

—

Net cash provided by financing activities

15,426

101,914

Net (decrease) increase in cash, cash equivalents and restricted cash

(58,313
)

32,503

Cash, cash equivalents and restricted cash at beginning of period

260,174

187,535

Cash, cash equivalents and restricted cash at end of period

$
201,861

$
220,038

Supplemental disclosure of non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable and
accrued expenses

$
507

$
—

Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:

Cash and cash equivalents, end of period

$
201,369

$
219,546

Restricted cash

492

492

Cash, cash equivalents and restricted cash, end of period

$
201,861

$
220,038

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

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Three and Six Months Ended June 30, 2018 and 2017~~

(~~amounts~~ in thousands, except share and per share data)

1. Nature of the Business ~~and Basis of Presentation~~

AVROBIO, Inc. (the “Company” or “AVROBIO”) is a ~~clinical stage~~clinical-stage gene therapy company focused on developing potentially curativeex vivo lentiviral gene therapies to treat rare diseases following a single ~~dose.~~dose treatment regimen.

The Company is subject to risks and uncertainties common to ~~early-stage~~clinical-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, developing and scaling a clinical and commercial supply chain, receiving 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. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and 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.

The Company has incurred recurring losses since its inception, including net losses of $90,899and $91,581 for the nine months ended September 30, 2021 and 2020, respectively. In addition, as of September 30, 2021, the Company had an accumulated deficit of $355,315. The Company has primarily funded these losses through the proceeds from sales of common and preferred stock. Although the Company has incurred recurring losses and expects to continue to incur losses for the foreseeable future, the Company expects that its existing cash and cash equivalents on hand as of September 30, 2021 of $201,369 will be sufficient to fund current planned operations and capital expenditure requirements for at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). However, the future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements (the “unaudited condensed consolidated financial statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America ~~(GAAP)~~(“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification ~~(ASC)~~(“ASC”) and Accounting Standards Update ~~(ASU)~~(“ASU”) of the Financial Accounting Standards Board ~~(FASB)~~(“FASB”).

The unaudited condensed consolidated ~~interim~~ financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, ~~2017,~~2020, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of ~~June~~September 30, ~~2018,~~2021, and the results of its operations for the three and nine months ended September 30, 2021 and 2020, its statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and its statement of cash flows for the ~~three and six~~nine months ended ~~June~~September 30, ~~2018~~2021 and ~~2017.~~2020.

The results for the ~~six~~three and nine months ended ~~June~~September 30, ~~2018~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2018,~~2021, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, ~~2017,~~2020, and the notes thereto, which are included ~~elsewhere~~ in the Company’s ~~final prospectus~~Annual Report on Form 10-K for ~~its initial public offering (“IPO”),~~the year ended December 31, 2020, filed with the ~~Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended,~~SEC on ~~June 21, 2018 (the “Prospectus”).~~March 18, 2021.

The ~~accompanying~~unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of ~~June~~September 30, ~~2018,~~2021, there have been no changes to the Company’s significant accounting policies ~~and estimates, which are detailed~~as described in the Company’s ~~Prospectus, have not changed.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

~~Reverse Stock Split~~

~~On June 1, 2018, the Board approved a1-for-4.312~~ reverse stock split of the Company’s common stock. The reverse stock split was approved by the stockholders on June 7, 2018 and became effective on June 7, 2018. Stockholders entitled to fractional shares as a result of the reverse stock split will receive a cash payment in lieu of receiving fractional shares. All share and per share data shown in the accompanying unaudited condensed consolidated financial statements and related notes have been retroactively revised to reflect the reverse stock split. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. Shares of common stock reserved for issuance upon the conversion of the Company’s Preferred Stock were proportionately reduced and the respective conversion prices were proportionately increased.6

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~1. Nature of the Business~~(in thousands, except share and ~~Basis of Presentation (continued)~~per share data)

~~Initial Public Offering~~

~~On June 20, 2018, the Company’s registration statement onForm S-1~~ relating to its IPO was declared effective by the SEC. The IPO closed on June 25, 2018 and the Company issued and sold 5,247,958 common shares at a public offering price of $19.00 per share for net proceeds of $90,271 after deducting underwriting discounts and commissions of $6,980 and other offering expenses of approximately $2,459. Simultaneously, on June 25, 2018, the Company issued and sold 787,193 additional common shares, pursuant to the full exercise of the underwriters’ option to purchase additional shares, for net proceeds of $13,910 after deducting underwriting discounts and commissions of $1,047. Thus, the aggregate net proceeds to the Company from the IPO, after deducting underwriting discounts and commissions and other offering costs, were $104,182. Upon the closing of the IPO, series Seed redeemable convertible preferred stock (the “Series Seed Preferred Stock”), series A redeemable convertible preferred stock (the “Series A Preferred Stock”) and series B redeemable convertible preferred stock (the “Series B Preferred Stock”), (the Series Seed Preferred Stock, the Series A Preferred Stock and the Series B Preferred Stock are collectively referred to as the “Preferred Stock”) then outstanding converted into an aggregate of 15,320,213 shares of common stock.

~~2. Summary of Significant Accounting Policies~~

~~Subsequent Event Considerations~~

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. See Note 15.

~~Use of Estimates~~

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, stock-based compensation expense, the valuation of equity and derivative instruments and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.

~~Cash and Cash Equivalents~~

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value.

~~Concentrations of Credit Risk~~

~~The Company has no significantoff-balance~~ sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash and cash equivalents in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~2. Summary of Significant Accounting Policies (continued)~~

~~Fair Value Measurements~~

Certain assets and liabilities of the Company are carried at fair value under GAAP (see Note 3). Fair value is defined as 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.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or ~~decision making~~decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer (“CEO”). The Company and the CEO view the Company’s operations and manage its business as ~~one~~1 operating segment. All material long-lived assets of the Company reside in the United States.

~~Research~~

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires that the Company make estimates and ~~Development Costs~~judgments that may affect the reported amounts of assets, liabilities and expenses and the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, judgments and methodologies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates. Changes in estimates are reflected in reported results in the period in which they become known.

~~Research~~Significant estimates relied upon in preparing the unaudited condensed consolidated financial statements include the determination of the fair value of share-based awards issued and ~~development costs are expensed as incurred. Research and development expenses consist~~the estimation of ~~costs incurred in performing~~accrued research and development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, third-party license fees, and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials as well as to manufacture research and development materials.~~Non-refundable~~ prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed or until it is no longer expected that the goods will be delivered or the services rendered.

The Company has entered into various research and development related contracts with parties both inside and outside of the United States. The payments to these agreements are recorded as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~expenses.

~~2. Summary of Significant Accounting Policies (continued)~~

~~Stock-Based~~Stock-based Compensation

For stock-based awards issued to employees and members of the Company’s board of directors (the “Board”) for their services on the Board, the Company measures the estimated fair value of the stock-based award on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company issues stock-based awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company has not issued any stock-based awards with performance- or market-based vesting conditions. The Company accounts for forfeitures as they occur.

~~Stock-based~~Prior to the adoption of Accounting Standards Update (“ASU”) No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the measurement date for non-employee awards ~~issued~~was generally the date the services are completed, resulting in financial reporting period adjustments to~~non-employees~~ ~~are recorded at their~~ stock-based compensation during the vesting terms for changes in the fair ~~values, and are periodically revalued as~~value of the awards. After adoption of ASU 2018-07, the measurement date for non-employee awards ~~vest and are recognized as expense over~~is the ~~related service period.~~later of the adoption date of ASU 2018-07, or the date of grant, without change in the fair value of the award. For stock-based awards granted to~~non-employees~~ nonemployees subject to graded vesting that only contain service conditions, the Company has elected to recognize stock-based compensation expense using the straight-line recognition method.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s cash compensation costs are classified.

Given the absence of an active market for the Company’s common stock prior to ~~the IPO,~~its initial public offering (“IPO”), the Company and the Board, the members of which the Company believes have extensive business, finance, and venture capital experience, were required to estimate the fair value of the Company’s common stock at the time of each grant of a stock-based award. The Company and the Board determined the estimated fair value of the Company’s equity instruments based on a number of factors, including external market conditions affecting the biotechnology industry sector. The Company and the Board utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid,Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors in determining the value of the Company’s common stock at each grant date, including: (1) prices paid for the Company’s redeemable convertible preferred stock, which the Company had sold to outside investors inarm’s-length transactions, and the rights, preferences, and privileges of the Company’s redeemable convertible preferred stock and common stock; (2) valuations performed by an independent valuation specialist; (3) the Company’s stage of development; (4) the fact that the grants of stock-based awards involved illiquid securities in a private company; and (5) the

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

likelihood of achieving a liquidity event for the common stock underlying the stock-based awards, such as an IPO or sale of the Company, given prevailing market conditions.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. As there was no public market for its common stock prior to June 21, 2018, which was the first day of trading, and as the trading history of the Company’s common stock was limited through ~~June 30, 2018,~~December 31, 2020, the Company determined the volatility for awards granted up through December 31, 2020 based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. ~~The~~Beginning with options granted in 2021, the Company estimates its expected stock volatility ~~has been determined~~ using a weighted-average ofcalculation based on the historical volatility ~~measures~~ of ~~this group of guideline companies. The~~the Company and publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero.

See Note 10 for the assumptions used by the Company in determining the grant date fair value of stock-based awards granted, as well as a summary of the stock-based award activity under the Company’s stock-based compensation plan for the six months ended June 30, 2018.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~2. Summary of Significant Accounting Policies (continued)~~

~~Warrant to Purchase Preferred Stock~~

Prior to the IPO, the Company classified the warrant for the purchase of shares of its redeemable convertible preferred stock (see Note 7) as a liability on its consolidated balance sheets as the warrant is a free-standing financial instrument that may require the Company to transfer assets upon exercise. The preferred stock warrant liability was initially recorded at fair value upon the date of issuance and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant to purchase preferred stock are recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. Changes in the fair value of the warrant to purchase preferred stock will continue to be recognized until the warrant is exercised, expires or qualifies for equity classification.

The Company utilizes the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value the warrant. The Company assesses these assumptions and estimates on a quarterly basis as additional information impacting the assumptions is obtained. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying redeemable convertible preferred stock issuable upon exercise of the warrant, the remaining contractual term of the warrant, the risk-free interest rate, the expected dividend yield and the expected volatility of the price of the underlying redeemable convertible preferred stock.

Upon the IPO, the warrant to purchase preferred stock was converted to a warrant to purchase common stock. The carrying amount of warrant to purchase preferred stock as of the date of IPO was transferred to the account of additional paid in capital.

~~Comprehensive Income (Loss)~~

~~Comprehensive income (loss) is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances fromnon-owner~~ sources. Comprehensive income (loss) includes net income (loss) as well as other changes in stockholders’ (deficit) equity which includes certain changes in equity that are excluded from net income (loss). Comprehensive loss has been disclosed in the accompanying statements of operations and comprehensive loss and equals the Company’s net loss for all periods presented.

~~Leases~~

The Company categorizes leases at their inception as either operating or capital leases. On certain lease arrangements, the Company may receive rent holidays or other incentives. The Company recognizes lease costs on a straight-line basis once control of the space is achieved, without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments or escalating payment amounts. The difference between required lease payments and rent expense has been recorded as deferred rent and other accrued expenses and other current liabilities in the accompanying consolidated balance sheets. Additionally, incentives received are treated as a reduction of costs over the term of the agreement, as they are considered an inseparable part of the lease agreement.

~~Net Income (Loss) per Share Attributable to Common Stockholders~~

~~Net income (loss) per share attributable to common stockholders is determined using thetwo-class~~ method, which includes the weighted-average number of shares of common stock outstanding during the period and other securities that participate in dividends (a participating security). In periods of income, the redeemable convertible preferred stock would be considered participating securities because the shares include rights to participate in dividends with the common stock; however, the redeemable convertible preferred stock is not considered a participating security in periods of loss as they do not have an obligation to share in the Company’s net losses.

~~Under thetwo-class~~ method, basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is computed using the more dilutive of (1) the~~two-class~~ ~~method or (2) theif-converted~~ method. The Company allocates net income first to the holders of Preferred Stock based on dividend rights under the Company’s certificate of incorporation and then to preferred and common stockholders based on ownership interests.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~2. Summary of Significant Accounting Policies (continued)~~

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company is no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, its consolidated financial statements may not be comparable to companies that comply with public company effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of ~~an offering~~its IPO or such earlier time that it is no longer an “emerging growth ~~company”.~~company.”

Subsequent Event Considerations

Recently Issued Accounting Pronouncements

In ~~June 2018,~~February 2016, the FASB issued ASU No.~~2018-07,~~ ~~“Compensation—Stock Compensation (Topic 718): Improvements~~ 2016-02, (Topic 842) Leases, or ASU 2016-02. ASU 2016-02 requires an entity to ~~Nonemployee Share-Based Payment Accounting”~~ ~~which addresses accounting~~recognize assets and liabilities arising from a lease for ~~issuance of all share-based payments on the same accounting model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments tonon-employees~~ ~~was covered by ASC Subtopic505-50.~~ ~~As it considered recently issued updates to ASC 718, the FASB, as part of its simplification initiatives, decided to replace ASC Subtopic505-50~~ ~~with Topic 718 as the guidance fornon-employee~~ ~~share-based awards. Under this new guidance,~~ both ~~sets of awards, for employees~~financing and~~non-employees,~~ ~~will essentially follow the same model, with small variations related to determining the term assumption when valuing anon-employee~~ ~~award as well as a different expense attribution model fornon-employee~~ ~~awards as opposed to employee awards.~~ operating leases. The ASU ~~is effective for public business entities beginning in 2019 calendar years~~will also require new qualitative and ~~one year later fornon-public~~ ~~business entities. The Company is currently evaluating~~quantitative disclosures to help investors and other financial statement users better understand the ~~impact that the adoption~~amount, timing, and uncertainty of ~~ASU2018-07~~ ~~will have on its consolidated financial statements.~~

~~In July 2017, the FASB issued ASU2017-11,~~ ~~Earnings Per Share (Topic 260), Distinguishing Liabilities~~cash flows arising from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments.leases. For public entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this update areASU 2016-02 is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The Company is currently evaluating the impact that the adoption of ASU~~2017-11~~ ~~will have on its consolidated financial statements.~~

~~In May 2017, the FASB issued ASUNo. 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~ ~~(“ASU2017-09”),~~ which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as2018. As a result of the ~~change in terms~~Company having elected the extended transition period for complying with new or ~~conditions. The standard~~revised accounting standards pursuant to Section 107(b) of the JOBS Act, ASU 2016-02 is effective for ~~annual periods beginning after~~the Company for the year ended December ~~15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued~~31, 2022, and ~~(2)~~ all ~~other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company is currently evaluating the impact that the adoption of ASU2017-09~~ ~~will have on its consolidated financial statements.~~

~~In November 2016, the FASB issued ASUNo. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ ~~(“ASU2016-18”),~~ which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. For public entities, the standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, the standard is effective for annual periods beginning after December 15, 2018, including interim periods within fiscal years beginning after December 15, 2019.thereafter. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU~~2016-18~~ 2016-02 will have on its consolidated financial statements.

Based on this evaluation the Company currently expects that its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon adoption of this standard, which will increase the Company’s total assets and total liabilities.

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~2. Summary of Significant Accounting Policies (continued)~~(in thousands, except share and per share data)

~~Recently Issued Accounting Pronouncements (continued)~~

In ~~August~~June 2016, the FASB issued ASUNo. ~~2016-15,~~ ~~Statement~~2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of ~~Cash Flows: Classification~~Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 requires that credit losses be reported as an allowance using an expected losses model, representing the entity's current estimate of ~~Certain Cash Receipts and Cash Payments~~ ~~(“ASU2016-15”),~~credit losses expected to ~~address diversity~~be incurred. The accounting guidance currently in ~~practice in how certain cash receipts and cash payments are presented and classified in~~effect is based on an incurred loss model. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the ~~statement~~amortized cost of ~~cash flows. For public entities,~~ the ~~standard~~investment.ASU 2016-13 is effective for non-EGCs for fiscal years beginning December 15, 2019 and interim periods within those fiscal years, and will be effective for the Company for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, assuming the Company remains an EGC. Early adoption is permitted. The Company is currently evaluating the effects the adoption of ASU 2016-13 may have on its financial statements.

InNovember 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses,” or ASU 2019-11. ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments update guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in both ASU 2016-13 and ASU 2019-11 are effective for annual reporting periods beginning after December 15, ~~2017,~~2019, including interim periods within those fiscal years. ~~For all other entities,~~As a result of the ~~standard is~~Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, 2016-13 and ASU 2019-11 are effective for the Company for fiscal years beginning after December 15, ~~2018,~~2022, and ~~interim periods within fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of ASU2016-15~~ ~~will have on its consolidated financial statements.~~

~~In February 2016, the FASB issued ASUNo. 2016-02~~~~, Leases (Topic 842)~~ ~~(“ASU2016-02”),~~ which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a~~right-of-use~~ asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. ASU~~2016-02~~ ~~supersedes the previous leases standard, ASC 840,~~ ~~Leases~~ ~~. For public entities,not-for-profit~~ entities and an employee benefit plan that files financial statements with the U.S. Securities and Exchange Commission (SEC), the standard is effective for public entities for annual periods beginning after December 15, 2018 including interim periods within those fiscal years. ~~For all~~The Company is currently evaluating ASU 2016-13 and ASU 2019-11 and their impact on its consolidated financial statements and financial statement disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, or ASU 2019-12. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other ~~entities,~~aspects of the ~~standard~~accounting for income taxes. ASU 2019-12 is effective for non-EGCs for fiscal years beginning after December 15, ~~2019,~~2020 and interim periods within those fiscal years and will be effective for the Company for fiscal years beginning after December 15, ~~2020.~~2021 and interim periods beginning after December 15, 2022, assuming the Company remains an EGC. Early adoption is permitted.

~~In September 2017, the FASB issued ASU No.2017-13,~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)~~ ~~, which provides additional clarification and implementation guidance related toASU 2016-02~~ ~~and has the same effective date and transition requirements as ASU2016-02.~~ The Company is currently evaluating the ~~impact that~~effects the adoption ofASU ~~2016-02~~ ~~will~~2019-12 may have on its ~~consolidated~~ financial statements.

3. ~~Fair Value~~License Agreements

Agreement with The University of ~~Financial Assets~~Manchester

On September 30, 2020, the Company entered into an agreement (“MPSII License Agreement”) with The University of Manchester, England (“UoM”), whereby UoM granted to the Company an exclusive worldwide license under certain patent and ~~Liabilities~~other intellectual property rights, subject to certain retained rights, to develop, commercialize and sell an ex vivo lentiviral gene therapy for use in the treatment of Hunter syndrome, or mucopolysaccharidosis type II (“MPSII”). As consideration for the MPSII License Agreement, the Company agreed to pay UoM an upfront, one-time fee of $8,000, which was recognized as research and development expense during the year ended December 31, 2020.

~~The following table presents information about~~As part of the ~~Company’s financial assets~~agreement, the Company is obligated to make milestone payments of up to an aggregate of $80,000 upon the achievement of specified development and ~~liabilities measured at fair value~~regulatory milestones, to pay royalties, on a ~~recurring~~product-by-product and country-by-country basis, of a mid-single digit percentage based on net sales of products licensed under the agreement and ~~indicates~~to pay a low double digit percentage of any sublicense fees received by the ~~level~~Company. The next anticipated payment milestones under the MPSII License Agreement include $2,000, which would become due following the date of regulatory approval of the ~~fair value hierarchy utilized~~clinical trial application for the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM, and $4,000, upon the dosing of the first patient in the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM.

Unless terminated earlier, the agreement expires upon the later of 15 years from the effective date or the expiration of the last valid claim of the licensed patents, subject to ~~determine~~certain surviving rights and obligations. UoM and the Company can each terminate the agreement in the event of the bankruptcy or insolvency of the other party, or a material breach by the other party and failure to cure such ~~fair values as~~breach within a certain period of ~~June 30, 2018 and December 31, 2017, respectively:~~time. UoM has the right to terminate the agreement in the event of certain actions relating to challenge or opposition to the licensed intellectual property brought by the Company or its affiliates or sublicensees.

   Fair Value Measurements as of
June 30, 2018 Using:
   Level 1    Level 2    Level 3    Total
Assets:

Money market funds
   $ 154,549    $ —      $ —      $ 154,549








   Fair Value Measurements as of
December 31, 2017 Using:
   Level 1    Level 2    Level 3    Total
Assets:

Money market funds
   $ 5,684    $ —      $ —      $ 5,684
Restricted cash
   24    —      —      24








   $ 5,708    $ —      $ —      $ 5,708








Liabilities:

Derivative liability
   $ —      $ —      $ 371    $ 371
Warrant to purchase redeemable convertible preferred stock
   —      —      35    35








   $ —      $ —      $ 406    $ 406

~~During the six months ended June 30, 2018 and 2017, there were no transfers between Level 1, Level 2 and Level 3.~~AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~3. Fair Value of Financial Assets~~(in thousands, except share and ~~Liabilities (continued)~~per share data)

~~Valuation~~Concurrently with the MPSII License Agreement, the Company entered into a collaborative research funding agreement with UoM (“CRFA”). Under the CRFA, the Company has agreed to fund the budgeted costs of ~~the Warrant~~an investigator-sponsored Phase 1/2 clinical trial to ~~Purchase Preferred Stock~~

~~The warrant to purchase preferred stock liability in the table above is composed of the fair value of a warrant to purchase shares of Series A Preferred Stock that was issued to a lender~~be sponsored by UoM in connection with ~~a loan and security agreement in 2017. The fair value of~~ the ~~warrant~~development activities under the MPSII License Agreement, which are currently expected to ~~purchase preferred stock was determined based on significant inputs not observable~~equal approximately £9,275 in the ~~market, which represents a Level 3 measurement within~~aggregate.

For the ~~fair value hierarchy.~~

~~In order to determine the fair value of the warrant to purchase preferred stock,~~three months ended September 30, 2021 and 2020, the Company ~~utilized available facts~~incurred $1.0 million and circumstances to estimate the number of shares of Series A Preferred Stock for which the warrant will ultimately be exercisable. The Company then used the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value the warrant to purchase preferred stock. Estimates and assumptions impacting the fair value measurement include the fair value of the underlying shares of Series A Preferred Stock, the remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The Company determined the fair value of the underlying preferred stock based on various valuation methodologies. The Company lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded guideline companies for a term equal$0, respectively, related to the ~~remaining contractual term of~~CRFA. For the ~~warrant. The risk-free interest rate is determined by reference~~nine months ended September 30, 2021 and 2020, the Company incurred $1.8 million and $0, respectively, related to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrant. The Company estimated no expected dividend yield based on the fact that the Company has never paid or declared dividends and does not intend to do so in the foreseeable future. Upon the IPO, the warrant to purchase preferred stock was converted to a warrant to purchase common stock. The carrying amount of warrant to purchase preferred stock as of the date of IPO was transferred to the account of additional paid in capital.CRFA.

~~The following table sets forth a summary of changes in the fair value of the Company’s preferred stock warrant liability for which fair value was determined by Level 3 inputs:~~

   Warrant
Liability
Balance as of December 31, 2017
   $ 35
Change in fair value
   162
Conversion of preferred stock warrant to common stock warrant
   (197 )
Balance as of June 30, 2018
   $ —

~~Valuation of Derivative~~

~~In January 2016, in connection with a license agreement entered into~~Agreements with University Health Network (“UHN”), and as part of the initial consideration for the license, the Company issued 1,161,665 shares of common stock to UHN pursuant to a stock purchase agreement (the “Stock Purchase Agreement”). The Stock Purchase Agreement contains a provision requiring the Company to make a cash payment to UHN of up to $2,000 if UHN’s fully diluted ownership is reduced within specified percentages as part of an IPO by the Company. The Company concluded the anti-dilution feature represented a derivative instrument and should be measured at fair value, with changes in fair value recognized as a gain or loss to other income (expense), net in the consolidated statements of operations and comprehensive loss. The initial fair value of the derivative of $49 was recorded as research and development expense in January 2016.

On June 30, 2017, the Company remeasured the fair value of the derivative, using current assumptions, resulting in an increase in fair value of $3 and $35, which was recorded in other expense in the accompanying condensed consolidated statements of operations and comprehensive loss for the three months and six months ended June 30, 2017, respectively.

On June 21, 2018, in connection with the Company’s IPO, the Company remeasured the fair value of the derivative to $2,000 as the Company was required to pay the dilution payment as mentioned above, which the Company paid in July 2018. An increase in fair value of $1,042 and $1,629 was recorded in other expense in the accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2018, respectively.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~3. Fair Value of Financial Assets and Liabilities (continued)~~

~~The following table sets forth a summary of changes in the fair value of the Company’s derivative liability for which fair value is determined by Level 3 inputs:~~

   Derivative
Liability
Balance as of December 31, 2017
   $ 371
Change in fair value
   1,629
Transferred to accrued expenses
   (2,000 )


Balance as of June 30, 2018
   $ —

~~4. Prepaid Expenses and Other Current Assets~~

~~Prepaid expenses and other current assets consisted of the following:~~

   June 30,
2018    December 31,
2017
Prepaid development costs
   $ 762    $ 163
Prepaid rent
   76    122
Other current assets
   294    60




   $ 1,132    $ 345

~~5. Property and Equipment, Net~~

~~Property and equipment, net consisted of the following:~~

   June 30,
2018    December 31,
2017
Laboratory and office equipment
   $ 926    $ 126
Leasehold improvements
   1,112    240
Computer equipment and software
   83    28




   2,121    394
Less: Accumulated depreciation and amortization
   (71 )    (45 )




   $ 2,050    $ 349

Depreciation and amortization expense for the three months ended June 30, 2018 and 2017 was $45 and $13, respectively. Depreciation and amortization expense for the six months ended June 30, 2018 and 2017 was $66 and $15, respectively.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~6. Accrued Expenses~~

~~Accrued expenses and other current liabilities consisted of the following:~~

   June 30,
2018    December 31,
2017
Dilution payment (Note 3)
   $ 2,000    $ —
Compensation and benefit costs
   846    794
Short-term deferred rent
   171    9
Research and development costs
   753    831
IPO issuance cost
   693    —
Property and equipment
   667    —
Other liabilities
   308    464




   $ 5,438    $ 2,098

~~7. Loan Agreement and Warrant to Purchase Preferred Stock~~

On June 23, 2017, the Company entered into the Loan Agreement with a lender, which provided for the issuance of term loans of up to $10,000, subject to the achievement of various development and corporate milestones. Any outstanding principal amounts under the Loan Agreement will accrue interest at a floating per annum rate equal to the greater of 1% and the “prime rate,” as defined in the Loan Agreement, minus 3%.

Payments on the Loan Agreement are interest only, payable monthly in arrears, until November 1, 2018, which can be extended by six months if the third tranche is drawn. Thereafter, principal and interest amounts are repayable over a~~30-month~~ ~~period, unless the third tranche is funded and the initial interest-only period is extended by six months, in which case principal and interest amounts are repayable over a24-month~~ ~~period. As of June 30, 2018, the Company had not drawn down from the facility and $10,000 was available to the Company.~~

The Loan Agreement contains customary indemnification obligations and customary events of default. In the event of default by the Company under the Loan Agreement, the lender would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which the Company may be required to repay all amounts then outstanding under the Loan Agreement or the lender may take possession of the collateral securing the Loan Agreement. No events of default had occurred through June 30, 2018.

The Loan Agreement also includes certain restrictions on, among other things, the Company’s ability to incur additional indebtedness, change the name or location of its business, merge with or acquire other entities, pay dividends or make other distributions to holders of the Company’s capital stock, make certain investments, engage in transactions with affiliates, create liens, open new deposit accounts, sell assets or pay subordinated debt.

In connection with the Loan Agreement, the Company agreed to issue a warrant to the lender for the purchase of up to 188,702 shares of the Company’s Series A Preferred Stock with an exercise price of $0.7949 per share. The warrant expires on June 22, 2027. The warrant is initially exercisable for the purchase of up to 28,305 shares of Series A Preferred Stock and can become exercisable for up to an additional 160,397 shares of Series A Preferred Stock based on the amounts drawn under the Loan Agreement. On the issuance date of the warrant, the Company recorded a deferred financing cost and a liability for the warrant to purchase preferred stock in the Company’s consolidated balance sheet equal to the issuance-date fair value of the warrant. Upon closing of the IPO, the carrying amount of the warrant to purchase preferred stock as of the date of IPO was transferred to the account of additional paid in capital (Note 3).

The Company recognized a loss of $150 and $162 in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2018, respectively, related to the change in fair value of the warrant.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~8. Redeemable Convertible Preferred Stock~~

Prior to the IPO, the authorized capital stock of the Company included 63,491,857 shares of $0.0001 par value preferred stock, of which 3,333,333 shares have been designated as Series Seed Preferred Stock, 31,639,202 shares have been designated as Series A Preferred Stock and 28,519,322 shares have been designated as Series B Preferred Stock.

~~In January 2018, the Company issued and sold 28,519,322 shares of Series B Preferred Stock, at a price of $2.1389 per share, for total proceeds of $58,757, net of issuance costs of $2,243.~~

~~As of December 31, 2017, the Preferred Stock consisted of the following:~~

   December 31, 2017
   Preferred
Shares
Authorize    Preferred
Shares
Issued and
Outstanding    Carrying
Value    Liquidation
Preference    Common Stock
Issuable Upon
Conversion
Series Seed preferred stock
   3,333,333    3,333,333    $ 1,500,000    $ 1,500,000    806,711
Series A preferred stock
   31,639,202    31,450,499    25,000,000    25,000,000    7,611,438










   34,972,535    34,783,832    $ 26,500,000    $ 26,500,000    8,418,149

Upon closing of the IPO, the Preferred Stock as of December 31, 2017, together with Series B Preferred Stock issued in January 2018, were converted to 15,320,213 shares of common stock. The holders of the Company’s Preferred Stock had certain voting, dividend, and redemption rights, as well as liquidation preferences and conversion privileges. All rights, preferences, and privileges associated with the preferred stock were terminated at the time of the Company’s IPO in conjunction with the conversion of all outstanding shares of Preferred Stock into shares of common stock.

~~9. Common Stock~~

~~As of June 30, 2018, the authorized capital stock of the Company included 150,000,000 shares of common stock, $0.0001 par value, respectively.~~

~~At June 30, 2018 and December 31, 2017, the Company has reserved the following shares of common stock for future issuance:~~

   June 30,
2018    December 31,
2017
Shares reserved for Series Seed Preferred Stock outstanding
   —      806,711
Shares reserved for Series A Preferred Stock outstanding
   —      7,611,438
Shares reserved for issuance under the 2018 Stock Option and Incentive Plan
   533,911    —
Shares reserved for issuance under the 2018 Employee Stock Purchase Plan
   223,200    —
Shares reserved for vesting of restricted stock awards
   214,789    276,301
Shares reserved for exercise of outstanding stock options
   1,871,139    1,034,961
Shares reserved for issuance under the 2015 Stock Option and Grant Plan
   —      143,717




Total shares of authorized common stock reserved for future issuance
   2,843,039    9,873,128

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~10. Stock-Based Compensation~~

~~Amended and Restated 2015 Stock Option and Grant Plan~~

The Company’s Amended and Restated 2015 Stock Option and Grant Plan, (the “2015 Plan”) provides for the Company to issue restricted stock awards and restricted stock units, or to grant incentive stock options or~~non-statutory~~ stock options. Incentive stock options may be granted only to the Company’s employees including officers and members of the Board who are also employees. Restricted stock awards and restricted stock units and~~non-statutory~~ ~~stock options may be granted to employees, members of the Board, outside advisors, and consultants of the Company.~~

~~The total number of common shares that may be issued under the 2015 Plan was 2,008,564 shares. Following the IPO, no further grants will be made under 2015 plan.~~

Shares that expire, are terminated, surrendered or canceled under the 2015 Plan without having been fully exercised will be available for future awards under the 2018 Plan (as defined below). In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future awards.

~~The 2015 Plan is administered by the Board. Equity awards granted to employees and members of the Board typically vest over four years.~~

~~2018 Stock Option and Incentive Plan~~

The Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”) was adopted by the Board June 1, 2018 and approved by stockholders on June 7, 2018 and became effective upon the effectiveness of the Company’s Registration Statement on Form~~S-1.~~ The 2018 Plan replaced the 2015 Plan as the Board determined not to make additional awards under the 2015 Plan following the pricing of the Company’s IPO. The 2018 Plan allows the compensation committee to make equity-based and cash-based incentive awards to its officers, employees, directors and other key persons (including consultants).

The Company initially reserved 616,300 shares of its common stock for the issuance of awards under the 2018 Plan. The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by its compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change in its capitalization.

~~The total number of common shares that may be issued under the 2018 Plan was 616,300 shares as of June 30, 2018, of which 533,911 shares remained available for future grant.~~

~~During the six months ended June 30, 2018 and 2017, the Company granted options to purchase 836,178 and 196,872 shares of common stock to employees and members of the Board, respectively.~~

~~2018 Employee Stock Purchase Plan~~

The Company’s 2018 Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board June 1, 2018 and approved by stockholders on June 7, 2018 and became effective upon the effectiveness of the Company’s Registration Statement on Form~~S-1.~~ The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code. The ESPP initially reserves and authorizes the issuance of up to a total of 223,200 shares of common stock to participating employees. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and each January 1 thereafter through January 1, 2028, by the least of (i) 1% of the outstanding number of shares of our common stock on the immediately preceding December 31; (ii) 1,115,700 shares or (iii) such number of shares as determined by the ESPP administrator. The number shares reserved under the ESPP is subject in the event of a stock split, stock dividend or other change in our capitalization.

~~The total number of common shares that may be issued under the ESPP was 223,200 shares as of June 30, 2018, of which 223,200 shares remained available for future grant.~~

~~As of June 30, 2018, the initial purchase period under the ESPP has not yet commenced.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~10. Stock-Based Compensation (continued)~~

~~Stock Option Valuation~~

~~The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and members of the Board were as follows, presented on a weighted-average basis:~~

   Six Months
Ended June 30,
   2018 2017
Expected option life (years)
   6.06 6.08
Risk-free interest rate
   2.73 % 1.90 %
Expected volatility
   83.86 % 85.50 %
Expected dividend yield
   —   % —   %

~~The following table summarizes the Company’s stock option activity for the six months ended June 30, 2018:~~

   Number of
Options    Weighted-
Average
Exercise
Price    Weighted-
Average
Remaining
Contractual
Term
(Years)    Aggregate
Intrinsic
Value
Outstanding as of December 31, 2017
   1,034,961    $ 0.78    8.94    $ 3,427
Granted
   836,178    $ 6.38    9.74
Exercised
   —
Cancelled or forfeited
   —



Outstanding as of June 30, 2018
   1,871,139    $ 3.29    9.02    $ 47,228



Exercisable as of June 30, 2018
   309,594    $ 0.72    8.13    $ 8,619
Unvested as of June 30, 2018
   1,559,125    $ 3.80    9.20    $ 38,609

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at June 30, 2018.

~~The weighted-average grant-date fair value of the Company’s stock options granted during the six months ended June 30, 2018 and 2017 was $7.63 and $0.66, respectively.~~

~~Restricted Common Stock~~

~~The following table summarizes the Company’s restricted common stock activity for the six months ended June 30, 2018:~~

Number
of Shares Weighted-Average
Grant Date Fair
Value
Issued and unvested as of December 31, 2017
276,301 $ 0.42
Vested
(61,512 ) 0.42
Forfeited, canceled or expired
— —

Issued an unvested as of June 30, 2018
214,789 0.42

~~The total fair value of restricted common stock vested during the six months ended June 30, 2018 and 2017 was $26 and $17, respectively.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~10. Stock-Based Compensation (continued)~~

~~Stock-Based Compensation~~

~~Stock-based compensation expense was allocated as follows:~~

   Six Months Ended
June 30,
   2018    2017
Research and development
   $ 187    $ 35
General and administrative
   379    29




Total stock-based compensation expense
   $ 566    $ 64

~~As of June 30, 2018, total unrecognized compensation cost related to the unvested stock-based awards was $6,776, which is expected to be recognized over a weighted-average period of 3.61 years.~~

~~11. License Agreements~~

~~Agreements with UHN~~

Fabry License Agreement—

On January 27, 2016, the Company entered into an agreement with UHN, pursuant to which UHN granted the Company an option to enter into an exclusive license under the UHN intellectual property related to Fabry disease in accordance with thepre-negotiated licensing terms. On November 4, 2016, the Company exercised its option and entered into a license agreement with UHN, pursuant to which UHN granted the Company an exclusive worldwide license under certain intellectual property rights and anon-exclusive worldwide license under certainknow-how, in each case subject to certain retained rights, to develop, commercialize and sell products for use in the treatment of Fabry disease. In addition, for three years following the execution of the agreement, UHN granted the Company an exclusive option to obtain a license under certain improvements to the licensed intellectual property rights as well as an option to negotiate a license under certain other improvements.

Under this agreement, the Company paid an option fee of CAD $20, an upfront license fee of CAD $75, plus the annual license maintenance fee for the first year. Thereafter, the Company is also required to pay UHN future annual license maintenance fees until the first sale of a licensed product in certain markets. The Company is also obligated to make future milestone payments in an aggregate amount of up to CAD $2,450 upon the achievement of specified milestones as well as royalties on acountry-by-country basis of a low to~~mid-single~~ ~~digit~~ mid-single-digit percentage of annual net sales of licensed products and a lower single-digit royalty percentage in certain circumstances. Additionally, the Company has agreed to pay a low double-digit royalty percentage of all sublicensing revenue.

The agreement requires the Company to meet certain performance milestones within specified timeframes.

UHN may terminate the agreement if the Company fails to meet these performance milestones despite using commercially reasonable efforts and the Company is unable to reach agreement with UHN on revised timeframes. The Company’s royalty obligation expires on a licensedproduct-by-licensed product andcountry-by-country basis upon the latest to occur of the expiration or termination of the last valid claim under the licensed intellectual property rights in such country, the tenth anniversary of the first commercial sale of such licensed product in such country and the expiration of any applicable regulatory exclusivity in such country.

Unless terminated earlier, the agreement expires upon the expiration of the Company’s royalty obligation for all licensed products. UHN can terminate the agreement if the Company fails to make any payments within a specified period after receiving written notice of such failure, or in the event that the Company fails to obtain or maintain insurance. Either the Company or UHN may terminate the license agreement in the event of a material breach by the other party and failure to cure such breach within a certain period of time. The Company can voluntarily terminate the agreement with prior notice to UHN.

For the ~~six~~three months ended ~~June~~September 30, ~~2018~~2021 and ~~2017, no upfront fee~~2020, the Company recorded research and development expense related to this agreement with UHN of $102 and $65, respectively, which consists of reimbursable funded study trial costs. For the nine months ended September 30, 2021 and 2020, the Company recorded research and development expense related to this agreement with UHN of $175 and $174, respectively, which consists of reimbursable funded study trial costs. NaN milestone or maintenance fees were incurred related to ~~Fabry license agreement.~~

this agreement in the three or nine months ended September 30, 2021 and 2020.

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~11. License Agreements (continued)~~(in thousands, except share and per share data)

~~Agreements with UHN (continued)~~

Interleukin 12 License Agreement—

On January 27, 2016, the Company entered into an exclusive license agreement with UHN, pursuant to which UHN granted the Company a license to certain patent rights for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights related to Interleukin 12. Upon execution of this agreement, the Company paid an upfront license fee of CAD $264. In addition, as part of the initial consideration for the license, the Company issued to UHN 1,161,665 shares of the Company’s common ~~stock.~~stock and agreed to pay UHN up to $2,000 upon the closing of an IPO if certain criteria are met. The fair value of the shares issued to UHN of $480 and the upfront fee was expensed upon the execution of the agreement. ~~In addition, the Company agreed to pay UHN up to $2,000 upon~~Upon the closing of anthe IPO ~~if certain~~in 2018, as the criteria ~~are met. This obligation is considered a derivative instrument and was initially recorded at fair value of $49.~~were met, the Company paid UHN $2,000. The Company is also required to pay UHN future annual license maintenance fees of CAD $50 on each anniversary of the effective date of the license agreement prior to expiration or termination and potential future milestone payments of up to CAD $19,275 upon the achievement of specified clinical and regulatory milestones. The Company also agreed to pay UHN royalties of a low ~~single digit~~single-digit percentage of net sales of licensed products sold by the Company. If the Company grants any sublicense rights under the license agreement, the Company has agreed to pay UHN a low double-digit royalty percentage of any sublicense income received by the Company.

The agreement requires the Company to meet certain ~~due~~ diligence requirements based upon specified milestones. The agreement expires on the later of the date the last patent rights expire in the last country or ten years from the date of first sale. UHN can terminate the agreement if the Company fails to make any payments within a specified period after receiving written notice of such failure, or in the event that the Company fails to obtain or maintain insurance. The Company can voluntarily terminate the agreement with prior notice to UHN. Either the Company or UHN may terminate the license agreement in the event of a material breach by the other party and failure to cure such breach within a certain period of time.

For the ~~six~~three months ended ~~June~~September 30, ~~2018~~2021 and ~~2017,~~2020, the Company did 0t record research and development expense related to this agreement with UHN. For the nine months ended September 30, 2021 and 2020, the Company recorded research and development expense related to this agreement with UHN of ~~$41~~$39 and ~~$151 (nil for the three months ended June 30, 2018 and 2017),~~$38, respectively, which consists of ~~upfront fees and~~ license maintenance fees. NaN milestone fees were incurred related to this agreement in the three and ~~development milestone payments.~~nine months ended September 30, 2021 and 2020.

Agreement with BioMarin Pharmaceutical Inc. (“BioMarin”)

On August 31, 2017, the Company entered into a license agreement with BioMarin, pursuant to which BioMarin granted the Company an exclusive worldwide license under certain intellectual property rights owned or controlled by BioMarin to develop, commercialize and sell products for use in the treatment of Pompe disease. The license agreement was amended in February 2018 and again in January 2020 to, among things, provide that BioMarin would supply the Company with certain technology materials. As consideration for this agreement, the Company paid an upfront license fee of $500 in cash and issued 233,765 shares of Series B Preferred Stock to BioMarin at the time of ~~our~~the Company’s Series B Preferred Stock financing in January 2018. ~~Both~~The Company has a license agreement with BioMarin, pursuant to which BioMarin granted the ~~upfront cash payment~~Company an exclusive worldwide license under certain intellectual property rights owned or controlled by BioMarin to develop, commercialize and sell products for use in the treatment of ~~$500 and the value of the shares Series B Preferred Stock issued of $500 were recorded as research and development expense during the year ended December 31, 2017.~~Pompe disease. The Company is also obligated to make future milestone payments of up to $13,000 upon the achievement of certain specified milestones and agreed to pay BioMarin royalties of a low single-digit percentage of net sales of licensed products sold by the Company or its affiliates covered by patent rights in a relevant country. ~~No upfront fees~~

The Company has recognized 0 expenses related to the license ~~were recorded~~ for the ~~six~~three and nine months ended ~~June~~September 30, ~~2018.~~2021 and 2020.

Unless terminated earlier, the agreement expires upon the expiration of the Company’s royalty obligation for all licensed products throughout the world. BioMarin and the Company can terminate the agreement in the event of a material breach by the other party and failure to cure such breach within a certain period of time. The Company may terminate the agreement at will upon written notice to BioMarin. BioMarin has the right to terminate the agreement upon the Company’s bankruptcy or insolvency, or in the event of any challenge or opposition to the licensed patent rights or related actions brought by the Company or its affiliates or sublicensees, or if the Company, its affiliates or sublicensees knowingly assist a third-party in challenging or otherwise opposing the licensed patent rights, except as required under a court order or subpoena.

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~11. License Agreements (continued)~~(in thousands, except share and per share data)

Agreement with GenStem Therapeutics, Inc. (“GenStem”)

On October 2, 2017, the Company entered into a license agreement with GenStem, pursuant to which GenStem granted the Company an exclusive worldwide license, subject to certain retained rights, under certain intellectual property rights owned or controlled by GenStem to develop, commercialize and sell products for use in the treatment of cystinosis. Under this agreement, the Company paid an upfront license fee of $1,000 and is required to make payments upon completion of certain milestones up to an aggregate of $16,000. The Company also agreed to pay GenStem a tiered mid to high single-digit royalty percentage on annual net sales of licensed products as well as a low double-digit percentage of sublicense income received from certain ~~third party~~third-party licensees. The Company’s royalty obligation expires on a licensedproduct-by-licensed product andcountry-by-country basis on the eleventh anniversary of the first commercial sale of such licensed product in such country or the expiration of the last valid claim under the licensed patent rights covering such licensed product in such country, whichever is later. Unless terminated earlier, the agreement expires upon the expiration of the Company’s royalty obligation for all licensed products throughout the world. GenStem and the Company can terminate the agreement in the event of a material breach by the other party and failure to cure such breach within a certain period of time. The Company may terminate the agreement at will upon the specified prior written notice to GenStem. ~~No upfront fees~~

The Company has recognized 0 expenses related to ~~the license were recorded~~this agreement for the ~~six~~three and nine months ended ~~June~~September 30, ~~2018.~~2021 and 2020.

Agreement with Lund University Rights Holders

On November 17, 2016, the Company entered into a license agreement with affiliates of Lund University, along with certain other relevant rights holders that may be added from time to time, pursuant to which such rights holders granted to the Company an exclusive worldwide license, subject to certain retained rights, under certain intellectual property rights to develop, commercialize and sell products in any and all uses relevant to Gaucher disease. As consideration for the license, the Company is required to make payments in connection with the achievement of certain milestones up to an aggregate of $550. The agreement expires on the latest of (i) the twentieth anniversary of the end of a certain research project the Company is funding pursuant to an agreement with Lund University, (ii) the expiration of the term of any patent filed on the licensed rights that covers a licensed product, (iii) the expiration of any applicable marketing exclusivity right and (iv) such time that neither the Company nor any sublicensees, partners or contractors are commercializing a licensed product. Either the Company or the rights holders acting together may terminate the license agreement if the other such party commits a material breach and fails to cure such breach within a certain period of time, or if the other party enters into liquidation, becomes insolvent, or enters into composition or statutory reorganization proceedings. ~~No upfront fees~~

The Company has recognized 0 expenses related to ~~the license were recorded~~this agreement for the ~~six~~three and nine months ended ~~June~~September 30, ~~2018~~2021 and ~~2017.~~2020.

~~12. Net Loss per Share~~

For purposes of the diluted net loss per share calculation, stock options, unvested restricted stock, the warrant to purchase shares of Series A Preferred Stock and Preferred Stock were considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.4. Fair Value Measurement

The following ~~potentially dilutive common stock equivalents, presented based~~table presents information about the Company’s financial assets measured at fair value on ~~amounts outstanding at each period end, were excluded from~~a recurring basis and indicates the ~~computation~~level of ~~diluted net loss per share attributable~~the fair value hierarchy utilized to ~~common stockholders for the periods indicated because including them would have had an anti-dilutive effect:~~determine such fair values as of September 30, 2021 and December 31, 2020:

   Six Months Ended
June 30,
   2018    2017
Options to purchase common stock
   1,871,139    796,311
Restricted common stock
   214,789    368,062
Redeemable convertible preferred stock (as converted to common stock)
   —      4,155,742
Warrants to purchase redeemable convertible preferred stock (as converted to common stock)
   —      6,850
Warrants to purchase common stock
   6,850    —

	Fair Value Measurements as of September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	200,433	$	—	$	—	$	200,433
	$	200,433	$	—	$	—	$	200,433

	Fair Value Measurements as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents — money market funds	$	44,416	$	—	$	—	$	44,416
	$	44,416	$	—	$	—	$	44,416

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

~~13.~~

The fair value of cash equivalents was determined through quoted prices by third-party pricing services.

During the nine months ended September 30, 2021, there were 0 transfers between levels.

5. Supplemental Balance Sheet Information

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

	September 30, 2021		December 31, 2020
Tax incentive refund	$	2,662	$	2,558
Prepaid research and development expenses		4,560		3,145
Prepaid insurance		1,839		973
Prepaid compensation benefits		706		609
Other current assets		522		275
	$	10,289	$	7,560

Property and equipment, net

Property and equipment, net consisted of the following:

	September 30, 2021			December 31, 2020
Laboratory and office equipment	$	5,869		$	3,965
Leasehold improvements		1,586			1,377
Computer equipment		149			143
		7,604			5,485
Less: Accumulated depreciation and amortization		(3,385	)		(2,421	)
Property and equipment, net	$	4,219		$	3,064

Depreciation and amortization expense was $374 and $301, respectively, for the three months ended September 30, 2021 and 2020. Depreciation and amortization expense was $963 and $898, respectively, for the nine months ended September 30, 2021 and 2020.

Restricted Cash

As of September 30, 2021 and December 31, 2020, the Company had restricted cash of $492, which consists of cash used to secure letters of credit for the benefit of the landlord in connection with the Company’s lease agreements. The cash will be restricted until the termination or modification of the lease arrangement.

Accrued Expenses

Accrued expenses and other current liabilities consisted of the following:

	September 30, 2021		December 31, 2020
Compensation and benefit costs	$	6,225	$	6,402
Research and development expenses		11,233		5,847
Consulting and professional fees		889		1,096
Other liabilities		1,215		348
	$	19,562	$	13,693

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

6. Commitments and Contingencies

~~Lease Agreements~~

On January 12, 2018, the Company entered into a lease agreement for office space located in Cambridge, Massachusetts. The lease agreement expires in January 2023, with a landlord who is an affiliate of the landlord of the Company’s prior lease facility. The annual lease payments are subject to a 3% increase each year. The Company recognizes rent expense on a straight-line basis over the lease period and has recorded deferred rent for rent expense incurred but not yet paid. The Company received a tenant incentive allowance of $842 in 2018. Such incentive allowance is being amortized as a reduction of rent expense on a straight-line basis over the lease period. In accordance with the lease agreement, the Company is required to maintain a security deposit of $209, which was recorded in other assets. In contemplation of this agreement, the Company terminated its prior lease agreement.

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2021 and ~~2017,~~2020 and to the best of ~~its~~the Company’s knowledge, no material legal proceedings are currently pending or threatened.

Other

The Company is also party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met at ~~June~~September 30, ~~2018~~2021 and December 31, ~~2017,~~2020, or royalties on future ~~sales of specified products.~~sales. No milestone or royalty payments under these agreements are expected to be payable in the immediate ~~future.~~future, except as disclosed in Note 3 “License Agreements.”

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of September 30, 2021. The Company does not anticipate recognizing any significant losses relating to these arrangements. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

~~14.~~

7. Stockholders’ Equity

Common Stock

As of September 30, 2021 and December 31, 2020, the authorized capital stock of the Company included 150,000,000 shares of common stock, $0.0001 par value and 10,000,000 shares of undesignated preferred stock. As of September 30, 2021 and December 31, 2020, 0 undesignated preferred stock was outstanding.

As of September 30, 2021, 0 cash dividends have been declared or paid.

Common Stock Reserved for Future Issuance

As of September 30, 2021 and December 31, 2020, the Company has reserved the following shares of common stock for future issuance:

	September 30, 2021		December 31, 2020
Shares reserved for exercise of outstanding stock options		7,999,382		5,559,545
Shares reserved for vesting of restricted stock units		709,025		1,198
Shares reserved for issuance under the 2018 Stock Option and Grant Plan		2,147,631		3,877,478
Shares reserved for issuance under the 2018 Employee Stock Purchase Plan		1,151,010		762,900
Shares reserved for issuance under the 2019 Inducement Plan		414,280		365,050
Shares reserved for issuance under the 2020 Inducement Plan		1,637,000		1,700,000
Total shares of authorized common stock reserved for future issuance		14,058,328		12,266,171

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

8. Stock-based Compensation

Stock Option Valuation

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and members of the board of directors were as follows, presented on a weighted-average basis:

	Nine Months Ended September 30,
	2021			2020
Expected option life (years)		6.07			6.00
Risk-free interest rate		0.76	%		0.84	%
Expected volatility		81.25	%		75.85	%
Expected dividend yield		—	%		—	%

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2021:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2020		5,559,545		$	14.97		7.65	$	13,511
Granted		3,916,982		$	13.25
Exercised		(205,972	)	$	4.23
Cancelled or forfeited		(1,271,173	)	$	16.44
Outstanding as of September 30, 2021		7,999,382		$	14.20		8.05	$	2,634
Exercisable as of September 30, 2021		2,812,685		$	13.45		6.17	$	2,593

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020 was $1,760 and $595, respectively.

The weighted-average grant-date fair value of the Company’s stock options granted during the nine months ended September 30, 2021 and 2020 was $9.12 and $12.98, respectively.

Restricted Stock Units

The following table summarizes the Company’s restricted common stock units for the nine months ended September 30, 2021:

	Number of Shares			Weighted- Average Grant Date Fair Value
Issued and unvested as of December 31, 2020		1,198		$	15.65
Granted		771,600		$	9.63
Vested		(431	)	$	15.65
Forfeited, cancelled or expired		(63,342	)	$	9.63
Issued and unvested as of September 30, 2021		709,025		$	9.64

The total fair value of restricted stock units vested during the nine months ended September 30, 2021 and 2020 was $7 thousand and $44 thousand, respectively.

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

Stock-Based Compensation

Stock-based compensation expense was allocated as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	1,965	$	2,686	$	5,989	$	6,095
General and administrative		3,204		2,119		8,505		5,431
Total stock-based compensation expense	$	5,169	$	4,805	$	14,494	$	11,526

As of September 30, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $52,327, which is expected to be recognized over a weighted-average period of 2.91 years.

9. Net Loss Per Share

For purposes of the diluted net loss per share calculation, stock options and unvested restricted stock are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.

The following potentially dilutive common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the computation of diluted net loss per share for the periods indicated:

	Nine Months Ended September 30,
	2021		2020
Options to purchase common stock		7,999,382		5,658,890
Restricted stock units		709,025		1,342

10. Related Party Transactions

UHN

~~In connection with~~For the Company’s entry into a license agreement with UHN on January 27, 2016, the Company issued UHN 1,161,665 shares of its common stock. As a result of the issuance of common stock, UHN owned 4.64% and 9.65% of the Company’s fully diluted equity as of June 30, 2018 and December 31, 2017, respectively. Upon the closing of the IPO, as UHN’s fully-diluted percentage ownership of the Company was reduced within a range of specified percentages, the Company is obligated to pay UHN an amount up to $2,000, which was recorded in accrued expenses as of June 30, 2018. See Note 3 for further discussion on the accounting treatment for this provision.

~~During the six~~three months ended ~~June~~September 30, ~~2018~~2021 and ~~2017,~~2020, the Company recognized ~~$41~~$102 and ~~$151 (nil for three months ended June 30, 2018 and 2017),~~$65, respectively, of research and development expense related to the license agreements with UHN. For the nine months ended September 30, 2021 and 2020, the Company recognized $215 and $212, respectively, of research and development expense related to the license agreements with UHN. Refer to Note 3 “License Agreements” for additional information regarding the UHN license agreements.

Others

For the ~~six~~three months ended ~~June~~September 30, ~~2018~~2021 and ~~2017~~2020, the Company recorded expenses of ~~$40~~$228 and ~~$48 ($2 and $24 for the three months ended June 30, 2018 and 2017),~~$355, respectively, related to ~~consulting services provided by an entity affiliated with an officer of the Company and~~ a ~~member of the Board. The entity is also a shareholder of the Company and owned 0.48% and 1.56% of the Company’s fully diluted equity as of June 30, 2018 and 2017, respectively.~~

~~Others~~

~~For the three and six months ended June 30, 2017, the Company recorded expenses of $15 and $15, respectively, related~~sublease to ~~services~~rent lab space, provided by an entity affiliated with a member of the ~~Board~~Company’s board of directors. For the nine months ended September 30, 2021 and 2020, the Company recorded expenses of $1,278 and $1,081, respectively, related to a sublease to rent lab space, provided by an entity affiliated with a member of the Company’s board of directors

11. Subsequent Events

On November 2, 2021 (the “Closing Date”), the Company entered into a term loan facility for up to $65.0 million (the “Term Loan”) with the lenders party thereto and Silicon Valley Bank (“SVB”) as administrative agent and collateral agent. The Company expects to use the proceeds from the Term Loan for working capital or to fund its general business purpose.

The Term Loan is governed by a loan and security agreement, dated November 2, 2021 (the “Loan and Security Agreement”). The Term Loan Agreement provides for (i) on the Closing Date, $30.0 million aggregate principal amount of ~~office space. The lease was terminated in February 2017~~term loans available through October 31, 2023; (ii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory milestones prior to the time of draw; (iii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory and/or clinical milestones prior to the time of draw; and ~~the services were no longer being provided as of June 30, 2017.~~

(iv) an

AVROBIO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(in thousands, except share and per share data)

~~15. Subsequent Events~~

~~On July 13, 2018,~~additional discretionary $15.0 million term loan facility available upon the ~~lender~~Company’s request and approval by SVB and the lenders. The Company drew $15.0 million in term loans on the Closing Date.

The Term Loan will mature on October 1, 2026. Each advance under the Term Loan accrues interest at a floating rate per annum equal to the greater of (i) 8.10% and (ii) the Prime Rate plus 4.85%. The Term Loan payments are interest only from the Closing Date through November 1, 2024, after which the Company is required to pay equal monthly installments of principal and accrued interest through October 1, 2026.The Term Loans may be prepaid in full through November 2, 2022 with payment of a 1.50% prepayment premium, after which they may be prepaid in full through November 2, 2023 with payment of a 1.00% prepayment premium, after which they may be prepaid in full with no prepayment premium. An additional final payment of 9.00% of the ~~Loan Agreement exercised its common stock warrants to purchase 6,850 shares~~amount of ~~common stock on a net basis, resulting~~Terms Loans advanced by the lenders will be due upon prepayment or repayment of the Term Loans in ~~the issuance of 6,091 shares of common stock.~~

full.

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 consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form10-Q and our audited consolidated financial statements and related ~~footnotes~~notes for the year ended December 31, ~~2017~~2020 included in our Annual Report on Form 10-K for the ~~final prospectus for our initial public offering dated June 20, 2018.~~year ended December 31, 2020. Some of the information contained in this discussion and analysis or set forth elsewhere in this ~~report,~~Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties and assumptions. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in ~~Item 1A of Part II of this report,~~our Annual Report on Form 10-K for the year ended December 31, 2020, as supplemented by our subsequent filings with the SEC.

Overview

We are a ~~Phase 2 clinical stage~~leading clinical-stage gene therapy company with a mission to free people from a lifetime of genetic disease. Our company is focused on developing potentially curativeex vivo lentiviral-based gene therapies to treat patients with rare diseases following a single ~~dose.~~dose treatment regimen. Our gene therapies employ hematopoietic stem cells that are ~~extracted~~harvested from the patient and then modified with a lentiviral ~~vectors~~vector to insert the equivalent of a functional copy of the gene that is defective in the target disease. We believe that our approach, which is designed to transform stem cells from patients into therapeutic products, has the potential to provide curative benefit ~~in an outpatient setting~~ for a range of diseases. Our initial focus is on a group of rare genetic diseases referred to as lysosomal ~~storage diseases,~~disorders, some of which today are primarily managed with enzyme replacement therapies, or ERTs. These lysosomal disorders have well-understood biologies, identified patient populations, established standards of care yet with significant unmet needs, and represent large market opportunities with approximately $4.8 billion in worldwide net sales in 2020.

Our initial pipeline is comprised of six lentiviral-based gene therapy programs: AVR-RD-01 for the treatment of Fabry disease; AVR-RD-04 for the treatment of cystinosis; AVR-RD-02 for the treatment of Gaucher disease type 1; AVR-RD-06 for the treatment of Gaucher disease type 3; AVR-RD-05 for the treatment of Hunter syndrome; and AVR-RD-03 for the treatment of Pompe disease.

AVR-RD-01 is currently being evaluated for the treatment of Fabry disease in an investigator-sponsored Phase 1 clinical trial and a Company-sponsored Phase 2 clinical trial. Five patients have been dosed in the investigator-sponsored Phase 1 clinical trial of AVR-RD-01, and enrollment is complete. Nine patients have been dosed in our Company-sponsored Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial, and we are actively recruiting additional potential patients for our currently active sites. We recently amended the FAB-GT clinical trial protocol in the United States to include female participants, eliminate the antibody-status exclusion and collect additional CNS and cardiovascular data, and we plan to submit such amendment in other jurisdictions where we have active clinical sites. In September 2021 we received feedback from the Food and Drug Administration, or FDA, on chemistry, manufacturing and controls, or CMC, requirements for our planned registration trial of AVR-RD-01. Additionally, we plan to engage the FDA in the first quarter of 2022 to obtain feedback on our revised clinical trial design. We are currently aiming to initiate a registration trial in mid-2022, subject to implementing certain modifications to our CMC plans and subject to feedback from the FDA on our proposed trial design.

AVR-RD-04 is currently being studied for the treatment of cystinosis by our collaborators at the University of California, San Diego, or UCSD, in a Phase 1/2 investigator-sponsored clinical trial, and three patients have been dosed. Subject to regulatory clearance we are planning to initiate a Company-sponsored clinical trial of AVR-RD-04 in the second half of 2022.

Two patients have been dosed in our Company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for the treatment of Gaucher disease type 1, which we refer to as the Guard1 clinical trial, and we are actively recruiting additional potential patients for our currently active sites.

AVR-RD-06 is our program for the treatment of Gaucher disease type 3, for which we are planning to initiate a potential registration trial in the second half of 2022, subject to regulatory clearance.

AVR-RD-05 is being studied for the treatment of Hunter syndrome by our collaborators at The University of Manchester, and a Phase 1/2 investigator-sponsored clinical trial is expected to commence in the second half of 2022.

Our AVR-RD-03 program for Pompe disease is currently in preclinical development, with IND-enabling proof-of-concept preclinical studies completed, toxicology studies expected to be completed in 2021 and a Company-sponsored clinical trial being planned for 2022, subject to regulatory clearance.

We are initially targeting rare diseases in which current standard of care provides the mechanistic proof that the enzymes or proteins produced endogenously following treatment with our gene therapies can offer benefit to patients. Typically in lysosomal storage diseases, a gene mutation results in the deficiency or malfunctioning of an enzyme or other protein. This results in the inability of lysosomes to properly process cellular byproducts. As a result, these byproducts accumulate to toxic levels in the body’s cells and, in turn, disrupt the function of multiple tissues and organs. Fabry disease, Gaucher disease and Pompe disease are primarily managed by~~bi-weekly,~~ multi-hour infusions with ERTs that seek to exogenously replace the missing enzyme. However, given the characteristics of most ERTs, they typically only remain in the plasma for a short period of time and thus, are not ideal because they are only dosed every two weeks. These existing therapies manage, rather than cure, the underlying diseases and, as a result, patients continuecurrently expect to have ~~disease progression. Further,~~dosed an aggregate of 20 to 25 patients across our pipeline by the ~~frequent, periodic and life-long dosing schedule required for ERTs results in significant costs for the healthcare system and is burdensome for the patient.~~

We seek to develop promising gene therapy programs by applying our expertise in gene and cellular therapies and clinical and regulatory strategy and execution to efficiently bring these potentially curative therapies to patients. In our initial programs, we leverage yearsend of extensive preclinical and early clinical research by leading researchers, as well as our internal research efforts, to advance potential therapies. We plan to identify and develop future product candidates through our own internal research efforts as well as through collaborations with leading academics.2021.

Since our inception in 2015, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights, conducting discovery, research and development activities for our programs and planning for potential commercialization. ~~We do not have any products approved for sale and~~To date, we have not generated any product revenue ~~from product sales. To date, we~~and have ~~funded~~financed our operations ~~with proceeds from~~primarily through the ~~sales~~private placement of ~~preferred stock~~our securities and through public offerings of our ~~initial public offering of~~ common ~~stock, or our initial public offering (the “IPO”).~~stock. Through ~~June~~September 30, ~~2018,~~ 2021, we had received gross cash proceeds of $87.5 million from ~~the~~ sales of our preferred ~~stock~~stock; gross cash proceeds, before deducting underwriting discounts and ~~$114.7~~commissions and expenses, of $428.1 million from ~~the~~ sales of our common stock through our ~~IPO. Since~~initial public offering and follow-on offerings; and gross cash proceeds, before deducting commissions and expenses, of $23.5 million from sales of our ~~inception,~~common stock through our “at-the-market,” or ATM, facility.

Additionally, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates and programs. Our net losses were ~~$18.7~~$90.9 million and ~~$4.6~~$91.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2021 and ~~2017,~~2020, respectively. As of ~~June~~September 30, ~~2018~~2021, we had an accumulated deficit of ~~$44.1~~$355.3 million. We expect to continue to incur significant expenses for at least the next several years as we advance our current and future product candidates from discovery through preclinical development and clinical trials and seek regulatory approval of our product candidates. We have expanded the number of programs in our pipeline to a total of six investigational gene therapies, three of which are currently in clinical development. As a result, further development of these programs will require us to expend significant resources to advance these candidates. 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. We may also incur expenses in connection with thein-licensing or acquisition of additional product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

~~As a result, we~~We will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations with proceeds from outside sources, with a majority of such proceeds to be derived from sales of equity, including the net proceeds from our ~~IPO.~~follow-on offerings and sales of common stock under our ATM facility, as well as proceeds from our recently announced Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders, and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. We may also ~~plan to~~ pursue additional funding from outside sources, including our expansion of, or our entry into, new borrowing

arrangements; research and development incentive payments from the Australian government; and our entry into potential future collaboration agreements for one or more of our programs. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potentialin-licenses or acquisitions.

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

As of ~~June~~September 30, ~~2018,~~2021, we had cash and cash equivalents of ~~$155.0~~$201.4 million. We believe that our existing cash and cash equivalents as of ~~June~~September 30, ~~2018~~2021, together with the $15.0 million drawn at close from our Term Loan Agreement, will enable us to fund our operating expenses and capital expenditure requirements into ~~2020.~~the fourth quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.” To finance our operations beyond that point, we will need to raise additional capital, which cannot be assured.

COVID-19 Update

As the global healthcare community responded to the COVID-19 pandemic, in 2020 many hospitals, including our clinical sites, temporarily paused elective medical procedures, including dosing of new patients in clinical trials of our investigational gene therapies. While dosing of new patients and data collection from enrolled patients has resumed at clinical sites, the extent to which clinical activities continue to be delayed or interrupted will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and variants of the virus that causes the disease, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. We ~~recently dosed~~have continued our work-from-home policy for most employees, excluding our laboratory staff and a limited number of non-laboratory employees. For those employees, we have implemented safety measures designed to comply with applicable federal, state and local guidelines in response to the ~~first patient~~ongoing COVID-19 pandemic. We may be required to take additional actions that impact our operations as required by applicable laws or regulations, or which we determine to be in the best interests of our employees.

We continue to closely monitor this rapidly evolving situation and the potential impact on our Company. For additional information regarding the impact of the ongoing ~~Phase 2~~COVID-19 pandemic on our business, please see the section titled “Risk Factors” in Part II, Section 1.A of this Quarterly Report.

Other Updates

In October 2021, we reported new interim safety data from our FAB-GT clinical trial ofAVR-RD-01 for the treatment of Fabry ~~disease. We recently held apre-IND~~ ~~meeting with the FDA to discuss the requirements to commence clinical trials in the United States. We expect to open a U.S. site for~~disease and our ~~ongoing Phase 2~~Guard1 clinical trial of~~AVR-RD-01~~ ~~in 2019.~~ AVR-RD-02 for the treatment of Gaucher disease type 1 at the virtual 28th Annual Congress of the European Society of Gene & Cell Therapy. In addition, ~~on July 11, 2018,~~we debuted our new approach to safety monitoring involving high-resolution molecular biology follow-up that is designed to enable the collection and monitoring of integration sites for individual cell types and at different stages of cell maturation.

We recently announced the appointment of Essra Ridha, M.D., MRCP, FFPM, as the Company’s new Chief Medical Officer. Dr. Ridha’s employment with us commenced in October 2021.

In October 2021, the FDA granted rare pediatric disease designation (RPDD) for AVR-RD-05 for the treatment of Hunter syndrome. Under this program, if AVR-RD-05 is approved by the FDA then the Company may qualify for a ~~third patient was dosed in the ongoing investigator-sponsored Phase 1 clinical trial~~voucher that can be redeemed to receive a priority review of~~AVR-RD-01~~ a subsequent marketing application for ~~Fabry disease.~~a different product candidate.

Components of Our Consolidated Results of Operations

~~Revenue~~

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If development efforts for our product candidates are successful and result in regulatory approval or additional license agreements with third parties, we may generate revenue in the future from product sales.

Operating Expenses

Research and Development Expenses

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

~~license maintenance fees and milestone fees~~consist of costs incurred in connection with ~~various license agreements;~~

the development of our product candidates, including:

expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•
license maintenance fees and milestone fees incurred in connection with various license agreements;

~~manufacturingscale-up~~ ~~expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;~~
•
expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;

~~employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;~~
•
manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;

~~costs related to compliance with regulatory requirements; and~~
•
costs of purchasing lab supplies and non‑capital equipment used in our preclinical activities;

~~allocated facilities costs, depreciation and other expenses, which include rent and utilities.~~
•
employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

•

costs related to compliance with regulatory requirements; and

•

allocated facilities costs, depreciation and other expenses, which include rent and utilities.

We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

Our direct research and development expenses are tracked on aprogram-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs, and central laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee the research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track their costs by program.

The table below summarizes our research and development expenses ~~incurred by program:~~related to our product candidates (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		Three Months Ended September 30,				Nine Months Ended September 30,
	(in thousands)								2021		2020		2021		2020
Fabry	$	2,519	$	864	$	4,407	$	1,251	$	3,356	$	2,375	$	9,143	$	8,416
Gaucher		1,579		174		2,434		265		1,409		2,177		5,887		5,775
AML		—		—		46		166
Pompe										1,705		1,757		2,413		4,499
Cystinosis		129		—		277		—		2,243		319		3,270		1,208
Pompe		237		—		384		—
Hunter										1,520		8,000		1,872		8,000
Other research activities										—		569		116		4,728
Unallocated research and development expenses		2,943		843		5,506		1,633		12,810		13,312		41,413		35,023

Total research and development expenses	$	7,407	$	1,881	$	13,054	$	3,315	$	23,043	$	28,509	$	64,114	$	67,649

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years, particularly as we increase personnel costs, including stock-based compensation, contractor costs and facilities costs, as we continue to advance the development of our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates.

The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

~~the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;~~
•
the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;

~~establishing an appropriate safety profile withIND-enabling~~ ~~studies;~~
•
the impact of the ongoing COVID-19 pandemic on our preclinical development activities, clinical trials and other research and development activities;

~~successful patient enrollment in, and the initiation and completion of, clinical trials;~~
•
establishing an appropriate safety profile with IND-enabling studies;

~~the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;~~
•
successful patient enrollment in, and the design, initiation and completion of, clinical trials;

~~establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;~~
•
the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

~~development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;~~
•
establishing and maintaining clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers;

~~obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;~~
•
development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

~~significant and changing government regulation;~~
•
obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

~~launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and~~
•
significant and changing government regulation;

~~maintaining a continued acceptable safety profile of the product candidates following approval.~~
•
launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and

•

maintaining a continued acceptable safety profile of the product candidates following approval.

We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the ~~U.S. Food and Drug Administration, or~~ FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our planned clinical trials for any reason, including as a result of the ongoing COVID-19 pandemic, we could be required to

expend significant additional financial resources and time on the completion of clinical development of that product candidate. 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.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits, travel and stock-based compensation expense for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company. We anticipate the additional costs for these services will substantially increase our general and administrative expenses. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidate.

Other (Expense) Income, ~~(Expense)~~Net

~~Interest Income~~

~~Interest~~Other (expense) income, net primarily consists of interest income earned on ~~money market funds~~our cash and ~~other bank deposits.~~

~~Other Expense~~

~~Other expense consists of foreign exchange gain or loss.~~

~~Change in Fair Value of Preferred Stock Warrant Liability~~

In connection with entering into our loan agreement, we agreed to issue a warrant to purchase shares of our preferred stock to the lender. Prior to the completion of the IPO, we classified the warrant as a liability on our consolidated balance sheetcash equivalents and ~~we were required to remeasure to fair value at each reporting date. We recognized~~ changes in the fair value of the warrant liability as a component of other income (expense), net in our consolidated statements of operations and comprehensive loss. Upon the IPO, the warrant to purchase preferred stock was converted to a warrant to purchase common stock. The carrying amount of the warrant to purchase preferred stock as of the date of IPO was transferred to additional paid in capital. No further revaluation needed for the warrant to purchase common stock.foreign currency.

~~Change in Fair Value of Derivative Liability~~

Our stock purchase agreement with University Health Network, or UHN, provides for a payment to UHN upon completion of an initial public offering, which included our June 2018 IPO, if UHN’s fully-diluted percentage ownership of our company is reduced within a range of specified percentages. We classify the IPO dilution payment obligation as a liability on our consolidated balance sheet and we are required to remeasure to fair value at each reporting date. We recognize changes in the fair value of the derivative liability as a component of other income (expense), net in our consolidated statements of operations and comprehensive loss. On June 21, 2018, in connection with our IPO, we remeasured the fair value of the derivative liability to $2.0 million as we were required to pay the dilution payment as mentioned above, which was paid in July 2018.

Consolidated Results of Operations

Comparison of the ~~Three Months Ended June~~three months ended September 30, ~~2018~~2021 and ~~2017~~2020

The following table summarizes our consolidated results of operations ~~for the three months ended June 30, 2018 and 2017:~~(in thousands):

	Three Months Ended September 30,
	2021			2020			Change
Operating expenses:
Research and development	$	23,043		$	28,509		$	(5,466	)
General and administrative		9,577			8,209			1,368
Total operating expenses		32,620			36,718			(4,098	)
Loss from operations		(32,620	)		(36,718	)		4,098
Other (expense) income:
Interest income		2			12			(10	)
Other expense		5			(74	)		79
Total other (expense) income, net		7			(62)			69
Net loss	$	(32,613	)	$	(36,780	)	$	4,167

   Three Months
Ended June 30,    Change
   2018    2017
   (in thousands)
Operating expenses:

Research and development
   $ 7,407    $ 1,881    $ 5,526
General and administrative
   2,140    661    1,479






Total operating expenses
   9,547    2,542    7,005






Loss from operations
   (9,547 )    (2,542 )    (7,005 )
Other income (expense):

Interest income
   234    11    223
Change in fair value of preferred stock warrant liability
   (150 )    —      (150 )
Change in fair value of derivative liability
   (1,042 )    (3 )    (1,039 )
Other expense
   (2 )    —      (2 )






Total other expense, net
   (960 )    8    (968 )






Net loss
   $ (10,507 )    $ (2,534 )    $ (7,973 )

Research and Development Expenses

   Three Months
Ended June 30,    Change
   2018    2017
   (in thousands)
Direct research and development expenses by program:

Fabry
   $ 2,519    $ 864    $ 1,655
Gaucher
   1,579    174    1,405
Cystinosis
   129    —      129
Pompe
   237    —      237
Unallocated research and development expenses:

Personnel related (including stock-based compensation)
   2,123    646    1,477
Other
   820    197    623






Total research and development expenses
   $ 7,407    $ 1,881    $ 5,526

Research and development expenses ~~were $7.4~~decreased by approximately $5.5 million to $23.0 million for the three months ended ~~June~~September 30, ~~2018, compared to $1.9~~2021, from $28.5 million for the three months ended ~~June~~September 30, ~~2017. The increase of $5.5~~2020. This decrease was driven by the $8.0 million ~~was primarily due to increases of $1.7 million in direct costs~~upfront license fee paid for ~~our Fabry~~the Hunter program $1.4 million in direct costs connected with our Gaucher program, $0.1 million in direct costs related to our Cystinosis program, $0.2 million in direct costs connected with our Pompe program and $2.1 million in research and discovery and unallocated costs, which primarily consisted of personnel-related costs due to the increase in research and development employee headcount.

~~The increase in direct costs for our Fabry program was primarily due to CMO fees of $0.7 million, CRO fees of $0.3 million, as well as process development costs and consulting fees of $0.6 million.~~

~~The increase in direct costs for our Gaucher program was primarily due to CMO fees of $0.8 million, as well as CRO fees and consulting fees of $0.3 million.~~

~~The increase in direct costs for our Cystinosis program was primarily due to consulting fees of $0.1 million.~~

~~The increase in direct costs for our Pompe program was primarily due to process development costs of $0.2 million.~~

The increase in research and discovery and unallocated costs was primarily due to an increase of $1.5 million in personnel-related costs, including stock-based compensation, as a result of hiring additional personnel in our research and development department, an increase of $0.4 million in unallocated research and development costs and an increase of $0.3 million in unallocated facility costs and rent expense. Personnel-related costs forduring the three months ended ~~June~~September 30, ~~2018~~2020, offset by a $2.5 million increase in program development activities related to the advancement of our pipeline programs during the three months ended September 30, 2021. The $2.5 million increase in program development activities included a $0.4 million increase in personnel-related costs, a $1.8 million increase in clinical costs, and ~~2017 included~~a $3.8 million increase in manufacturing costs. These increases were offset by a $2.9 million decrease in preclinical costs and a $0.7 million decrease in non-cash stock-based ~~compensation expense of $0.2 million and less than $0.1 million, respectively.~~compensation.

General and Administrative Expenses

General and administrative expenses were ~~$2.1~~$9.6 million for the three months ended ~~June~~September 30, ~~2018,~~2021, compared to ~~$0.7~~$8.2 million for the three months ended ~~June~~September 30, ~~2017.~~2020. The increase of ~~$1.5~~$1.4 million was ~~primarily due~~attributable to ~~increases~~an increase of ~~$0.9~~

$0.8 million in personnel-related costs ~~including~~and a $1.1 million increase in non-cash stock-based compensation, ~~$0.3 million~~offset in ~~consulting expense, $0.2 million~~part by a decrease in other expenses, primarily related to facilities costs, professional fees and ~~$0.1 million in facility expense. The increase in personnel-related costs was due to the hiring~~legal fees, of additional personnel in our general and administrative functions, including the hiring of our Chief Financial Officer (“CFO”) in late 2017. Professional fees increased due to costs associated with the preparation of our financial statements, preparing to become a publicly traded company, as well as ongoing business operations. The increase in facility expense was primarily due to the addition of increased office space as a result of the continued growth of the employee headcount.

~~Other Income (Expense), net~~$0.5 million.

Other ~~income~~(Expense) Income, Net

Other (expense), net, was ~~an expense of $1.0 million for the three months ended June 30, 2018, compared to an income~~ less than $0.1 million for the three months ended ~~June~~September 30, ~~2017. The~~2021 and 2020, and primarily consisted of interest income and foreign currency gains recognized during the period.

Comparison of the nine months ended September 30, 2021 and 2020

	Nine Months Ended September 30,
	2021			2020			Change
Operating expenses:
Research and development	$	64,114		$	67,649		$	(3,535	)
General and administrative		26,765			24,515			2,250
Total operating expenses		90,879			92,164			(1,285	)
Loss from operations		(90,879	)		(92,164	)		1,285
Other (expense) income:
Interest income		21			706			(685	)
Other expenses		(41	)		(123	)		82
Total other (expense) income, net		(20	)		583			(603	)
Net loss	$	(90,899	)	$	(91,581	)	$	682

Research and Development Expenses

Research and development expenses decreased by approximately $3.5 million to $64.1 million for the nine months ended September 30, 2021, from $67.6 million for the nine months ended September 30, 2020. This decrease was driven by the $8.0 million upfront license fee we paid for our Hunter program during the nine months ended September 30, 2020, offset by a $4.5 million increase in ~~other expense~~program development activities related to the advancement of ~~$1.0~~our pipeline programs during the nine months ended September 30, 2021. The $4.5 million ~~was primarily due to~~ increase ~~of $1.0~~in program development activities included a $6.1 million increase in ~~the change~~personnel-related costs, a $3.7 million increase in ~~fair value of derivative liability~~clinical costs, and ana $2.5 million increase ~~of $0.2 million~~ in ~~the change in fair value of preferred stock warrant liability,~~manufacturing costs. These increases were partially offset by a ~~$0.2~~$7.6 million ~~increase~~decrease in ~~interest income.~~preclinical costs.

~~Comparison of the Six Months Ended June 30, 2018 and 2017~~

~~The following table summarizes our consolidated results of operations for the six months ended June 30, 2018 and 2017:~~

   Six Months
Ended June 30,
   2018    2017    Change
   (in thousands)
Operating expenses:

Research and development
   $ 13,054    $ 3,315    $ 9,739
General and administrative
   4,281    1,271    3,010






Total operating expenses
   17,335    4,586    12,749






Loss from operations
   (17,335 )    (4,586 )    (12,749 )
Other income (expense):

Interest income
   392    15    377
Change in fair value of preferred stock warrant liability
   (162 )    —      (162 )
Change in fair value of derivative liability
   (1,629 )    (35 )    (1,594 )
Other expenses
   (15 )    (5 )    (10 )






Total other expense, net
   (1,414 )    (25 )    (1,389 )






Net loss
   $ (18,749 )    $ (4,611 )    $ (14,138 )

~~Research and Development Expenses~~

   Six Months
Ended June 30,
   2018    2017    Change
   (in thousands)
Direct research and development expenses by program:

Fabry
   $ 4,407    $ 1,251    $ 3,156
Gaucher
   2,434    265    2,169
AML
   46    166    (120 )
Cystinosis
   277    —      277
Pompe
   384    —      384
Unallocated research and development expenses:

Personnel related (including stock-based compensation)
   3,743    1,281    2,462
Other
   1,763    352    1,411






Total research and development expenses
   $ 13,054    $ 3,315    $ 9,739

Research and development expenses were $13.1 million for the six months ended June 30, 2018, compared to $3.3 million for the six months ended June 30, 2017. The increase of $9.7 million was primarily due to increases of $3.2 million in direct costs for our Fabry program, $2.2 million in direct costs connected with our Gaucher program, $0.3 million in direct costs related to our Cystinosis program, $0.4 million in direct costs related to our Pompe program and $3.9 million in research and discovery and unallocated costs, all partially offset by a decrease of $0.1 million in direct costs for our AML program as we shifted our focus onto developing our other programs.

~~The increase in direct costs for our Fabry program was primarily due topre-clinical,~~ ~~clinical and process development costs of $1.4 million, CMO fees of $0.7 million, as well as CRO and consulting fees of $1.0 million.~~

~~The increase in direct costs for our Gaucher program was primarily due to CMO fees of $0.8 million, process development costs of $0.9 million, as well as CRO and consulting fees of $0.3 million.~~

~~The increase in direct costs for our Cystinosis program was primarily due to consulting fees of $0.3 million.~~

~~The increase in direct costs for our Pompe program was primarily due to development costs of $0.3 million.~~

The increase in research and discovery and unallocated costs was primarily due to an increase of $2.5 million in personnel-related costs, including stock-based compensation, as a result of hiring additional personnel in our research and development department, an increase of $0.5 million in unallocated research and development costs, and an increase of $0.8 million in unallocated facility costs and rent expense. Personnel-related costs for the six months ended June 30, 2018 and 2017 included stock-based compensation expense of $0.2 million and less than $0.1 million, respectively.

General and Administrative Expenses

General and administrative expenses were ~~$4.3~~$26.8 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2021, compared to ~~$1.3~~$24.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2017.~~2020. The increase of ~~$3.0~~$2.3 million was ~~primarily due~~attributable to ~~increases~~an increase of ~~$1.4~~$1.8 million in personnel-related costs ~~including~~and a $3.1 million increase in non-cash stock-based compensation, ~~$1.0~~offset in part by a decrease of $1.3 million in consulting ~~expense, $0.4 million~~costs and a decrease in other expenses, primarily related to facilities costs, professional fees and ~~$0.1 million in~~ legal ~~expense. The increase in personnel-related costs was due to the hiring~~fees, of additional personnel in our general and administrative functions, including the hiring of our CFO in late 2017. Professional fees increased due to costs associated with the preparation of our consolidated financial statements, preparing to become a publicly traded company, as well as ongoing business operations.

~~Other Income (Expense), net~~$1.3 million.

Other ~~income~~(Expense) Income, Net

Other (expense), net, was ~~an expense of $1.4 million for the six months ended June 30, 2018, compared to an expense~~ less than $0.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2017. The increase in other expense~~2021, and primarily consisted of ~~$1.4 million was primarily due to an increase of $1.6 million in~~foreign currency losses recognized during the change in fair value of derivative liability and an increase of $0.2 million in the change in fair value of preferred stock warrant liability, partially offset by a $0.4 million increase in interest income.period.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of preferred stock and our common stock through our ~~IPO.~~ IPO, and we have raised additional capital through subsequent follow-on offerings and our ATM facility.Through ~~June~~September 30, ~~2018,~~ 2021, we had received gross cash proceeds of $87.5 ~~and $114.7~~ million from sales of our preferred stock; gross cash proceeds, before deducting underwriting discounts and commissions and expenses, of $428.1 million from sales of our common stock through our initial public offering and ~~IPO, respectively.~~follow-on offerings; and gross cash proceeds, before deducting commissions and expenses, of $23.5 million from sales of our common stock under our ATM facility.

On July 1, 2019, we filed a shelf registration statement on Form S-3 with the SEC, or the July 2019 Shelf, which covers the offering, issuance and sale by us of up to an aggregate of $200.0 million of our common stock, preferred stock, debt securities, warrants and/or units. We simultaneously entered into a Sales Agreement with Cowen and Company, LLC, as sales agent, to provide for the offering, issuance and sale by us of up to $50.0 million of our common stock from time to time in ATM offerings under the July 2019 Shelf. The July 2019 Shelf was declared effective by the SEC on July 10, 2019.

On December 20, 2019, we filed a shelf registration statement on Form S-3 with the SEC, or the December 2019 Shelf, which covers the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units. The December 2019 Shelf was declared effective by the SEC on January 14, 2020.

In July 2019, we closed an underwritten public offering, or the July 2019 Follow-On Offering, under the July 2019 Shelf of 7,475,000 shares of our common stock at a public offering price of $18.50 per share, which included 975,000 shares of our common stock resulting from the full exercise of the underwriters’ option to purchase additional shares at the public offering price. The net proceeds to us from this offering, after deducting underwriting discounts and commissions and other offering expenses payable by us, were $129.5 million.

In February 2020, we closed an underwritten public offering, or the February 2020 Follow-On Offering, under the December 2019 Shelf of 4,350,000 shares of our common stock at a public offering price of $23.00 per share. The net proceeds to us from this offering, after deducting underwriting discounts and commissions and other offering expenses payable by us, were $93.6 million.

In June 2020, we sold an aggregate of 384,140 shares of common stock under the ATM facility for net proceeds, after deducting commissions and other offering expenses payable by us, of $8.1 million.

In November 2020, we closed an underwritten public offering, or the November 2020 Follow-On Offering, of 5,000,000 shares of our common stock at a public offering price of $15.00 per share. The net proceeds to us from the November 2020 Follow-On Offering, after deducting underwriting discounts and commissions and other offering expenses payable by us, were $70.2 million.

In May 2021, we sold an aggregate of 1,829,268 shares of common stock under the ATM facility for net proceeds, after deducting commissions and other offering expenses payable by us, of $14.5 million. As of September 30, 2021, approximately $26.5 million of common stock remained available for future issuance under the ATM facility.

On November 2, 2021, or the Closing Date, we entered into the Term Loan Agreement. The Term Loan Agreement provides for (i) on the Closing Date, $30.0 million aggregate principal amount of term loans available through October 31, 2023; (ii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory milestones prior to the time of draw; (iii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory or clinical milestones prior to the time of draw; and (iv) an additional discretionary $15.0 million term loan facility available upon our request and approval by the Agent and the Lenders, or, collectively, the Term Loans. We drew $15.0 million in term loans on the Closing Date. The loan repayment schedule provides for interest only payments until November 1, 2024, followed by consecutive monthly payments of principal and interest. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on October 1, 2026.

As of September 30, 2021, we had cash and cash equivalents of $201.4 million. Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation. We believe that our existing cash and cash equivalents as of September 30, 2021, together with the $15.0 million drawn at the closing of the Term Loan Agreement, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023.

Cash Flows

The following table summarizes our cash flows for each of the periods ~~presented:~~presented (in thousands):


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2021			2020
Net cash used in operating activities	$	(14,229	)	$	(4,458	)	$	(72,128	)	$	(68,315	)
Net cash used in investing activities		(400	)		(62	)		(1,611	)		(1,096	)
Net cash provided by financing activities		163,681			3,436			15,426			101,914

Net increase (decrease) in cash and cash equivalents	$	149,052		$	(1,084	)

Net (decrease) increase in cash and cash equivalents							$	(58,313	)	$	32,503

Operating Activities

During the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2021, operating activities used ~~$14.2~~$72.1 million of cash, ~~and~~ cash equivalents and restricted cash, resulting from our net loss of ~~$18.7~~$90.9 million ~~partially~~ offset by~~non-cash~~ ~~charges of $2.7 million and net~~ cash provided by changes in our operating assets and liabilities of ~~$1.9~~$3.5 million and non-cash charges of $15.3 million. ~~Thenon-cash~~ charges primarily included $0.6 million of stock-based compensation, $1.6 million of change in fair value of derivative liability and $0.2 million of change in fair value of preferred stock warrant liability. The net changes in our operating assets and liabilities ~~was~~were primarily due to ~~increases~~an increase in accrued expenses and other liabilities of ~~$3.0~~$5.6 million, ~~due to ongoing research, development, and clinical trial efforts and partially~~ offset by ~~increases~~a $2.7 million increase in ~~assets~~prepaids and other current assets. The non-cash charges primarily included $14.5 million of ~~$1.2~~stock-based compensation expense and $1.0 million ~~including an increase due to a $0.2 million security deposit for a new lease that was executed in 2018.~~of depreciation and amortization expense.

During the ~~six~~nine months ended ~~June~~September 30, ~~2017,~~2020, operating activities used ~~$4.5~~$68.3 million of cash, ~~and~~ cash equivalents and restricted cash, resulting from our net loss of ~~$4.6~~$91.6 million ~~and net~~partially offset by cash ~~used~~provided by changes in our operating assets and liabilities of ~~$0.1~~$11.0 million ~~primarily offset by~~and non-cash charges of ~~$0.3~~$12.3 million.

~~Investing Activities~~

~~During the six months ended June 30, 2018, we used $0.4~~ The net changes in our operating assets and liabilities were primarily due to an increase in accrued expenses and other liabilities of $12.9 million due to ongoing preclinical, manufacturing, and clinical trial efforts, a decrease in other assets of $0.2 million, offset by a $0.8 million increase in prepaids and other current assets and a decrease of $1.3 million in accounts payable. The non-cash charges primarily included $11.5 million of stock-based compensation expense and $0.9 million of depreciation and amortization expense.

Investing Activities

Net cash ~~and cash equivalents~~used in investing activities ~~consisting of purchases of property and equipment. During~~was $1.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2017, we~~2021 compared to $1.1 million for the nine months ended September 30, 2020. The increase in cash used ~~less than $0.1 million of cash and cash equivalents~~in investing activities was primarily due to an increase in purchases of property and equipment.

Financing Activities

~~During the six months ended June 30, 2018, net~~Net cash provided by financing activities was ~~$163.7~~$15.4 million ~~primarily consisting of net cash proceeds of $105.4 million from our IPO in June 2018 and net cash proceed of $58.3 million from our issuance of Series B preferred stock in January 2018.~~

~~During~~for the ~~six~~nine months ended ~~June~~September 30, ~~2017, net~~2021 compared to $101.9 million for the nine months ended September 30, 2020. The decrease in cash provided by financing activities was ~~$3.4 million, consisting of net cash proceeds from our issuance of Series A preferred stock in March 2017.~~

~~Term Loan Agreement~~

~~In June 2017, we entered into a Loan and Security Agreement, which we refer to as the Loan Agreement, with Silicon Valley Bank, or SVB, providing a senior securednon-revolving~~ ~~loan facility of up to an aggregate principal amount of $10.0 million, available for us to draw down in three tranches until October 31, 2018, subject~~primarily due to the ~~satisfaction~~proceeds of ~~certain milestones for each tranche. As of June 30, 2018, we had not drawn down~~$93.6 million raised from the ~~facility~~February Follow-On Offering during the nine months ended September 30, 2020.

Funding Requirements

Notwithstanding the impact of the evolving COVID-19 pandemic on our company and the ~~$3.5 million first tranche was available.~~

~~The first tranche of $3.5 million was made available upon entry into the Loan Agreement as~~global economy generally, we satisfied the borrowing conditions at such time. The second tranche of $3.5 million will be made available after the funding of the first tranche amounts and upon confirmation by SVB that either we have met certain clinical and developmental milestones, or we have subsequently obtained at least $7.5 million in cash proceeds from the sale of our equity securities from investors reasonably acceptable to SVB. The third tranche of $3.0 million will be made available after the funding of the first and second tranche amounts and upon confirmation by SVB that we have subsequently obtained at least an additional $6.5 million in cash proceeds from the sale of our equity securities to investors reasonably acceptable to SVB, and we have received a signed and enforceable term sheet from investors acceptable to SVB committing to provide financing on or before March 31, 2018 in an amount equal to at least 12 months of operating expenses. In January 2018, we received gross cash proceeds of $60.5 million from the sale of our Series B preferred stock.

Any outstanding principal amounts under the Loan Agreement will accrue interest at a floating per annum rate equal to the greater of 1% and the “prime rate,” as published in the Wall Street Journal, minus 3%. Payments on the Loan Agreement are interest only, payable monthly in arrears, until November 1, 2018, which can be extended by six months if the third tranche is drawn. Thereafter, principal and interest amounts are repayable over a~~30-month~~ ~~period, unless the third tranche is funded and the initial interest-only period is extended by six months, in which case principal and interest amounts are repayable over a24-month~~ ~~period.~~

Pursuant to the Loan Agreement, we provided a first priority security interest in all existing and after-acquired assets, excluding intellectual property and certain other assets owned by us. The Loan Agreement contains a negative pledge on our intellectual property.

In connection with the Loan Agreement, we issued a warrant to SVB to purchase shares of our Series A preferred stock at an exercise price of $0.7949 per share. This warrant was initially exercisable for 28,305 shares of Series A preferred stock. Up to an additional 160,397 shares of Series A preferred stock may become subject to this warrant, with the proportion of such additional shares equal to the percentage of the full $10.0 million aggregate principal amount under the Loan Agreement that we draw down thereunder. Following the completion of our IPO, this warrant is initially exercisable for 6,850 shares of common stock, and up to an additional 38,818 shares of common stock may become subject to this warrant.

The Loan Agreement allows us to voluntarily prepay all but not less than all the outstanding amounts thereunder. A scaling prepayment fee of 1% or 0.5% would be assessed if we prepay the amounts within the first anniversary of funding, or between the first and second anniversary of funding, respectively. No prepayment fee would be assessed if we prepay the amounts after the second anniversary of funding. A final payment fee of 6.75% multiplied by the original principal amount of each tranche drawn is due upon the earliest to occur of the maturity date of the Loan Agreement, the termination of the Loan Agreement, the acceleration of the Loan Agreement or repayment or prepayment of such borrowings.

The Loan Agreement contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change in our business, operations or condition, a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of the SVB’s lien in the collateral or in the value of such collateral. In the event of default by us under the Loan Agreement, SVB would be entitled to exercise its remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the Loan Agreement or SVB may take possession of the collateral securing the Loan Agreement.

The Loan Agreement includes certain restrictions on, among other things, our ability to incur additional indebtedness, change the name or location of our business, merge with or acquire other entities, pay dividends or make other distributions to holders of our capital stock, make certain investments, engage in transactions with affiliates, create liens, open new deposit accounts, sell assets or pay subordinated debt.

~~Funding Requirements~~

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. ~~In addition, we expect to incur additional costs associated with operating as a public company that we had not incurred as a private company.~~ Our expenses will also increase as we:

~~continue our development of our product candidates, including continuing enrollment in our recently initiated Phase 2 clinical trial forAVR-RD-01;~~

~~initiate additional clinical trials and preclinical studies for our other product candidates;~~

~~seek to identify and develop orin-license~~ ~~or acquire additional product candidates and technologies;~~

•

continue our development of our product candidates, including continuing enrollment in our ongoing clinical trials and initiating additional clinical and preclinical studies for our current and future product candidates;

•

encounter delays or interruptions in our preclinical studies, clinical trials, or supply chain as a result of the COVID-19 pandemic;

•

seek to identify and develop or in-license or acquire additional product candidates and technologies;

•

seek to industrialize ourex vivo lentiviral gene therapy approach into a robust, scalable and, if approved, commercially viable process;

•

seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

~~seek marketing approvals for our product candidates that successfully complete clinical trials, if any;~~
•
establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;

~~establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;~~
•
hire and retain additional personnel, such as clinical, medical, manufacturing, quality, commercial and scientific personnel;

~~hire and retain additional personnel, such as clinical, quality control, commercial and scientific personnel;~~
•
expand our infrastructure, office space and facilities to accommodate our growing employee base, including adding equipment and physical infrastructure to support our research and development; and

~~expand our infrastructure and facilities to accommodate our growing employee base, including adding equipment and physical infrastructure to support our research and development; and~~

~~continue to transition our organization to operating as a public company.~~

•

continue to incur additional public company-related costs.

We believe that our $201.4 million of existing cash and cash equivalents as of ~~June~~September 30, ~~2018~~2021, together with the $15.0 million drawn on the closing of the Term Loan Agreement, will enable us to fund our operating expenses and capital expenditure requirements into ~~2020.~~the fourth quarter of 2023. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we receive regulatory approval for~~AVR-RD-01~~ or any of our ~~other~~ product candidates, we

expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, government and other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. 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. If we raise additional funds through government and other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

The disclosure of our contractual obligations and commitments is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our ~~final prospectus~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on ~~June 21, 2018.~~March 18, 2021. There have been no significant changes to the table ~~except~~ contained therein as of September 30, 2021.

On November 2, 2021, we entered into the Term Loan Agreement for the new lease signed on January 12, 2018. The lease agreement expires in January 2023, with a landlord who is an affiliate of the landlord of our prior lease facility. The annual lease payments are subjectup to ~~a 3% increase each year. In accordance with the lease agreement, we received a tenant incentive allowance of $842 thousand~~$65.0 million. See “—Liquidity and ~~maintained a security deposit of $209 thousand during the six months ended June 30, 2018. In contemplation of this agreement, we terminated our prior lease agreement.~~Capital Resources.”

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. During the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2021, there were no material changes to our critical accounting policies. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Significant Judgments and Estimates” in our ~~final prospectus dated June 20, 2018~~Annual Report on Form 10-K for the ~~IPO,~~fiscal year ended December 31, 2020, which was filed with the SEC on ~~June 21, 2018~~March 18, 2021, and the notes to the consolidated financial statements included in Item 1, ~~“Condensed~~“Condensed Consolidated Unaudited Financial Statements,” of this Quarterly Reporton Form 10-Q.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may take advantage of these exemptions until we are no longer an emerging growth

company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and, as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held bynon-affiliates (and we have been a public company for at least 12 months and have filed one annual report onForm 10-K) or we issue more than $1.0 billion ofnon-convertible debt securities over a three-year period.

Off-Balance Sheet Arrangements

WeAs of September 30, 2021, we did not have ~~during the periods presented, and we do not currently have,~~ any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the ~~rules and regulations of the Securities and~~ Exchange ~~Commission.~~Act.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, “Summary of Significant Accounting Policies”to our consolidated financial statements appearing at the beginning of this Quarterly Report onForm 10-Q.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

As of ~~June~~September 30, ~~2018,~~2021, we had cash and cash equivalents of ~~$155.0~~$201.4 million, which consisted of ~~cash and~~primarily money market funds. ~~Interest income~~Our primary exposure to market risk is ~~sensitive to~~interest rate sensitivity, which is affected by changes in the general level of U.S. interest ~~rates; however, due~~rates, particularly because our cash equivalents are in held in short-term money market funds. Due to short-term duration of our investment portfolio and the ~~nature~~low risk profile of ~~these~~our investments, an immediate ~~10%~~100 basis point change in interest rates would not have a material ~~impact~~effect on the fair market value of our ~~cash and cash equivalents, financial position or results of operations.~~portfolio.

Foreign Currency Exchange Risk

We are exposed to foreign exchange rate risk. Our headquarters are located in the United States, where the majority of our general and administrative expenses and research and development costs are incurred in U.S. dollars. A portion of our research and development costs are incurred by our subsidiaries in Australia and Canada, whose functional currencies are the U.S. dollar but engage in transactions in Australian dollars and Canadian dollars, respectively. During each of the ~~six~~three months ended ~~June~~September 30, ~~2018~~2021 and ~~2017,~~2020, we recognized foreign currency transaction losses of ~~$15~~$5 thousand and $5$74 thousand, respectively. During each of the nine months ended September 30, 2021 and 2020, we recognized foreign currency transaction losses of $41 thousand and $123 thousand, respectively These losses primarily related to unrealized and realized foreign currency gains and losses as a result of transactions entered into by our Australian and Canadian subsidiaries in currencies other than the U.S. dollar. These foreign currency transaction gains and losses were recorded in other expense, net in our consolidated statements of operations. We believe that a 10% change in the exchange rate between the U.S. dollar, Australian dollar, Great British Pound, and Canadian dollar would not have a material impact on our financial position or results of operations.

As we continue to grow our business, our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could adversely impact our results of operations. To date, we have not entered into any foreign currency hedging contracts to mitigate our exposure to foreign currency exchange risk.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, ~~2018.~~2021. The term “disclosure controls and procedures,” as defined inRules 13a-15(e) and 15d-15(e) under ~~the Securities Exchange Act of 1934, as amended, or~~ the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide

only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. ~~Based~~While we continue to evaluate our disclosure controls and procedures, including new procedures and processes relating to our internal control over financial reporting, based on the evaluation of our disclosure controls and procedures as of ~~June~~September 30, ~~2018,~~2021, our Chief Executive Officer and Chief Financial Officer concluded that as a result of the material weaknesses in our internal control over financial reporting as previously disclosed in our final prospectus for our initial public offering, dated June 20, 2018, filed with the SEC and as described in Part II, Item 1A. of this report, our disclosure controls and procedures were ~~not~~ effective at the reasonable assurance level as of ~~June~~September 30, 2018. Notwithstanding the material weaknesses, our management has concluded that the financial statements included elsewhere in this report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

We are implementing measures, including those described in Part II, Item 1A. of this report, designed to improve our internal control over financial reporting to remediate these material weaknesses. The measures we are implementing are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. We will continue to implement measures to remedy our internal control deficiencies, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses. In addition, until the above remediation steps have been completed and are operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses previously disclosed, and as described above, will continue to exist.2021.

Changes in Internal Control over Financial Reporting

~~Other than the changes intended to remediate the material weaknesses noted above, no~~No change in our internal control over financial reporting (as defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended ~~June~~September 30, ~~2018~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of ~~June~~September 30, ~~2018,~~2021, we doare not ~~believe we are party~~presently subject to any ~~claim~~pending or threatened litigation ~~the outcome of which,~~that we believe, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A.

Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this ~~report,~~Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission, or the SEC, before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common stock. Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Forward-Looking Information” in this Quarterly Report on Form 10-Q.

Risks related to our business, financial position and need for additional capital

We have incurred net losses since inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred net losses. We incurred net losses of ~~$4.7~~$119.7 million and ~~$18.6~~$73.0 million for the years ended December 31, ~~2016~~2020 and ~~2017,~~2019, respectively, and ~~$10.5 million and $18.7~~$90.9 million for the ~~three months and six~~nine months ended ~~June~~September 30, ~~2018, respectively.~~2021. We historically ~~have~~ financed our operations primarily through private placements of our preferred ~~stock.~~stock and, more recently, our initial public offering and follow-on public offerings of our common stock, as well as sales of our common stock under our “at-the-market” facility. In addition, in November 2021 we entered into the Term Loan Agreement. We have devoted substantially all of our efforts to research and development, including clinical and preclinical development of our product candidates, as well as assembling our team. We expect that it will be several years, if ever, before we have commercialized any product candidates. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if, and as, we:

~~continue our development of our product candidates, including continuing enrollment in our recently initiated Phase 2 clinical trial forAVR-RD-01;~~

~~initiate additional clinical trials and preclinical studies for our other product candidates;~~

~~seek to identify and develop orin-license~~ ~~additional product candidates;~~

~~seek marketing approvals for our product candidates that successfully complete clinical trials, if any;~~

~~establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;~~

•

continue our development of our product candidates, including continuing enrollment in our ongoing clinical trials, particularly if and as we commence and continue clinical-stage activities for our product candidates;

•

initiate additional clinical trials and preclinical studies for our current and future product candidates;

•

experience delays or interruptions in preclinical studies, clinical trials, or our supply chain due to the ongoing COVID-19 pandemic;

•

seek to identify and develop or in-license additional product candidates;

•

seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

•

establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;

•

continue our implementation of our plato platform as we seek to industrialize ourex vivo lentiviral gene therapy approach into a robust, scalable and, if approved, commercially viable process;

•

hire and retain additional personnel, such as clinical, quality control, commercial and scientific personnel;

•

expand our office space, infrastructure and facilities to accommodate our growing employee base, including adding equipment and physical infrastructure to support our research and development; and

~~continue to transition our organization to operating as public company.~~
•
continue to incur additional public company-related costs.

To become and remain profitable, we must develop and eventually commercialize product candidates with significant market potential. This will require us to be successful in a range of challenging activities, and our expenses will increase substantially as we

seek to complete preclinical and clinical trials of our product candidates, and manufacture, market and sell these or any future product candidates for which we may obtain marketing approval, if any, and satisfy any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our ~~company~~Company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our ~~company~~Company also could cause you to lose all or part of your investment.

We have never generated revenue from product sales and do not expect to do so for the next several years, if ever.

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, our product candidates. We do not anticipate generating revenues from product sales for the next several years, if ever. Our ability to generate future revenues from product sales depends heavily on our, or our collaborators’, success in:

•

completing research and preclinical and clinical development of our product candidates and identifying new lentiviral-based gene therapy product candidates;

•

seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical trials;

•

launching and commercializing product candidates for which we obtain regulatory and marketing approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner;

•

qualifying for adequate coverage and reimbursement by government and third-party payors for our product candidates;

•

establishing and maintaining supply and manufacturing processes and relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and the market demand for our product candidates, if approved;

•

obtaining market acceptance of our product candidates, if approved, as a viable treatment option;

•

addressing any competing technological and market developments;

•

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements; and

•

attracting, hiring and retaining qualified personnel.

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

As of September 30, 2021, we had cash and cash equivalents of $201.4 million. We believe that our existing cash and cash equivalents as of September 30, 2021, together with the $15.0 million drawn at the closing of our Term Loan Agreement, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate further clinical trials of and seek marketing approval for, our product candidates and continue to enhance and optimize our vector technology and manufacturing processes. Furthermore, we have expanded the number of programs in our pipeline to a total of six investigational gene therapies, three of which are in clinical development. As a result, further development of these programs will require us to expend significant resources to advance these candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution. Furthermore, we 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 when needed or on reasonable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs.

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

~~the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our other product candidates;~~
•
the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our current and future product candidates, including the extent of any impacts from the COVID-19 pandemic on these activities;

•

the costs, timing and outcome of regulatory review of our product candidates;

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the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

~~the costs associated with our manufacturing process development and evaluation of third-party manufacturers~~
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the costs associated with our manufacturing process development and evaluation of third-party manufacturers;

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revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

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

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the terms of our current and any future license agreements and collaborations; and

~~the extent to which we acquire or~~
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the extent to which we acquire or in-license other product candidates, technologies and intellectual property.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, will be derived from or based on sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Our Term Loan Agreement contains restrictions that potentially limit our flexibility in operating our business. In addition, we may be required to make a prepayment or repay our outstanding indebtedness earlier than we expect.

On November 2, 2021, we entered into the Term Loan Agreement, which provides for term loans of up to $65.0 million in the aggregate available in three tranches. The Term Loan Agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

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incur or assume certain debt;

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merge or consolidate or acquire all or substantially all of the capital stock or property of another entity;

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change the nature of our business;

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change our organizational structure or type;

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license, transfer, or dispose of certain assets;

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grant certain types of liens on our assets;

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make certain investments;

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pay cash dividends; and

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enter into material transactions with affiliates.

A breach of any of these covenants could result in an event of default under the Term Loan Agreement. An event of default will also occur if, among other things, a material adverse change in our business, operations, or condition occurs, which could potentially include a material impairment of the prospect of our repayment of any portion of the amounts we owe under the Term Loan Agreement. In the case of a continuing event of default under the Term Loan Agreement, the lenders could elect to declare all amounts outstanding to be immediately due and payable, proceed against the collateral in which we granted the Lenders a security interest under the Term Loan Agreement, or otherwise exercise the rights of a secured creditor. Amounts outstanding under the Term Loan Agreement are secured by all of our existing and future assets, excluding intellectual property, which is subject to a negative pledge arrangement.

At closing, we drew $15.0 million of the $30.0 million available to us as part of the first tranche. The Term Loan Agreement also gives us the ability to access up to an additional $35.0 million, of which $20.0 million may be drawn in two additional tranches subject to the achievement of certain regulatory and clinical milestones and of which $15.0 million may be drawn in an additional tranche with the approval of the Agent and the Lenders. If we are unable to satisfy these or other required conditions, or if the Agent

and Lenders do not consent, as applicable, we would not be able to draw down the remaining tranches of financing and may not be able to obtain alternative financing on commercially reasonable terms or at all, which could adversely impact our business.

We may not have enough available cash to repay or refinance our indebtedness at the time any such repayment is required. In such an event, we may be required to delay, limit, reduce, or terminate our preclinical and clinical product development or grant others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our business, financial condition, and results of operations could be materially adversely affected as a result.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or cause us to relinquish valuable rights.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Any additional indebtedness we incur would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, or our product candidates, or grant licenses on terms unfavorable to us. Adequate additional financing may not be available to us on acceptable terms, or at all.

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

We are a ~~development-stage~~clinical-stage company founded in November 2015. Our operations to date have been limited to corporate organization, recruiting key personnel, business planning, raising capital, acquiring rights to our technology, identifying potential product candidates, undertaking preclinical studies and planning and supporting clinical trials of certain of our product candidates and establishing research and development and manufacturing capabilities. ~~Although we recently initiated our Phase 2 clinical trial forAVR-RD-01,~~ weWe have not yet demonstrated the ability to complete clinical trials of our product candidates, obtain marketing approvals, manufacture products on a clinical or commercial scale or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. In addition, as ~~a new business,~~an early-stage company, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

Risks related to the discovery and development of our product candidates

Business interruptions resulting from the coronavirus disease (COVID-19) pandemic or similar public health crises have caused and may continue to cause a disruption of the development of our product candidates and adversely impact our business.

Public health crises such as pandemics or similar outbreaks could adversely impact our business. The ongoing COVID-19 pandemic has continued to disrupt normal business operations both in and outside of affected areas and has had significant negative impacts on businesses and financial markets worldwide. We continue to monitor our operations and applicable government recommendations and have continued our work-from-home policy for most employees, excluding our laboratory staff and a limited number of non-laboratory employees. Notwithstanding these measures, the evolving COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties on which we rely. If members of our management and other key personnel are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. We may experience limitations in employee resources, including because of sickness of employees or their families or the desire of employees to avoid contact with individuals or large groups of people.

In addition, clinical trial activities, including patient enrollment and data collection, are dependent upon global clinical trial sites which have been and continue to be adversely affected by the ongoing COVID-19 pandemic. For example, as the global healthcare community responded to the fluctuations in COVID-19 cases and hospitalizations, many hospitals, including our clinical sites, temporarily paused elective procedures, which included dosing of new patients with our investigational gene therapies. While dosing of new patients began to resume in the first half of 2021, our ability to continue clinical activities without further delay or interruption will depend on future developments that are highly uncertain and cannot be accurately predicted. Additionally, while ongoing data collection has continued for our patients that have been dosed, certain data collection has been delayed and additional delays could result from COVID-19-related interruptions, particularly as new variants of the virus are identified and continue to spread. We are currently conducting clinical trials for our product candidates in the United States, Canada and Australia, and plan to expand to other geographies that have been affected by COVID-19.

Additional factors from the ongoing COVID-19 pandemic that have delayed and may continue to delay or otherwise adversely affect enrollment in or the progress of the clinical trials of our product candidates, as well as our business generally, include:

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the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, including the attention of physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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limitations on travel that could interrupt key trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by employees, contractors or patients to clinical trial sites, including any government-imposed travel restrictions or quarantines that may impact the ability or willingness of patients, employees or contractors to travel to our clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or progress of our clinical trials;

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interruption in global shipping affecting the transport of clinical trial materials, such as patient samples, investigational drug product and conditioning drugs and other supplies used in our clinical trials;

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business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel limitations or mass transit disruptions, any of which could adversely impact our business operations or those of third party service providers, contractors, or suppliers on whom we rely,impair the productivity of our personnel, subject us to additional cybersecurity risks, create data accessibility problems, cause us to become more susceptible to communication disruptions, or delay necessary interactions with local regulators, ethics committees and other important agencies and contractors;

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business disruptions involving our third parties on whom we rely, including CROs and other collaborators for the conduct of our clinical trials or our third party suppliers or manufacturers, which could impact their ability to perform adequately or disrupt our supply chain; and

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changes in hospital or research institution policies or government regulations, which could delay or adversely impact our ability to conduct our clinical trials.

Since the beginning of the COVID-19 pandemic, three vaccines for COVID-19 have received Emergency Use Authorization by the FDA and one of those later received marketing approval. Additional vaccines may be authorized or approved in the future. 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.

These and other factors arising from the ongoing COVID-19 pandemic could worsen and further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results. The extent to which the ongoing COVID-19 pandemic impacts our operations or those of our third party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, the efficacy and safety of vaccines, including against emerging variants, the ability of third parties to manufacture and distribute vaccines and the public’s willingness to receive such vaccines, and new information that may emerge concerning mutations of the coronavirus that causes COVID-19, among others.

We have concentrated our research and development efforts on our lentiviral-based gene therapy approach, and our future success depends on our successful development of viable gene therapy product candidates. There can be no assurance that we will not experience problems or delays in developing new product candidates and that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved. WeFor example, timely enrollment in our clinical trials is dependent upon global clinical trial sites which have been and may continue to be adversely affected by the ongoing COVID-19 pandemic, especially if a resurgence of cases occurs. In addition, the implementation of our plato platform and upgrades, including our transition to Target Concentration Intervention, or TCI, conditioning using busulfan for our single-agent conditioning regimen, may result in delays or setbacks in our research and development activities, and we may not realize the intended benefits of these efforts. In addition, 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 completing our clinical studies or commercializing our products on a timely or profitable basis, if at all. For example, as of the ~~transition~~date of this Quarterly Report we have only dosed eight patients using our plato platform, which we plan to utilize for the majority of patients in our ongoing FAB-GT clinical trial for AVR-RD-01 and all patients in the Guard1 clinical trial of AVR-RD-02. Our implementation of the LV2 lentiviral vector or of our cell processing to an industrialized, automated closed system using ~~all~~ disposable supplies may not be successful or may experience unforeseen delays, which may cause shortages or delays in the supply of our products available for clinical trials and future commercial sales, if ~~any.~~any, or impair our research and development efforts, including those in our ongoing and future clinical trials. In addition, there is no assurance that products using our proprietary LV2 lentiviral vector or manufactured using this automated system will ultimately achieve the same favorable preliminary results observed to ~~date in~~date. Furthermore, the ~~Phase 1~~FDA generally prefers that clinical trials be double-blinded and potentially include sham controls. Such a trial design could be challenging to implement due to the nature of~~AVR-RD-01.~~ the treatment regimen of lentiviral gene therapy.

In addition, the clinical trial requirements of the FDA and other foreign regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidates. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or more extensively studied product candidates. To date, only a limited number of gene therapies have received marketing authorization from the FDA or foreign regulatory authorities. 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, Canada, Europe, Japan or other major markets or how long it will take to commercialize our product candidates, if any are approved. Approvals by foreign regulatory authorities may not be indicative of what the FDA may require for approval, and vice versa.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. The FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise the CBER in its review. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the United States National Institutes of Health, or NIH, also are ~~potentially~~ subject to ~~review by~~ the NIH ~~Office~~Guidelines, under which supervision of ~~Science Policy’s Recombinant DNA Advisory Committee,~~human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the ~~RAC,~~environment, and such review may result in ~~limited circumstances. Although the FDA decides whether individual gene therapy protocols may proceed, the RAC public review process, if undertaken, can~~some delay ~~the~~before initiation of a clinical trial, even if the FDA has reviewed the trial design and details and authorized its initiation. Conversely, the FDA can put an investigational new drug application, or IND, on clinical hold even if the RAC has provided a favorable review or an exemption from~~in-depth,~~ ~~public review.~~trial. If we were to engage anNIH-funded institution to conduct a clinical trial, that institution’s ~~institutional biosafety committee, or~~ IBC as well as its institutional review board, or IRB, would need to review the proposed clinical trial to assess the safety of the ~~trial and may determine that RAC review is needed.~~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 any of our product candidates. Similarly, foreign regulatory authorities may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines.

The FDA, NIH and the European Medicines Agency, or EMA, have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing. For example, the EMA advocates a risk-based approach to the development of a gene therapy product. Agencies at both the federal and state level in the United States, as well as the U.S. congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such action may delay or prevent commercialization of some or all of our product candidates.

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 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 certain

of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. 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, and our business, financial condition, results of operations and prospects would be materially and adversely affected.

The FDA ~~recently~~continues to develop its approach to assessing gene and cell therapy products. For example, the agency has released a series of draft ~~guidances, which amongst~~and final guidance documents relating to, among other topics, ~~regarded~~ various aspects of gene therapy product development, review, and approval, including aspects relating to clinical and manufacturing issues related to gene therapy products. In January 2020, the FDA released a final guidance with recommendations for long-term follow-up studies of patients following human gene therapy administration due to the increased risk of undesirable and unpredictable outcomes with gene therapies that may present as delayed adverse events. We cannot be certain whether such guidance, or other guidance that the FDA may issue, will be relevant to or have an adverse impact on our gene therapy candidates or the duration or expense of any applicable regulatory development and review ~~processes~~processes.

During the conduct of clinical trials, patients may experience changes in their health, including illnesses, injuries, discomforts or a fatal outcome. It is possible that as we test~~AVR-RD-01~~ ~~or other~~ our product candidates in larger, longer and more extensive clinical programs, or as use of our product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier clinical trials, as well as conditions that did not occur or went undetected in previous clinical trials, will be reported by ~~subjects.~~patients. Additionally, any early access to the Company’s investigational therapies, such as through expanded or Right to Try access, may lead to discovery of undesirable side effects that could have adverse effects on the development programs for current and future product candidates. Gene therapies are also subject to the potential risk that occurrence of adverse events will be delayed following administration of the gene therapy due to persistent biological activity of the genetic material or other components of the vectors used to carry the genetic material. Many times, side effects are only detectable after investigational products are tested in larger scale, pivotal clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval. FDA guidance advises that patients treated with gene therapies undergo long-term follow-up observation for potential adverse events for as long as 15 years. If additional clinical or long-term follow-up experience indicates that~~AVR-RD-01~~ or any ~~other~~of our product ~~candidate has~~candidates have side effects or ~~causes~~cause serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked or limited.

There have been several significant adverse side effects in gene therapy treatments in the past, including multiple reported cases of leukemia, myelodysplastic syndrome and death seen in other clinical trials. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. Possible adverse side effects that may occur with treatment with gene therapy products include an immunologic reaction early after administration that could substantially limit the effectiveness of the treatment or represent safety risks for patients. Another traditional safety concern for gene therapies using viral vectors has been the possibility of insertional ~~mutagenesis~~oncogenesis by the vectors, leading to malignant transformation of transduced cells. As more patients are dosed with ex vivo lentiviral gene therapies and higher VCNs are achieved, it is expected that very rare cases of insertional oncogenesis may occur. In addition, persistent dominant clonal expansion due to vector integration has been observed in third-party ex vivo lentiviral gene therapy clinical trials, including one case of thalassemia and three cases of cerebral adrenoleukodystrophy, or C-ALD. Each of the C-ALD patients developed persistent dominant clonal expansions within a year of gene therapy infusion, and two patients were subsequently diagnosed with myelodysplastic syndrome with single lineage dysplasia. While our lentiviral gene therapy approach is

designed to avoid immunogenicity against the drug product after administration, there can be no assurance that patients would not create antibodies that may impair treatment. In addition, although we are investigating a plan to potentially implement molecular cytogenetic screening, there can be no assurance that we will successfully implement such screening procedures in a timely manner or at all, or that, if implemented, they will enhance the safety profile of our gene therapy product candidates. If any of our gene therapy product candidates demonstrates adverse side effects at unacceptable rates or degrees of severity, we may decide or be required to halt or delay clinical development of such product candidates.

In addition to side effects caused by our product candidates, the conditioning, administration process or related procedures, which we evaluate from time to time as part of our process improvement and optimization efforts, also can cause adverse side effects. A gene therapy patient is generally administered ~~cytotoxic~~one or more myeloablative drugs to remove stem cells from the bone marrow to create sufficient space in the bone marrow for the modified gene-corrected stem cells to engraft and produce their progeny. This procedure causes adverse side effects and transiently compromises the patient’s immune ~~system. While certain of~~system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia.

In 2019 we began transitioning, in connection with our Company-sponsored clinical trials, towards a new conditioning regimen for our product candidates ~~are~~utilizing busulfan as the myeloablative conditioning agent instead of the melphalan that we previously used. The use of this conditioning regimen is designed to utilize ~~outpatient, milder conditioning regimens that are intended~~a precision dosing program, TCI, to ~~require only limited~~achieve a balance between the removal of a ~~patient’s~~sufficient amount of bone marrow cells ~~our~~from a patient against potential risks such as toxicity or graft failure. While we believe that the conditioning regimen could be performed during a limited hospital stay, we cannot guarantee that the conditioning will not require a lengthier hospitalization. Our conditioning regimens may not be successful or may nevertheless result in adverse side effects. For example, in ~~the ongoing investigator-sponsored Phase 1 clinical trial and~~each of our ongoing ~~company-sponsored Phase 2~~ clinical ~~trial ofAVR-RD-01,~~trials several adverse events, including suppression of ~~white blood cell~~neutrophils and platelet counts ~~nausea and/or vomiting~~ following the conditioning process, were observed. IfWhile such adverse events in connection with conditioning is expected, if in the future any such adverse events caused by the conditioning process or related procedures continue at unacceptable rates or degrees of severity, the FDA or other foreign regulatory authorities could order us to cease development of, or deny approval of,~~AVR-RD-01~~ or our ~~other~~ product candidates for any or all targeted indications. There have been cases of therapy-related myelodysplastic syndrome, a type of blood disorder that is a potential precursor to acute myeloid leukemia, in patients with preexisting cancer where busulfan treatment was posited to be a contributing factor to this secondary malignancy. Although we are investigating a plan to potentially implement molecular cytogenetic screening as an additional risk reduction measure, there can be no guarantees that these procedures will be implemented in a timely manner or would be successful if implemented. Even if we are able to demonstrate that adverse events are not product-related, such occurrences could adversely affect patient recruitment or the ability of enrolled patients to complete the clinical ~~trial.~~trial, and lead to a decline in our stock price.

Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or 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, a communication plan to health care practitioners, and restrictions on how or where the product can be distributed, dispensed or used. Furthermore, if we or others later identify undesirable side effects caused by~~AVR-RD-01~~ or our ~~other~~ product candidates, several potentially significant negative consequences could result, including:

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

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regulatory authorities may require additional or boxed warnings on the label;

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

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

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our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates, lead to a decline in our stock price, and ~~could~~ significantly harm our business, prospects, financial condition and results of operations.

Our regulatory approach for AVR-RD-01 for the treatment of Fabry disease recently changed, and there can be no assurance that our new, proposed regulatory pathway will be accepted by regulatory agencies.

On March 11, 2021, approximately three weeks before our End-of-Phase 1 meeting for AVR-RD-01 held on March 31, 2021, the FDA granted full (also referred to as traditional) approval of Fabrazyme^® (agalsidase beta) more than 18 years after the ERT received accelerated approval on the basis of a surrogate endpoint: reduction of GL-3 (also referred to as Gb3) inclusions in biopsied PTCs. The conversion to full approval limits the accelerated approval pathways available for new therapies to treat Fabry disease, which must now show clinical benefit over Fabrazyme on a surrogate endpoint. Reduction of GL-3 in PTCs is ~~being investigated in an ongoing investigator-sponsored Phase 1 clinical~~the only surrogate endpoint that has been accepted as a basis for approval for Fabry ERTs at this time. As a result of the Fabrazyme full approval, together with the FDA’s feedback on our original proposed trial ~~and an ongoing company-sponsored Phase 2 clinical~~design, we intend to pursue full approval for AVR-RD-01 based on the same surrogate endpoint that served as the basis for Fabrazyme’s full approval.

In September 2021 we received feedback from the FDA on CMC requirements for our planned registration trial, and we expect to engage with the FDA in the first quarter of 2022 to discuss and obtain feedback on our revised clinical trial design. We are currently aiming to initiate a registration trial in mid-2022, subject to implementing certain modifications to our CMC plans and subject to feedback from the FDA on the proposed trial design. However, our planned regulatory pathway is subject to numerous risks, including the following:

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FDA guidance provides that the acceptability of surrogate endpoints is determined on a case-by-case basis, and a particular surrogate endpoint that may be appropriate for use in a particular drug or biologic clinical development program should not be assumed to be appropriate for use in a different program that is in a different clinical setting. Although we believe the recent full approval of Fabrazyme on the basis of a surrogate endpoint of complete/near complete reduction of GL-3 inclusions in biopsied renal PTCs may potentially support use of this endpoint in a registration trial of AVR-RD-01, we have

not discussed this proposed surrogate endpoint with the FDA and there can be no assurance that the FDA will agree with our approach. Moreover, the FDA could require longer clinical or follow-up study requirements for patients, specify patient inclusion criteria that limits our ability to successfully and timely recruit and enroll patients, or require other study design details that will require additional clinical work or render our earlier clinical data of limited utility in support of an application for marketing authorization.

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Even if we obtain alignment with the FDA on our proposed regulatory pathway, without undertaking the special protocol assessment process to obtain FDA agreement on the details of the trial design, including the measurement methodology, number of trial participants and study duration, there is a risk that the FDA may disagree with the final details of our trial design. In addition, although we would propose to the FDA that the registration trial would enroll a number of patients comparable to other orphan disease gene therapy trials, the FDA could require us to enroll more patients than we expect. We have previously encountered delays in patient enrollment and recruitment, and any similar delays in the future could affect our ability to successfully complete a registration trial.

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The timing of our new proposed regulatory pathway is uncertain. Although we intend to engage with the FDA in the first quarter of 2022 to discuss our proposed trial design, we have not yet requested such meeting and there can be no assurances that the FDA will be available to meet with us in a timely manner, particularly given the agency’s workload during the ongoing COVID-19 pandemic. Additionally, we will need to make certain modifications to our CMC plans in response to the feedback we received from the FDA in September 2021, and we expect to discuss these modifications at our planned FDA meeting in the first quarter of 2022. Although we believe that we’ll be able to successfully implement any required CMC modifications without material delay on the expected timing of our clinical trial initiation, there can be no assurances that the FDA will agree with our proposed CMC plans or that we will be able to implement such plans in a timely manner. Even if we obtain alignment with the FDA on our proposed trial design and CMC readiness, we will need to submit a registration study protocol before we can commence a clinical trial, the timing of which will depend in part upon our interactions with the FDA. Our planned engagement with the FDA and submission of the protocol could be delayed, and as a result we may not be able to initiate a clinical trial in mid-2022, if at all. Furthermore, although the kidney biopsy endpoint in our FAB-GT trial has a 48-week follow-up period, even if the FDA agrees to a kidney biopsy surrogate endpoint in our proposed registration trial design, the FDA could require the follow-up period to be longer than 48-weeks, which would increase the length of the trial and delay any submission of a BLA.

Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical studies, including our proposed registration trial of AVR-RD-01, will be conducted as planned or completed on schedule, if at all. Even if we are able to complete a registration trial for AVR-RD-01 and receive marketing approval, such approval may be for indications or patient populations that are not ~~commenced~~as broad as intended or desired, which could limit the potential commercial viability of the approved product. Any inability to successfully conduct our proposed registration trial of AVR-RD-01 using a kidney biopsy surrogate endpoint or other inability to successfully complete our clinical ~~trials for any~~development of AVR-RD-01 could result in additional costs to us and impair our ~~other product candidates.~~ ability to generate revenues.

We have never completed a pivotal or registration clinical trial, and may be unable to do so for any product candidates we may ~~develop, includingAVR-RD-01.~~develop.

We are at ~~a very~~an early stage of development for all of our product ~~candidates includingAVR-RD-01.~~candidates. As of ~~August 1, 2018, our product candidateAVR-RD-01~~ ~~has been administered to~~the date of this Quarterly Report, we have dosed only ~~three~~19 patients ~~in an~~across four ongoing ~~Phase 1~~ clinical ~~trial and to one patient in our~~trials. These ongoing ~~Phase 2 clinical trial. The ongoing Phase 1 and Phase 2~~ clinical trials, ~~forAVR-RD-01~~ ~~must be completed,~~ as well as potentially additional pivotal clinical trials (also referred to as registration trials), must be completed in order to obtain FDA or other regulatory approval to market~~AVR-RD-01.~~ ~~Carrying out later-stage clinical trials is a complicated process. We only recently dosed the first patient in our company-sponsored Phase 2 clinical trial in the second quarter of 2018.~~ these product candidates. We have limited experience in preparing, submitting and prosecuting regulatory filings, and have not previously submitted a biologics license application, or BLA, for any product candidate.

Carrying out later-stage clinical trials is a complicated and lengthy process, and we do not expect that all data from patients participating in the clinical trials will be relevant or meaningful. For example, the primary efficacy endpoint of our Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial, is the change, from baseline to one year post-treatment with AVR-RD-01, in the average number of Gb3 inclusions per PTC, as measured in a patient kidney biopsy. The second patient in the FAB-GT trial has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and lower plasma lyso-Gb3 levels. This patient’s cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, and accordingly we do not expect that data obtained from this patient will have a meaningful impact on certain efficacy endpoints in our FAB-GT clinical trial, including kidney and skin biopsies. Nonetheless, there may be other important insights derived from data collected from this patient in the FAB-GT clinical trial. In addition, although a kidney biopsy was performed on the third patient in the FAB-GT clinical trial, as a result of human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions

could not be evaluated and will not be available. However, we expect to continue collecting other data from the third patient, including measures of kidney function such as estimated glomerular filtration rate and measured glomerular filtration rate.

In addition, across our company-sponsored clinical trials we have ~~not yet conducted clinical trials of any our product candidates~~dosed only one patient in the United States, and our interactions with the FDA have generally been ~~and are expected to be limited for the near future, and we~~limited. We cannot be certain how many additional clinical trials ofAVR-RD-01, AVR-RD-04, AVR-RD-02 or any ~~of our~~ other product candidates will be required or how such trials should be designed. In order to commence a clinical trial in the United States, we are required to seek FDA acceptance of an IND for each of our product candidates. We cannot be sure any IND we submit to the FDA, or any similar clinical trial application we submit in other countries, will be accepted. ~~We recently held apre-IND~~ ~~meeting with~~While we have received clearance from the FDA to ~~discuss the requirements to~~ commence clinical ~~trials~~testing in the United States for AVR-RD-01 and ~~we expect to open a U.S. site for our ongoing Phase 2~~AVR-RD-02, and the sponsor of the investigator-led clinical trial of~~AVR-RD-01~~ ~~in 2019. However,~~for AVR-RD-04 has received the same, there can be no assurance that we will ~~commence clinical trials in the United States on~~be able to submit and secure similar clearances for any of our ~~expected timeframe or at all.~~other product candidates. We may also be required to conduct additional preclinical testing prior to filing an IND for any of our product candidates, and the results of any such testing may not be positive. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to a BLA submission and approval of~~AVR-RD-01~~ or any of our ~~other~~ product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing~~AVR-RD-01.~~ any of our product candidates.

The ongoing Phase 1 clinical trial ofAVR-RD-01 is an investigator-sponsored trial being conducted by University Health ~~Network. In addition,~~Network, and the ~~planned~~ongoing Phase 1/2 clinical trial ofAVR-RD-04 ~~will be~~ is also an investigator-sponsored clinical trial, which is being conducted by our collaborators at the University of California, San Diego. In addition, the planned Phase 1/2 clinical trial of AVR-RD-05 will be an investigator-sponsored trial conducted by our collaborators at The University of Manchester. We do not control the design or administration of investigator-sponsored trials, nor the submission or approval of any IND or foreign equivalent required to conduct these trials, and the investigator-sponsored trials could, depending on the actions of such third parties, jeopardize the validity of the clinical data generated, identify significant concerns with respect to our product candidates that could impact our findings or clinical trials, and adversely affect our ability to obtain marketing approval from the FDA or other applicable regulatory authorities. To the extent the results of this or other investigator-sponsored trials are inconsistent with, or different from, the results of our planned ~~company-sponsored~~Company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the ~~company-sponsored~~Company-sponsored trial, or subject such results to greater scrutiny than it otherwise would. In these circumstances, the FDA or such foreign regulatory authorities may require us to obtain and submit additional clinical data, which could delay clinical development or marketing approval of our product candidates. In addition, while investigator-sponsored trials could be useful to inform our own clinical development efforts, there is no guarantee that we will be able to use the data from these trials to form the basis for regulatory approval of our product candidates.

Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials.

Results from preclinical studies or early clinical trials are not necessarily predictive of future clinical trial results and are not necessarily indicative of final results. For example, there can be no assurance that prior results, such as signals of safety, activity or durability of effect, observed from preclinical studies or clinical trials will be replicated or will continue in ongoing or future studies or trials. Furthermore, preliminary results may not be indicative of the final results of a trial after all data have been collected and analyzed. There is a high failure rate for gene therapy and biologic product candidates proceeding through clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, the design of a pivotal clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Our ~~company~~Company has limited experience in designing and conducting clinical trials and we may be unable to design and execute a clinical trial to support regulatory approval. ~~To date, we have not received definitive guidance from the FDA or other foreign regulatory bodies regarding the necessary endpoints for approval of any of our product candidates, includingAVR-RD-01.~~ There are no assurances that the FDA or other foreign regulatory bodies will find the efficacy endpoints we propose in future pivotal trials to be sufficiently validated and clinically meaningful, or that our product candidates will achieve the~~pre-specified~~ ~~endpoints in future pivotal trials to a degree of statistical significance.~~

We also may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy or the approval of competitive therapies during the period of our product candidate development. ~~OurAVR-RD-02,AVR-RD-03~~ ~~andAVR-RD-04~~ ~~product candidates have not yet been tested in humans.~~ Any of our ~~other~~current or future product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies. Any such failure would cause us to abandon the product candidate.

Additionally, the clinical trials performed to date have been open-label studies and have been conducted at a limited number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Moreover, patients selected for

early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware that patients have received treatment and may interpret the information more favorably given this knowledge. Because our clinical trials are ongoing, the data that we report are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the safety and efficacy data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.

~~Identifying~~Although we expect to have dosed an aggregate of 20 to 25 patients across all our clinical programs by the end of 2021, there can be no assurance we will achieve that goal. The timing and ~~qualifying patients to participate in clinical trials~~success of our ~~product candidates is critical to our success. The timing of our~~patient enrollment and clinical ~~trials depends~~trial activities depend on our ability to recruit patients to participate as well as the completion of requiredfollow-up periods. Patients may be unwilling to participate in our gene therapy clinical trials because of negative publicity from adverse events related to the biotechnology or gene therapy fields, competitive clinical trials for similar patient populations, clinical trials in product candidates employing our vectors, the existence of current treatments or for other reasons. In addition, the indications that we are currently targeting and may in the future target are rare diseases, which may limit the pool of patients that may be enrolled in our ongoing or planned clinical trials. The timeline for recruiting patients, conducting studies and obtaining regulatory approval of our product candidates may be delayed, including as a result of the ongoing COVID-19 pandemic, which could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether. For example, as a result of the COVID-19 pandemic, patient enrollment and dosing was temporarily paused in our ongoing clinical trials and certain data collection has been delayed. While patient enrollment and dosing activities have begun to resume, there could be additional pauses in the future as a result of the COVID-19 pandemic or other factors.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical trials in a timely manner. For example, in 2017, the ongoing investigator-sponsored Phase 1 clinical trial ofAVR-RD-01 encountered delays in the enrollment of patients due to delays in identifying patients for enrollment and the evaluation of information from screened potential trial participants. In 2019, we encountered delays in the enrollment of patients in the Company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease, which we refer to as the Guard1 clinical trial. While a number of patients had been identified for the Guard1 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment. Additionally, as a result of the COVID-19 pandemic, in 2020 we encountered protracted timelines with our Guard1 investigational site startup activities, which also impacted patient enrollment.

Patient enrollment and trial completion is affected by factors including the:

~~size of the patient population and process for identifying subjects;~~
•
ability to enroll patients and conduct studies as a result of the ongoing COVID-19 pandemic;

~~design of the trial protocol;~~
•
size of the patient population and process for identifying patients;

~~eligibility and exclusion criteria;~~
•
design of the trial protocol;

~~perceived risks and benefits of the product candidate under study;~~
•
eligibility and exclusion criteria;

•

perceived risks and benefits of the product candidate under study;

•

perceived risks and benefits of gene therapy-based approaches to treatment of diseases, including any required pretreatment conditioning regimens;

~~perceived risks and benefits of gene therapy-based approaches to treatment of diseases, including any required pretreatment conditioning regimens;~~
•
availability of competing therapies and clinical trials;

~~availability of competing therapies and clinical trials;~~
•
severity of the disease under investigation;

~~severity of the disease under investigation;~~
•
availability of genetic testing for potential patients;

~~availability of genetic testing for potential~~
•
proximity and availability of clinical trial sites for prospective patients;

~~proximity and availability of clinical trial sites for prospective subjects;~~
•
ability to obtain and maintain subject consent;

~~ability to obtain and maintain subject consent;~~

~~risk that enrolled subjects~~
•
risk that enrolled patients will drop out before completion of the trial;

•

patient referral practices of physicians; and

•

ability to monitor patients adequately during and after treatment.

We have expanded our patient enrollment activities to include patients who reside in a country other than the country where the applicable clinical site is located, and who are required to travel for some or all of the clinical testing and procedures required for patients in the applicable clinical trial. We have encountered and in the future may continue to encounter logistical and regulatory challenges that could delay or prevent any such international patients from successfully enrolling and completing clinical trial procedures, including delays in processing or obtaining patient travel visas or denials of entry at borders, potential travel disruptions, or de-prioritization or unavailability of resources at clinical sites for non-resident international clinical trial participants, any of which could delay our progress and completion of planned clinical trials and which would have an adverse effect on our business. In addition, once these international patients return to their home country they may need to travel back to the country where the applicable clinical site is located. If these patients are unwilling or unable to return to the clinical site for testing and procedures, progress and completion of the ~~trial;~~clinical trial could be delayed or prevented.

~~patient referral practices of physicians; and~~

~~ability to monitor subjects adequately during and after treatment.~~

Our current product candidates are being developed to treat rare conditions. We plan to seek initial marketing approvals in the United States, Europe and certain other major markets, including Japan. We may not be able to initiate or continue clinical trials ~~including our recently initiated Phase 2 clinical trial forAVR-RD-01~~ ~~for which enrollment is ongoing,~~ if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by FDA or other foreign regulatory authorities. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

•

difficulty in establishing or managing relationships with contract research organizations, or CROs, clinical study sites and physicians;

•

different standards for the conduct of clinical trials;

•

the absence in some countries of established groups with sufficient regulatory expertise for review of gene therapy protocols;

•

our inability to locate qualified local consultants, physicians and partners; and

•

the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatment.

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

•

delays as a result of the ongoing COVID-19 pandemic;

•

delays in reaching a consensus with regulatory agencies on study design;

•

delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites;

•

delays in obtaining required Institutional Review Board, or IRB, approval at each clinical study site;

•

delays in recruiting suitable patients to participate in our clinical studies;

•

imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites;

•

failure by our CROs, other third parties or us to adhere to clinical study requirements;

•

failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines in other countries;

•

delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites;

~~delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites;~~
•
delays in having patients complete participation in a study or return for post-treatment follow-up;

~~delays in obtaining required IRB approval at each clinical study site;~~
•
clinical study sites or patients dropping out of a study;

~~delays in recruiting suitable patients to participate in our clinical studies;~~
•
the occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or

~~imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites;~~

~~failure by our CROs, other third parties or us to adhere to clinical study requirements;~~

~~failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines in other countries;~~

~~delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites;~~

~~delays in having patients complete participation in a study or return for post-treatmentfollow-up;~~

~~clinical study sites or patients dropping out of a study;~~

~~the occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or~~

•

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues. In addition, if we make changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plan or marketing approval for our product candidates. For example, ~~while~~for our FAB-GT clinical trial of AVR-RD-01, we ~~are currently utilizing the LV1 version of the lentiviral vector in the ongoing Phase 1 and Phase 2 clinical trials ofAVR-RD-01,~~ ~~we plan to transition~~have transitioned our~~AVR-RD-01~~ lentiviral vectors to an LV2 ~~version. While LV2 is intended to confer improvements~~version in ~~safety and efficiency in viral production, there is no guarantee that we can realize these intended benefits.~~connection with our plato platform implementation. In addition, the transition from LV1 to LV2 ~~will likely require updates~~has required (and is anticipated to continue to require) submission of relevant data to the applicable regulatory authorities in connection with certain of our regulatory filings, including our INDs and clinical trial applications, to demonstrate analytic comparability between LV1 and ~~INDs with~~LV2. Our IND application for our FAB-GT clinical study of AVR-RD-01 for Fabry disease in the ~~relevant~~United States, which was cleared by the FDA in April 2019, included data to demonstrate comparability between LV1 and LV2 and a transition to an automated manufacturing platform. In addition, our CTA (including amendments) and IND for our Guard1 clinical study of AVR-RD-02 for Gaucher disease in Canada and the United States, for which Health Canada has issued no objection letters and the FDA has cleared, respectively, included data utilizing LV2 and our automated manufacturing platform. While these applications included data relating to our LV2 lentiviral vector and our automated manufacturing process, which are elements of our plato platform, and allow us to commence clinical trials incorporating such elements, we expect that the FDA, Health Canada or other regulatory authorities will require us to undertake additional actions in connection with our transition to our plato platform, including submission of additional comparability studies in connection with future regulatory filings, which may result in delays, suspension or termination of ongoing or future clinical trials, or our inability to conduct our trials according to the plans or the timelines that we have envisioned. For example, the Phase 1/2 investigator-sponsored clinical study of AVR-RD-04 for cystinosis in the United States, which has been cleared by the FDA, does not include our LV2 lentiviral vector or our automated manufacturing platform. Additionally, the study drug for the planned investigator-sponsored clinical study of AVR-RD-05 for Hunter syndrome will not be manufactured using our plato platform, and neither the automated, closed manufacturing system nor LV2 will be used in connection with this clinical trial. We anticipate that we will be required to submit comparability data in future regulatory filings relating to our transition to LV2 and the automated manufacturing platform. Any such filings may result in delay, suspension or termination of ongoing or future clinical trials pending our submission, and the ~~agencies’~~applicable regulatory agency’s review, of such updates. Clinical ~~study~~trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, 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 and results of operations.

If the results of our clinical studies are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:

•

be delayed in obtaining marketing approval for our product candidates, if at all;

•

obtain approval for indications or patient populations that are not as broad as intended or desired;

•

obtain approval with labeling or a REMS that includes significant use or distribution restrictions or safety warnings;

•

be subject to changes with the way the product is administered;

•

be required to perform additional clinical studies to support approval or be subject to additional post-marketing testing requirements;

•

have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a REMS;

•

be subject to the addition of labeling statements, such as warnings or contraindications;

•

be sued; or

•

experience damage to our reputation.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our products.

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 studies, 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 recommendsnon-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 studies 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 studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. If we are unable to obtain necessary regulatory approvals, our business, prospects, financial condition and results of operations may suffer.

Only certain of our clinical trials, including the Phase 2 FAB-GT clinical trial of AVR-RD-01 for Fabry disease and the Phase 1/2 Guard1 clinical trial of AVR-RD-02 for Gaucher disease type 1, utilize our commercial-scale plato platform.

While we have submitted and intend to continue to submit comparability studies to the FDA and other regulatory agencies, as needed, with respect to our implementation of our commercial-scale plato platform in these and future clinical trials sponsored by us, there can be no assurance that the FDA or other regulatory agencies will not in the future require us to conduct additional preclinical studies or clinical trials that could result in delays and additional costs in our development or commercialization programs for our product candidates, which could adversely affect our business. We intend to continue implementing our commercial-scale plato platform, including heightened vector efficiency, our closed, automated manufacturing system and utilization of a TCI conditioning regimen with busulfan, in connection with each of our investigational product candidates. We have developed the plato platform to form the backbone of our commercial programs, with the intent of replacing our original academic platform with improved solutions for delivering our gene therapy candidates to patients in multiple disease indications. We believe improvements from our plato platform may lead to better patient outcomes with our gene therapy candidates. In order to implement this transition, we have been and will be required to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plans or marketing approvals, if any. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, 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 and results of operations.

We operate in a highly competitive segment of the biopharmaceutical market. We face competition from many different sources, including larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Our product candidates, if successfully developed and approved, will compete with established therapies, some of which are being marketed by large and international companies. In addition, we expect to compete with new treatments that are under development or may be advanced into the clinic by our competitors. There are a variety of product candidates, including gene therapies, in development for the indications that we are targeting.

We anticipate competing with the largest pharmaceutical companies in the world. For example, Sanofi Genzyme and Shire, acquired by Takeda Pharmaceutical Company Ltd., market the enzyme replacement therapies, or ERTs, that represent the standard of care for Fabry patients. In March 2021, Fabrazyme, marketed by Sanofi Genzyme, received full (also referred to as traditional) approval more than 18 years after the ERT received accelerated approval on the basis of a surrogate endpoint. Amicus has secured regulatory approval in the United States and Europe for Migalastat, its oral chaperone therapy for Fabry disease. In addition, Protalix BioTherapeutics, together with Chiesi Global Rare Diseases, is developing pegunigalsidase alfa, their investigational product candidate for Fabry disease. For Gaucher disease, we expect to compete with existing enzyme replacement therapies marketed by Sanofi Genzyme, Shire, Protalix and Pfizer, as well as oral therapies marketed by Actelion and Sanofi. Sanofi also markets an enzyme replacement therapy for Pompe disease, and Shire markets an enzyme replacement therapy for Hunter syndrome. Cystinosis is currently treated by therapies marketed by Horizon Orphan, Mylan, Chiesi, Recordati and Sigma Tau Pharmaceuticals, and Eloxx Pharmaceuticals has been advancing a new treatment in clinical trials. In addition, we may compete with other gene therapy companies in our industry such as bluebird bio and Spark Therapeutics (which was acquired by Roche in 2019). In particular, a

number of gene therapy companies have announced preclinical or clinical non-viral and adeno-associated viral based gene therapy programs that, if successful in obtaining regulatory approval, could compete with our gene therapies.

Many of our competitors have significantly greater financial, product candidate development, manufacturing and marketing resources than we do. Large pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and mergers and acquisitions within these industries may result in even more resources being concentrated among a smaller number of larger competitors. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our business would be materially and adversely affected if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any product candidate that we may develop.

Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

While we intend to seek designations for our product candidates with the FDA and comparable foreign regulatory authorities that are intended to confer benefits such as a faster development process or an accelerated regulatory pathway, there can be no assurance that we will successfully obtain such designations. In addition, even if one or more of our product candidates are granted such designations, we may not be able to realize the intended benefits of such designations.

The FDA and comparable foreign regulatory authorities offer certain designations for product candidates that are designed to encourage the research and development of product candidates that are intended to address conditions with significant unmet medical

need. These designations may confer benefits such as additional interaction with regulatory authorities, a potentially accelerated regulatory pathway and priority review. However, there can be no assurance that we will successfully obtain such designations for any of our product candidates. In addition, while such designations could expedite the development or approval process, they generally do not change the standards for approval. Even if we obtain such designations for one or more of our product candidates, there can be no assurance that we will realize their intended benefits.

~~For example, we~~We may seek a Breakthrough Therapy Designation for some of our product candidates. A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For therapies that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Therapies designated as breakthrough therapies by the FDA are also eligible for accelerated approval. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification.

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

In addition, we may seek a regenerative medicine advanced therapy, or RMAT, designation for some of our product candidates. An RMAT is defined as cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Gene therapies, including genetically modified cells that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine therapy. The RMAT program is intended to facilitate efficient

development and expedite review of RMATs, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition. A new drug application or a BLA for an RMAT may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites. Benefits of such designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A regenerative medicine therapy that is granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of ~~real world~~real-world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. RMAT designation is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a regenerative medicine advanced therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of RMAT designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as for RMAT designation, the FDA may later decide that the biological products no longer meet the conditions for qualification.

Outside of the United States, we intend to developAVR-RD-01 in Japan under the purview of the Japanese Pharmaceutical and Medical Device Agency, or PMDA. Pursuant to Japan’s regenerative medicine law, an expedited path to conditional approval may exist for regenerative medicine products that show sufficient safety evidence and signals of efficacy in a Phase 2 clinical trial. However, there can be no assurance that the results of our ~~recently initiated~~ongoing Phase 2 FAB-GT clinical trial will demonstrate the safety evidence and efficacy signals required for such conditional approval. In addition, this conditional approval is time-limited, and there must be an agreement as tofollow-up collection of information to confirm efficacy and safety, similar to a post-marketing commitment in the United States.

We may be unable to obtain orphan drug designation for our product candidates and, even if we obtain such designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved.

Regulatory authorities in some jurisdictions, including the United States and other major markets, may designate drugs intended to treat conditions or diseases affecting relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union. Additionally, orphan designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.

In December 2018, October 2019 and March 2020, the FDA granted our requests for orphan drug designation for AVR-RD-01 for the treatment of Fabry disease, AVR-RD-02 for the treatment of Gaucher disease and AVR-RD-04 for the treatment of cystinosis, respectively. In September 2020, October 2020 and March 2021 we announced that the European Commission granted our request for orphan drug designation for AVR-RD-02 for the treatment of Gaucher disease, AVR-RD-01 for the treatment of Fabry disease, and AVR-RD-04 for the treatment of cystinosis, respectively. If we request orphan drug designation (or the foreign equivalent) for~~AVR-RD-01~~ or any ~~of our~~ other product candidates, there can be no assurances that the FDA or foreign regulatory authorities will grant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an orphan product does not mean that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval.

Generally, if a product candidate with an orphan drug designation 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 foreign regulatory authorities from approving another marketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another sponsor receives such approval before we do (regardless of our orphan drug designation), we will be precluded from receiving marketing approval for our product for the applicable exclusivity period. The applicable period is seven years in the United States and 10 years in the European Union. The exclusivity period in the European Union can be reduced to ~~six~~nine years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be

revoked if any regulatory agency 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 patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the United States. Even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan indication if:

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the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior;

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the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application; or

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the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of orphan medicinal product.

~~the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application; or~~

~~the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of orphan medicinal product.~~

Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory oversight.

Even if we obtain any regulatory approval for our product candidates, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information. Any regulatory approvals that we receive for our product candidates also may be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. FDA guidance advises that patients treated with ~~some types of~~ gene ~~therapy~~therapies undergo long-term follow-up ~~observations~~ observation for potential adverse events for as long as 15 years. The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or ~~cGMP,~~CGMP, requirements and adherence to commitments made in the BLA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

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

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issue a warning letter asserting that we are in violation of the law;

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seek an injunction or impose administrative, civil or criminal penalties or monetary fines;

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suspend or withdraw regulatory approval;

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suspend any ongoing clinical trials;

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refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners;

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restrict the marketing or manufacturing of the product;

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seize or detain the product or otherwise require the withdrawal of the product from the market;

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refuse to permit the import or export of products; or

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refuse to allow us to enter into supply contracts, including government contracts.

~~seek an injunction or impose administrative, civil or criminal penalties or monetary fines;~~

~~suspend or withdraw regulatory approval;~~

~~suspend any ongoing clinical trials;~~

~~refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners;~~

~~restrict the marketing or manufacturing of the product;~~

~~seize or detain the product or otherwise require the withdrawal of the product from the market;~~

~~refuse to permit the import or export of products; or~~

~~refuse to allow us to enter into supply contracts, including government contracts.~~

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 adversely affect our business, financial condition, results of operations and prospects.

In addition, the FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.

We anticipate competing with the largest pharmaceutical companies in the world. For example, Sanofi and Shire market the enzyme replacement therapies, or ERTs, that represent the standard of care for Fabry patients. Recently, Amicus secured regulatory approval in Europe for its oral therapy for Fabry disease. For Gaucher disease, we expect to compete with existing enzyme replacement therapies marketed by Sanofi, Shire, Protalix and Pfizer, as well as oral therapies marketed by Actelion and Sanofi. Sanofi also markets an enzyme replacement therapy for Pompe disease. Cystinosis is currently treated by therapies marketed by Horizon Orphan, Mylan and Sigma Tau Pharmaceuticals. In addition, we may compete with other gene therapy companies in our industry such as bluebird bio and Spark Therapeutics.

Many of our competitors have significantly greater financial, product candidate development, manufacturing and marketing resources than we do. Large pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and mergers and acquisitions within these industries may result in even more resources being concentrated among a smaller number of larger competitors. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to~~in-license~~ novel therapeutics that could make the product candidates that we develop obsolete. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our business would be materially and adversely affected if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any product candidate that we may develop.

Our focus on developing our current product candidates may not yield any commercially viable products, and our failure to successfully identify and develop additional product candidates could impair our ability to grow.

As part of our growth strategy, we intend to identify, develop and market additional product candidates beyond our existing product ~~candidates for Fabry disease, Gaucher disease, Pompe disease and cystinosis.~~candidates. We may spend several years completing our development of any particular current or future product candidates, and failure can occur at any stage. The product candidates to which we allocate our resources may not end up being successful. Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential than~~AVR-RD-01~~ or our ~~other~~ product candidates. Our spending on current and future research and development programs may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate.

Because our internal research capabilities are limited, we may be dependent upon biotechnology companies, academic scientists and other researchers to sell or license product candidates, approved products or the underlying technology to us. The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising product candidates and products.

In addition, certain of our current or future product candidates may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess or compare favorably to existing, approved therapies, such as ERT. We have not yet succeeded and may never succeed in demonstrating efficacy and safety of our product candidates or any future product candidates in clinical trials or in obtaining marketing approval thereafter. ~~For example, although we have evaluatedAVR-RD-02,AVR-RD-03~~ ~~andAVR-RD-04~~ ~~in preclinical studies and have evaluatedAVR-RD-01~~ ~~in an early-stage clinical trial, we have not yet advancedAVR-RD-02,AVR-RD-03~~ ~~andAVR-RD-04~~ ~~into clinical trials orAVR-RD-01~~ ~~into Phase 2 clinical development, nor have we obtained regulatory approval to sell any product based on our therapeutic approaches.~~ Accordingly, our focus on treating these diseases may not result in the ~~discovery and~~ development of commercially viable products.

If we are unsuccessful in our development efforts, we may not be able to advance the development of our product candidates, commercialize products, raise capital, expand our business or continue our operations.

Risks related to manufacturing

The manufacturing process we use to produce our product candidates is complex, novel and has not been validated for commercial use. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.

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

In addition, the FDA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA or other foreign regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Even 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 or product recalls. There is no assurance we will not experience lot failures in the future. Lot failures or product recalls could cause us to delay clinical trials, or, if approved, commercial product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

Risks related to our reliance on third parties

We do not expect to independently conduct all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing. We currently rely, and expect to continue to rely, on third parties with respect to these items. For example, we ~~are moving~~have moved our cell processing to an automated, closed system with a single ~~third party~~third-party supplier.

Any of these third parties may terminate their engagements with us or renegotiate the terms of our agreements at any time. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our preclinical and clinical studies are conducted in accordance with the study plan, protocols and regulatory requirements.

If our contract counterparties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical and clinical studies required to support approval of our product candidates or the FDA or other regulatory agencies may refuse to accept our clinical or preclinical data. For example, in 2017, the ongoing investigator-sponsored Phase 1 clinical trial ofAVR-RD-01 encountered delays in the enrollment of patients due to delays in identifying patients for enrollment and the evaluation of information from screened potential trial participants. In 2019, we encountered delays in the enrollment of patients in the Company-sponsored Guard1 clinical trial of AVR-RD-02 for Gaucher disease. While a number of interested patients had been identified for the Guard1 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment in these studies. Additionally, as a result of the COVID-19 pandemic, in 2020 we encountered protracted timelines with our investigational site startup activities for our Guard1 clinical trial, which also impacted patient enrollment. In 2020, a kidney biopsy was conducted on the third patient in the FAB-GT clinical trial of AVR-RD-01, but due to human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions could not be evaluated and will not be available. Although our quality assurance personnel have worked closely with the external vendor to identify the cause of the vendor error and to identify additional protocols for implementation by the vendor that are designed to prevent similar errors in the future, there can be no assurances that such protocols will be successfully implemented by the vendor.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

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the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

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reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities;

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termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and

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disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the impact of the ongoing COVID-19 pandemic or the bankruptcy of the manufacturer or supplier.

Any of these events could lead to delays of our preclinical and clinical studies or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

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.

We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities.

All entities involved in the preparation of therapeutics for clinical studies 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 clinical studies must be manufactured in accordance with good manufacturing practices, or GMP. 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 BLA on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and GMP regulations enforced by the FDA through its facilities inspection program. Some of our contract manufacturers have not produced a commercially-approved product and have never been inspected by the FDA before. 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 study 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 and results of operations may be materially harmed.~~

These factors could cause the delay of clinical studies, 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 preclinical and clinical studies may be delayed.

We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates.

We currently depend on a limited number of suppliers for some of the components necessary for our product candidates. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. Our use of a limited number of suppliers of raw materials, components and finished goods exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand. There are, in general, relatively few alternative sources of supply for these 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 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 supplier or manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects.

If we are required to switch to a replacement supplier or manufacture materials ourselves, the manufacture and delivery of our product candidates could be interrupted for an extended period, adversely affecting our business. Establishing additional or replacement suppliers may not be accomplished ~~quickly.~~quickly, and we may not be able to enter agreements with replacement suppliers on reasonable terms, if at all. In either scenario, our clinical trials supply could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. 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. For example, the FDA could require additional supplemental ~~data and clinical trial~~bridging data if we rely upon a new supplier. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials. While we seek to maintain adequate inventory of the components and materials used in our product candidates, 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 conduct our clinical trials and, if our product candidates are approved, to meet the demand of our customers and cause them to cancel orders.

In addition, as part of the FDA’s approval of our product candidates, the FDA must review and approve the individual components of our production process, which includes the manufacturing processes and facilities of our suppliers. Our current suppliers have not undergone this process, nor have they had any components included in any product approved by the FDA.

Our reliance on these suppliers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:

~~the interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;~~
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delays in production, supply, shipment or delivery as a result of the ongoing COVID-19 pandemic;

~~delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;~~
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the interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;

~~a lack of long-term supply arrangements for key components with our suppliers;~~
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delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;

~~the inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;~~
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a lack of long-term supply arrangements for key components with our suppliers;

~~difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;~~
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the inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;

~~production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;~~
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difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;

~~a delay in delivery due to our suppliers prioritizing other customer orders over ours;~~
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production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;

~~damage to our reputation caused by defective components produced by our suppliers;~~
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a delay in delivery due to our suppliers prioritizing other customer orders over ours;

~~increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and~~
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damage to our reputation caused by defective components produced by our suppliers;

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increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and

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fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.

If any of these risks materialize, costs could significantly increase and our ability to conduct our clinical trials and, if our product candidates are approved, to meet demand for our products could be impacted.

All entities involved in the preparation of therapeutics for clinical studies 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 clinical studies 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 BLA on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and CGMP regulations enforced by the FDA through its facilities inspection program. Some of our contract manufacturers have not produced a commercially-approved product and have never been inspected by the FDA before. 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, or if the FDA is unable to conduct such an inspection due to the ongoing COVID-19 pandemic, the FDA may issue a complete response letter or defer action on our applications, and approval of the products may be delayed or may not be granted.

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 and results of operations may be materially harmed.

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 rely on third parties to manufacture our vectors and our product candidates, and because we collaborate with various organizations and academic institutions on the advancement of our gene therapy approach, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer 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, such as 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, 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 ourknow-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. 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 in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

Risks related to commercialization of our product candidates

If we are unable to establish sales, distribution and marketing capabilities or enter into agreements with third parties to market and sell~~AVR-RD-01~~ ~~and~~ our ~~other~~ product candidates, we will be unable to generate any product revenue.

We ~~currently have no sales, distribution or marketing~~are in the preliminary stages of building our commercial organization. To successfully commercialize any of our current or future product candidates, if approved, we will need to develop these capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time-consuming and could delay any product launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may enter into collaborations regarding any approved product candidates with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well-funded sales, distribution and marketing operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates, if approved. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

If the market opportunities for our product candidates are smaller than we believe they are, our product revenues may be adversely affected and our business may suffer.

We focus our research and product development on treatments for serious lysosomal ~~storage diseases.~~disorders. Our understanding of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. The number of patients in the United States and elsewhere may turn out to be lower than expected or may not be otherwise amenable to treatment with our products, or patients may become increasingly difficult to identify and access, and any approval we receive from regulatory agencies may be for a narrower indication and smaller patient population than anticipated, all of which would adversely affect our business, financial condition, results of operations and prospects.

The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Even if we obtain any regulatory approval for our product candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and third-party payors accepting gene therapy products in general, and our product candidates in particular, as effective, safe and cost-effective. Any product that we bring to the market may not gain market acceptance

by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the potential efficacy and potential advantages over alternative treatments, including any similar generic treatments;

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the efficacy and safety as demonstrated in pivotal clinical trials and published in peer-reviewed journals;

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the prevalence and severity of any adverse events or side effects, including any limitations or warnings contained in a product’s approved labeling or that are later found to be associated with a product, including in findings from long-term follow-up studies;

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the prevalence and severity of any side effects resulting from the conditioning regimen for the administration of our product candidates;

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the ability to offer the products for sale at competitive prices;

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the clinical indications for which the products are approved by the FDA or comparable regulatory agencies;

~~the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;~~
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the relative convenience and ease of dosing and administration compared to alternative treatments;

~~the prevalence and severity of any side effects resulting from the conditioning regimen for the administration of our product candidates;~~

~~the relative convenience and ease of administration;~~

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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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the strength of marketing and distribution support and timing of market introduction of competitive products;

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restrictions on how the product is distributed;

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publicity concerning our products or competing products and treatments; and

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favorable third-party insurance coverage and sufficient reimbursement.

Sales of medical products also depend on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these ~~therapies;~~

physicians that the ~~strength~~products are safe, therapeutically effective and cost effective. In addition, the inclusion or exclusion of ~~marketing~~products from treatment guidelines established by various physician groups and ~~distribution support~~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 ~~timing of market introduction of competitive products;~~

~~publicity concerning our products or~~cost effective as compared with competing ~~products and treatments; and~~treatments.

~~sufficient third-party insurance coverage or reimbursement.~~

Even if a product candidate displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product, if approved for commercial sale, will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.

If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

We are currently ~~plan to conduct~~conducting clinical trials for our product candidates ~~outside of~~in the United States, ~~including in~~ Canada and Australia, ~~Japan, Europe~~ and ~~Israel.~~plan to expand to other geographies. If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject to additional risks related to entering into international business relationships, including:

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different regulatory requirements for approval of drugs and biologics in foreign countries;

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reduced protection for intellectual property rights;

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unexpected changes in tariffs, trade barriers and regulatory requirements;

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economic weakness, including inflation, or political instability in particular foreign economies and markets;

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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

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workforce uncertainty in countries where labor unrest is more common than in the United States;

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

~~reduced protection for intellectual property rights;~~

~~unexpected changes in tariffs, trade barriers and regulatory requirements;~~

~~economic weakness, including inflation, or political instability in particular foreign economies and markets;~~

~~compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;~~

~~foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;~~

~~workforce uncertainty in countries where labor unrest is more common than in the United States;~~

~~production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and~~

~~business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.~~

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

The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. In the United States, recently enacted legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or their commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are

able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.

Our ability to successfully commercialize our product candidates or any other products that we or they may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford ~~expensive treatments, such as stem cell transplants.~~treatments. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement is not available, or is available only at limited levels, we may not be able to successfully commercialize our product candidates, if approved. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, or HHS, as ~~the~~ CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow ~~the~~ CMS to a substantial degree. It is difficult to predict what ~~the~~ CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs and commercial payors are critical to new product acceptance. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

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a covered benefit under its health plan;

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safe, effective and medically necessary;

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appropriate for the specific patient;

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cost-effective; and

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neither experimental nor investigational.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and certain other major markets where we plan to commercialize may put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health ~~systems.~~systems, and pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

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

Due to the novel nature of our technology and the potential for our product candidates to offer therapeutic benefit in a single administration, we face uncertainty related to pricing and reimbursement for these product candidates.

Our target patient populations are relatively small, as a result of which the pricing and reimbursement of our product candidates, if approved, must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our product candidates, if approved.

manner. Accordingly, we and our manufacturing suppliers employ multiple steps to control the manufacturing process with the goal of ensuring that the product candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, including even minor deviations from the intended process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA or other applicable regulatory standards or specifications with consistent and acceptable production yields and costs.

Healthcare legislative reform measures and constraints on national budget social security systems may have a material adverse effect on our business and results of operations.

~~Third-party payors, whether domestic~~The United States and many foreign jurisdictions have enacted or ~~foreign,~~proposed legislative and regulatory changes affecting the healthcare system that could prevent or ~~governmental~~delay marketing approval of our product candidates or ~~private, are developing increasingly sophisticated methods~~any future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval. Changes in regulations, statutes or the interpretation of ~~controlling healthcare costs.~~ existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

In ~~both~~ the United States, ~~and certain foreign jurisdictions,~~ there have been and continue to be a number of legislative ~~and regulatory changes~~initiatives to ~~the health care system that could impact our ability to sell our products profitably. In particular,~~contain healthcare costs. For example, in 2010, the Patient Protection and Affordable Care Act, ~~or ACA or PPACA,~~ as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA, was enacted, which, substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, ~~subjected~~subjects biologic products to potential competition by lower-cost biosimilars, ~~addressed~~addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, ~~increased~~increases the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, ~~extended~~increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extends the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, ~~subjected~~subjects manufacturers to new annual fees and taxes for certain branded prescription drugs, creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, and ~~provided~~provides incentives to programs that increase the federal government’s comparative effectiveness research. ~~Some of the provisions~~

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, ~~have yet~~and we expect there will be additional challenges and amendments to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA in the future. Members of Congress have introduced several pieces of legislation aimed at significantly revising or repealing the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to ~~waive, defer, grant exemptions from, or delay~~ the ~~implementation of any provision~~ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for the purpose of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that ~~would impose a fiscal burden on states~~limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. ~~Several state Attorneys General filed suit~~It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, the CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required underchallenge, repeal or replace the ACA ~~for plans sold through such marketplaces. Congress may consider other legislation to replace elements of the ACA.~~will impact our business.

~~The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, thetax-based~~ shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain~~ACA-mandated~~ ~~fees, including theso-called~~ “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device exercise tax on~~non-exempt~~ medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress also could consider subsequent legislation to replace elements of the ACA that are repealed. Thus, the full impact of the ACA, any law replacing elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our business remains unclear. In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through ~~2027~~2030 unless additional Congressional action is ~~taken.~~taken; however, pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, these reductions have been suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic. The Consolidated Appropriations Act of 2021, extended the suspension period to March 31, 2021. An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, signed into law on April 14, 2021, has extended the suspension period to December 31, 2021. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals

and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, President Biden signed an Executive Order on July 9, 2021 affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option. Among other things, the executive order directs the FDA to continue to clarify and improve the approval framework for biosimilars, including the standards for interchangeability of biological products, facilitate the development and approval of biosimilar and interchangeable products, clarify existing requirements and procedures related to the review and submission of BLAs, and identify and address any efforts to impede biosimilar competition. Additionally the executive order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and would have applied to all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. The MFN is currently subject to ongoing litigation. Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we receive for any of our product candidates. Additionally, on December 2, 2020, HHS published 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 rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. on December 2, 2020, HHS published 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 rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that it will continue to seek new legislative measures to control drug costs.

We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payors.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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the demand for our drug product candidates, if we obtain regulatory approval;

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our ability to set a price that we believe is fair for our products;

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our ability to generate revenue and achieve or maintain profitability;

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the level of taxes that we are required to pay; and

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the availability of capital.

~~our ability to set a price that we believe is fair for our products;~~

~~our ability to generate revenue and achieve or maintain profitability;~~

~~the level of taxes that we are required to pay; and~~

~~the availability of capital.~~

Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

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

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

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. Since March 2020when foreign and domestic inspections of facilities were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch monitoring and pre-approval inspections on a prioritized basis. The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections. As of May 2021, certain inspections, such as foreign preapproval, surveillance, and for-cause inspections that are not deemed mission-critical, remain temporarily postponed. In April 2021, the FDA issued guidance for industry formally announcing plans to employ remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates and in May 2021 announced plans to continue progress toward resuming standard operational levels. Should the FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be adequate, the FDA has stated that it generally intends to issue a complete response letter or defer action on the application until an inspection can be completed. Additionally, as of May 26, 2021, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. However, the FDA may not be able to continue its current pace and approval timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the ongoing COVID-19 pandemic and travel restrictions FDA is unable to complete such required inspections during the review period. In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future shutdowns of other government agencies, such as the SEC, may also impact our business through review of our public filings and our ability to access the public markets.

Any contamination in our manufacturing process, shortages of materials or failure of any of our key suppliers to deliver necessary components could result in interruption in the supply of our product candidates and delays in our clinical development or commercialization schedules.

Given the nature of biologics manufacturing, there is a risk of contamination in our manufacturing processes. Any contamination could materially adversely affect our ability to produce product candidates on schedule and could, therefore, harm our results of operations and cause reputational damage.

Some of the materials required in our manufacturing process are derived from biologic sources. Such 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 our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.

Risks related to our business operations

Our gene therapy approach utilizes lentiviral vectors derived from viruses, which may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Gene therapy remains a novel technology, with only a limited number of gene therapy products approved to date. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with 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 we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia, myelodysplastic syndromes and ~~death~~deaths seen in other trials using other vectors. Adverse events in our clinical studies or discovered in long-term follow-up, even if not ultimately attributable to our product candidates (such as the many adverse events that typically arise from the conditioning process), or adverse events in other lentiviral gene therapy trials, and the resulting publicity could result in a decline in our stock price, increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

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

We are highly dependent on principal members of our executive team and key employees, ~~including our Chief Executive Officer, Chief Financial Officer, Head of Operations, Chief Science Officer, Chief Business Officer, and Chief Medical Officer,~~ the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees. The loss of the services of one or more of our current employees might impede the achievement of our research, development and commercialization objectives. Recruiting and retaining other qualified employees, consultants and advisors for our

business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which is likely to continue. As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, our ability to recruit and retain qualified personnel could be impacted by other factors, such as remote or hybrid working arrangements, including those resulting from the ongoing COVID-19 pandemic, which could impact employees’ productivity and morale, as well as any failure to succeed in preclinical or clinical ~~trials may make it more challenging to recruit and retain qualified personnel.~~trials. The inability to recruit or the loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.

We will need to expand our operations and we may experience difficulties in managing this growth, which could disrupt our operations.

~~As of June 30, 2018, we had 34 full-time employees.~~ As we mature, we expect to rapidly expand our full-time employee base and to hire more consultants and contractors. Our management may need to divert a disproportionate amount of its attention away from ourday-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.

If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities and, in the longer term, build a commercial infrastructure to support commercialization of any of our product candidates that are approved for sale. Future growth would impose significant added responsibilities on members of management. It is likely that our management, finance, development

personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and product candidates requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.

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

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA or of other foreign regulatory authorities, provide accurate information to the FDA and other foreign 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 may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We 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 governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We can face serious consequences for violations.

Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have

direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We also expect ournon-U.S. activities to increase in time. We plan to engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The ~~Securities and Exchange Commission, or~~ SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the United States Foreign Corrupt Practices Act’s accounting provisions.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health information privacy and security laws, and other health care laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to:

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, the purchase, lease, order, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties;
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between

federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act, which impose criminal and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for, among other things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; making, using or causing to be made or used, a false statement of record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government;

the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;
pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. On December 2, 2020, HHS published 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 rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
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federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information;
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the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;

the federal transparency requirements under the Affordable Care Act, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.

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federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; and

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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers

Additionally, we are subject to state and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the ~~payer.~~payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental ~~payers,~~payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also

impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties. Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

~~Because~~The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the ~~breadth~~unauthorized sale of pharmaceutical products.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.

The failure to comply with any of these laws or regulatory requirements subjects entities to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in federal and state funded healthcare programs (such as Medicare and Medicaid), contractual damages and the ~~narrowness~~curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Any action for violation of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the ~~statutory exceptions and safe harbors available, it~~business. If any of the physicians or other healthcare providers or entities with whom we expect to do business is ~~possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations are~~ found not to be in ~~violation of any of the~~compliance with applicable laws, ~~described above~~that person or ~~any other government regulations that apply to us, we~~entity may be subject to ~~penalties,~~criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and ~~criminal~~administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in ~~government health care~~Medicare, Medicaid and other federal healthcare programs, ~~such as Medicare~~contractual damages, reputational harm, diminished profits and ~~Medicaid, imprisonment~~future earnings, and ~~the~~ curtailment ~~or restructuring~~ of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

We and any potential collaborators may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial patients, employees and other individuals about whom we or our potential

collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

European data collection is governed by restrictive regulations governing the use, processing and cross-border transfer of personal information.

We currently plan to conduct clinical trials in the European Union, or EU, and the United Kingdom, or UK, and as a result will be subject to additional privacy restrictions. The collection, use, disclosure, transfer or other processing of personal health data in the EU is governed by the provisions of the General Data Protection Regulation, or GDPR. 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, providing information to individuals regarding data processing activities, obtaining consent from individuals to whom the data processing relates, imposing notification of personal data breaches to the competent national data protection authorities, implementing safeguards in connection with the security and confidentiality of the personal data, accountability requirements and taking certain measures when engaging third-party processors. The GDPR informs our obligations with respect to any clinical trials conducted in the European Economic Area 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 imposes strict rules on the transfer of personal data out of the European Union, including to the United States, and as a result increases scrutiny that such rules may apply to transfers of personal data from any clinical trial sites located in the EU and the UK to the United States. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal data 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 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.

Given the breadth and depth of its obligations, complying with the GDPR’s requirements is rigorous and time intensive and requires significant resources and assessment 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.

Further, the UK exited the EU effective January 31, 2020, subject to a transition period that ended December 31, 2020. Following the UK’s withdrawal from the EU on January 31, 2020, pursuant to the transitional arrangements agreed to between the UK and EU, the GDPR continued to have effect under law in the UK, and continued to do so until December 31, 2020 as if the UK remained a member state of the EU for such purposes. Following December 31, 2020, and the expiry of those transitional arrangements, the data protection obligations of the GDPR continue to apply to UK-related processing of personal data in substantially unvaried form and fashion under the so-called “UK GDPR” (i.e., the GDPR as it continues to form part of UK law by virtue of section 3 of the European Union (Withdrawal) Act 2018, as amended (including by the various Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations)).

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.

The use of our product candidates in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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the impairment of our business reputation;

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the withdrawal of clinical study participants;

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costs due to related litigation;

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the distraction of management’s attention from our primary business;

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substantial monetary awards to patients or other claimants;

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the inability to commercialize our product candidates; and

~~the withdrawal of clinical study participants;~~

~~costs due to related litigation;~~

~~the distraction of management’s attention from our primary business;~~

~~substantial monetary awards to patients or other claimants;~~

~~the inability to commercialize our product candidates; and~~

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decreased demand for our product candidates, if approved for commercial sale.

We carry master product liability insurance of $5.0 million per occurrence and $5.0 million in the ~~aggregate.~~aggregate in the United States. For studies conducted in Australia and Canada, we maintain local admitted policies with varying limits. We believe our product liability insurance coverage is sufficient in light of our current clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Patients with the diseases targeted by certain of our product candidates are often already in severe and advanced stages of disease and have both known and unknown significantpre-existing and potentially life- threatening health risks. During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our

commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

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

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

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

Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business, financial condition, results of operations and prospects.

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

had a material adverse effect on our business. However, if any cyberattack or data breach were to occur in the future and cause interruptions in our or our collaborators’, contractors’ or consultants’ operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

~~Comprehensive tax reform legislation could adversely affect our business and financial condition.~~

On December 22, 2017, President Trump signed into law the TCJA that significantly reforms the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, contains significant changes to corporate taxation, including the reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), the limitation of the deduction for net operating losses to 80% of current year taxable income and the elimination of net operating loss carrybacks and modification or repeal of many business deductions and credits (including the reduction of the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”). We continue to examine the impact this tax reform legislation may have on our business. However, the effect of the TCJA on our business, whether adverse or favorable, is uncertain, and may not become evident for some period of time. We urge investors to consult with their legal and tax advisers regarding the implications of the TCJA on an investment in our common stock.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

As of December 31, ~~2017,~~2020, we had federal and state net operating loss carryforwards of ~~$19.0~~$214.0 million and ~~$18.9~~$201.6 million, respectively, and federal and state research and development tax credit carryforwards of approximately ~~$119,000.~~$3.7 million and $0.7 million, respectively. If not utilized, the net operating loss carryforwards and research and development credits will generally expire at various dates through ~~2037.~~2038 (other than federal net operating loss carryforwards generated in taxable years beginning after December 31, 2017, which are not subject to expiration and generally may not be carried back to prior taxable years except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years). These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than ~~50%~~50 percentage point change, by value, in its equity ownership over a three-year period, the corporation’s ability to use itspre-change net operating loss carryforwards and otherpre-change tax attributes to offset its post-change

income may be limited. We may have experienced ownership changes in the past. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, ~~including our IPO,~~ some of which may be outside of our control. If an ownership change occurred or occurs and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development carryforwards are adjusted, it would harm our future operating results by effectively increasing our future tax obligations. The reduction of the corporate tax rate under the TCJA may cause a reduction in the economic benefit of our net operating loss carryforwards and other deferred tax assets available to us. Under the TCJA,For taxable years beginning after December 31, 2020, deductions for federal net operating losses ~~generated~~arising in taxable years beginning after December 31, 2017 ~~will not be subject to expiration.~~may only offset 80% of taxable income.

Risks related to our intellectual property

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions andinter partes reexamination proceedings before the U.S. Patent and Trademark Office, or ~~U.S. PTO,~~USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we or our licensors are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. In particular, we are aware of issued patents in the United States that cover the lentiviral vectors used in the manufacture of our product candidates. While we believe that we have reasonable defenses against a claim of infringement, potentially including that certain of these patents are expected to expire prior to commercializing our product candidates, if approved, in the United States, there can be no assurance that we will prevail in any such action by the holder of these patents. In the event that the holder of these patents seeks to enforce its patent rights and our defenses against a claim of

infringement are unsuccessful, we may not be able to commercialize our product candidates in the United States, if approved, without first obtaining a license to some or all of these patents, which may not be available on commercially reasonable terms or at all. In addition, the defense of any claim of infringement, even if successful, is time-consuming, expensive and diverts the attention of our management from our ongoing business operations.

Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe or be alleged to infringe. In addition, third parties may obtain patents in the future and claim that use of our or our licensors’ technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Even in the absence of a finding of infringement, we may choose to obtain a license, if such a license is available. A successful claim of patent or other intellectual property infringement against us could materially adversely affect our business, results of operations and financial condition.

Our rights to develop and commercialize our product candidates are subject, in part, to the terms and conditions of licenses granted to us by others.

We depend upon the intellectual property rights granted to us under licenses from third parties that are important or necessary to the development of our technology and products, including technology related to our manufacturing process and our gene therapy product candidates. In particular, we havein-licensed certain intellectual property rights andknow-how from the University Health

Network (relevant toAVR-RD-01 and our Fabry program) and affiliates of Lund University (relevant toAVR-RD-02 and our Gaucher type 1 program). In addition, we havein-licensed patents and patent applications from BioMarin Pharmaceutical Inc., or ~~Biomarin~~BioMarin (relevant toAVR-RD-03 and our Pompe program), ~~and~~ GenStem Therapeutics, Inc., or GenStem (relevant toAVR-RD-04 and our cystinosis program)and The University of Manchester (relevant to AVR-RD-05 and our Hunter program), directed to compositions and methods related to the manufacture and use ofAVR-RD-03, AVR-RD-04 and~~AVR-RD-04,~~ AVR-RD-05, respectively. Any termination of these licenses could result in the loss of significant rights and could harm or prevent our ability to commercialize our product candidates.

Each of our existing licenses are exclusive but are limited to particular fields, such as Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, or Pompe disease, ~~or cystinosis,~~ and are subject to certain retained rights. Absent an amendment or additional agreement, we may not have the right to use intellectual propertyin-licensed for one of our programs for another program. In addition, licenses that we may enter into in the future may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses. Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial condition.

In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. For example, pursuant to each of our intellectual property licenses with GenStem, BioMarin, ~~and~~ the rights holders associated with Lund University, and The University of Manchester, our licensors retain control of such activities. Therefore, we cannot be certain that these patents and applications will be prosecuted, maintained and enforced in a manner consistent with the best interests of our business. If our licensors fail to maintain such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected.

Our current license agreements impose, and we expect that future license agreements that we may enter into will impose, various obligations, including diligence and certain payment obligations. If we fail to satisfy our obligations, the licensor may have the right to terminate the agreement. Disputes may arise between us and any of our licensors regarding intellectual property subject to

such agreements and other issues. Such disputes over intellectual property that we have licensed or the terms of our license agreements may prevent or impair our ability to maintain our current arrangements on acceptable terms, or at all, or may impair the value of the arrangement to us. Any such dispute could have a material adverse effect on our business. If we cannot maintain a necessary license agreement or if the agreement is terminated, we may be unable to successfully develop and commercialize the affected product candidates.

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

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We rely on manufacturing and otherknow-how, patents, trade secrets, trademarks, license agreements and contractual provisions to establish our intellectual property rights and protect our products. These legal means, however, afford only limited protection and may not adequately protect our rights. The failure to obtain, maintain, enforce or defend such intellectual property rights, for any reason, could allow third parties to make competing products or impact our ability to develop, manufacture and market our products, if approved, on a commercially viable basis, or at all, which could have a material adverse effect on our financial condition and results of operations.

In particular, we rely primarily on trade secrets,know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available or our trade secrets,know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Our licensors and we have sought, and we intend to continue to seek to protect our proprietary position by filing patent applications in the United States and, in at least some cases, one or more countries outside the United States related to current and future product candidates that are important to our business. However, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents, whether the claims of any issued patents will provide us with a competitive advantage, or whether we will be able to successfully pursue patent applications in the future related to our current or future product

candidates. WeWhile we have in-licensed patents and patent applications relevant to AVR-RD-03, we currently have no owned or in-licensed patents or patent applications coveringAVR-RD-01, AVR-RD-02 or~~AVR-RD-02,~~ AVR-RD-06, and the patent ~~application~~applications that wein-licensed related toAVR-RD-04 is and AVR-RD-05 are at a very early stage. Many of our product candidates arein-licensed from third parties. Accordingly, in some cases, the availability and scope of potential patent protection is limited based on prior decisions by our licensors or the inventors, such as decisions on when to file patent applications or whether to file patent applications at all.

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

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. Although our license agreements grant us worldwide rights, and our currentlyin-licensed U.S. patent rights have certain corresponding foreign patents or patent applications, there can be no assurance that we will obtain or maintain such corresponding patents or patent applications with respect to any future license agreements. 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 even in jurisdictions where we and our licensors pursue patent protection. Consequently, we and our licensors may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we and our licensors pursue patent protection, 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 pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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

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

If one of our licensing partners or we initiate legal proceedings against a third-party to enforce a patent covering one of our product candidates, should such a patent issue, the defendant could counterclaim that the patent covering our product candidate 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, written description ornon-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 ~~United States Patent and Trademark Office, or~~ 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 includere-examination, post grant review,inter partes review and equivalent 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. 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. Such a loss of patent protection could have a material adverse impact on our business.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietaryknow-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 proprietaryknow-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 and contractors. We cannot guarantee that we have entered into such agreements with each party that may have or have 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. While we have confidence in these individuals, organizations and systems, agreements or 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 by competitors.

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.

Certain 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 orknow-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 personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. Our licensors may face similar risks, which could have an adverse impact on intellectual property that is licensed to us.

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

We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we own or license or that we may own or license in the future. While it is our

policy to require our employees and contractors who may be involved in the 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 develops intellectual property that we regard as our own; our licensors may face similar obstacles. We could be subject to ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against any claims challenging inventorship or ownership. If we or our licensors fail in defending any such claims, we may have to pay monetary damages and may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property, which could adversely impact our business, results of operations and financial condition.

Some intellectual property which we havein-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as ~~“marchin”~~“march-in” rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with ~~nonU.S.~~non-U.S. manufacturers.

Some of the intellectual property rights we have licensed, including rights licensed to us by GenStem, may have been generated through the use of U.S. government and California state funding and may therefore be subject to certain federal and state laws and regulations. For example, with respect to the AVR-RD-04 program for cystinosis, the NIH previously granted funding to UCSD for certain research in connection with the development of UCSD’s gene therapy program for cystinosis, which we have licensed from GenStem. As a result, the U.S. government may have certain rights to intellectual property embodied in our ~~current~~AVR-RD-04 program, or ~~future~~in other product candidates to the extent funded by the U.S. government pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act. These U.S. government rights in certain inventions developed under a government-funded program include anon-exclusive,non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, ornon-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as~~“march-in~~ “march-in rights”). The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. In addition, the U.S.

government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract withnon-U.S. product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply. Any exercise by the government of certain of its rights could harm our competitive position, business, financial condition, results of operations and prospects. With respect to state funding, specifically funding via the California Institute of Regenerative Medicine, or CIRM, which has granted funds for the study of AVR-RD-04 for cystinosis, the grantee has certain obligations and the state or CIRM has certain rights. For example, the grantee has an obligation to share intellectual property, including research results, generated by CIRM-funded research, for research use in California.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Changes in either the patent laws or the interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes several significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also may affect patent litigation. These also include provisions that switched the United States from a~~“first-to-invent”~~ “first-to-invent” system to a~~“first-to-file”~~ “first-to-file” system, allow third-party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under afirst-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, 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.

The patent positions of companies engaged in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Two cases involving diagnostic method claims and “gene patents” ~~have recently been~~were decided this year by the Supreme Court of the United States, or Supreme Court. On March 20, 2012, the Supreme Court issued a decision in Mayo Collaborative

Services v. Prometheus Laboratories, Inc., or Prometheus, a case involving patent claims directed to a process of measuring a metabolic product in a patient to optimize a drug dosage for the patient. According to the Supreme Court, the addition of well-understood, routine or conventional activity such as “administering” or “determining” steps was not enough to transform an otherwise patent-ineligible natural phenomenon into patent-eligible subject matter. On July 3, 2012, the USPTO issued a guidance memo to patent examiners indicating that process claims directed to a law of nature, a natural phenomenon or a naturally occurring relation or correlation that do not include additional elements or steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied and the claim amounts to significantly more than the natural principle itself should be rejected as directed to not patent-eligible subject matter. On June 13, 2013, the Supreme Court issued its decision in Association for Molecular Pathology v. Myriad Genetics, Inc., or Myriad, a case involving patent claims held by Myriad Genetics, Inc. relating to the breast cancer susceptibility genes BRCA1 and BRCA2. Myriad held that an isolated segment of naturally occurring DNA, such as the DNA constituting the BRCA1 and BRCA2 genes, is not patent-eligible subject matter, but that complementary DNA, which is an artificial construct that may be created from RNA transcripts of genes, may be patent-eligible. On March 4, 2014, the USPTO issued a guidance memorandum to patent examiners entitled 2014 Procedure For Subject Matter Eligibility Analysis Of Claims Reciting Or Involving Laws Of Nature/Natural Principles, Natural Phenomena, And/Or Natural Products. These guidelines instruct USPTO examiners on the ramifications of the Prometheus and Myriad rulings and apply the Myriad ruling to natural products and principles including all naturally occurring nucleic acids.

Certain claims of our licensed patents and patent applications contain, and any future patents we may obtain may contain, claims that relate to specific recombinant DNA sequences that are naturally occurring at least in part and, therefore, could be the subject of future challenges made by third parties. In addition, the 2014 USPTO guidance could impact our ability to pursue similar patent claims in patent applications we may prosecute in the future.

We cannot assure you that our efforts to seek patent protection for our product candidates will not be negatively impacted by the decisions described above, rulings in other cases or changes in guidance or procedures issued by the USPTO. We cannot fully predict what impact the Supreme Court’s decisions in Prometheus and Myriad may have on the ability of life science companies to obtain or

enforce patents relating to their products in the future. These decisions, the guidance issued by the USPTO and rulings in other cases or changes in USPTO guidance or procedures could have a material adverse effect on our existing patent rights and our ability to protect and enforce our intellectual property in the future.

Moreover, although the Supreme Court has held in Myriad that isolated segments of naturally occurring DNA are not patent-eligible subject matter, certain third parties could allege that activities that we may undertake infringe other gene-related patent claims, and we may deem it necessary to defend ourselves against these claims by assertingnon-infringement and/or invalidity positions, or paying to obtain a license to these claims. In any of the foregoing or in other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from utilizing the patented subject matter. Such outcomes could harm our business, financial condition, results of operations or prospects.

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

Depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates, one or more U.S. patents that we license or may own or license in the future, if any, 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. 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. A patent may only be extended once and only based on a single approved product. However, we may not be granted an extension because of, 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 revenue could be reduced, possibly materially. In addition, we do not control the efforts of our licensors to obtain a patent term extension, and there can be no assurance that they will pursue or obtain such extensions to the patents that we license from them.

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.

We ~~currently~~have registered the marks “AVROBIO” and “plato” with the USPTO but do not have trademarks or trademark applications with the USPTO for the ~~mark~~marks “AVRO” ~~and~~or the AVROBIO logo. In the future, even if we apply for registration of these marks, there can be no assurance that such registration will be approved.

Once registered, our 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 financial condition or results of operations.

Intellectual property rights and regulatory exclusivity rights do not necessarily address all potential threats.

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:

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others may be able to make gene therapy products that are similar to our product candidates but that are not covered by the claims of the patents that we license or may own or license in the future;

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we, our license partners or current or future collaborators, might not have been the first to make the inventions covered by the issued patents or pending patent applications that we license or may own or license in the future;

•

we, our license partners or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

~~others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;~~

~~it is possible that our pending licensed patent applications or those that we may own or license in the future will not lead to issued patents;~~
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;

~~issued patents that we hold rights to or may hold rights to in the future may be held invalid or unenforceable, including as a result of legal challenges by our competitors;~~
•
it is possible that our pending licensed patent applications or those that we may own or license in the future will not lead to issued patents;

~~one or more of our product candidates may never be protected by patents;~~
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issued patents that we hold rights to or may hold rights to in the future may be held invalid or unenforceable, including as a result of legal challenges by our competitors;

our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
•
one or more of our product candidates may never be protected by patents;

~~we may not develop additional proprietary technologies that are patentable;~~
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our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

~~the patents of others may have an adverse effect on our business; and~~
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we may not develop additional proprietary technologies that are patentable;

~~we may choose not to file a patent application for certain trade secrets or~~
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the patents of others may have an adverse effect on our business; and

•

we may choose not to file a patent application for certain trade secrets or know-how, and a third party may subsequently file a patent application or obtain a patent covering such intellectual property.

Should any of these events occur, they could significantly harm our business, financial condition, results of operations and prospects.

Risks related to ownership of our common stock

The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above the ~~initial public offering price.~~price at which you purchased our shares.

Our stock price is likely to be volatile. Since our initial public offering, or IPO, in June 2018, through October 29, 2021, the trading price of our common stock has ranged from $5.23 to $53.70. The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the price at which you purchased shares. The market price for our common stock may be influenced by many factors, including:

~~adverse results or delays in preclinical studies or clinical trials;~~
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the ongoing COVID-19 pandemic;

~~reports of adverse events in other gene therapy products or clinical studies of such products;~~
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adverse results or delays in ongoing or planned preclinical studies or clinical trials;

~~an inability to obtain additional funding;~~
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reports of adverse events in other gene therapy products or clinical studies of such products;

~~failure by us to successfully develop and commercialize our product candidates;~~
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an inability to obtain additional funding;

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failure by us to comply with the terms of our Term Loan Agreement;

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failure by us to successfully develop and commercialize our product candidates;

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failure by us to maintain our existing strategic collaborations or enter into new collaborations;

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failure by us or our licensors and strategic partners to prosecute, maintain or enforce our intellectual property rights;

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changes in laws or regulations applicable to future products;

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an inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;

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adverse regulatory decisions;

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the introduction of new products, services or technologies by our competitors;

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failure by us to meet or exceed financial projections we may provide to the public;

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failure by us to meet or exceed the financial projections of the investment community;

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the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;

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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic partner or our competitors;

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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

~~additions or departures of key scientific or management personnel;~~

~~significant lawsuits, including patent or stockholder litigation;~~
•
additions or departures of key scientific or management personnel;

~~changes in the market valuations of similar companies;~~
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significant lawsuits, including patent or stockholder litigation;

~~sales of our common stock by us or our stockholders in the future; and~~
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changes in the market valuations of similar companies;

•

sales of our common stock by us or our stockholders in the future; and

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the trading volume of our common stock.

In addition, companies trading in the stock market in general, and The Nasdaq Global Select Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

An active trading market for our common stock may not ~~develop.~~be sustained.

Prior to our ~~initial public offering~~IPO in June 2018, there had been no public market for our common stock. 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. If an active market for our common stock ~~does not develop or~~ is not sustained, it may be difficult for you to sell shares you ~~purchase~~purchased without depressing the market price for the shares, or at all.

An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling additional shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

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

The trading market for our common stock will likely depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. Although we have obtained research coverage from certain analysts, there can be no assurance that analysts will continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Based on shares outstanding as of ~~June 30, 2018,~~October 29, 2021, our executive officers, directors, five percent stockholders and their affiliates beneficially owned approximately ~~62.22%~~45% of our ~~outstanding~~ voting stock. As a result, if these stockholders were to act together, they would be able to ~~control~~significantly influence all matters submitted to our stockholders for approval, as well as our management and ~~affair.~~affairs. For example, these stockholders, acting together, may be able to ~~control~~influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders. Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the current trading price of our stock and have held their shares for a longer period, they may be more interested in selling our ~~company~~Company to an acquirer than other investors or they may want us to pursue strategies that deviate from the interests of other stockholders.

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

We are an “emerging growth company,” or EGC, as defined in the JOBS Act. We will remain an EGC until the earliest of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the completion of our ~~initial public offering in June 2018;~~IPO; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the first day of the year following the first year in which the market value of our common stock that is held bynon-affiliates exceeds $700 million as of June ~~30.~~30 in any given year. 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 emerging growth companies. These exemptions include:

•

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

•

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

•

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s discussion and analysis of financial condition and results of operations” disclosure;

•

reduced disclosure obligations regarding executive compensation; and

•

an exemption from the requirement to seek nonbinding advisory votes on executive compensation or golden parachute arrangements.

We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of reduced reporting burdens in this ~~report.~~Annual Report on Form 10-K. In particular, we have not included in this Annual Report, and do not intend to include in our 2021 Proxy Statement, all of the executive compensation information that would be required if we were not an EGC. 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.

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

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” if the market value of our common stock held by non-affiliates is below $250 million (or $700 million if our annual revenue is less than $100 million) as of June 30 in any given year, which would allow us to take advantage of many of the same exemptions from disclosure requirements.

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

As a public company, and particularly after we are no longer an EGC, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will ~~need~~continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations ~~will increase~~have increased our legal and financial compliance costs and will continue to make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and increasingly more expensive for us to obtain and maintain director and officer liability insurance.

Pursuant to Section 404, we ~~will be~~are required to furnish a report by our management on our internal control over financial reporting, ~~including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while~~and, once we ~~remain~~are no longer an EGC or a “smaller reporting company,” we will ~~not~~ be required to ~~include~~furnish an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404, ~~within the prescribed period,~~ we ~~will~~continue to be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially continue to engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that ~~neither~~ we ~~nor our independent registered public accounting firm~~ will not be able to conclude ~~within the prescribed timeframe~~ that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

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 ~~controls~~control over financial reporting ~~are~~is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are 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 ~~controls~~control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements, or may 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 have a negative effect on the trading price of our stock.

We ~~will be~~are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management ~~will be~~is required to assess the effectiveness of these controls annually. However, for as long as we are an EGC or a “smaller reporting company,” our independent registered public accounting firm will not be required to attest to the effectiveness of our internal ~~controls~~control over financial reporting pursuant to Section 404. We could be an EGC for up to five ~~years.~~years following the completion of our IPO and will qualify as a “smaller reporting company” if the market value of our common stock held by non-affiliates is below $250 million (or $700 million if our annual revenue is less than $100 million) as of June 30 in any given year. An independent assessment of the effectiveness of our internal ~~controls~~control over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal ~~controls~~control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

~~We and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting.~~ If we ~~are unable to remedy these~~experience material weaknesses or ~~if we~~deficiencies in the future, or otherwise fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.

In connection with the audit of our consolidated financial statements for the years ended December 31, 2016 and 2017, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting related to deficiencies in our controls over the financial statement close and cash disbursement processes. Specifically, there was a lack of controls over the identification and review of complex accounting issues involving significant judgment or estimates as well as the cutoff and classification of certain expenses between general and administrative and research and development. In addition, our internal controls related to the cash disbursements process were not adequately designed to identify unauthorized payment requests. Specifically, in 2017 we were subject to a cyberattack by a third party. This deficiency in our controls resulted in the theft of a portion of our funds.

We ~~are implementing measures designed~~expect to continue our efforts to improve our ~~internal~~ control ~~over financial reporting to remediate these material weaknesses, including formalizing our~~ processes, and internal control documentation and strengthening supervisory reviews by our financial management; hiring additional qualified accounting and finance personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and segregating duties amongst accounting and finance personnel; and planning to implement certain accounting systems to automate manual processes, such as tracking and accounting for stock-based awards.

~~We expect to incur additional costs to remediate these control deficiencies,~~ though there can be no assurance that our efforts will ultimately be successful or avoid potential future material ~~weaknesses.~~weaknesses, and we expect to continue incurring additional costs as a result of these efforts. If we are unable to successfully remediate ~~our existing or~~ any future material weaknesses in our internal control over financial reporting, ~~or if we identify any additional material weaknesses,~~ the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result. We also could become subject to investigations by Nasdaq, the ~~Securities and Exchange Commission, or~~ SEC or other regulatory authorities.

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

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.

~~Significant sales~~A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly.

Sales of a substantial number of shares of our common stock in the public market could occur at any ~~time.~~time, subject to certain restrictions described below. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of ~~June 30, 2018,~~October 29, 2021, holders of an aggregate of approximately ~~15.3~~4.5 million shares of our common stock will have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. In addition, ~~1,871,139~~ shares reserved for issuance upon the exercise of ~~existing~~ stock options outstanding ~~as of June 30, 2018~~ under our equity incentive plans will become eligible for sale in the public market in the ~~future, subject to certain legal and contractual limitations.~~future. We have registered all shares of common stock that we may issue under our equity compensation plans, which can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock. For example, our ~~loan and security agreement with Silicon Valley Bank~~Term Loan Agreement restricts our ability to pay ~~any~~certain kinds of dividends or ~~making any~~to make certain kinds of distributions on account of our capital ~~stock.~~stock, and we may enter into agreements in the future with similar restrictions. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Provisions in our amended and restated certificate of incorporation andby-laws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.

Our amended and restated certificate of incorporation, amended and restatedby-laws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation andby-laws, include provisions that:

•

authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

•

create a classified board of directors whose members serve staggered three-year terms;

•

specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president;

•

prohibit stockholder action by written consent;

•

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

•

provide that our directors may be removed only for cause;

•

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

•

specify that no stockholder is permitted to cumulate votes at any election of directors;

•

expressly authorize our board of directors to modify, alter or repeal our amended and restated by-laws; and require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated by-laws.

~~create a classified board of directors whose members serve staggered three-year terms;~~

~~specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president;~~

~~prohibit stockholder action by written consent;~~

~~provide that our directors may be removed only for cause;~~

~~provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;~~

~~specify that no stockholder is permitted to cumulate votes at any election of directors;~~

~~expressly authorize our board of directors to modify, alter or repeal our amended and restatedby-laws;~~ ~~and~~

~~require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restatedby-laws.~~

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

Any provision of our amended and restated certificate of incorporation or amended and restatedby-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our ~~amended and restated~~ bylaws ~~limit the~~contain exclusive forum ~~for certain litigation that~~provisions, which may ~~be initiated by our stockholders, which could~~ limit ~~our stockholders’~~a stockholder’s ability to ~~obtain~~bring a ~~favorable~~claim in a judicial forum ~~for disputes~~it finds favorable and may discourage lawsuits with ~~us or our directors, officers or employees.~~respect to such claims.

Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware iswill be the sole and exclusive forum for ~~(i)~~any state law claim for (1) any derivative action or proceeding brought on our ~~behalf, (ii)~~behalf; (2) any action asserting a claim of breach of or based on a fiduciary duty owed by any of our current or former directors, officers or other ~~employee~~employees to us or our ~~stockholders, (iii)~~stockholders; (3) any action asserting a claim against us or any of our current or former directors, officers, employees or stockholders arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or ~~bylaws~~our amended and restated bylaws; or ~~(iv)~~(4) any action asserting a claim governed by the internal affairs ~~doctrine.~~doctrine, or the Delaware Forum Provision. The ~~choice~~Delaware Forum Provision will not apply to any causes of ~~forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us~~action arising under the Securities Act or ~~our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find~~ the ~~choice of forum provision contained in our~~Exchange Act. Our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions which could have an adverse effect on our business, financial condition or results of operations. In addition, our amended and restated bylaws contain a provision by virtue of whichfurther provide that, unless we consent in writing to ~~the selection of~~ an alternative forum, the United States District Court for the District of Massachusetts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities ~~Act. We have chosen~~Act, or the ~~United States Court for the District of Massachusetts~~Federal Forum Provision, as ~~the exclusive forum for such causes of action because~~ our principal executive offices are located in Cambridge, Massachusetts. In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.

We recognize that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware or the Commonwealth of Massachusetts. Additionally, these forum selection clauses in our amended and restated bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they 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 even though an action, if successful, might benefit our stockholders. Section 22 of the Securities Act creates a concurrent jurisdiction for state and federal courts over all suits brought concerning a duty or liability created by the securities laws, rules and regulations thereunder. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. The ~~U.S.~~Federal Forum Provision may also impose additional litigation costs on stockholders who assert the provision is unenforceable, and if the Federal Forum Provision is found to be unenforceable, we may incur additional costs with resolving such matters. The Court of Chancery of the State of Delaware and the United States District Court infor the District of Massachusetts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

General Risk Factors

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

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business, financial condition, results of operations and prospects.

Despite our security measures, our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. For example, in 2017 we were subjected to a cyberattack by a third party, which led to the theft of a portion of our funds. We implemented remedial measures promptly following this breach and do not believe that this breach had a material adverse effect on our business. In addition, ~~some companies that have adopted similar federal district court forum selection provisions are currently~~in February 2019, one of our vendors was subject to a ~~suit~~cyberattack by a third party, which resulted in the ~~Court~~payment by us of ~~Chancery of the State of Delaware brought by stockholders who assert that the federal district court forum selection provision is not enforceable.~~a fraudulent invoice. We ~~recognize that the federal district court forum selection clause may impose additional litigation costs on stockholders who assert the provision is not enforceable~~have implemented remedial measures following this breach and ~~may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders~~ do not ~~reside~~believe that this breach had a material effect on our business.However, if any cyberattack or data breach were to occur in the future and cause interruptions in our or ~~near~~our collaborators’, contractors’ or consultants’ operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our business data, trade secrets or other proprietary information or other similar disruptions. For example, the ~~Commonwealth~~loss of ~~Massachusetts.~~

clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

Changes in tax law could adversely affect our business and financial condition.

The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

On June 25, 2018, we completed our initial public offering of 6,035,151 shares of our common stock at a price of $19.00 per share for an aggregate offering price of approximately $114.7 million, including the full exercise of the underwriters’ option to purchase additional shares. Morgan Stanley & Co. LLC, Cowen and Company, LLC, Wells Fargo Securities, LLC and Wedbush Securities Inc. served as the underwriters of the IPO. The offer and sale of all of the shares in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File Nos. 333-225213 and 333-225764), which became effective on June 20, 2018.

We received aggregate net proceeds from the offering of approximately $104.2 million, after deducting underwriting discounts and commissions, as well as other offering expenses. There has been no material change in our planned use of the net proceeds from the offering as described in the final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act.

Not applicable.

Item 3.

Defaults Upon Senior Securities.

Not ~~Applicable~~applicable.

Item 4.

Mine Safety Disclosures.

Not ~~Applicable.~~applicable.

Item 5.

Other Information.

~~None~~Term Loan Agreement

On November 2, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, by and among the Company, the lenders party thereto from time to time, or the Lenders, and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. The Term Loan Agreement provides for (i) on the Closing Date, $30.0 million aggregate principal amount of term loans available through October 31, 2023; (ii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory milestones prior to the time of draw; (iii) an additional $10.0 million term loan facility available through October 31, 2023 upon the achievement of certain regulatory and/or clinical milestones prior to the time of draw; and (iv) an additional discretionary $15.0 million term loan facility available upon our request and approval by the Agent and the Lenders, or, collectively, the Term Loans. The Company drew $15.0 million in term loans on the Closing Date.

The obligations under the Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for intellectual property pursuant to the terms of the Term Loan Agreement.

The interest rate applicable to the Term Loans is the greater of (a) the WSJ Prime Rate plus 4.85% or (b) 8.10% per annum. The Term Loans are interest only from the Closing Date through November 1, 2024, after which the Company is required to pay equal monthly installments of principal and accrued interest through October 1, 2026, the maturity date.

The Term Loans may be prepaid in full through November 2, 2022 with payment of a 1.50% prepayment premium, after which they may be prepaid in full through November 2, 2023 with payment of a 1.00% prepayment premium, after which they may be prepaid in full with no prepayment premium. An additional final payment of 9.00% of the amount of Terms Loans advanced by the Lenders will be due upon prepayment or repayment of the Term Loans in full.

The Term Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.

The Term Loan Agreement also includes customary events of default, including failure to pay principal, interest or certain other amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross-default and cross-acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material invalidity of guarantees or grant of security interest, material adverse change, involuntary delisting from Nasdaq and change of control, in certain cases subject to certain thresholds and grace periods. If one or more events of default occurs and continues beyond any applicable cure period, the Agent may, with the consent of the Lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such Lenders, terminate the commitments of the Lenders to make further loans and declare all of the obligations of the Company under the Term Loan Agreement to be immediately due and payable.

The foregoing description of the Term Loan Agreement is not intended to be complete and is qualified in its entirety by reference to the Term Loan Agreement, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Item 6.

Exhibits.


Exhibit Number		Description

3.1		Fourth Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to our Current Report onForm 8-K filed on June 25, 2018 and incorporated herein by reference).

3.2		Certificate of Change of Registered Agent and/or Registered Office of the Registrant (filed as Exhibit 3.2 to our Quarterly Report on Form 10-Q filed on November 5, 2020 (File No. 001-38537) and incorporated herein by reference).

3.3		Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to our Current Report on Form 8-K filed on June 25, 2018 and incorporated herein by reference).

~~3.2~~ 10.1		~~Amended~~Loan and ~~RestatedBy-laws~~ ~~(filed~~Security Agreement, dated November 2, 2021, by and among the Registrant, the lenders party thereto from time to time and Silicon Valley Bank, as ~~Exhibit 3.2 to our Current Report onForm 8-K~~ ~~filed on June 25, 2018~~administrative agent and ~~incorporated herein by reference).~~collateral agent.

~~10.1~~ 31.1		~~Amended and Restated Employment Agreement by and between the Registrant and Geoff MacKay (filed as Exhibit 10.9 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.2~~		~~Amended and Restated Employment Agreement by and between the Registrant and Nerissa Kreher, M.D. (filed as Exhibit 10.10 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.3~~		~~Amended and Restated Employment Agreement by and between the Registrant and Katina Dorton (filed as Exhibit 10.11 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.4~~		~~Form of Indemnification Agreement (filed as Exhibit 10.4 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.5~~		~~2018 Stock Option and Incentive Plan and forms of award agreements thereunder (filed as Exhibit 10.2 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.6~~		~~Senior Executive Cash Incentive Bonus Plan (filed as Exhibit 10.3 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~10.7~~		~~2018 Employee Stock Purchase Plan (filed as Exhibit 10.14 to our Registration Statement on FormS-1/A~~ ~~filed on June 11, 2018 and incorporated herein by reference).~~

~~31.1~~		Certification of Principal Executive Officer Pursuant to Rules13a-14(a) and15d-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 Rules13a-14(a) and15d-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 and 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		~~XBRL Instance Document~~ Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).

101.SCH		Inline XBRL Taxonomy Extension Schema ~~Document~~Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.

104		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

*	Indicates the exhibit is being furnished, not filed, with this report.

SIGNATURES

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.

				AVROBIO, INC.
		~~AVROBIO, INC.~~
Date: November 4, 2021	By:
~~Date: August 9, 2018~~		~~By:~~	/s/ Geoff MacKay
			Geoff MacKay
			President, Chief Executive Officer, and Principal Executive Officer

Date: ~~August 9, 2018~~November 4, 2021	By:	~~By:~~	/s/ ~~Katina Dorton~~Erik Ostrowski
			~~Katina Dorton~~ Erik Ostrowski
			Chief Financial Officer and Principal Financial and Accounting Officer

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